India and Russia seal defence deals, hail partnership

NEW DELHI Mon Dec 24, 2012 7:15pm IST

1 of 2. Russia's President Vladimir Putin (2nd L) and Prime Minister Manmohan Singh (2nd R) watch Russia's Foreign Minister Sergei Lavrov (L) exchanges documents with his Indian counterpart Salman Khurshid during a signing ceremony in New Delhi December 24, 2012.

Credit: Reuters/Grigory Dukor

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NEW DELHI (Reuters) - India agreed to buy dozens of Russian military helicopters and fighter jet assembly kits at a summit on Monday, underlining the resilience of ties between the long-time allies despite New Delhi's recent moves to diversify its arms suppliers.

Indian Prime Minister Manmohan Singh and Russian President Vladimir Putin trumpeted their countries' strategic partnership at the summit in New Delhi, and in a joint statement agreed on global issues from Syria's unrest to Iran's nuclear ambitions.

The deals reinforce a long-standing strategic alliance based on shared suspicion of China - even though Russia has latterly been courting India's adversary, Pakistan, and India has been turning to the United States and Europe out of frustration with Russian weaponry.

"Russia is a key partner in our efforts to modernise our armed forces," Singh said in a statement, welcoming Putin as "a valued friend and the original architect of the India-Russia strategic partnership".

Sixty percent of India's arms purchases still come from Russia but it has begun to look further afield in recent years as it seeks to match its growing economic might with military power, and warily eyes its giant neighbour China.

"It's clear that because New Delhi has set a course for diversification of weapons suppliers, the competitive battle is escalating. Russia is ready for this," Russia's ambassador to India, Alexander Kadakin, said in an interview posted on the Russian Foreign Ministry website on Monday.

Despite the feelgood rhetoric at the one-day summit, there are several strains between the two countries, including Russian efforts to improve relations with Pakistan, India's arch-rival.

India has been frustrated by delays in the delivery of a reconditioned Soviet-built aircraft carrier, which is now expected late in 2013, and Russian products have also been plagued by maintenance problems and a lack of spare parts.

Separately, the Russian conglomerate Sistema (SSAq.L) warned New Delhi this month that a lack of progress in a dispute over telecoms licences was putting bilateral relations at risk.

DEFENCE DEALS FALL SHORT

Russian defence industry sources had expected Putin's visit to New Delhi, his first since he started a new six-year term in the Kremlin in May, to produce agreements on the sale of fighter jets and aircraft engines worth more than $7.5 billion.

Monday's deals appeared to fall short of that sum, however.

Kremlin sources said Russia would sell India 71 MI-17 V-5 military helicopters worth $1.3 billion, and technological kits worth $1.6 billion to assemble 42 Sukhoi SU-30MKI fighter jets. The original deal for the jets was agreed last year.

Russian defence industry sources and media reports had said a multi-billion-dollar deal for the long-term supply of nearly 1,000 warplane engines could be signed during the visit or had already been signed in October.

But Sergei Chemezov, head of the state conglomerate Russian Technologies, which includes the arms exporter Rosoboronexport, told reporters on the sidelines of the meetings in New Delhi that work on contracts for engine supplies was still ongoing.

Separately, Russian Direct Investment Fund (RDIF) - a sovereign wealth fund - and the Indian lender State Bank of India (SBI.NS) agreed to invest up to $2 billion jointly to promote trade and economic cooperation projects.

Putin announced record arms sales this year but wants to mitigate the loss of deals with Libya and of uncertainty about the future of long-time client Syria on the defence industry, an important source of political support for him.

Putin, whose country took up the presidency of the G20 this month, also hopes for strong growth in overall trade with India.

(Additional reporting by Steve Gutterman in Moscow; Writing by John Chalmers; Editing by Kevin Liffey)

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