INDIA-USSR: STRAINS IN RELATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88T00096R000300410001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 28
• Document Creation Date: December 27, 2016
• Document Release Date: May 4, 2011
• Sequence Number: 1
• Publication Date: November 1, 1986
• Content Type: REPORT

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Directorate of
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India-USSR: Strains
in Relations
NESA 86-10044
November / 986
ropy 4 5 9
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Intelligence
in Relations
India-USSR: Strains
contributions from
This paper was prepared b Office
of Near Eastern and South Asian Analysis, with
Office of Soviet Analysis.
Comments and queries and welcome and may be
directed to the Chief, South Asia Division, NESA
Reverse Blank Secret
NESA 86-10044
November 1986
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in Relations
Key Judgments Indo-Soviet relations have experienced strains in the two years since Indian
/it/orma[ion available Prime Minister Rajiv Gandhi and Soviet General Secretary Mikhail
as oj7 November 1986 Gorbachev took office. Gandhi's drive to modernize India's military and
was used in this report.
industry by incorporating advanced Western technology and both leaders'
initiatives to reduce tensions with their neighbors have weakened the
convergence of the two countries' strategic interests.
Gorbachev's selection of India for his first visit to the Third World as
General Secretary reflects his interest in preserving the strength of
bilateral contacts. Although Moscow is not complacent about India's turn
to the West, it believes New Delhi's continuing concern about Pakistan and
China will perpetuate close ties to the USSR. But New Delhi, which
welcomes the visit of a major supporter and military supplier, does not wish
to strengthen its ties to Moscow significantly.
Gandhi views the United States and other Western nations-not the
USSR-as natural partners in his effort to transform India into a modern
economic power. The USSR, in his opinion, cannot supply the technology
India needs. Gandhi has accelerated purchases of Western technology,
such as advanced computers and telecommunications equipment, and is
counting on Western help to improve India's capacity to design and
manufacture the military's next generation of tanks, combat aircraft,
helicopters, and warships. Since the beginning of 1985 the share of Indian
military purchases from the West has increased from about 20 percent to
45 percent, while the share from the USSR declined from 80 percent to 55
percent.
Gandhi has used personal diplomacy to try to improve relations with the
United States, Pakistan, and China. For his part, Gorbachev has undertak-
en foreign policy initiatives in Asia that have given New Delhi pause. The
General Secretary's revival of proposals for aMoscow-sponsored Asian
security forum and his offer to withdraw Soviet troops from Mongolia in
the interest of improving Sino-Soviet relations have troubled India. Gandhi
is concerned that Gorbachev's proposals will frustrate India's aspirations to
be the guarantor of security in South Asia and that Soviet overtures to
Beijing will diminish New Delhi's importance to Moscow.
Secret
NESA 86-10044
November 1986
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During Gorbachev's visit New Delhi and Moscow will probably try to keep
the best face on their relationship and protect the gains realized from
several decades of close ties. The Indians will want to protect their access
to Soviet markets and cheap military equipment, but they are likely to
make only token commitments to purchase Soviet technology-more with
a view to satisfying Moscow's interest in appearances than from a desire to
expand cooperation.
The Soviets will work to protect their position as the predominant supplier
to India's public sector and the military while limiting Western inroads.
During the visit Moscow is likely to call attention to its sale of the MIG-29
aircraft to India and to promise to help New Delhi match any AWACS ca-
pability the United States provides Pakistan. Privately, the Soviets may
also dangle offers of SA-Ss, more advanced air-to-air missiles, and MIG-
31 s to demonstrate their interest in a continuing arms relationship.
Moscow may soft-pedal its Asian security proposals during bilateral talks
in order to avoid rufliing Indian political sensitivities. Neither side is likely
to raise the Afghan situation.
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Several developments could lead to a deterioration in Indo-Soviet relations,
although none is likely to lead in the near term to a major problem in
relations:
? New Delhi's continuing disdain for Soviet advanced technology could
increase strains in the bilateral economic relationship in view of the
Soviets' interest in using trade to maintain a close political relationship.
? Moves by the Soviets to extend their influence beyond Afghanistan to
Pakistan or elsewhere in the Indian Ocean region would arouse Indian
sensitivities.
