The Rafale deal and why it makes China nervous

The People's Daily, the Chinese Communist newspaper, says the sale of the Rafale fighter plane 'encourages, excites and spurs India's appetite and ambition to become a great military power while intensifying its aggressive and expansionist tendencies, which poses a serious threat to peace and stability in Asia.'

Does India have a choice, considering the People's Liberation Army's frantic speed of development, wonders Claude Arpi.

There were six in contention; four were dropped, and one became the Chosen One: The Rafale.

In French, 'Rafale' poetically means a 'sudden gust of wind.'

It was one of the six fighter aircraft in competition for the Medium Multi-Role Combat Aircraft, MMRCA, when the Indian Air Force wanted to acquire 126 polyvalent fighter planes.

In April 2011, the IAF shortlisted two birds -- the Rafale produced by Dassault Aviation and the Eurofighter (known in Europe as 'Typhoon') from EADS, the European consortium.

It was a big deal worth $12 billion. You can imagine the stakes, especially for Dassault which a few months earlier, was unsuccessful in exporting its flagship plane to Brazil and the Emirates.

Finally on January 31, 2012, the IAF announced that the Rafale was the chosen one.

The 'deal of the century' was that 18 Rafales would be supplied in fly-away condition by Dassault to the IAF by 2015 (or three years after the signature of the contract) and the remaining 108 pieces would be manufactured in India under a transfer of technology agreement.

The concurrent company did not let go easily and a lot of lobbying started. The British prime minister wanted Delhi to explain the reasons of favouring the French. 'The Typhoon is a superb aircraft, far better than the Rafale,' David Cameron said, adding: 'Of course, I will do everything I can --- as I have already -- to encourage the Indians to look at the Typhoon, because I think it is such a good aircraft.'

Interestingly, the Chinese were also unhappy with the selection of the Rafale by the IAF, but for other reasons.

An article published in The People's Daily (French edition only) argued that India and France were supposed to be non-violent countries, how could they ink such a deal?

The Chinese Communist Party newspaper affirmed: 'During the twentieth century in France there was a great writer called Romain Roland (1866-1944), the Nobel Laureate for Literature, who was strongly opposed to war. In India, there has been an illustrious politician named Mohandas Karamchand Gandhi (1869-1948) who was a pacifist leader, known worldwide for his fights against violence.'

'At present, their homelands are engaged in a sinister and repulsive arms race, which shakes and profoundly changes the international scene. If by chance these two great and illustrious men were still alive, what would they feel about this selfish and pernicious transaction and what opinion would they give in this matter?'

Is it not amusing that the Chinese Communist Party's mouthpiece today quotes Gandhi in connection with the Rafale deal?

The People's Daily article also says the sale of the Rafale 'encourages, excites and spurs India's appetite and ambition to become a great military power while intensifying its aggressive and expansionist tendencies, which poses a serious threat to peace and stability in Asia.'

Well, does India have a choice, considering the frantic speed of development of the PLA (People's Liberation Army), PLAAF (Chinese Air Force) and PLAN (Navy)?

A few months later, an Indian MP alleged that there had been 'manipulation in the evaluation process'.

This eventually delayed the process as an independent investigation had to be conducted; it finally concluded that the evaluation was conducted according to the RFP (Request for Proposal) terms and defence procurement procedures. The intricate negotiations thus lost several months.

Once the hurdle created by the MP was removed, it was reported that in September, while in Bangalore, Air Chief Marshal N A K Browne stated that the process continued: 'The negotiations are absolutely on. We hope that at least this financial year, we should be able to finish the negotiations and finalise the deal... It is a very complex project, as we are discussing various areas like transfer of technology, the offset clause, what Hindustan Aeronautics Ltd will do and the cost as well.'

Dassault had some doubts about HAL's capacity to produce 108 aircraft; probably with reason, looking at the fate of the Tejas project which has taken more than 30 years to take off.

On November 6, Rakesh Sood, the Indian ambassador in France, told the Indian Journalists Association at India House in London that the contract would soon be concluded. 'The Rafale deal is in the final stages and hopefully, it should be concluded in the next 3 to 4 months.'

The negotiation, Sood added, was a hugely complex exercise. 'Along with that a pretty stringent clause has been put for transfer of technology, (there is an) offset clause, and Dassault Aviation has accepted them.'

