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Notwithstanding some bitterness of the Russian
vodka, the Indian side finally agreed to pay this
price after being told by the Prime Minister’s
Office that the high level of friendship with
Russia has to be maintained and an agreement must
be worked out, preferably before Dr Manmohan Singh
left for Moscow Dec 6th.
That was indeed done on the morning of Dec 4th,
The Navy Day, with a visiting Russian delegation.
The Indian side however asked for some additional
onboard equipment at least as part of the increased
price, but within that price, which the Russians
agreed to. Details of that were still being finalized
with the Russians 10 days later in the Indian
capital.
The original agreement with the Russians signed
in 2004 was for $ 974 million for the carrier’s
refurbishment and upgradation, Gorshkov itself
being offered free of cost. The delivery was then
set for 2008.
In 2007, Rosoboronexport, the sole Russian agency
responsible for selling and exporting weapon systems,
indicated a delay in the delivery of the carrier,
and in 2008, demanded an additional $ 1.2 billion
in writing saying it had made mistakes in calculations
and that it had to many more miles of wiring for
instance than it had originally thought.
After that, during the negotiations to settle
the dispute arising from this new demand, Rosoboronexport
representatives mentioned varying figures asking
for still more money, taking the cost of the carrier
to $ 2.9 billion. Rising prices of oil, which
is consumed during the trials, was among the reasons
quoted for this second revision of the Gorshkov
cost.
The Indian side had agreed to consider the written
request for additional $ 1.2 billion but declined
to entertain any thing above that.
Well placed sources from Moscow told India strategic
that the Russian Government asked Rosoboronexport
to come down to $ 2.4 billion, and it also submitted
a letter in this regard to the Indian Navy’s
negotiating team.
Finally, India agreed to pay a total of $ 2.3
billion but with a request for some additional
equipment, and the Russians agreed to that. India
has also agreed for delivery of the carrier, which
the Navy urgently needs, by 2012 without any penalty.
It may be noted that the Russian Government paid
the Sevmash shipyard, which is doing the repair
work on Gorshkov, $ 250 millions as credit to
ensure that the work did not stop. India had Paid
$ 600 million at the time of the contract, and
another instalment of $ 122 million in August
this year.
India has already paid more than $ 600 million
for 16 Mig 29K carrier borne aircraft, the first
four of which have been delivered at the INS Hansa,
the naval base in Goa. The Navy has asked for
29 more Mig 29Ks, the proposal for which has been
cleared by the government and an order is likely
to be placed soon.
These deals, although related to the Gorshkov,
are separate and the Mig 29K aircraft will operate
from both the Gorshkov and the India’s first
indigenous aircraft carrier now under construction
at the Kochi shipyard in southern India.
There has been no official confirmation of the
price from either side but Russian sources said
that the agreed price was “close to what
the Indian Navy wanted.”
The Indian Prime Minister’s delegation did
announce though from Moscow that the agreement
over the price had been reached.
We do not know if the two sides shared some vodka
over the deal, but there is goodwill between the
negotiatiors on both the sides following the conclusion
of the price.
Russia cannot ignore India, as it is a big arms
market needing to replace most of its Soviet vintage
systems. And Moscow’s traditional friendship
is literally like ‘From Russia with Love’
which New Delhi will never forget.
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