? Moscow's efforts to improve relations with Beijing could lead to a
weakening of Indo-Soviet ties.
? A decision by Moscow to stir up domestic political troubles for Gandhi in
order to divert his Western-oriented drive to modernize India could
strengthen Gandhi's resolve to reduce the Soviet presence in his country.
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Key Judgments
iii
The Foundations of Indo-Soviet Relations
1
Security Assistance
2
Commercial Ties
2
Political Influence and Advantage
4
What Has Changed Under Rajiv Gandhi and Gorbachev?
7
Changing Economic Priorities and Conditions
7
Changing Military Procurement Strategy
10
Diverging Strategic Perceptions
11
Putting the Best Face on Indo-Soviet Relations
12
Potential Pressures
14
A More Aggressive Soviet Role in Afghanistan/Pakistan
14
An Expanded Soviet Role in Asia
14
Soviet Meddling in India
14
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Figure 1
India's Strategic Geopolitical Position
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India-USSR: Strains
in Relations
Close relations with each other have long been impor-
tant to both India and the USSR. Indian Prime
Minister Rajiv Gandhi has said repeatedly that he
values good relations with the Soviet Union, describ-
ing Moscow as a "loyal and trusted friend of India."
He has visited Moscow twice since becoming Prime
Minister in 1984. Soviet Communist Party General
Secretary Mikhail Gorbachev has selected India for
his first venture into the Third World since he took
office. Moreover, India was the only Third World
country, aside from Afghanistan, mentioned by Gor-
bachev in his report to the 27th Soviet party congress
in February 1986.
Nonetheless, there are developments that have
strained bilateral relations. Gandhi and Gorbachev
have taken steps to reduce tension on their respective
borders-Gandhi with Pakistan, Gorbachev with Chi-
na-that threaten to alter their previously compatible
views of the strategic situation in Asia. Gandhi has
also increased New Delhi's efforts to acquire sophisti-
cated military and commercial technology from the
West, a development the Soviets see as a threat to
their longstanding ties to India.
Moscow's efforts to limit US and Western influence
in South Asia by promoting Indian preeminence have
long complemented India's aspirations to regional
dominance. In New Delhi's view, the Soviets have
provided security assistance that has allowed India to
achieve a significant military advantage over Paki-
stan, its most immediate strategic threat. Indian
policymakers also long considered Soviet military and
economic aid a crucial counterweight to US and
Chinese influence in the region. The Soviets view
India's size, location, and regional dominance as a
roadblock to the spread of Chinese influence-their
most immediate concern in South and East Asia since
the early 1960s.
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Indian and Soviet strategic interests began to diverge
with the Soviet invasion of Afghanistan in 1979, 25X1
which was undertaken without India's foreknowledge.
From New Delhi's perspective, Pakistan replaced
Afghanistan as India's western buffer, and its concern
about Soviet intentions in Pakistan increased. From
Moscow's perspective, Islamabad's support for the
Afghan resistance gave Moscow an interest in neu-
tralizing Pakistan that went beyond support for
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Making the best of what they considered a bad
situation, the Indians pressed the Soviets for more
advanced military equipment at reduced prices to
match US support for Pakistan. The USSR and India
signed a comprehensive arms agreement worth ap-
proximately $2.4 billion-the largest in Indian histo-
ry-in May 1980. Since then India has not altered its
policy on Afghanistan. Some Indian officials have
quietly savored the fact that, so long as the Pakistanis
face the Soviets on their Afghan border, Pakistan is
less likely to attack India,
Security Assistance
Arms agreements have been the most visible aspect of
the Indo-Soviet relationship
we estimate that India has
purchased $15 billion worth of defense materiel from
the USSR in the past 25 years, making Moscow New
Delhi's primary arms supplier. India's purchases from
the USSR, which rival those of Libya, Iraq, Syria,
and Cuba, have grown progressively larger and more
sophisticated:
? Agreements in the 1960s totaled just over $1 billion
for the decade, and India became the first non-
communist country to coproduce a major Soviet
weapon system-the MIG-21.
