Defence Minister A.K.Antony said that MoD welcomed exercises with the U.S., but that political sensitivities often prevailed in India's decision making over what level of visibility to allow for coverage of the events

154212 5/16/2008 10:24 08NEWDELHI1351 Embassy New Delhi SECRET 08NEWDELHI1321 "VZCZCXRO6033 OO RUEHBI RUEHCI RUEHLH RUEHPW DE RUEHNE #1351/01 1371024 ZNY SSSSS ZZH O 161024Z MAY 08 FM AMEMBASSY NEW DELHI TO RUEKJCS/SECDEF WASHDC IMMEDIATE RUEHC/SECSTATE WASHDC IMMEDIATE 1764 INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE RUEHBJ/AMEMBASSY BEIJING 6908 RUEHLO/AMEMBASSY LONDON 4952 RUEHMO/AMEMBASSY MOSCOW 2676 RUEHKO/AMEMBASSY TOKYO 5656 RUEHGV/USMISSION GENEVA 7735 RHEHAAA/WHITE HOUSE WASHDC RUEAIIA/CIA WASHDC RHEHNSC/NSC WASHDC RUEIDN/DNI WASHINGTON DC RUCNDT/USMISSION USUN NEW YORK 6418 RHMFISS/HQ USCENTCOM MACDILL AFB FL RHHMUNA/HQ USPACOM HONOLULU HI RUEKJCS/JOINT STAFF WASHDC" "S E C R E T SECTION 01 OF 02 NEW DELHI 001351

SIPDIS

E.O. 12958: DECL: 05/14/2018

TAGS: PGOV, PREL, MARR, ETRD, IN

SUBJECT: AMBASSADOR PUSHES INDIAN DEFENSE MINISTER FOR END-USE MONITORING AGREEMENT, ADVOCATES FOR U.S. BUSINESS

REF: NEW DELHI 1321

Classified By: Ambassador David C. Mulford for Reasons 1.4 (B, D)

1. (S) Summary. During a May 14 meeting with Defense Minister AK Antony, Ambassador:

-- advocated for the Sikorsky S-92 helicopter in the VVIP helicopter competition and for Honeywell to be able to compete its F125IN engine for the Jaguar engine upgrade; -- handed over a draft Memorandum of Understanding for the Defense Telephone Link; -- sought clarification on the GOI's position on bilateral and multilateral military exercises; and -- encouraged Antony to help resolve outstanding issues related to the Enhanced End-Use Monitoring Agreement for the VVIP aircraft India has purchased.

Antony:

-- assured the Ambassador that Indian procurements are carried out with full transparency under the auspices of the Defense Procurement Policy; -- said that MoD welcomed exercises with the U.S., but that political sensitivities often prevailed in India's decision making over what level of visibility to allow for coverage of the events; and -- said the EEUM for the VVIP aircraft was a problem for India, both politically and in terms of the inspections it called for, but assured the Ambassador that India shared U.S. concerns over security of the equipment, and called for an early solution to the issue to maintain delivery schedules.

End Summary.

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Procurements Transparent Under DPP 2006

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2. (C) The Ambassador met with Defense Minister AK Antony on May 14 to press forward on several pending defense-related issues. The Ambassador began by advocating for Sikorsky on the bid for India's VVIP helicopter, noting the American company's reputation, partnership with Indian manufacturer Tata Industries, cost competitiveness, and the opportunity to help develop India's indigenous production capabilities. The Ambassador later also advocated for Honeywell to have the opportunity to compete its F125FN engine in a publicly tendered, open competition for the upgrade of the Jaguar engine, emphasizing the superior performance Honeywell was able to demonstrate in a trial at Hindustan Aeronautics Limited in January. Antony assured the Ambassador that all of India's procurements are handled in full transparency under the auspices of India's Defense Procurement Policy (DPP) of 2006. The Defense Minister noted that when there had been procedural lapses in the past in implementing the DPP, such as when Bell Helicopter had been deemed technically non-compliant under shady circumstances, he has canceled such decisions and had the bids re-tendered. He added that there will be an update to the DPP ""within a few months.""

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DTL MOU Delivered

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3. (S) Noting that he was following up on a proposal made when Secretary Gates had visited Antony in late February, the Ambassador handed over a draft Memorandum of Understanding for a dedicated Defense Telephone Line (DTL) between the U.S. and India. Antony took the MOU and passed it to Joint Secretary (Planning & International Cooperation) Kumar, who was seated next to him, suggesting he would consider it and offer a substantive response once he has had the opportunity to review it.

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Exercises Welcomed, Publicity Maybe Not

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4. (C) Citing the success of bilateral and then more recently multilateral naval exercises in the past few years, the Ambassador sought clarity of India's position on holding such

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events. He explained that lately the USG has received mixed signals from the GOI on India's willingness to be seen with us, such as when Antony expressed surprise at the USS Cole being involved in a recent port visit, and the media not being allowed to cover the Cole's community relations events. Antony responded that India is a complex democracy, with various parliamentary committees and political parties with competing interests. So while the Ministry of Defense welcomes the exercises themselves, political tensions can dictate that the events receive less visibility than we may want. ""We don't want to create a political controversy by proceeding in a high profile manner,"" he reasoned, adding ""we have no problem with the exercises as such, but how to highlight them can be a problem.""

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EEUM for VVIP Aircraft a Problem, Needs Early Solution

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5. (C) The Ambassador mentioned to Antony that he had met earlier in the day with Foreign Secretary Menon and discussed the issue of an Enhanced End-Use Monitoring (EEUM) Agreement for India's VVIP aircraft, saying that he found the discussion constructive and that Menon appeared to be looking for a way forward on concluding an agreement. The Ambassador reiterated that the Large Aircraft Infrared Counter-Measures (LAIRCM) equipment on board the aircraft was highly sophisticated, sensitive technology, which under U.S. law necessitated the security arrangements contained in the EEUM. Antony said that the addition of EEUM requirements after a Letter of Offer and Acceptance (LOA) had been signed created problems for India, both politically and with regard to the inspections required. Because these planes would be used primarily by the Indian Prime Minister and President, this case was especially high profile in New Delhi. Additionally, previous reports by the Comptroller Auditor-General to India's parliament, criticizing end-use monitoring clauses from recent sales (Note: Antony was probably referring to the CAG's report on the sale of the USS Trenton, which it had criticized for being limited to ""defensive"" purposes. End Note.) had made it difficult for the Indian government to defend the issue of India's sovereignty with this agreement. However, Antony said, we need to find a solution as soon as possible, so that we could maintain the delivery schedule which has the planes being handed over to India in mid-June.

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Comment: EEUM Still Hot at Political Level

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6. (C) Comment. Antony's take on the EEUM ""problem"" was in contrast to FS Menon's more relaxed approach earlier in the day (reftel), suggesting that while the bureaucrats may be coming to grips with U.S. requirements, at Antony's political level there may still be resistance. Still, Antony did acknowledge India's desire to quickly resolve the issue, and seemed pleased to hear the Ambassador's efforts to reach common ground. He also was pleased to hear that the ""spot"" inspections which were problematic to India could be handled by a mutually agreeable procedure of fixed time meetings. While our legal and procedural arguments seem to be making headway, Antony's remarks were a clear reminder that EUM is still very much a political issue for India.

MULFORD

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