Sorry, Washington, India Can’t Be Scared Away From Russia


Hi, Don! Vladimir Putin with Narendra Modi on October 4, 2018. Putin arrived in India on Thursday for a two-day visit during which India is expected to sign a $5 billion deal to buy Russian S-400 air defense systems despite a new U.S. law ordering sanctions on any country trading with Russia’s defense and intelligence sectors. (Mikhail Metzel, Sputnik, Kremlin Pool Photo via AP)

Vladimir Putin is in India on Thursday, and defense contracts between the two countries are likely on the table. Despite the U.S. sanctions against Russian defense firms, India is unlikely to be scared away from the Russians by Washington’s strong-arming tactics. India prime minister Narendra Modi is his own man. His country is not dependent on the U.S., even as Lockheed Martin has a long-standing defense deal with the Tata Group to build the wings for the C-130 Hercules.

Modi is not going to diss Putin. And the U.S. defense industry doesn’t want to lose them to a political spat between Washington and Moscow.

India and Russia Defense Deals

Russia and India have long-standing defense relations. In fact, India has deeper ties to Russian military contractors than it does to Americans. However, Americans definitely view India as a country they do not want to lose. It is an important, trustworthy partner. As George Costanza of the ’90s sitcom Seinfeld once said, they’ve “got hand.” India has the upper hand when it comes to defense sanctions against the Russians.

The Russian government confirmed today that Putin will oversee the signing of an S-400 air defense system deal with India this week. The roughly $5-billion deal is “quite likely” according to the India state press after being delayed because of U.S. sanctions. Now that India is confident that it has a waiver around those sanctions, the missile contract looks imminent.

Russian army S-400 Triumf antiaircraft system outside of Red Square in Moscow. (AP Photo/Sergey Ponomarev)

The Russian-built S-400 Triumf—aka the SA-21 Growler in NATO terminology—is a long-range surface-to-air missile system. It is considered to be more effective than the Terminal High Altitude Area Defense system developed by Lockheed Martin. The S-400 is a mobile system that can be deployed within five minutes and is capable of firing three types of missiles. It can simultaneously track 100 airborne targets, including super-fighters such as the F-35, and engage six of them at the same time.

Washington is well aware that it cannot punish India for this deal. India is a key military partner. Secretary of Defense James Mattis had asked the Senate to exempt India from the recent sanctions. And Admiral Harry Harris, Commander of the U.S. Pacific Command, said India represented a “strategic opportunity” for American defense contractors.

U.S. defense deals with India have grown from near zero to $15 billion since 2008, with Tata Advanced Systems being a key partner. Harpoon missiles, Apache and Chinook helicopters are all partially manufactured in India. Lockheed Martin aircraft and Boeing drones do not want to lose India because of Russia.

So as evidence that India will not be cowered, Washington gave Modi a waiver from Russian defense sanctions in July.

Trade War? No Thanks

Narendra Modi, India’s prime minister, listens as President Donald Trump speaks during a joint statement in the Rose Garden of the White House in Washington during their first meeting in June 2017. Washington might need India more than India needs Washington. Good for India. Photographer: Andrew Harrer/Bloomberg

The U.S. is unlikely to seek revenge in a roundabout way via “trade wars” with India.

The biggest trade issue for India is its IT firms being allowed to send India locals to the U.S. on H1-B visas. The U.S. has been cracking down on those visas for the last two years. India companies like Infosys have been caught in fraudulent uses of the visa, leading the U.S. immigration authorities that grant them to allow for fewer of those temporary work visas for the big Indian IT companies that take the lion’s share of the roughly 80,000 H1-Bs available each year.

India is still discussing bilateral trade issues with the U.S. as part of a “trade package” of mutual concerns, but no separate trade agreement is being considered, commerce department officials told The Economic Times in September.

Trump said India was keen on a trade deal, with Ambassador Kenneth Juster going so far as to call for an eventual free trade agreement. A trade pact is unlikely to benefit India much anyway because tariffs on most Indian goods are already low.

India ran a $22.6 billion trade surplus with the U.S. in the first 12 months of the year ending July 13, based on trade analysis provided by Panjiva Research. That deficit remained despite a 21.2% increase in U.S. exports to India and a more modest 10% rise in India imports.

Another reason why the U.S. won’t turn a cold shoulder to Modi because of his Russia deals: oil. Exports to India rose over 20% in August thanks in large part to higher oil imports. The U.S. is now one of the world’s largest oil and gas producers, rivaling non-OPEC member Russia. The U.S. may be able to beat up on the Europeans over their imports of Russian gas (to no avail, by the way) but will likely remain quiet when it comes to India.

That’s because India is a burgeoning market. There is room for growth there. And if the twin powers of the oil lobby and the defense lobby band together, one can surmise that bringing Washington’s commercial and political fight with the Russians to Indian soil is going to be a bad idea.

The 19th India-Russia Annual Bilateral Summit will take place in New Delhi on Friday. Modi and Putin are expected to review bilateral defense cooperation deals and discuss the oil and gas market in light of tighter sanctions on Iranian crude oil. India’s Foreign Ministry stated that the government will not abide by U.S. sanctions against Iran. But due to India’s exposure to the U.S. financial system, it has had to lessen its reliance on Iranian crude and did so last month for the first time since former president Obama reopened that market in exchange for a nuclear power deal. India is Iran’s second-largest oil client after China.


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