? India escalated its purchases of arms from Moscow
in the 1970s, following its war with Pakistan and the
US-Chinese rapprochement. New Delhi's $3 billion
worth of purchases in this decade included missile
boats, T-72 tanks, and BMP-1 infantry combat
vehicles.
? From 1980 to 1986 the combined value of Indo-
Soviet arms agreements amounted to $11 billion,
and India became the first Third World country to
order Kilo-class submarines, Tarantul-class missile
corvettes, and TU-142 Bear antisubmarine patrol
aircraft. India also acquired coproduction rights for
the T-72 tank and the BMP-2 infantry combat
vehicle.
New Delhi toward the end of the 1970s won increas-
ingly generous concessionary financing, payable in
soft currency, for these purchases. Although the
Soviets offered only 10-percent financing with 40-
percent downpayments in the early 1960s, by the late
1970s they were negotiating 15-to-20-year loans at
2.5 to 3 percent with no downpayment on most items.
Despite these highly advantageous terms, Indian ne-
gotiators typically have pressed for lower prices and
faster delivery.
Indian officials have said publicly that they are
worried about the growing debt owed the Soviets for
military equipment. Annual payments to Moscow for
equipment already purchased totaled an estimated
$600 million in 1985 and are projected to increase to
more than $1.8 billion by 1994.
Commercial Ties
The USSR is India's second-largest commercial trad-
ing partner-after the United States. Two-way trade
totaled slightly less than $3.7 billion in 1985, com-
pared with $4.1 billion for trade with the United
States. The value of bilateral trade grew by an
average of almost 20 percent annually between 1970
and the early 1980s, largely because of growing Soviet
oil deliveries and higher oil prices, but has leveled off
in the last few years as the Soviets have reduced
purchases of Indian agricultural products and con-
sumer goods.
The Soviet Union has become a more important
commercial trading partner for India in the last
decade-even though the rate of growth has leveled
off-as trade with the rest of the world, particularly
Western Europe, has slowed and as oil prices have
declined. Indian exports to the Soviet Union as a
share of total Indian exports increased from nearly
12 percent in the late 1970s to over 20 percent in the
early 1980s. The increase in import share, while less
dramatic, has grown from 7 percent to over 10 percent
in the same period.
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Figure 2
India: Soviet Share of Total Trade,
1970-85
Exports
Imports
Indian commercial exports play an important role in
New Delhi's military relationship with the Soviet
Union. We believe the Indo-Soviet economic relation-
ship calls for an Indian surplus in commercial trade to
be used to cover a portion of New Delhi's debts for
purchases of Soviet military equipment. Indian offi-
cials have indicated that Indian military payments are
taken into account when planning trade adjustments
to achieve an overall balance in India's trade with the
USSR.
The commercial trading relationship consists largely
of the exchange of Soviet petroleum for Indian agri-
cultural products and consumer goods. Our analysis
of Indian and Soviet trade statistics indicates that
crude oil and petroleum products have accounted for
about 70 percent of India's commercial imports from
the USSR over the last three years:
? India's petroleum imports have averaged about
115,000 barrels per day, or roughly 40 percent of
India's net oil imports.
? The Indians paid an average of $32 per barrel for
deliveries of crude oil and petroleum products dur-
ing this period-roughly the world market price.
? Most of the crude oil is delivered from the Middle
East on the Soviet account, while a large share of
the petroleum products has been of Soviet origin.
The Indians have consistently resisted a major in-
crease in the import of Soviet manufactured goods,
contending that their own industry can satisfy most of
these needs. Indian imports of machinery and equip-
ment from the USSR have declined in importance,
accounting for only 15 percent of Soviet exports last
year compared with 65 percent in the early 1970s.
The Soviets are the biggest buyers of a number of
Indian products-about 70 percent of Soviet pur-
chases are manufactured and semiprocessed goods-
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Origins of the Indo-Soviet Economic Relationship
Indian industrialists and economic planners of the
early postindependence period believed that the pri-
vate sector could not survive on its own and would
need strong government regulations and protection.