At that time, it was probably thought that the signature of the deal could be synchronised with French President Francois Hollande's visit to India. Though Sood had certainly not read the French edition of The People's Daily, he spoke of France's 'long interest in Indian civilisation', adding 'recently a (French) lady had produced a nine volume Ramayana in French... Indian music, yoga and films are quite popular in France.'

Sood's conclusions about the civilisational closeness between India and France were not similar to Beijing's: India needed the Rafales. But it was not considering the cash crunch. The Indian economy was not doing as well as Montek Singh Ahluwalia, deputy chairman of India's Planning Commission, had announced, and the fiscal deficit had to be cut, Finance Minister P Chidambaram said.

Last May, Defence Minister A K Antony told Parliament that his ministry would seek a hike in the Rs 193,408 crore (Rs 193 trillion) defence outlay of the 2012-2013 budget as only a budget increase could take care of the threat of the China-Pakistan military nexus. Antony spoke of 'new ground realities' and the 'changing security scenario'.

But with the changing scenario, the Indian defence ministry announced it had to prioritise its expenditure for the remaining months of the financial year. The ministry decided to focus on purchases that would impact on the armed forces' operational preparedness.

For example, the ministry planned to speed up infrastructure development in Arunachal Pradesh, buy ammunition to end shortages and acquire high-value assets, from aircraft to warships.

In December, the finance ministry announced that the armed forces's modernisation budget would be slashed by around Rs 10,000 crore (Rs 100 billion) in the forthcoming Budget.

The Rafale deal would have to wait for the next financial year, along with the artillery guns modernisation programme (Rs 20,000 crore/Rs 200 billion), and the creation of a new mountain corps to counter China (Rs 65,000 crore/Rs 650 billion).

In the plan expenditure, the government has already allotted Rs 55,000 crore (Rs 550 billion) for the MMRCA deal. But this was five years ago and cost escalations are bound to have crept in, which might prove to be a serious problem.

The Times of India commented: 'The move will lead to a major slowdown in the ongoing acquisition projects. It also makes it clear that the already much delayed $20 billion MMRCA project to acquire 126 fighters will not be inked anytime before March 31.'

Though the IAF had been promised an additional Rs 10,000 crore to cater for the first installment of Rafales, defence expert, Major General Mrinal Suman (retd) told The New Indian Express that the budgetary cuts would impact 'all acquisitions in the pipeline, as they become easy targets.'

A gloomy scenario

It is in these circumstances that a new development occurred -- Foreign Minister Salman Khurshid visited Paris last week. While many had doubts about the deal, Agence France Press reported that India could buy up to 189 Rafales instead of the 126.

Apparently, Khurshid raised the possibility of an additional 63 jets being added to the shopping list. A source told AFP: 'There is an option for procurement of an additional 63 aircraft subsequently for which a separate contract would need to be signed.'

The deal would then mean a staggering $18 billion contract, which would be a great boon for the French defence industry, but costly for India though Indian suppliers could secure work equivalent to 50 per cent of the total value with the clause currently under negotiations.

Khurshid seemed confident during his visit to Paris. 'We know good French wine takes time to mature and so do good contracts. The contract details are being worked out. A decision has already been taken, just wait a little for the cork to pop and you'll have some good wine to taste.'

His counterpart Laurent Fabius said, 'The final decision belongs to the Indian government in its sovereignty. But from what I am told by my colleague minister of India things are progressing well, and I can confirm the full support of the French government.'

Another issue which might slightly delay the deal is that the IAF requires two-seater jets and not the one-seater model presently produced by Dassault, but this should be solved in due time.

The People's Daily had said, 'The delirious and bustling feeling of excitement from the French side resembles the behavior of Fanjin, which had a fit of madness upon learning that he was successful in the three-year provincial tests (under the Ming and Qing dynasties).' It is not exactly the attitude of the French (and the Indian) authorities who are progressing slowly, but surely towards an agreement, which is very important for both countries.

One can however understand that the Chinese are nervous.

Major General Luo Yuan, a well-known Chinese expert on military issues, recently quoted the ancient Art of War: 'The best policy in war is to thwart the enemy's strategy; the second best is to disrupt his alliances through diplomatic means; the third best is to attack his army in the field; the worst policy of all is to attack walled cities,' his conclusion was that to thwart the enemy's strategy, deterrence is the key.