Part 1. A Longstanding Friendship under Threat

The Russian Federation is the second largest supplier of weapons globally. In 2016, 21% of global arms sales were Russian. Between 2000 and 2016 Russia accounted for on average 25% of global exports. During that period 30% of exports went to India, making it the largest importer of Russian arms. For India, one of the world´s top five arms importers, this meant that 72% of its weapons came from Russia. The arms trade with India alone accounts for a full percent of Russia’s total exports.

The Russian Federation is the second largest supplier of weapons globally. In 2016, 21% of global arms sales were Russian. Between 2000 and 2016 Russia accounted for on average 25% of global exports. During that period 30% of exports went to India, making it the largest importer of Russian arms. For India, one of the world´s top five arms importers, this meant that 72% of its weapons came from Russia. The arms trade with India alone accounts for a full percent of Russia’s total exports.

However, the importance of this trade lies not only in its size. Together with energy cooperation, it forms the foundation of the broader Russian-Indian partnership. The military cooperation is institutionalized in and led by the Indo-Russian Governmental Commission on Military Technical Cooperation (IRGCMTC). Its regular meetings lend extra resilience to the Russian-Indian partnership. Its long history already strengthens this relationship as the Soviet Union has been India's biggest arms supplier since the 1960's.

The Indian-Russian arms trade is of significant domestic importance for Russia. Armament exports form a significant proportion of Russian manufactured and technology-intensive exports. This makes the arms industry a leading sector in the integration of Russia with the global economy. These exports furthermore stimulate innovation, help keep production lines in service and preserve a full spectrum of military developmental capabilities.

Any disruption of this relation could have a significant impact on the Russian economy and the Indian national security. Therefore, the American sanctions against Russia and its arms industry are of significant concern to both Russia and India. This article will describe the impact the American sanctions will have on the Russian-Indian arms trade. To answer that question, Part 1 will first examine the current military relationship between the India and Russia. The article will, therefore, document which and how many Russian weapon systems the Indian Armed Forces use. It will further describe the military cooperation on production and development, looking for instance at joint ventures and Russian-licensed military production in India. After a brief introduction into the sanctions, Part 2 will describe the impact of the sanctions on the outstanding orders, joint ventures and licensed manufacturing and maintenance of existing equipment, if they were to be applied in their strictest form. Finally, the article will examine how likely it is that the sanctions will be applied in their strictest form. Considering the Indian reaction so far, the article will conclude that the sanctions could cause a significant conflict between India and the U.S.

Assessing the Current Russian-Indian Arms Trade

Oleg Popadyuk, Vyacheslav Trubnikov, Igor Denisov, Harinder Sekhon, Andrey Kortunov, Kanwal Sibal, Prabhat Prakash Shukla, Liudmila Filippova, Ksenia Kuzmina:
70th Anniversary of Russia-India Relations: New Horizons of Privileged Partnership

The military relationship between Russia and India is close and long-standing, stretching back decades. During the Cold War, India acquired much of its weaponry from Russia. India even produced a range of Soviet weapons systems domestically under license, including hundreds of MiG-21 and MiG-27 fighter aircraft. This bond has endured beyond 1991, as India bought large quantities of Konkurs-M anti-tank missiles and R-73 air-to-air missiles. In more recent years a range of smaller and bigger purchases took place. To describe the potential impact of the American sanctions this article will first assess the current Indian stockpile of Russian weapons.

Naval vessels

The Indian Navy has for decades been a deterrent force maintaining peace for the county in a region of turmoil. To achieve that, India depends heavily on Russian material. All the Indian Navy’s six Talwar-class frigates (Project 11356) were built in Russia. These guided missile frigates can be equipped with the Russian 3M-54 Klub/Kalibr cruise missiles or BrahMos missiles. The ships can also carry Russian-built Kamov Ka series helicopters. The final frigate was delivered in 2013. Costing US$2.6 billion each these crafts came with stealth features making them the Navy's lead frigates for the first quarter of the 21st century. India will further strengthen its navy with three Admiral Grigorivich class frigates.

The Indian Navy has been leasing its first nuclear-powered attack submarine, the INS Chakra, from Russia. Construction on the submarine started in 1993 but was later suspended due to a lack of funds. The Indian Navy offered to pay for the completion of the submarine conditionally upon them being able to lease it after completion. It was handed over in 2011 for a ten-year lease at an estimated cost of $920 million, with the possibility of buying it afterward. Earlier Indian naval crews had been trained in Russia to operate the vessel. The training of the crew was viewed as crucial to the development of India's nuclear submarine programme, known as the Arihant class submarine. Agreements to lease two additional nuclear attack submarines are underway. These leases are significant because nuclear submarines are advanced weapon systems that provide significant geopolitical power as they allow India to complete its nuclear triad. Russia might also allow India to send a team of shipbuilders to witness and assist in the modification of the third submarine. Such experience is beneficial for India's ambitions to build its nuclear-powered submarines. The fact that Russia is prepared to transfer such sensitive equipment to India illustrates the importance it attaches to sustaining its position as India’s primary weapons supplier.

