PUTIN: "MANY GUESTS IN MOSCOW, BUT ONLY ONE INDIA"

C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 003810

SIPDIS

E.O. 12958: DECL: 05/16/2015
TAGS: PREL ENRG ETRD KNNP TSPA RS CH IN
SUBJECT: PUTIN: "MANY GUESTS IN MOSCOW, BUT ONLY ONE INDIA"

REF: A. NEW DELHI 5978


B. NEW DELHI 3652

C. NEW DELHI 3653

D. NEW DELHI 7733

Classified By: Charge Robert O. Blake, Jr., for Reasons 1.4 (B, D)


1. (C) Summary: According to our Indian contacts, President
Putin offered India a range of defense and energy cooperation
proposals during PM Manmohan Singh's May 8-10 visit to
Moscow, renewing top-level bonhomie after his scratchy visit
to New Delhi last December. Commenting on Putin's offer to
look into India's request for four additional nuclear
reactors and nuclear fuel, jointly produce MIG-29s, begin a
Joint Working Group for economic cooperation, and discuss
high-tech cooperation on a global navigation system, NSA MK
Narayanan called the visit "far more productive than
anticipated." The bulk of the Russia-India relationship
continues to gravitate around defense and energy cooperation,
but the former remains bogged down in details over
Intellectual Property Rights (IPR) while the latter continues
to face obstacles over Nuclear Supplier Group (NSG)
restrictions. India-Russia dialogue is set to continue when
President Kalam visits Russia at the end of May and at the
first ever stand alone meeting between the Foreign Ministers
of India, Russia and China on June 2 in Vladivostok. By
playing such close attention to the PM at a time when the
leaders of 53 other countries were also in Moscow, Putin
appeared to signal that he does not want to let India's
growing ties with the US and other partners overtake old
fraternal relations with Moscow -- but the reality is that
others are catching up. End Summary.

Priority on Nuclear Energy
--------------


2. (U) With energy a major focus of the meeting, the Indian
PM reportedly emphasized New Delhi's request for expanded
nuclear cooperation and assured Putin that the GOI would soon
pass export control legislation to address proliferation
concerns. According to press summaries of his meeting, India
would like four additional 1000 mega-watt nuclear reactors
for its Koodankulam nuclear power station and more enriched
uranium for its US-built Tarapur reactors. (Note: Putin
rebuffed the Tarapur fuel request in December 2004, citing
NSG restrictions. Russia is currently assisting with two
such nuclear reactors, made possible because the agreement
was signed in 1989 before Russia joined the NSG in 1992.
These reactors are two of the five Indian facilities under
IAEA safeguards (Ref A). End Note).


3. (C) Stressing India's role as a responsible nuclear power,
the PM briefed Putin on a major piece of export control
legislation that was before Parliament. Singh asserted that
the "Weapons of Mass Destruction and their Delivery Systems"
legislation (Ref B),subsequently passed on May 13, would
increase international confidence in India's export controls,
thus paving the way for greater nuclear cooperation.
According to the Tribune News Service, NSA Narayanan
speculated that "concrete results encompassing cooperation in
nuclear energy are expected soon."


4. (C) One week after the PM-Putin meeting, Foreign
Secretary Saran told the Charge that although the Russian

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president made no commitment, he agreed to review proposals
for nuclear cooperation and promised to give the matter his
"individual attention" (Ref C). While pessimistic about the
chances that additional Russian reactors could be supplied
under current restrictions, Dr. Nandan Unnikrishnan, a
Russian expert from the Observer Research Foundation (ORF)
attributed this changed Russian position in part to the
civil-nuclear dimension in recent US initiatives and observed
that "having the Americans in the nuclear market has given
the GOI room to negotiate."


5. (C) Energy is also likely to figure at a meeting of the
Foreign Ministers of India, China and Russia on June 2 in
Vladivostok, a trilateral idea Moscow initially proposed in

1998. Briefing the press on his way home from Russia, the PM
stated that "There are immense possibilities of cooperation."
A major motive for this meeting, ORF's Unnikrishnan
asserted, is the fact that India and China are the world's
most quickly growing energy consumers, an area where Russia
is a key player. Therefore, he added, it is in their mutual
interest to avoid competing over Russian energy, which would
lead to higher prices in both countries.

Defense Cooperation and Continuing IPR Problems
-------------- --


6. (C) Emphasizing to the PM that "Russia has always stood
by India and will always stand by India," Putin reportedly
pushed his offer for joint production of the MIG-29,
presumably to counter the US offer to co-produce F-16 or
F-18s with India. He dropped a key clause on retroactivity
from the IPR agreement, which the two sides have been unable
to agree on after Putin first offered India "a role" in
producing MIG-29s during his December 2004 visit (Ref D) and
which India would not accept. Dr. Anuradha Mitra Chenoy, a
Russian studies professor at Jawaharlal Nehru University
(JNU),told Poloff recently that the US offer "might have
pushed it" (the Russian offer),but recalled that India and
Russia have a history of coproduction, including T-72 and
T-90 tanks, the SU-30 fighter aircraft and most recently, the
BrahMos cruise missiles. Sixty to seventy percent of Indian
military hardware still comes from Russia, she added,
although India complains about delays in production, lack of
spare parts and the difficulties of servicing broken
equipment. Russia made the offer because it "doesn't want to
miss out" on the defense deals, she speculated. MEA Joint
Secretary (Americas) S. Jaishankar likewise indicated to

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PolCouns that New Delhi saw the US multi-role combat aircraft
offer as a key driver of the Russian's new MIG-29 proposal.

