US embassy cable - 05NEWDELHI9133

C O N F I D E N T I A L SECTION 01 OF 04 NEW DELHI 009133 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 12/02/2015 
TAGS: PREL, ENRG, EPET, PGOV, KNNP, MASS, IN, India-Russia 
SUBJECT: INDO-RUSSIAN SUMMIT TUNED TO DEFENSE COOPERATION 
 
REF: MOSCOW 14309 
 
Classified By: PolCouns Geoffrey Pyatt for Reasons 1.4 (B, D) 
 
1.  (C) Summary: The GOI hopes to expand Indo-Russian defense 
and space cooperation at the December 4-6 Sixth Annual Summit 
in Russia, but a sluggish economic relationship is dragging 
down bilateral ties.  President Putin and Prime Minister 
Singh are expected to sign four agreements on defense 
Intellectual Property Rights (IPR), an amendment on military 
cooperation through 2010, technology safeguards for the 
GLONASS satellite navigation system and solar physics. 
Notably, the Prime Minister's delegation will include the 
heads of both India's space and atomic energy agencies. 
Russian Embassy Political Officer Dennis Liebov described the 
visit as "nothing special," and predicted that the Russian 
and Indian leaders would discuss energy security, efforts to 
revive trade and business, and future nuclear power 
cooperation.  PM Singh is bringing a fourteen member 
delegation of prominent industrialists to Moscow, but 
business analysts in New Delhi argue that obstacles such as 
visa denials, logistical difficulties, racism, and lack of 
banking outlets will prevent any substantial momentum in the 
economic realm.  As a result, Russia watchers here are 
pessimistic about the direction of Indo-Russian relations, 
and suggest that the shrinking economic base and India's 
foreign policy reorientation towards America will continue to 
wear on the historically close relationship with Moscow. 
Russia's loss is our gain.  End Summary. 
 
Defense and Space Ties Still the Strongest Area 
--------------------------------------------- ---- 
 
2.  (C) During the December 4-6 Annual Summit in Moscow, 
Prime Minister Singh and President Putin are expected to sign 
four agreements, all of which are restricted to defense and 
space, a further sign that this relationship is struggling to 
grow beyond these traditional fields of cooperation.  The 
list of agreements, previously on topics from narcotics 
cooperation to relaxed visa requirements, has been 
significantly narrowed down and now amounts to two 
substantial agreements between the leaders, the IPR Defense 
Agreement preventing third-country transfers and a Technology 
Safeguard Agreement to protect Russian hardware and allow 
India to launch the new generation Glonass-K navigational 
satellites.  The third reported agreement is a Protocol on 
Inter-Governmental Commission on Military-Technical 
Cooperation until 2010, but Russian Desk Officer Somnath Gosh 
clarified that the only change is to reflect the IPR 
Agreement.  According to a December 1 "Hindustan Times" 
article, Indian Space Research Organization (ISRO) Chairman 
Madhvan Nair will accompany the Prime Minister in order to 
sign an agreement on cooperation in solar physics with the 
Russian Space Agency Roskosmos.  MEA Russian Desk Officer 
Somnath Gosh commented that since these meetings occur on an 
annual basis, they "can't be expected to produce big ticket 
items every time."  Nonetheless, even Gosh was clearly 
unexcited by the upcoming summit. 
3.  (C) India has been under pressure to sign the IPR 
Agreement, which would prevent the transfer of Russian 
products and technology to third parties, since Putin's visit 
to Delhi in December 2004.  Russia is concerned that India 
wants to export co-produced items such as the BRAHMOS cruise 
missle, and insists on controlling end-users.  Russia is also 
concerned over transfer of technology to Israel, because 
Israel is doing most of the upgrades to Russian legacy 
systems such as India's MiG-21s.  Although every previous 
bilateral military agreement had its own separate IPR clause 
which covered third-party transfers, the MEA's Gosh told us 
that Russia has raised quite a "hue and cry" to obtain an 
umbrella agreement.  The Observer Research Foundation's 
Senior Fellow Nandan Unnikrishnan speculated that this 
agreement, rather than opening up new opportunities for joint 
production, gives Russia a "comfort blanket" on its deals 
with India.  He commented that India's similar agreement with 
the US created "an ego problem" with the Russians, who then 
wanted their own IPR safety net. 
 
4.  (C) Indian Defense Minister Pranab Mukherjee began a 
discussion of the "Protocol on Inter-Governmental Commission 
on Military-Technical Cooperation until 2010" during his 
November 14-17 visit to Moscow.  In a speech, he told the 
General Staff Academy of the Russian Armed Forces that 
military cooperation is the "bedrock" of the bilateral 
relation, and that India's recent strengthening of defense 
ties is "not at the expensive of our traditionally friendly 
relations with Russia."  Mukherjee and his counterpart Sergei 
Ivanov reportedly discussed potential Russian assistance to 
India's efforts to build an indigenous nuclear-powered 
submarine Advanced Technology Vessel (ATV) and aircraft 
carrier Air Defense Ship (ADS) as well as joint development 
and financing of a fifth generation fighter.  However, 
Gulshan Sachdeva, a Professor at Jawaharlal Nehru University, 
predicted that India's defense purchases from Russia will 
fall from seventy five percent to under fifty percent in the 
next ten years, due to India's efforts to diversify its 
defense sources, new competition for defense purchases, and 
Russia's declining technological edge.  Sachdeva commented 
that Russia's defense sales to India, which has been the 
foundation for the continued close relationship since 1991, 
are no longer a "strategic decision for Russia, but instead 
just a way to make money." 
 
