Gorshkov Deal: India’s Helplessness with Russia
Laxman Kumar Behera
Associate Fellow, IDSA, New Delhi
e-mail: laxmanbehera@gmail.com
The Gorshkov deal between India and Russia has run into controversy over the price and cost overruns of the planned induction of the 44,500 tonne aircraft carrier into the Indian Navy. The Russian failure to adhere by contractual agreements also reveals India’s helplessness in regard to Russian military hardware. This article discusses key developments in the Gorshkov deal and the reasons for its being against India’s interests.
The deal goes back to 20 January 2004, when India signed the Contract and Supplementary Agreements worth US$974 million for inducting the Admiral Gorshkov into the Indian Navy. The agreements related to repair and re-equipment, logistics support, shore infrastructure, training of ship’s crew, repair and technical documents. The delivery of the carrier was scheduled for August 2008. However, as time elapsed, questions were raised over its timely delivery. But, the Indian establishment was assured that the ship would be delivered on the contractual terms.
The Russian assurance was short-lived as India soon received a revised “Master Schedule” indicating a delay in the project and increase in price by US$1.2 billion due to “increase in scope of work not originally envisaged.” The revised schedule greatly disconcerted the Indian establishment, which took a tough stand, and particularly about the price escalation. While the Navy Chief advocated no further price negotiations, the MoD did not agree to pay additional costs till late October 2008, though it undertook “only technical evaluation” regarding repairs and re-equipment of the aircraft carrier. However, if recent media reports are to be believed, the Cabinet Committee on Security has recently approved cost re-negotiation, which reverses its earlier stand, and confirms India’s helplessness before its traditional military supplier.
The Gorshkov is not the only case where Russia has deviated from its contractual obligations, citing various factors like technical problems, fall in dollar value and rise in operating costs. However, unlike previous cases, where India did not invoke the penalty clause, the Gorshkov signalled, albeit briefly, India’s impatience to pay for Russia’s failures. This is evident from the MoD’s reluctance to enter further price negotiations.
However, despite India’s displeasure, what made New Delhi accede to Russian demands is primarily due to two factors. The first is the lack of an alternative to the Gorshkov in the immediate future, if the reported offer of the US Kitty Hawk to India is ignored as only rumour (the Defence Minister had ruled out in Parliament the possibility of procuring an aircraft carrier from any other external sources). The delivery of India’s indigenous aircraft carrier, Advanced Defence Ship, will not occur before 2012 or perhaps 2015. Since the only carrier with India, the INS Viraat, is currently on life extension, this situation degrades Indian maritime security preparedness that revolves around acquiring three aircraft carriers. The decommissioning of INS Viraat has become contingent on the delivery of Gorshkov; hence, India could not but agree to pay the additional money demanded by Russia.
The second factor is related to developments within the Russian defence industry which has exploited India’s weaknesses. When negotiations for Gorshkov started in the early 1990s, resulting in the signing of a contract in 2004, the Russian defence industry was not what it has become today or was at the peak of the Cold War. With the collapse of the Soviet Union, the Russian defence industry badly needed money from outside and military exports took precedence over domestic procurement. Later, the situation reversed, with Russia becoming flush with energy revenues and rapid economic growth. The earlier export-oriented approach has changed to domestic procurement backed by a rising defence budget. The Russian threat to retain the aircraft carrier for its own purposes, if New Delhi does not pay more, can be viewed from this perspective. Moscow’s apparent u-turn over the lease of a nuclear submarine to India can also be similarly viewed.
Therefore, the lack of alternatives to Gorshkov has left little leverage for India to move decisively against its traditional supplier, which supplies nearly 70 per cent of New Delhi’s defence hardware. Also, given India’s continued dependence on Russia for arms and weapons, New Delhi is quite nervous about upsetting Moscow over many ongoing high-value programmes like the T-90 MBT, Su-30 MKI aircraft, fifth generation fighter aircraft, multi-role transport aircraft, AWACS, and medium lift helicopters, among others.
The Gorshkov deal no doubt reveals India’s helplessness with Russia. The possible lesson from this incident is apparent. What India must do is to diversify its supply sources away from Russia, to the maximum extent possible. But, this is easier said than done.
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