GOI Resists Restrictions on Third Party Equipment
-------------- --------------


7. (C) When Putin dropped the remaining retroactive clause
obstacle to the IPR agreement, Indian Ambassador to Russia
Kanwal Sibal reportedly concluded that Russia had "broadly
agreed to a draft agreement". He asserted that it would be
signed shortly and "significantly upgrade the level of
defense collaboration." Sujan Dutta, who covers military
affairs for the "Telegraph", told Poloff that one week later,
the draft was returned to India for stronger protection in
the areas of co-production arrangements and third party
upgrades. According to Dutta, the first part of the
agreement gives Russia veto power over any other Indian
company that makes parts for the co-produced military
hardware. Dutta suggested to PolOff that this could limit
India to buying spares only from Russia. The second clause
restricts India from upgrading Russian hardware with third
party equipment without Russian approval. Russia is
apparently concerned about Israeli upgrades to their hardware
and the resulting loss in market share. According to the
"Hindustan Times", the GOI has called this "restrictive,"
while Moscow says this agreement is a precondition for all
future deals.


8. (C) ORF's Unnikrishnan pointed out that India used to
sign IPR agreements with Russia on a contract-by-contract
basis and have signed previous IPR agreements with the US,
leading him to conclude that India will eventually sign one
with Moscow. Calling this issue "teething problems" for an
emerging global power, Unnikrishnan predicted that the
signing would likely take place during Manmohan Singh's next
state visit to Moscow, expected in November.

Restoring Economic and Technology Ties
--------------


9. (U) In an attempt to revive the economic and trade
relationship, the leaders set up a Joint Working Group (JWG)
to discuss banking issues and measures to increase trade.
NSA Narayanan reportedly said that the JWG was set up because
"economic relations do not mirror Indo-Russian strategic
relations". Noting this gap, Dr. Unnikrishnan stated that
the Indian-Russian economic relationship offers the most room
for growth. Although it has lagged behind since the end of
the Soviet Union, he believes both leaders have realized that
any "strong relationship must have an economic underpinning"
and that India could assist Russia in agriculture, small
scale business, IT and the diamond industry. Putin and Singh
also reportedly finalized an agreement to aid Moscow's entry
to the WTO. According to NSA Narayanan, Petroleum Minister
Mani Shankar Aiyar will visit Moscow in late May to explore
opportunities to meet India's skyrocketing energy needs
through increased investment in the Sakhalin 3 and Kurmangazy
oil fields. In the area of space, Putin sought Indian
assistance in setting up a global navigation "Sputnik" system
as a rival to the US Global Positioning System.

Comment
--------------


10. (C) Indo-Russian summits inevitably call up references
to their historically special relationship, but Russia's
attitude towards India has changed since Putin's visit last
December. After the parade of government leaders that have
come through Delhi recently, Russia has taken note of India's
growing number of competing "strategic partners." It may be,
as Dr. Unnikrishnan put it, that "the Russian-Indian
relationship was running into a glass ceiling, which Russia
wants to transcend." Putin's proposals on nuclear and
defense cooperation look like catch-up after recent US
activity in this area. India also seems to be using growing
US-India ties to its advantage with Russia, demonstrated by
the PM's ability to spin the export control legislation,
which was primarily drafted to address the requirements for
the Next Steps in Strategic Partnership (NSSP) and the UNSCR
1540, to push for greater nuclear cooperation with Russia.


11. (C) Nonetheless, these good intentions do not portend
clear sailing. The IPR agreement is the clearest
manifestation of the difficulty the GOR and GOI face in
coming to concrete agreements that accommodate the shifting
power equation of their relationship. The three-way meeting
in Vladivostok is symbolically significant as the three
countries' first stand-alone meeting, driven in large part by
their mutual interest in energy. Putin reportedly remarked
at the VE meeting that "There are many guests in Moscow, but
only one India." From the Delhi standpoint, Putin seems
increasingly aware that if Russia does not keep up the
momentum in its ties with New Delhi, then India's attention
will turn elsewhere.


12. (C) However, New Delhi's shifting priorities were also
reflected in the great importance that Indian commentators
have attached to what we understand was a second-long
encounter between the PM and President Bush. For many in New
Delhi, the President's reported expression of appreciation
for Indian democracy and his anticipation of a successful
Manmohan visit to Washington in July was as important as the
perceived restoration of good vibes around the Indo-Russian
relationship.
BLAKE