At that time, most Indian leaders considered central
planning the most e.~cient system to allocate re-
sources and to direct private investment. Strict anti-
monopoly regulations were enacted to avoid great
concentrations of wealth, to ensure that no private
industrialist gained unfair advantage in a particular
sector, and to assure the continued existence of
traditional small industries. Export promotion was
discouraged so that no industrialist gained undue
advantage over his local competition by being suc-
cessful overseas. Foreign investment and imports
were discouraged to avoid competition from large
multinationcil.firms and to promote economic sell=
stVficiency.
Soviet willingness to finance major public-sector in-
dustrial projects stimulated economic cooperation
between Moscow and New Delhi. Machinery and
equipment accounted for one-half to three-fourths of
Indian purchases from the Soviet Union during the
mid-19SOs to the mid-1970s as New Delhi built up its
and some Indian industries are almost wholly depen-
dent on the Soviet market. Almost 90 percent of
woolen knitwear manufactured in Punjab goes to the
Soviet Union. Sales of Indian cosmetics are also
heavily dependent on the Soviet market. The Soviet
Union became the largest customer for Indian tea last
year, when it bought more than 40 percent of India's
exports.
The Soviet Union is not dependent on Indian trade for
any critical imports or markets. New Delhi accounts
for less than 5 percent of Moscow's trade. By a classic
economic division of labor, however, the USSR has fit
the Indian economy into Soviet needs. Moscow ex-
ports machinery and other civilian goods-as well as
weaponry-that it can readily manufacture, but that
it might not be able to sell in more competitive and
more quality-conscious Western markets. In return, it
heavy industrial base. The projects built with Soviet
collaboration now account for roughly 40 percent of
India's steel output, 80 percent of metallurgical
equipment, 40 percent of mining equipment, SS
percent of heavy power equipment, 3S percent of oil
extraction, 40 percent of oil processing, and ]0
percent of power generation. All of these projects are
in the public sector and are considered by many
Indian economists as inefficient partly because of
the poor quality of the plant.
By the mid-1970s, growth in bilateral trade had
nearly stopped, according to US Embassy officials,
because Indian payments for Soviet goods were not
sufficient to sustain growth in their imports of Soviet
goods. Indian man-tfacturers had reached a point
where they could supply much of the country's
requirements for machinery and equipment. The
Soviet Union then agreed to sell India more petro-
leum, enabling economic relations to resume their
expansion. Several increases in the quantity and the
price of petroleum provided Moscow with higher
rupee earnings and stimulated rapid growth in trade
in the early 1980s.
gets industrial as well as low-technology manufac-
tured goods and some raw materials that India can
produce more easily and cheaply than the USSR can.
Since the late 1960s the Soviets have assigned Indian
imports a significant role in filling needs that the
USSR does not have to meet. Moscow would be
reluctant to lose such inputs and will be careful not to
damage the economic relationship.
Political Influence and Advantage
Indo-Soviet political ties have developed less from an
ideological affinity than from the two countries' per-
ceptions that they have strategic concerns in common.
India signed a Treaty of Peace, Friendship, and
Cooperation with the USSR in 1971 that serves as the
basis for their political relations. At the time, New
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Figure 3
India: Trade Relations With the USSR,
1980-94
Estimated Payments for Military Imports 1,
Rupee Trade
India's economic relations with the Soviet Union are
governed by an agreement to balance all bilateral
payments for imports, exports, and debt. All transac-
tions, whether commercial or military, are handled in
Indian rupees through the Indian banking system.
The two states have neither any need to pay nor an
opportunity to earn hard currency. In 1978, Moscow
and New Delhi agreed to make periodic adjustments
in the rupee-ruble ratio on the basis oj'changes in the
value oj'the Indian rupee relative to a speclfed
basket of currencies. The variable exchange rate
helps protect Moscow against a decline in the pur-
chasing power of rupees that India pays under long-
term contracts and jor debt servicing. In July 1986,
the Reserve Bank of India announced a 3 percent
devaluation oj"the rupee in terms oj'the ruble. The
current exchange rate is 13.37 rupees per ruble.
Delhi wanted to ensure Moscow's support during the
war over Bangladesh, and both viewed the treaty as a
response to US moves to improve relations with
China. The Indians frequently observe that Soviet
military and economic support in the 1970s came
without political strings.
