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US arms industry gung-ho about India

US firms are rushing to step up sales to India even as Bush Admn struggles to convince Congress to back the N-deal.

india Updated: Apr 11, 2006 11:45 IST

US companies are rushing to step up sales of fighter jets and other weapons to India even as the Bush administration struggles to convince Congress to back a landmark civilian nuclear energy deal with India.

"By any standards, this is an attractive market," said Rick Kirkland, a senior executive with No. 1 US Defence contractor Lockheed Martin Corp., and a frequent visitor to India since 1993, citing the sheer size of the Indian armed forces.

US Defence contractors are clearly eager to "get in on the ground floor of the Indian defence market," said Alan Tonelson at the US Business and Industry Council, adding that the nuclear deal had energised efforts that had been under way for some time.

But analysts and executives say the drive to expand arms sales to India remains complicated by concerns about proliferation; the impact on China; whether growing ties with India could alienate Pakistan, a key ally in the global war on terror; and cumbersome US export regulations.

"This is a very difficult balancing act," said Tonelson.

Indeed, Indian Foreign Secretary Shyam Saran on Saturday warned a decision by US lawmakers to block the nuclear deal could hurt warming US-India ties.

Defence analysts and industry executives said failure to approve the nuclear deal could dampen India's appetite for US weapons but was unlikely to throw US firms completely out of the running to supply new fighters or ships.

Kirkland said US companies saw promising opportunities in India, particularly given New Delhi's growing interest in using Western arms to replace some of the ships, fighter jets and other weapons that it has bought from Russia for decades.

This week, Lockheed executives will fly to New Delhi to deliver in person a bid to replace India's current fleet of Russian-made long-range maritime reconnaissance aircraft with upgraded surplus US Navy P-3 aircraft, a deal that could be worth up to $700 million, Kirkland said.

He said working on that bid had taught Lockheed officials a great deal about the way India buys weapons.

Other competitors for that program include Chicago-based Boeing Co. and Europe's EADS, but nearly all top US Defence contractors are pursuing strategies to get a firm foothold in the Indian Defence market.

One senior executive with Northrop Grumman Corp. said his company was in discussions with Indian officials about their plans to expand their coastal fleet. Bush's nuclear deal with India has "opened a lot of doors," said the executive.

One of the biggest competitions involves India's plan to buy up to 126 new multi-role fighter jets, a contest analysts value at $10 billion. Lockheed is pitching its F-16 fighter jet against Boeing's F/A-18E/F Super Hornet fighter.

Lt. Gen. Jeffrey Kohler, who heads the Pentagon's Defence Security Cooperation Agency and has visited India four times in the last two years, calls working with the Indian military a "very, very important piece" of the US strategy.

Loren Thompson, defence analyst with the Virginia-based Lexington Institute, said billions of dollars of defence contracts could be up for grabs in India in the next decade.

"This could be a significant opportunity for the US defence sector," he said, although he cautioned that India still faces some budgetary constraints, and US officials and lawmakers remain concerned about the effect of improving US-Indian ties on Washington's relationship with Pakistan.

"The simple reality is that many of the weapons India might be inclined to buy could be used against Pakistan," he said.

Washington has said it will sell Pakistan advanced fighter jets, but the market is not quite as lucrative, analysts said.

Lockheed just signed a reconnaissance plane deal with Pakistan that could be worth $250 million, Kirkland said.

John Hillen, a top State Department official, last month highlighted the importance of the US-Indian relationship, comparing President George W. Bush's nuclear agreement with India to Washington's opening to China in the 1970s.

But he said more work was needed to speed up approvals for export licenses and streamline US laws regulating exports of sensitive national security or so-call dual use equipment. Otherwise, US companies could risk losing out on big Indian contracts.

Defence industry executives welcomed his remarks but said turning those words into action was critical.

"The devil will be in the details," said Richard Aboulafia, analyst with the Virginia-based Teal Group.

Kirkland said one key issue would be helping Indian officials understand the importance of assessing the cost of operating and maintaining a weapons system over its life, as opposed to just the initial purchasing cost.

But he said his company's talks with Indian officials about the issue were going well. "The willingness and openness to discuss very tough issues is there on both parts," he said.