India Balks at C-130, P-8 RestrictionsU.S. Resale and Other Limits Could Snag Future Sales
By ANTONIE BOESSENKOOL and vivek raghuvanshi
Published: 8 February 2009
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WASHINGTON and NEW DELHI - Washington's restrictions on resale and other conditions could dampen New Delhi's interest in American defense goods, said officials, executives, and observers in both countries.
As the world's aerospace industry converges on Bangalore for the biennial Aero India exhibition, Indian officials say they won't accept Washingon's standard conditions for U.S. arms customers, including that customers seek permission before reselling U.S. equipment.
"We're frustrated at both sides that this has been an issue for at least two-and-a-half or three years now and we haven't found a way to come to closure on it," said Jeffrey Kohler, Boeing vice president of international strategy for Integrated Defense Systems Business Development and the former head of the U.S. Defense Security Cooperation Agency (DSCA).
The End Use Monitoring (EUM) provision "has been an issue all along," Kohler said. "We've sort of pushed it down the road while the two governments work on it. But we're reaching a very critical point now. Lockheed is reaching a critical point on the C-130. We [Boeing] now have a major contract that, obviously, we would like to see this issue resolved."
If no agreement is reached this year on EUM language, Kohler said, "There will be a serious blow to the relationship and, obviously, it would make it virtually impossible for U.S. defense companies to work with the Indians."
The annual value of U.S. arms sales to India is set to soar from tens of millions of dollars to billions this year. U.S. defense sales to India totaled $76.4 million in 2007, according to the U.S.-based Aerospace Industries Association. Then came 2008, in which New Delhi agreed to buy six Lockheed Martin C-130Js for $596 million, and last month, when the government agreed to buy eight Boeing P-8I maritime reconnaissance planes for $2.1 billion.
With Boeing and Lockheed competing for India's $10 billion fighter jet contract, and New Delhi's interest in ballistic missile defense systems, such as Patriot Advanced Capability-3 and the Aegis combat system, some believe the United States could be on track to become India's top weapon supplier, displacing Russia, which sold the country arms worth more than $2 billion last year.
But disagreements over post-sale limits could stop that from happening.
'Will Not Comply'?
Several Indian Defense Ministry officials said privately that New Delhi will not comply with EUMs and other export-control limitations that Washington requires of its weapon customers. They said the government has promised on several occasions not to share U.S. weapon technology with other countries. But they said India will not be told how and where to operate the equipment it buys for its own military.
Among the limitations they cited were the EUM, which would allow U.S. officials to block retransfers of the planes; the Communications and Information Security Memorandum of Agreement, which guides the sharing of sensitive information between two nations; and the Logistics Supply Agreement, which regulates things such as logistics support and fuel for fighter jets and naval warships.
Indian Defence Ministry spokes-man Sitanshu Kar said the two countries were discussing these issues, but he declined to elaborate.
Sources in both countries said India wants the United States to alter the EUM provisions.
Rick Kirkland, president for South Asia of Lockheed Martin Global, said the United States and India are discussing how to implement "a number of agreements," including EUMs, for U.S.-India trade in general.
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