India Moves Towards US?

Air India, the Indian state-owned airline, chose Boeing over Airbus for a $6.8 billion order of 50 Boeing aircraft, including eight 777-200, fifteen 777-300 and twenty-seven 787s.

This is significant because of the political signals it sends.  While I hope it is an indicator that supports the Dawn's Early Light paradigm that India will move towards the US in a new strategic partnership (see DEL here, here and here), it could be a placating move, much like the US move to sell 24 F-16s to Pakistan before offering India 126 F-16s.

Joe Katzman at Winds of Change believes that India will ultimately opt for French Mirage 2000 aircraft.  If this is correct, then India would be placating the US and keeping its options open by turning down Airbus after a strong French push in order to then purchase militarily from the French.  The AP piece points out the high stakes diplomacy of the US vs. French dueling Transportation Ministers:

"Earlier this month, Boeing's senior vice president of sales Dinesh Keskar said his company had offered "comprehensive and competitive bids" for the planes and last week, U.S. Transportation Secretary Norman Mineta visited New Delhi and said relations between the United States and India would benefit if Boeing gets the order.

The French government has been lobbying on behalf of Europe-based Airbus, and French Transportation Minister Gilles de Robien was in New Delhi on Monday to meet with India's aviation minister, Praful Patel.

Indian Airlines, the domestic counterpart of Air India, wants to buy 42 planes from Airbus and is waiting for government approval. Robien said he hoped Air India also would choose Airbus."

India, through its domestic Indian Airlines, could still award Airbus a nice contract as India continues its policy of playing all sides wisely to its advantage, but Airbus losing the international flight order to Boeing has to hurt, especially after a string of Airbus victories of late (though this Air Canada purchase is a double blow economically).

Dawn's Early Light, while allowing that this announcement could be a feint towards the US before aligning with France on the defense aircraft order for the IAF, is of the opinion that New Delhi is demonstrating signs of partnering with Sec. Rice in her bid of building a long-term strategic alliance to counter China. 

Mr. Katzman and I are both in agreement that India could turn down the US offer for F-16s over a French or Russian design and still opt for the US partnership.  However, I believe India pursuing this type of blatant self-interested style diplomacy would not cement the type of political, economic and military partnership from the United States that would be in both countries' long-term interests.

Update: Bruce Chang (of Between Worlds and Naruwan Formosa) emails:

"Bill, coming so closely on the heels of Raffarin's trip as this news does, I'd say you're right that there's something goin on there.  Of course, New Delhi may see things differently, but the announcements of the deals is primarily a PR war between France and the US.  I don't doubt that India will continue to purchase equipment wherever it can get it so long as the purchase makes sense.  With regard to commercial airliners, Boeing's offerings clearly make more sense than Airbus, particularly if one is watching one's budget.  With regard to military aircraft, however, I don't know that the US is particularly generous about the latest generation of F-16s.  Even Taiwan has some vintage Mirages, if I remember correctly.  Thus, if the US were selling latest-and-greatest fighters, and China wasn't a threat, they would probably be buying from us.  The French have no problems selling their fighters because they don't expect ever to have to fight China.

Of course, announcements like this always include some political posturing.  I think essentially what India is saying is that they're watching out for their own best interests, but that they like what the US does have to offer.  Remember, all that India has to do is be able to beat Pakistan, just in case."

Update 2: Nitin Pai of The Acorn emails his thoughts:

"Bill,

I just came across this news so my impressions are preliminary.

I think this deal has more to do with bilateral economic relationship rather than with security. That's because the US and India struck a 'open skies' deal just a few weeks ago, and this order is likely part of a tacit quid pro quo. Private Indian carriers can, for the first time, ply the (lucrative) India-US sector. That's a big boost for the Indian aviation sector, the Air India order is a nice thank you note. It has to be tacit, lest the Europeans complain.

As for the F-16s; I wonder if you have read this piece by Kaushik http://www.defensenews.com/story.php?F=796137&C=thisweek
He advocates that India should go slow on the US arms offer. I don't agree with his conclusions, but he makes some very good arguments."

Update 3: Welcome back Winds of Change Monday Wrap-Up.  For more from Dawn's Early Light on India click here ("Japan Takes India to the Dance" and "Internal India Probe Could Delay Defense Contracts"), for China click here and for Japan click here. (May 1, 2005)

Comments

[Will Franklin]

Definitely a significant development.

[The Redhunter]

Bill

I'm just happy to see Boeing get the business. Heavens knows they need it after cancellation of the extended 747 and the Supercruise aircraft.

Nice analysis of the strategic angle.