VZCZCXRO8151
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHDH RUEHHM RUEHLH RUEHLN RUEHMA
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DE RUEHNE #2381/01 3291022
ZNR UUUUU ZZH
R 251022Z NOV 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 8705
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHCG/AMCONSUL CHENNAI 5327
RUEHMO/AMEMBASSY MOSCOW 3796
RUCPDOC/USDOC WASHDC
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC
RHEHAAA/WHITE HOUSE WASHINGTON DC
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE

UNCLAS SECTION 01 OF 03 NEW DELHI 002381 
 
SENSITIVE 
SIPDIS 
 
STATE FOR OES/PCI, OES/STC, OES/SAT, OES/EGC, EEB/CIP, SCA/RA, AND 
SCA/INSB 
DEPT PASS TO USTR CBLISS/MDELANEY/CLILIENFELD/CHINCKLEY/AADLER 
FAA FOR JSLOAN 
USDOC FOR ITA/MAC/OSA/KWELLS/LDROKER/ASTERN 
TREASURY FOR OFFICE OF SOUTH ASIA MNUGENT 
 
E.O. 12958: N/A 
TAGS: PREL TSPA KTIA IN
 
SUBJECT: Commercial Space Launch Agreement Talks Launched 
 
¶1. (SBU) Summary: Assistant U.S. Trade Representative (USTR) for 
Services and Investment Christine Bliss and Indian Space Research 
Organization (ISRO) Scientific Secretary A. Bhaskraranarayana led 
the first round of bilateral Commercial Space Launch Agreement 
(CSLA) negotiations October 27-28 in Bangalore.  ISRO was keen to be 
able to launch U.S. commercial satellites, but expected its nascent 
system to be afforded flexibility with respect to the market 
principles outlined in the CSLA.  ISRO opposed language in the draft 
CSLA text on distorting competition, transparency, and improper 
business practices, but agreed to propose some alternate wording 
after Bliss made clear that the USG would not allow commercial 
satellites to be licensed in the same way as non-commercial 
satellites.  USTR and ISRO have now scheduled a digital 
videoconference for December 8 to continue these talks. ISRO showed 
less flexibility in discussing satellite services, placing more 
emphasis on its responsibility to consumers than to foreign 
operators.  End Summary. 
 
¶2. (U) Other USG delegation members included: Claudio Lilienfeld, 
Deputy Assistant USTR for South and Central Asia; Catherine 
Hinckley, USTR Director of Telecommunications and E-Commerce Trade 
Policy; Steven W. Lett, Deputy United States Coordinator, 
International Communications and Information Policy, DOS; Joe 
Burton, Counselor for Technology and Security Policy, DOS; John 
Sloan, Space Policy Analyst, Federal Aviation Administration; Nicole 
Weber, First Secretary, U.S. Embassy, New Delhi; and Scott Woodard, 
Economic/Political Officer, U.S. Consulate Chennai.  Other GOI 
delegation members included: K.R. Sridharamurthi, Managing Director, 
Antrix Corporation; S.B. Iyer, Consultant; D.R. Suma, Director 
Launch Vehicle Program; T.S. Shoba, Director, Technology and 
Services, Antrix; D. Radhakrishnan, Deputy Director, Launch Vehicle 
Program Office; V. Gopalakrishnan, Policy Analyst; D. Gowrisankar, 
Deputy Director, International Cooperation; Randhir Jaiswal, Deputy 
Secretary (Americas Division), Ministry of External Affairs (MEA); 
and Shri Vipul, Deputy Secretary, Disarmament and International 
Security Division, MEA. 
 
ISRO Keen on Launching U.S. Satellites... 
----------------------------------------- 
 
¶3. (SBU) Bhaskraranarayana explained that the Technology Safeguards 
Agreement signed in July was the first step toward ISRO's goal of 
being able to launch U.S. commercial satellites, indicating that the 
CSLA talks are as important to ISRO as to the USG.  AUSTR Bliss 
acknowledged that many U.S. companies would like to have the option 
of Indian launch vehicles and the USG goal is to balance this desire 
with the continued healthy growth of U.S. domestic launch 
industry--to ensure that U.S. companies can compete on a level 
playing field.  Bhaskraranarayana said ISRO's system is nascent, 
with less than one percent of the potential market, and should 
therefore be afforded flexibility with respect to the market 
principles outlined in the CSLA.  Bliss asked him to clarify if both 
the "PSLV" launch vehicle, which is bidding for international 
projects and has an established track record, and the "GSLV," which 
has had only a few trial launches and is not yet in a position to 
attract international interest, are both nascent and in need of 
flexibility.  But ISRO did not provide a clear response. (Note: 
ISRO--through its wholly-owned commercial arm Antrix--has 
international launch service customers from Argentina, Belgium, 
Germany, Indonesia, Israel, Italy, and South Korea.) 
 
¶4. (SBU) Sridharamurthi explained Antrix's approach to pricing, 
saying it sticks to its principles even while others--Russia in 
particular--are artificially under-pricing.  He said that for India, 
artificially low prices for some customers would create problems 
since all customers would expect the same treatment and, thus, the 
business would not be viable.  So, Antrix charges cost plus a margin 
to fund Antrix's marketing and management costs.  To address risk, 
Antrix and its customers use all available options depending on what 
is available (or amenable to the customer), including commercial 
insurance, self-insurance, and a re-launch guarantee. 
Sridharamurthi noted that the cost associated with a re-launch 
guarantee is built into the launch price, adding that U.S. company 
SpaceX uses this same practice.  He maintained that Antrix is 
compelled to offer a re-launch guarantee because private insurance 
is not necessarily available. 
 