Petroleum share
of imports
I ~ ~ ~ ~ I
85 90 94
a May include some unspecified military items.
b Projections, based on CIA estimates, exclude payments
for contracts signed in 1986.
Indira Gandhi took advantage of Moscow's backing to
consolidate her support at home. She used Moscow's
attention and the domestic political support of the
Moscow-oriented Communist parties to bolster her
reputation as a national leader worthy of succeeding
her father, Jawaharlal Nehru.
India has a key place in Moscow's Afghan policy. The
USSR values India as a potential threat to Pakistan
and as the most important Third World country that
has not condemned the Soviet occupation. New
Delhi's refusal to condemn Moscow has helped keep
the Soviets attentive to India's requirements. In deal-
ing with New Delhi, Moscow has minimized the role
of the Afghan war in stimulating Pakistan's military
buildup, denied that it has regional ambitions, and
encouraged the notion that the Soviet presence in
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Figure 4
India: Composition of Trade With the USSR,
1970 and 1985
Exports
1970
Total = US $269 million
1985
Total = US $1,800 million
equipment - I
O[her consumer
goods - 23
Imports
1970
Total = US $136 million
Machinery and Machinery and
equipment - 64 equipment - IS
Afghanistan keeps Pakistan from directing its full Nonaligned Movement-makes its support for Soviet
attention to India. The Soviets have sought to under- positions valuable in securing the backing of other
mine improvements in Indo-Pakistani relations with a countries. The Soviets tout their relationship with
steady stream of articles in leftist Indian newspapers New Delhi as an example of the mutual respect and
and~es warning India of Pakistani duplicity. cooperation possible between nations with differing
social and political systems, an approach that they
undoubtedly believe plays well not only in India but in
We believe that Moscow also sees the Indo-Soviet other Third World states.
relationship as an important means of extending its
influence in the Third World. India's prestige among
developing nations-in particular as a leader of the
Secret 6
- Machinery and
Machinery and
equipment - 12
1985
Total = US $1,887 million
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Moscow has assiduously fostered India's aspirations
to become a major player on the international stage
and has taken care to impress on the Indians the
importance that it attaches to the special relationship:
? The Soviets have maintained a steady stream of
high-level contacts, both for public relations pur-
poses and to assure Indian leaders that they merit
special consultations and briefings.
? Moscow has praised New Delhi's role in the Non-
aligned Movement and lauds Gandhi's leadership in
the Six-Nation Disarmament Initiative by referring
to the group as the "Delhi Six."
? Indian diplomats in Moscow enjoy easy and fre-
quent access to the most important Soviet leaders,
and visiting Indian officials always receive VIP
treatment.
Moscow has exploited close Indo-Soviet relations to
establish a substantial presence in India and to devel-
op an extensive network of personal contacts through-
out the Indian Government and society.Z US officials
estimate that more than 800 Soviets work in India in
an official capacity, including diplomats, information
and cultural officers, trade mission representatives,
iournalists, and Aeroflot representatives. In addition,
we
estimate that about 500 Soviet military personnel are
associated with defense industrial projects and the
maintenance of military equipment in India, although
the Soviets do not provide tactical military training or
advice.
In addition to official representatives, the Soviets have
fostered an extensive and committed pro-Soviet lobby
among Indian politicians, bureaucrats, members of
the press, and public and private businessmen. This
lobby resists any diminution of the Soviet position in
India.
India's widely accepted independence and neutrality
in the superpower rivalry are sufficiently useful that
Moscow tolerates a political climate in which the
Moscow-backed Communist Party (CPI) is largely
ineffectual. According to the US Embassy in New
Delhi, the party is nearly a spent force in Indian
politics, declining steadily in size and influence. Al-
though the Soviets continue to support the CPI, the
Embassy reports that they spend most of their efforts
building ties to Gandhi's Congress Party. When the
CPI had some clout, Moscow brought pressure on it to
restrict its criticism of the government.
What Has Changed Under Rajiv Gandhi
and Gorbachev?
