Why the Rafale Deal, as Predicted, has Blown Up in The PM's Face

Rajiv Gandhi “paid the political price…with regard to the Bofors gun. Modi will have to carry the can for this Rafale transaction—a boondoggle in the making …[that] can mar Modi’s prospects.” These were the concluding lines in an op-ed  titled “Impatience seals worst possible defence deal” in the New Indian Express of April 17, 2015. That was 12 days after the prime minister, without prior approval of the Cabinet Committee on Security (CCS) or notice to the then Foreign Secretary S. Jaishankar accompanying him on the state visit, and to the great surprise and delight of the French President Francoise Hollande, announced in Paris the buy of 36 Rafales off the shelf. Subsequent writings, including exclusively in this blog, had talked of Rafale forever sullying the ruling BJP’s reputation much as Bofors has, over time, come to signify  Congress party corruption.

(It was critical writing such as this that, incidentally, led to my fortnightly column getting terminated in that paper “edited” by a BJP-RSS sympathizer. Then again, during the Manmohan Singh years, my campaign against the civilian nuclear cooperation deal with the US resulted in the closure of my column in the Asian Age, and why no major Indian daily newspaper has cared to publish my op-eds. But now with the Rafale issue publicly blowing up in Modi’s and the BJP government’s face, the horde of establishment-friendly commentators in the print and electronic media will rush in to still only mildly criticize Modi’s conduct of India’s foreign and military policies which, in truth, are tanking!!)

This brings us to the splash over the selection of Reliance Defence as the Indian strategic partner to fulfill the offsets obligations under the Rafale contract caused by Monsieur Hollande’s revelation to the French investigative internet news outlet, Mediapart, on 21 September.  “We didn’t have a say in that [selection],”Hollande stated. “It was the Indian government that proposed this service group (Reliance), and Dassault who negotiated with [Anil] Ambani. We didn’t have a choice, we took the interlocutor who was given to us.”

Just days before defence minister Nirmala Sitharaman had waxed categorical on this issue. “Isn’t that a decision for a commercial enterprise [the Rafale-maker, Dassault Avions] to take on their own?”, she had asked the Indian Express interviewer with rhetorical flourish and, presumably, with her eyes flashing fury (as television usually shows her in high dudgeon, addressing the Press). “I have nothing to do with it, I have not prompted them, not led him, not told them, I have not instructed them, I have not done any match-making whatsoever, so why am I be [sic] worried by what he would tell me? It may be A, B or C, it may be 70 different partners, it may be buying a product, they may be investing, it may be buying a service, so where am I in it? And how can I tell him you can say this and you cannot say that. Whatever he tells, and claims about obligation fulfilled, I have to hear them out.” [Grammar-wise this is a really mixed-up statement featuring  personal and impersonal nouns, and singular and plural clauses — all referring to Dassault!]

Well, both Hollande and Sitharaman are right! How can this be so? Well, the two apparently clashing views can be squared thus:

Hollande’s ejaculation was in self-defence. His pretty girl friend and cinema starlet, Julie Gayet, it was revealed by the media as having her film — some eminently forgettable movie financed by the Anil Ambani at a time when his Company, Reliance Defence (RD), itching to get into the lucrative defence industrial business, was angling to be the main offsets partner on the Rafale deal. This was at a time when Anil, perhaps, had an inkling of the truncated Rafale deal in the offing.  Hollande’s interest in clearing his name of the taint of possible quid pro quo by shifting the blame for the offsets partner selection by Dassault to the Indian government, is obvious enough. That doesn’t, however, make it a lie.

Equally, Ambani’s commercial interest to get a slice of the Rafale transaction, which one can speculate, drove him to fund Hollande’s mistress’s movie as a means preemptively to  remove any resistance from official French quarters, is also quite plain.

Sitharaman is also right in claiming that GOI had absolutely no formal role or say in Dassault’s selecting RD. She can easily back up her contention, secure in the knowledge that there’s not a shred of paper anywhere in GOI/Ministry of Defence and in all the correspondence between MEA and the Quai d’Órsay (French Ministry of Foreign Affairs in Paris)  leading up to the PM’s visit that hints at any such sideways suggestion made by Delhi. So, both Hollande and Sitharaman are in the clear.

That turns the spotlight on the Man in the ring — Modi. Could it not be possible that the Indian PM after announcing the Rafale deal, offhandedly and informally mentioned to Hollande in their one-on-one meeting in the Elysee Palace that the French President may care to consider Anil Ambani’s Reliance Defence as possible offsets partner for Dassault? This mere mention of RD by Modi must have been enough for Hollande to assert, as he has that  “We didn’t have a say in that [selection]. It was the Indian government that proposed this service group (Reliance), …. We didn’t have a choice, we took the interlocutor who was given to us.” Because to Hollande Modi was the Indian government, and he was well aware and as he implied to Mediapart, France was coming up trumps in this transaction, What it had ostensibly lost monetarily by a reduced order of aircraft was being more than made up by the entire Indian order of 36 high-value Rafale aircraft being manufactured in France, giving Dassault’s production line an extended run.

There was, moreover, the gleam of the real goldmine for the French aerospace industry in terms of the exorbitantly-priced air-to-air Meteor and air-to-ground Scalp missiles, and  spares and servicing support assuring 75% serviceability beyond the first 10-years of the Rafale’s presence in the IAF fleet (as mandated in the contract). This last by itself would amount to over $50 billion, according to a former senior IAF officer I quoted in my April 17, 2015 piece in the New Indian Express. Given the routine cost escalation in the armaments field, that sum will go up by multiples for every additional five years of service after 2032 (all 36 Rafales are to be inducted in IAF by 2022)!

There’s absolutely no doubt that Hollande must have promptly written an aide memoire after his meeting with the Indian PM, detailing Modi’s wishes and the benefits to France from following through on his suggestion and installing RD as offsets partner.  Except, the French government will never part with this piece of paper or otherwise refer to any documents regarding follow-up action to get Dassault to select Anil Ambani. In the event, whether Hollande was also persuaded by Madame Gayet’s filmy windfall is besides the point, even irrelevant.

Modi is not personally corrupt. No. But he has an interest in paying back his well-wishers among the Gujrati moneybags who have funded his political ascent, chief among them owners of the Adani Group and the Reliance Group. He must have reasoned that helping Anil Ambani start up a high-end defence industrial firm by feeding it custom would ultimately benefit the country by installing new source of economic growth, technology innovation, and employment generation. It may be recalled that it was after Modi’s trip to Australia and his meeting with the Aussie PM Malcolm Turnbull in April 2017 that, as Australian newspapers and media have hinted, the Adani Group’s $17 billion investment in a port and coal mines in Queensland began getting traction. According to a source in government, Gautam Adani, founder of the Adani Group, was the only other person present for at least a part of the Modi-Turnbull meeting in Canberra.

(Bharat Karnad is a Research Professor in National Security Studies at the Centre for Policy Research, New Delhi)