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FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5687
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RUCNDT/USMISSION USUN NEW YORK 7694

UNCLAS SECTION 01 OF 02 NEW DELHI 000438 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV MOPS MARR RU IN
SUBJECT: THE GIFT THAT KEEPS ON TAKING: GORSHKOV TROUBLES 
PROVIDE OPPORTUNITY TO BURNISH U.S. IMAGE IN DEFENSE SALES 
 
¶1. (SBU) SUMMARY. Russia plans to charge India an additional 
$700 million dollars for the aircraft carrier Admiral 
Gorshkov, the most recent chapter in a saga of price hikes 
and scheduling delays that brings the price of the 
refurbished Soviet-era carrier to a whopping $2.9 billion, 
nearly three times the $974 million originally negotiated by 
the prior Indian government in 2004, and swiftly approaching 
the market price of a new UK Queen Elizabeth-class carrier. 
With over ten years of effort and over $500 million invested, 
pulling out would be politically and financially impossible. 
The Gorshkov debacle, though just one aspect of a broad and 
deep Indo-Russian security relationship, has caught the 
attention of Indian media unlike other defense deals.  The 
contrast of the downward trend in India-Russian defense 
cooperation with the positive trajectory of the U.S.-India 
relationship provides an opportunity to erode the prevailing 
Indian perception of the U.S. as a less reliable partner in 
defense sales.  END SUMMARY. 
 
Gorshkov:  The Gift That Keeps On Taking 
- - - 
 
¶2. (U) In January of 2004, after a decade of hard-fought 
negotiations, Russia and India signed a deal for the sale of 
the 45,000 ton Soviet-era carrier, the Admiral Gorshkov 
(launched in 1982 and decommissioned in 1996).  As part of a 
package settled at $974 million, Moscow agreed to sell the 
ship at no cost to the Indians, on the condition that New 
Delhi refurbish the ship in a Russian shipyard and purchase a 
complement of MiG 29-K fighters and Kamov Ka-31 Helix 
reconnaissance and anti-submarine helicopters, as well as an 
assortment of weapons systems and training programs for 
Indian pilots and technical staff.  The refurbishing and 
outfitting process has been mired ever since in delays and 
price hikes.  Media reports suggest that New Delhi had 
anticipated a cost-escalation of $350-400 million in the 
course of refurbishing the aged ship, but was nevertheless 
stunned in November 2007 to hear the Russian call for an 
additional $1.2 billion.  In February 2008, India dispatched 
a team to the Sevmarsh Shipyard in Russia to inspect the ship 
and to work out the particulars of the renegotiation.  In May 
2008, New Delhi advanced Moscow $250 million to move forward 
on the project.  Today, that initial investment has more than 
doubled. 
 
¶3. (U)  On February 10, just as New Delhi had prepared itself 
for meetings to renegotiate the agreement, Russian Deputy 
Minister for Military-Technical Cooperation Alexander Fomin, 
paired with the Director General of the Sevmarsh Shipyard 
Nikolai Kalistratov, delivered to India the newly revised 
price of $2.9 billion, nearly three times the initially 
agreed sum.  Moreover, the delegation maintained, regardless 
of the outcome of the upcoming round of negotiations, 
Sevmarsh would require an immediate payment of $190 million 
to continue its operations.  Moscow maintains that it will 
meet the delivery deadline of 2012, predicated on New Delhi's 
timely payments. 
 
India "Over a Barrel" 
- - - 
 
¶4. (SBU)  Retired Vice Admiral and former Director of the 
Institute of Defense Studies Analysis C. Uday Bhaskar 
candidly confirmed for Acting PolCouns March 3 the Navy's 
frustration and displeasure.  Few on the Indian side had 
realized the extent to which the vague clauses regarding 
future estimates and open-ended price reevaluations could be 
manipulated by the Russians.  With huge sums of money already 
invested and Russia playing a pivotal role in India's nuclear 
submarine program, New Delhi has little leverage in the 
agreement.  "The Russians have us over a barrel," he 
confessed.  Bhaskar maintained that the Gorshkov is only one 
issue within the broader sphere of Indo-Russian military and 
political relations, and would thus require a political 
solution.  He added, however, that any resolution will have 
to wait until after the Lok Sabha elections because "the 
current government will not touch it." 
 
Grand Plans, Many Problems 
- - - 
 
NEW DELHI 00000438  002.2 OF 002 
 
 
 
¶5. (SBU) The Gorshkov is not the only problem bedeviling 
Indo-Russian defense ties.  The Russian sale of T-90 tanks 
was to include complete technology transfer with most of the 
tanks built in India, but so far none of the tanks have been 
built in India and technology for certain systems is being 
withheld.  The Indian lease of a Russian nuclear powered 
submarine was dealt a serious blow when the submarine 
suffered an accident during sea trials that will result in at 
least a one year delay and possibly cancellation of the deal. 
 
¶6. (U)  India, meanwhile, has continued to develop its 
carrier development capabilities, laying the keel for its 
first indigenous aircraft carrier (IAC) at Cochin Shipyard in 
Kerala on March 2, with an expected completion date of 2014. 
The 260 meter long IAC, built in collaboration with Italy and 
Russia, will carry twelve MiG-29Ks, eight Tejas Light Combat 
Aircraft, and ten helicopters on its 2.5 acre flight deck and 
hangars.  It will be manned by a crew of 160 officers, 1,400 
sailors, and will be powered by four LM2500 gas turbines. 
Eventually, naval sources indicated, Cochin will seek to 
manufacture nuclear powered carriers.  The IAC is slated to 
replace the aging INS Viraat, and will, together with the 
Gorshkov (renamed INS Vikramaditya), form the core of the 
Indian naval fleet.  India currently has no operational 
carriers in service while the Gorshkov renovation delays 
continue and the INS Viraat undergoes major refit. 
 
Comment 
- - - 
 
¶7. (SBU) The Gorshkov debacle, though just one aspect of a 
broad and deep Indo-Russian security relationship, has caught 
the attention of Indian media unlike other defense deals, 
providing an opportunity to further erode the prevailing 
Indian perception that Russia is an old friend and the U.S. 
is a less reliable partner in defense.  Recent major platform 
sales, such as of the C-130J and P-8I, if delivered on time 
and at cost, will highlight the contrast between the downward 
trend in India-Russia defense cooperation with the positive 
trajectory of the U.S.-India relationship.  Post suggests we 
take every opportunity in our public diplomacy to expose this 
contrast.  India has a long memory and changing this 
perception will require creativity, consistent effort, and 
patience.  Retired admiral and Chairman of the National 
Maritime Foundation, the Indian Navy's think tank, provided 
Poloff March 4 a pointed reminder of the old guard 
perspective and how much work needs to be done to change it: 
"If India can forgive the U.S. for keeping its relationship 
with India in the freezer for fifty years, we can forgive the 
Russians for their temporary madness and find an extra 
billion dollars for the Gorshkov." 
 
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