India’s only aircraft carrier, the Navy's crown jewel, the INS Vikramaditya was also supplied by Russia. Originally the Kiev-class ship was named the Admiral Gorshkov. It was extensively upgraded and sold to India for $2.3 billion in 2009. After sea trials conducted with a mixed Russian-Indian crew, the ship was commissioned into the Indian Navy in 2013.

Aircraft

India’s air force also uses large amounts of Russian hardware. They operate 272 Sukhoi Su-30 MKI fighter jets. These fighter jets were developed and put into production per the specifications of the Indian Air Force. This is an example of how Indian orders that deviate from the already established standard of Russian material give an innovative impetus to Russian military research and development. As part of the ‘Make In India’ program, 42 of the fighters were produced under license by public sector undertaking Hindustan Aeronautics Limited (HAL), thus yielding a mutually beneficial deal.

The Indian Navy’s aviation arm also operates Russian planes. They have, from 2004 to 2016, acquired 45 MiG-29K/KUB ship-based fighters for $2.2 billion. Of these fighters, 24 are stationed on the Russian-supplied aircraft carrier INS Vikramaditya. Some of these will now be upgraded to MiG-29UPG versions in Russia and India for slightly under a billion dollar. These aircraft are only those recently purchased. The total stock of Russian hardware is substantially larger. Apart from those mentioned above the Indian Airforce operates another 497 Russian planes.

In 2008, Russia and India inked a $1.34 billion deal for 151 Mi-17 V5 military transport helicopters. This brought the total of Russian helicopters in India’s armed forces to over 400. When all the machines were supplied, India planned to order another 48. In 2014, a deal was signed for India to build the Mi-17 under license on its territory.

Ground material

Pavel Kanevsky:
Trade Uncertainty: Possible Consequences of the Trade Wars for Russia and the World

India's main battle tank is the Russian build T-90. The Indian army first acquired these in 2001 when they bought 310 T-90S tanks, following delays in the manufacturing of their indigenous Arjun tank. Hundred eighty-six tanks were delivered in kits in various stages of completion. These were to be assembled locally with Russian machinery to help India build domestic production capacity. Shifting production to India was made easier by the fact that India had first used the Russian T-72. This model could already be completely produced domestically. Because of the T-90’s 60% parts commonality with the T-72 this simplified training and maintenance. This shows how the long-term and high-level military cooperation between Russia and India leads to a degree of path dependency, as the one purchase facilitates the next.

Follow-up contracts for 677 T-90Ms, worth more than a billion dollar in total were signed in 2006 and 2007 [1]. These were to be manufactured by the Heavy Vehicles Factory at Avadi in India. The first T-90M was received from Russia in a completely knocked-down condition in 2009. In the same year, the first ten license-built tanks were finished at the Heavy Vehicles Factory.

As support for Russian tanks over indigenously produced ones grew in India, more T-90s were bought. In 2012 a $1.5 billion order was placed for another 354 T-90Ms. A year later India's Defense Ministry approved the production of 235 tanks under Russian license for $1 billion. The Indian army is now estimated to own 1650 T-90s in addition to 2410 T-72s. The Indian command plans to control 2490 M-90s by the end of the decade.

In April 2018, Russian and Indian media reported a deal was close to being reached on the purchase of S-400 Triumf surface-to-air missile systems. The S-400 can destroy incoming hostile aircraft, missiles, and drones at ranges of up to 400 km. This is Russia's most advanced air defense system; it is currently deployed in Kaliningrad, Crimea, and Syria. The Economist called it: "one of the best air-defense systems currently made.” For now, the details of the potential deal remain unclear, but it is reported to cover five systems of an approximate worth of $5.5 billion. The deal will likely be finalized before the meeting of President of the Russian Federation Vladimir Putin and Indian Prime Minister Narendra Modi in October 2018.

There have been a plethora of smaller arms deals between Russia and India in the last two decades. They often cover munition that can be used by the Russian weapon platforms owned by the Indians. One of such deals was a manufacturing license worth $470 million, allowing Bharat Dynamics to produce 15,000 Russian Invar anti-tank missiles. India had earlier purchased 10,000 of these missiles which can be used by T-90 tanks. Further examples include the 3M-54 Club/Kalibr missile system which can be deployed on Talwar class frigates, Uran/Kh-35 anti-ship missiles, 3BM42 “Mango” 125 mm smoothbore gun rounds and the Sea Serpent/Novella anti-submarine search and sighting system.

