28 September 2014

3 Opportunities for Better US-India Defense Ties

By Hemal Shah
September 26, 2014

As Indian Prime Minister Narendra Modi arrives in the United States, U.S.-India defense ties face an era of opportunity. 

India’s Prime Minister Narendra Modi will make his first visit to the White House to meet with President Obama on Monday. Modi was elected to power with a sweeping mandate in May after promising to restore India’s moribund economy and modernize the military. The bigger goal of the Obama-Modi summit is clear: How can the U.S. and India move toward a genuinestrategic partnership? Along with an emphasis on economic cooperation, deepening defense and security ties will be a focus of the visit.

As the two leaders meet, a Chinese incursion into the Indian territory of Ladakh continues, Pakistan engages in border firing from time to time, al Qaeda is working to expand its India operations, and ISIS looks to recruit more Indians. India’s military is poorly equipped and the state is ill-prepared to tackle emerging security threats.

Against this backdrop, the Obama-Modi summit next week, followed by Indian Defense Minister Arun Jaitley’s visit to the Pentagon next month, signals an opportunity to renew the 2005 New Framework Agreement on defense and security expiring this year. The 2005 Agreement was signed to expand defense trade, technology transfers, co-production, and collaboration on counterterrorism, security and stability. Much has been gained by both sides under the agreement: India conducts more joint exercises with the U.S. than with any other country; defense sales have shot up from zero to $9 billion with the U.S. displacing Russia as India’s biggest supplier last year. However, the two countries are yet to progress from a basic symbiotic arms trade – between the world’s largest arms importer and exporter – to a seamless, committed, relationship informed by a coherent strategy.

In other words, the 2005 Framework hasn’t fully been able to transform and deepen the U.S.-India defense relationship. The two countries may be bound together by common interests like containing China’s growing power, post-U.S. withdrawal coordination in Afghanistan, or maritime security in Asia. But both the U.S. and India still suffer from a lack of trust given their checkered history. India’s insistence on foreign policy autonomy at times complicates America’s strategic bet on India to maintain stability in Asia. Additionally, neither is familiar with the other’s bureaucratic processes. If the U.S. and India can commit to addressing these issues, their defense and security ties under the renewed agreement can bring a lot more value.

First, the United States and India need to work consciously to re-build mutual trust by eliminating their baggage from the past. In 1998, the U.S. imposed sanctions when India tested its nuclear weapons. With sanctions eliminated post 9/11, the U.S.-India defense relationship saw a guarded surge with the ratification of the 2005 agreement. Nonetheless, India is still upset from occasional U.S. failures to approve licenses for spare parts – for instance, when the U.S. decided to freeze the engine supply for India’s Shivalik-class stealth warships in 2009 – casting doubts on their reliability in times of need. India refrained from choosing U.S.-made F-16 and FA-18 jets from their combat aircraft competition in 2011, despite the U.S. removal of restrictions on technology sharing with Indian firms earlier, underscoring the need for deeper trust and cooperation. Moreover, America’s special relationship with, and arms sales to, Pakistan has always been a cause of concern for India. Similarly, wary of India’s close ties with Russia from the Cold War era, the U.S. is guarded with its transmission of sensitive technology or know-how to India.

Second, both countries need to understand and appreciate each other’s strategic needs. America’s strategic bet on India to help maintain security and stability in Asia emerges from common interests between the two countries. This now includes Modi’s closer ties with Japan, America’s closest ally in Asia. Pentagon official Amer Latif argues that the U.S. views its technology as a “strategic commodity,” meaning national security considerations come before commercial interests. However, for India, decisions are sometimes torn between the needs of the military forces and the civil bureaucracy – the former looks for a combination of better equipment, military-to-military ties, and operational cooperation, while the latter mainly looks at checking boxes on acquisition. The needs of the bureaucracy are often prioritized which suits India’s deals with Russian, Israeli, and European suppliers who treat defense sales as an “export business.” Unlike the U.S., these countries’ small military budgets cannot fully absorb their defense industries’ capacity. But India’s bitter experience with Russia’s substandard equipment, particularly in the case of consecutive MiG-21 fighter jet crashes, highlights the impending need for it to replace its Soviet-era equipment.

Third, both countries need to straighten out their bureaucratic procedures and procurement processes. Ashton Carter, former deputy secretary of defense, remarked how it takes about 250 steps for the U.S. to move from development to delivery when he visited New Delhi in 2012. It’s like “hieroglyphics” he joked. On the other hand, India’s offsets policy – a vendor’s industrial compensation to a buyer via technology transfer or acquisition – is still ambiguous. India requires foreign governments or companies to reinvest 30 percent of any defense deal over $55 million in India’s state-owned or private defense companies. While foreign companies are willing to cooperate, they often run into problems, as there are hardly any reinvestment options in Indian R&D or products with export potential. The Indian government takes a while to nominate eligible defense offset partners, yet they don’t have the absorptive capacity to accept offsets worth billions of dollars. If anything, India’s offsets policy betrays her protectionist defense industry and obsolete products, exacerbated by heavy requirements of indigenous components when dealing with foreign investors. But Modi’s recent decision to raise the cap on foreign direct investment in defense from 26 percent to 49 percent and increase defense expenditure by 12 percent is a step in the right direction.

With these issues in mind, the timing cannot be better for the United States and India to renew the 2005 Agreement with a sharper strategy. India can benefit by being more strategic about choosing its arms suppliers and investing in real relationships with allies. The U.S. should take stronger measures to incentivize India to codevelop and coproduce defense products, which has already started with the Defense Trade and Technology Initiative (DTTI). Modi’s decisiveness could help accelerate India’s consent to the U.S. proposal of codeveloping the Javelin antitank missile, an offer the U.S. has extended exclusively to India. Deeper commitment and strategic cooperation with the U.S. will not only further India’s goal of indigenization but also Modi’s goal of military modernization to tackle foreign aggression and emerging terrorist threats. As for the U.S., a strong India that serves as a strategic democratic counterweight in Asia is in its best interest.

Hemal Shah is a research associate for India studies at the American Enterprise Institute in Washington, DC. She tweets @hemalshah_7.

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