 
NEW DELHI 00002381  002 OF 003 
 
 
...But Opposed to Competition, Transparency, 
and Corruption Provisions 
-------------------------------------------- 
 
¶5. (SBU) ISRO was very opposed to language in the draft CSLA text on 
distorting competition, transparency, and improper business 
practices.  Sridharamurthi said ISRO/Antrix never understood U.S. 
intentions behind the agreement, saying "we would rather not do 
business than create a system that is not sustainable."  DAUSTR 
Lilienfeld and other U.S. delegation members explained several times 
that the U.S. intention is to ensure that both countries adhere to 
the same set of principles in the commercial launch market, 
especially looking to the future when India would be a bigger 
player.  Sridharamurthi stressed that ISRO could only accept global 
principles.  He and Bhaskraranarayana said they could not understand 
why their nascent industry would have to adhere to such principles. 
Bliss made clear that the USG would not allow commercial satellites 
to be licensed in the same way as non-commercial satellites, 
indicating that commercial satellites licenses would either be 
allowed through the completion of a CSLA or after a substantial 
period of time has passed to allow the USG to evaluate ISRO's 
pricing practices and determine that they do not create market 
distortions. 
 
¶6. (SBU) Bhaskraranarayana said the language on improper business 
practices makes it look like the USG suspects ISRO of inappropriate 
actions, stressing that there is no place in a 
government-to-government agreement for language on business conduct. 
 He asserted that ISRO is prohibited by law from the mentioned 
practices (e.g., providing distorting subsidies, inducements, or 
additional services below prevailing rates), so there is no reason 
to include their mention in the text.  The U.S. side pointed out 
repeatedly that bilateral agreements in the trade arena all include 
language on precluding improper practices, and that such language is 
reciprocal in nature and not intended to imply that malfeasance is 
occurring.  The U.S. side did agree to consider revising and making 
more specific the scope of both the definition of improper business 
practices and inducements.  The ISRO side agreed to suggest some 
alternate language.  (Note: USTR and ISRO have scheduled a digital 
videoconference for December 8 to continue these talks.) 
 
Satellite Services Discussions Less Productive 
--------------------------------------------- - 
 
¶7. (SBU) AUSTR Bliss explained that opening up the satellite 
services sector would generate much faster growth.  Hinckley 
stressed the need for greater transparency in the rules governing 
which foreign satellite capacity can be accessed directly by users 
(such as telecom operators, video content providers, direct-to-home 
operators, etc.) in India and which satellite capacity needs to be 
contracted through ISRO.  (Note: Bhaskraranarayana refused to 
include remote sensing in the satellite services discussion, saying 
it is a different issue because it encompasses the sale of imaging 
rather than the sale of capacity.)  ISRO staff clarified that all 
C-band capacity (mainly used for distribution of cable programming 
and for telecommunications applications) can be contracted directly 
with foreign satellites, as long as it has been coordinated with the 
Indian National Satellite System (INSAT).  Ku-band capacity (mainly 
used for Direct to Home (DTH) and Very Small Aperture Terminal 
(VSAT) applications) must be contracted through ISRO, pursuant to a 
2001 Space Policy which is classified by India as "Secret."  The 
ISRO side agreed to provide the USG with a redacted version of this 
policy. 
 
¶8. (SBU) USTR raised the issue of contract durations for foreign 
satellite capacity, and ISRO claimed that the foreign operators are 
the ones limiting the contract terms to a few years and that ISRO 
had to make sure the capacity would be available long term.  USTR 
stressed that foreign operators are not able to properly plan 
because they have no regulatory certainty that they will be able to 
sell the capacity after they make the investment. 
ISRO was very insistent in asking what USTR defines as an U.S. 
company.  Bliss stated that USTR took a broad view of what is a U.S. 
company for trade purposes, but indicated USTR's goal was not simply 
to advocate on behalf of satellite operators, as there were many 
other U.S. companies interested in having direct access to 
satellites in India.  The ISRO side said more than once that the 
 
NEW DELHI 00002381  003 OF 003 
 
 
Indian private sector can access all of the capacity it needs 
through ISRO, implying that there was no need to tamper with what it 
considers to be a finely tuned system. 
 
Comment 
------- 
 
¶9. (SBU) Bhaskraranarayana opened the CSLA talks on a very positive 
note and expressed optimism about what could be achieved, but 
appeared a bit frustrated once he realized it would not be an easy 
process.  He vociferously objected to the USG need to mention 
improper business practices and transparency in the agreement, 
stating that it was "unseemly" and would create a stigma for ISRO. 
India is ranked 84 out of 180 (180 being most corrupt) on 
Transparency International's 2009 Corruption Perceptions Index, so 
the need to mention such practices should not come as such a 
surprise.  While the USG side knew the CSLA talks would be a 
challenge, negotiators were pleasantly surprised by ISRO's 
indication of some flexibility on elements of the draft text.  ISRO 
showed less flexibility in discussing satellite services, dismissing 
the idea that freer access for India's private sector to such 
services might have value and instead placing more emphasis on its 
responsibility to consumers.  No timeline was set for the next 
satellite services discussion. 
 
¶10. (U) USTR's Hinckley and Lilienfeld cleared this cable. 
 
Roemer