Environment Medvedev Joins Parade to India as Leaders Chase Nuclear Power, Arms Deals--21/12/10

Environment Medvedev Joins Parade to India as Leaders Chase Nuclear Power, Arms Deals

President Dmitry Medvedev will seek arms and nuclear-power contracts during an Indian visit this week that follows trips by U.S. President Barack Obama, Chinese Premier Wen Jiabao and French President Nicolas Sarkozy.

Medvedev’s two-day trip comes after Sarkozy spent four days in India earlier this month and Obama visited in November to promote trade. He will arrive with an $11 billion tender for 126 warplanes and as much as $100 billion in nuclear-power contracts up for grabs. Wen led a delegation that signed $16 billion of deals during a trip that ended Dec. 17.

India, Russia’s top arms customer, has tripled its defense budget over the last decade as it looks beyond a traditional military rivalry with Pakistan to counter China’s rising power. Prime Minister Vladimir Putin has spearheaded Russia’s efforts to fend off competition from the U.S. and Europe.

“Russia has always been a major player in India, but now it faces increasing competition in areas it traditionally dominated such as the arms trade as India tries to diversify its suppliers further to get the best price and quality,” Konstantin Makiyenko, deputy head of the Center for the Analysis of Strategies and Technologies in Moscow, said in a Dec. 17 phone interview.

India accounts for about 35 percent to 40 percent of Russia’s annual $8.6 billion of arms deliveries abroad, Makiyenko said.

Fighter Jet Competition

OAO RSK MiG is bidding against Dassault Systemes SA, Boeing Co. and Lockheed Martin Corp, for the fighter-jets contracts. Indian plans to expand the country’s atomic capacity 10-fold by 2020 may net deals for Rosatom Corp., Areva SA, Alstom SA, or Westinghouse Electric Co.

Obama and Sarkozy during their visits backed India’s campaign for a permanent seat on the United Nations Security Council. Wen stopped short of those endorsements, saying in a joint statement with Indian Prime Minister Manmohan Singh that China “understands and supports India’s aspiration to play a greater role in the United Nations, including in the Security Council.”

Medvedev may also be supportive, said Fyodor Lukyanov, an analyst at the Council on Foreign and Defense Policy in Moscow, adding that Russia is “very cautious” about changes to the Security Council, looking to safeguard its role.

Russia, the U.S., France, China and the U.K. are the council’s permanent members at present. They hold veto power over any measure.

Putin’s Deals

Putin in March closed more than $10 billion in agreements with India, including the delivery of India’s second aircraft carrier in 2012 and 29 MiG-29 fighters. The two countries signed a “road map” on nuclear energy that may net Russian companies a role in building as many as 16 reactors.

Medvedev’s delegation will include Mikhail Pogosyan, Moscow-based MiG’s chief executive officer, Sergei Kiriyenko, the CEO of Moscow-based Rosatom, Sergei Prikhodko, the president’s foreign policy aide, told reporters in Moscow on Dec. 17. Sergei Chemezov, head of Moscow-based Russian Technologies Corp., a holding that includes Rosoboronexport, the state arms exporter, will also accompany Medvedev.

Nuclear energy will be discussed “in detail” during the trip and the two countries will sign a cooperation agreement to open the door for future deals, Prikhodko said.

‘Entrench Ourselves’

“We want to entrench ourselves in the market and we’re seeing serious movement forward,” he said. The joint production of a transport aircraft and a fifth-generation fighter jet will also be on the agenda, Prikhodko said. The new fighters are designed to offer better radar-evading stealth capability and an improvement in maneuverability and speed.

Russia successfully tested a prototype of its fifth- generation PAK FA stealth fighter in January, one year behind schedule and 13 years after the first flight of its U.S. rival, Bethesda, Maryland-based Lockheed Martin’s F-22 Raptor.

“The fifth-generation fighter deal will be the most important issue,” and could be worth as much as $30 billion over the life of the agreement, because India may seek to deploy as many as 300 of the jets, Makiyenko said.

The contract for drawing up the design of the Indian modification of the jet will cost $295 million and may be signed during Medvedev’s visit to India, RIA Novosti reported Dec. 16, citing Hindustan Aeronautics Ltd. Chairman Ashok Nayak. He said Indian engineers will work in Russia over the next 18 months, the Russian news service said.

Fighter Jet Components

“The Indian fighters will most likely have a large amount of French, Israeli and British components,” Makiyenko said.

Dassault is based in Velizy Villacoublay, France; Boeing in Chicago and Lockheed Martin in Bethesda, Maryland. Areva is based in Paris and Alstom in Levallois-Perret, France; Monroeville, Pennsylvania-based Westinghouse Electric Co. is a unit of Toshiba Corp. of Tokyo.

India’s nuclear expansion may cost as much as $100 billion, the Indian official said.

“I think this is the” minimum, Kiriyenko said on Dec. 14, when asked about the spending figure. “Judging by their plans that’s the least they’ll spend. It’s realistic. And our share will be significant.”

Kiriyenko said no concrete nuclear contracts are likely to be signed during Medvedev’s visit as companies negotiate the details of the deals, he said.

Competition is increasing on India’s nuclear market, said Brahma Chellaney, an analyst at the Centre for Policy Research in New Delhi.

“India is going from being non-aligned to being multi- aligned, so Russia is only one partner,” he said. “India now has strategic partnerships with all the major powers except China. This was unthinkable 10 years ago.”

To contact the reporters on this story: Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net; Andrew MacAskill in New Delhi at amacaskill@bloomberg.net; Lyubov Pronina in Moscow at lpronina@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net