India, Russia Sign Military, Nuclear Pacts as Leaders Vow to Double Trade

Russia and India signed pacts to provide missiles for the Indian army, develop advanced stealth fighter jets and build more nuclear reactors as their leaders vowed to double trade over four years.

Russian President Dmitry Medvedev’s two-day visit to India comes after similar trips by President Barack Obama, Chinese Premier Wen Jiabao and French President Nicolas Sarkozy. Major nations are jostling for contracts as India builds its armed forces and plots a $100 billion expansion of its nuclear-power generating capacity.

“There is enormous unexploited potential for the development of our relations particularly in the area of trade and economic affairs,” Indian Prime Minister Manmohan Singh said today at a press conference with Medvedev in New Delhi.

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. Today’s deal -- which covers design modifications for planes to be bought by India -- may be worth $295 million, RIA Novosti reported Dec. 16.

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.

Photographer: Jock Fistick/Bloomberg

Russian President Dmitry Medvedev. Close

Russian President Dmitry Medvedev.

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Photographer: Jock Fistick/Bloomberg

Russian President Dmitry Medvedev.

India’s BrahMos Aerospace Pvt. agreed with Russia’s NPO Mashinostroyenia to make missiles for India’s army. No details were immediately available.

‘Major Player’

“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 telephone interview.

“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.

At first “Russia will be leading in terms of contribution, while the Indian participation will be increasing further on,” said Mikhail Pogosyan, chief executive officer of OAO Sukhoi Co., which will develop the jet in collaboration with the company’s Indian partner.

$20 Billion Target

Medvedev’s trip caps six months of visits by leaders and company executives from all five permanent members of the United Nations Security Council as they seek to boost exports to India’s $1.3 trillion economy, which may expand almost 9 percent this financial year.

Russia and India will attempt to increase bilateral trade to $20 billion by 2015 from the current level of $10 billion, they said in joint statement today.

Reliance Industries Ltd. and OAO Sibur Holding agreed a petrochemicals deal, Dr. Reddy’s Laboratories Ltd. and Russia’s R-Pharm announced a joint venture, and Tata Group said it will work on the Skolkovo technology park project outside Moscow in other pacts announced today.

AFK Sistema, Russian billionaire Vladimir Yevtushenkov’s holding company, may team up with India’s Oil & Natural Gas Corp. as the two companies seek to expand oil production with overseas projects. Sistema and ONGC agreed to study “a potential transaction” involving their Russian oil units, the Moscow-based company said today in an e-mailed statement. ONGC is seeking to expand in Russia, the world’s biggest oil and gas producer.

Nuclear Reactors

In agreements to provide the nuclear energy India wants to power its economy, Russia plans to build at least 18 reactors at three locations across the country, Sergei Kiriyenko, chief of Moscow-based Rosatom, said today.

As well as the reactors being built at Kudankulam in the southern state of Tamil Nadu, Russia will develop units at site near the eastern city of Kolkata and another undisclosed location, he said. Kiriyenko said each plant will have at least six reactors and the first at Kudankulam will be operating by the end of March.

India’s nuclear industry has attracted foreign interest following the 2005 agreement with the U.S. that attached International Atomic Energy Agency safeguards to the South Asian country’s civilian nuclear facilities. U.S. companies have so far lagged behind state-backed French and Russian companies over concerns new laws may make them liable for damages in the event of a nuclear accident.

‘Strong U.N. Candidate’

Medvedev said today India would be a “strong candidate” to become a permanent member of the United Nations Security Council if a decision is taken to expand it, joining endorsements by Obama and Sarkozy during their India visits.

China’s Wen stopped short of giving support last week, saying in a joint statement Singh that China “understands and supports India’s aspiration to play a greater role in the United Nations, including in the Security Council.”

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.

India and Russia announced in a joint statement that they welcomed South Africa’s engagement in the BRIC group of emerging economies which also includes Brazil and China. South Africa, Africa’s biggest economy, asked to join the group, the country’s Trade Minister Rob Davies said last week.

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

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

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