Trade Hits a Low Point 
---------------------- 
 
5.  (C) Compared to the big plans in the defense field, 
prospects for reviving India and Russia's sagging economic 
ties are slim.  The Russian Embassy's Liebov called the 
decreasing trade a "stumbling block" in the relationship, but 
MEA's Gosh said the trade relationship has "no hope of 
improving."  Professor Sachdeva noted that for the first 
time, less than one percent of India's GDP now comes from 
trade with Russia, and has "no scope of substantial 
improvement."  D.P. Das, a Russian Specialist at the 
Federation of Indian Chambers of Commerce and Industry 
(FICCI), indicated that the largest barriers to improving 
trade were visas, long transport times, an absence of 
financial infrastructure and banking facilities, and the lack 
of awareness and market analysis of opportunities for growth. 
 He added that PM Singh was interested in an open skies 
agreement with Putin to facilitate business travel.  Liebov 
commented that while Russia was open to such an agreement, 
the GOR was worried that there was not sufficient demand to 
justify the work required to negotiate it.  Without any 
concrete GOI proposals to revive trade, FICCI's Das laughed 
off Indian proposals (reftel) to increase trade from USD 
three billion to fourteen billion within the next five years. 
 
 
6.  (C) Institute for Defense Studies and Analyses Russia 
watcher Nivetida Das Kundu predicted that PM Singh would make 
visa relaxation proposals a "major issue."  Noting several 
high-profile cases of visa rejections (including the top 
executives of Indian corporates Reliance and Mahindra), Das 
Kundu pointed out that average Indian businessman faces such 
major hassles in obtaining a visas and entering the country 
that many are wary of even looking at opportunities in 
Russia.  The press here also complain of racist treatment at 
Russian airport.  Liebov responded to Poloff's inquiries 
about relaxing visas by commenting that illegal immigration 
through Russia into Europe is significant and that 
Sino-Indian trade flourishes even though it is "harder to get 
a visa to China."  He also observed that Russia will not be 
able to substantially relax visa restrictions until India 
agrees to the right of return for illegal immigrants, which 
the GOI has not agreed to with any other country. 
 
Lots of Energy Talk, but No New Proposals 
----------------------------------------- 
 
7.  (C) At the 2004 Annual Summit, India and Russia called 
for "joint development of new oil and gas fields and means of 
their transportation in Russia, India and other countries," 
but MEA's Gosh reported that no new energy proposals have 
resulted.  For all the GOI's interest in Russian energy, the 
only non-nuclear Indian investments are in Russia's Sakhalin 
One and Three Oil Fields.  Professor Sachdeva explained that 
Indian companies are finding it is physically too expensive 
to bring Russian oil to India.  Delhi's Russia watchers 
predicted that if the GOI can't find any other oil and gas 
prospects with Moscow, then India may increase these Sakhalin 
investments.  The ORF's Unnikrishnan suggested that the only 
area for collaboration is Russian investment in joint 
projects to modernize existing Indian facilities, including 
nuclear power plants. 
 
Where do we go from here? 
-------------------------- 
 
8.  (C) JNU's Professor Sachdeva echoed our government 
contacts in predicting that the shrinkage of the Indo-Russian 
economic base will begin to erode the traditionally close 
bilateral relationship.  Unnikrishnan also commented that 
India's "mothball political relationship can't stand alone 
without an economic foundation."  There is still enough 
momentum from past ties to continuing pushing the 
relationship forward for another 10 years, he added.  During 
the Soviet era, Russia acted as India's diplomatic support, 
economic partner and defense supplier, Sachdeva explained. 
He suggested that as India's foreign policy evolves, and the 
US increasingly takes on many of these roles, India will 
further reassess the value of its ties with Russia.  While 
emphasizing that New Delhi has built a trust level with 
Moscow that it does not enjoy anywhere else in the world, 
Sachdeva nevertheless suggested that "India will increasingly 
look towards the US for its security and economic 
architecture."  NOTE: A recent Office of Research poll 
indicates Russia is tied with America in terms of the trust 
Indians repose in them, topping the list at 91 percent.  For 
Russia, the score represents past accomplishment.  For the 
US, it represents future potential.  END NOTE. 
 
Comment:  Scope for Growth in Nuclear Power 
------------------------------------------- 
 
9.  (C) While MEA, the Russian Embassy and Delhi's Russia 
watchers all exude pessimism over the Annual Summit, everyone 
admits that from a strategic viewpoint the relationship is 
still important to India.  Despite the lack of economic or 
people-to-people contacts, India's unparalleled trust in the 
Russians goes a long way, especially with the older 
generation that dominates the political class.  While not 
officially on the agenda for this summit, we know that both 
sides are hoping that when Nuclear Suppliers Guidelines are 
relaxed, nuclear power will be another area for further 
growth.  The presence of Atomic Energy head Khakodkar in the 
PM's delegation reflects the prominence of this issue in the 
future Indo-Russian agenda.  Until then, like an old married 
couple, we expect few fireworks in this well-established but 
historically fruitful relationship. 
 
10.  (U) Visit New Delhi's Classified Website: 
(http://www.state.sgov.gov/p/sa/newdelhi/) 
MULFORD