January 19, 2016

Deal, yes. But a good deal...?


The economic and infrastructural assumptions at the base of the two big ticket items of the India-France bilateral — Rafale fighter jets and nuclear reactors — are flawed. Hence, even if the deals are signed, they will not bring about a transformation in strategic ties
French President François Hollande’s visit to India is being seen as a turning point of sorts in terms of the India-France ‘strategic partnership’ (whatever that means) but all indications are that it could turn out to be a damp squib. While all heads of state visits will routinely include smaller agreements, the true determinants of success will ultimately be the big ticket items in the pipeline — or so the narrative goes.
There is no doubt that a whole host of limited value (or sometimes valueless) ‘cooperation’, ‘consultation’ and ‘cultural’ agreements will be signed. But even if the big ticket defence and nuclear deals, that are seen as defining the strategic partnership between India and France in the next few decades go through, they will be of limited utility. The problem is that the fundamental economic and infrastructural assumptions of most of these deals are flawed, and the potential for strategic transformation, consequently, remains acutely limited.
Topping the list of French priorities will be the Rafale deal, now drastically reduced from 126 fighter jets to 36 but still proving to be a nightmare to negotiate largely owing to a price blow-out of over 300 per cent. It now seems de rigeur that every time the negotiations run into problems, reports in major newspapers emerge claiming that the deal is “almost done” and will be signed “next week” or “next month”. This has already happened seven times since 2011, and the reports that are emerging now saying that “the deal will be signed next week” are the eight such time to count.
These reports now have to be seen as a sign of desperation — a method of putting pressure on the Government to sign, but clearly such methods seem to have zero effect. The problem is one of price as well as the fact that public opinion and Press reports have next to no influence on the Defence Ministry. This is probably for the best — thankfully, good economics seems to have trumped the Prime Minister’s rather hasty promise to the French President in April 2015. It is possibly safe to assume that the Rafale deal will not happen during the current visit.
The second issue is the nuclear one. France is the world leader in the construction of nuclear reactors and its reprocessing technology has been the subject of the Indian establishment’s ‘techno-lust’ for quite some time now. The building of French civilian reactors in India also dovetails rather neatly into the Indian Navy’s plans to consolidate its submarine fleet into Western single hull designs, hopefully with a French reactor — currently the only Western military design that India has any hope of purchasing.
The India-France nuclear picture, as it stands, is this: In the military area, India is constructing a derivative of the conventional French Scorpene submarine and hopes to translate the expertise so gained into a single hull nuclear submarine fleet. Optimally, this will be mated to a French-designed reactor —a reactor the Indian Navy covets intensely but does not seem to have mustered the courage to ask for directly. The requests that have gone to the French have, at best, been indirect, couched in so much diplomatese as to make their importance go un-noticed.
France is a signatory to the nuclear non-proliferation treaty, which does not prevent the sale of militarised nuclear reactors. The sale of such reactors is, however, prohibited under French law. An Indian request for such reactors, if it were made directly and in simple language, would be couched in Indian ‘exceptionalism’. Essentially, we’d be telling the French: “We’re different, so change your laws for us”.
Aside from the legal problems, there is also the political opposition to such a deal within France as well as the question of international precedent. The French, however, have always been notoriously independent — far more ‘strategically autonomous’ than India has ever dared to be or even dreamed of. The quantity of the order (and, hence, the price of the contract) has to be hefty enough to overcome the institutional resistance within France to the deal.
However, even if the French agreed, their retort will also be one of exceptionalism: “Since we are making an exception for you by selling you militarised reactors, you must exempt France, and no one else, from the civil nuclear liability laws.” This will be akin to France asking for a monopoly in the Indian market.
This could actually be a good thing. It will germinate the seeds of a true strategic partnership, where the viability of the French nuclear industry is dependent on India, and where India’s nuclear well-being is dependent on a trusted ally that has repeatedly refused to sanction India and even thwarted harshly-worded UN resolutions after the nuclear tests of 1998.
However, while such a situation sounds good in theory, it is far from a being workable. India does not have enough money in the defence budget to give the Navy a sizeable nuclear fleet. In the absence of size, a large part of said nuclear fleet will have to be cut up every six to seven years for refuelling the core. This is a cheap option for France, which uses the exact same fuel in its civilian and military reactors and can use the fuel interchangeably.
For India, however, this is a ruinously expensive option. It means either large parts of the nuclear fleet will have to be laid up every year or that India will have to invest in a duplication of the entire fuel reprocessing infrastructure — one for civilian and one for military — and this will be in addition to the military infrastructure set-up needed to re-process bomb-grade fissile material.
In the civilian arena, short of a radical overhaul of Indian power laws and a crackdown on electricity theft, it is hard to see how the expensive French reactors can breakeven on operating and construction costs, or can even be built in sufficient numbers to generate the economies of scale given that military economies of scale cannot apply here (unlike in France), given India’s unique agreement with the International Atomic Energy Agency.
Clearly then, the economics of the two big ticket items — nuclear reactors and Rafale — simply aren’t working out. We may well sign them, but the prospects for ‘strategic transformation’ in relations is non existent — deal or no deal.


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