These orders pushed the limit of Russian technological capabilities and therefore fuel innovation. This is not the only benefit. More than Russia the Indian military has extensive contacts and practices with the world’s most advanced armed forces such as the U.S. As a result, the Indian military establishment is more forward-looking than the Russian. Therefore, the systems created for Indian demand are sometimes later acquired by the Russian military when funds become available. For instance, under the rearmament by defense minister Anatoly Serdyukov, Russian versions of the Indian SU-30MKI, MiG-29K/KUB ship-based fighters and Project 11356 Talwar class frigates were acquired.

Cooperation on production and development

In addition to the purchase of off-the-shelf weapon systems and components, India enjoys the closest defense-industrial relationship with Russia of any country outside the former Soviet Union. More than western powers Russia is willing to transfer knowledge and share sensitive technology with the Indians. This has helped India in its efforts to build a domestic armaments industry. Although New Delhi has often requested more substantial transfers while Russia points to business concerns or India’s limited capabilities in high-tech manufacturing as a hurdle to increased transfers, the importance of this relationship is undisputed. In recent years, the military cooperation between India and Russia has reached a new level. The relationship is shifting from a purely supplier-consumer model to a more cooperative paradigm, under which the financial, technological and other project-related risks are shared. Russian-Indian joint ventures have become more common. This is partly because they offer a risk mitigation strategy to protect the market shares of Russian arms exporters. More importantly, the willingness to transfer advanced technology and know-how through joint ventures confers competitive advantages on Russian exporters operating in India. These advantages are likely to last for some time.

In 2009 India became the first country that was not a permanent member of the UN Security Council to build a nuclear submarine. This Ahirant-class submarine was the result of extensive Russian-Indian cooperation. Russia offered to jointly design and built the Indian next-generation submarines. This included a substantial technology transfer. An Indian official said: “The Russian side has offered a transfer of all intellectual property for the design and prototype construction. This will mean that there are also no limits to the number of submarines that can be built under the project...” One other submarine has already been finished, and at least two more are planned.

One of the biggest joint ventures is the $4 billion acquisition of four Grigorovich class frigates in 2016. The Admiral Butakov and Admiral Istomin were almost fully built at Russia’s Yantar Shipyard in Kaliningrad. The two other frigates will be constructed with Russian assistance at the facility of Goa Shipyard Limited in India. The Project 11356 guided-missile frigates are an upgraded variant of the six Talwar-class frigates that Russia built for the Indian Navy between 2003 and 2013. They can be armed with the BrahMos cruise missile system, among other systems.

BrahMos cruise missiles are themselves the product of successful Indo-Russian joint R&D and production. BrahMos Pvt Ltd., an Indian-Russian joint venture company, produces them. They are also deployed on the earlier mentioned Talwar class frigates and submarines and can be used by the SU-30 MKI fighter aircraft. The joint venture has an authorized capital of $250 million with an Indian equity share of 50.5% and a Russian share of 49.5%. This project and the construction of the frigates are part of the defense manufacturing cooperation taking place under the Make in India program.

Make in India aims to increase goods production in India, amongst other things by supporting the domestic production of armaments. This has influenced the defense procurement policy. The program requires Indian components to account for at least 40 percent of the total used to produce indigenously developed equipment, and 60 percent of the equipment is designed outside India. Russia has proved to be a crucial partner of the Make in India program when it comes to defense procurement.

Another deal taking place under this program is the construction of 200 KA-226T twin-engine utility helicopters. Of these, 140 will be made in India. Initially, India announced a tender for this type of helicopter in which the Eurocopter was the main competitor of the KA-226T. However due to the unique characteristics of the Ka-226 and special requests of the Indian side the tender was canceled, and the joint venture was created in 2014 instead. India will also start producing the Russian Mi-17 helicopter after having bought a 151 of them since 2008. The production of both models is planned to reach a combined 400 annually.

The most ambitious shared project is the development of a 5th generation fighter aircraft; the Sukhoi/HAL FGFA. The project was started in 2007 after the success of the BrahMos development. Sukhoi's director Mikhail Pogosyan stated: "We will share the funding, engineering and intellectual property in a 50–50 proportion." Hindustan Aeronautics Ltd, Rosoboronexport, and Sukhoi work together on this project. The single-seat fighters will be assembled in Russia while the two-seaters will be assembled in India. HAL has a 25% share of design and development work including critical software, the cockpit displays, and the countermeasure dispensing system. A sizeable third-country market for this plane is projected. The project has however faced challenges with regard to the deadlines and the projected costs leading to disagreements among the participating companies. In early 2018 it was rumored that the partners were studying an upgrade to the Su-35 with stealth technology as a more affordable alternative to the FGFA. It has also been reported that India has withdrawn from the project. However, all news is based on one unnamed Indian official, and there has been no official confirmation so as of now the final fate of the project remains unclear. This source did not rule out a relaunch of the project once the Su-57 would be fully developed, or the acquisition of the finished Su-57 by India.

1. The T-90M is a vehicle tailored for Indian service, improving upon the T-90S.