Gandhi has set domestic priorities, and both he and
Gorbachev have undertaken diplomatic initiatives
that place previously compatible Indian and Soviet
strategic interests in conflict. External factors, such as
lower international oil prices and US initiatives to-
ward India, have also contributed to tensions in the
relationship since the two leaders came to power in
1984.
We believe Gandhi's determination to modernize
India rapidly has hurt relations with Moscow. He has
accelerated New Delhi's efforts to acquire sophisticat-
ed Western technology and looked increasingly to the
Indian private sector to assimilate it. He has attempt-
ed to improve relations with Pakistan and Sri Lanka
so that New Delhi's resources can be more fully
devoted to domestic development.
Gorbachev has taken initiatives in foreign policy that
we believe have given New Delhi pause. His revival of
Moscow's proposals for an Asian security pact and his
overtures to improve Sino-Soviet relations are viewed
in India as coming at New Delhi's expense.
Changing Economic Priorities and Conditions
Gandhi has concluded that India must acquire the
advanced computer and telecommunications technol-
ogy he believes is driving a new industrial revolution
in the developed countries~r risk economic decline
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Nawal Kishore Sharma, General Secretary, Congress Party
Parliament. He is the editor of Socialist India magazine.
Sharma, 61, is one of the founding members of the Congress Party's Friends of
the Soviet Union (FSUJ. Sharma is a se(j=described "leftist" member of the
Congress Party, but Embassy officers say he denies that FSU members are
Communists. He claims instead that Indira Gandhi established the FSU in 1981
to undercut Congress Party membership in the Indo-Soviet Cultural Society, a
Soviet front organization. Sharma is a longtime member of the lower house of
Mohsina Kidwai, Minister of Urban Development and of Transport
attended World Peace Council meetings in Hungary and the Soviet Union.
Kidwai, 54, was probably chosen for her post because she represents both Muslim
and women's minorities.
Margaret Alva, Minister of State for Youth ,4ffairs, Sports, and Women
US Embassy o.~cers identify Alva, 44, with the Indian left but not with
Communist arties.
(During March 1985, when she was Minister
of State for Parliamentary Fairs, Alva used her influence to advocate "left
lobby" candidates for three influential Congress Party parliamentary posts. She
visited Cuba in 1983 and was hailed by Fidel Castro as "the second most
important woman in India" (next to then Prime Minister Indira GandhiJ.
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K K. Tewari, Minister of State for Public Enterprises
In March 1985, US Embassy officers described Tewari as a "left lobby" member
of the lower house of Parliament. Before Rajiv Gandhi became Prime Minister,
these officers say Tewari had been active "recruiting"young MPs to sign petitions
that were critical of US foreign policy in South Asia. Tewari has used his current
post to attack Minister of Energy Vasant Sathe for "deviation"from Indian
socialist economic orthodoxy.
P. Shiv Shankar, Minister of Commerce
Shankar, 57, who was Foreign Minister during May-October 1986, quickly raised
hackles in New Delhi cs1'ter his appointment for his indiscreet comments about his
preference for close Indo-Soviet ties over Indo-LIS ties. Amer he lost his Foreign
Ministry post, one Indian newspaper said Shankar "had the disadvantage of being
perceived as too close to Moscow."Gandhi claimed that his appointment of
Shankar to both the Commerce and Foreign Ministry portfolios had proved too
much work for one person.
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in the 21st century, according to US Embassy reports.
He has accelerated purchases of advanced technology
from the United States and other Western states and
reduced government restrictions on India's private
sector. As a result, New Delhi is placing less priority
on the acquisition of Soviet equipment.
New Delhi is enjoying somewhat more economic and
foreign policy maneuvering room as lower prices for
imported oil have helped to ease India's short-term
foreign payments situation in the West and altered
India's balance of trade with the Soviet Union. The
drop in the average price of imported oil from $30 per
barrel in 1984 to $15 per barrel in 1986 will save New
Delhi approximately $2 billion annually-$700-800
million with the Soviets-at the 1985 delivery level.
Low oil prices are likely to swing the balance in Indo-
Soviet trade in India's favor and lead to a decline in
the value of total imports from the Soviet Union in
1986. Total Indian imports from the Soviet Union
during the first half of 1986 are down 40 percent from
the same period in 1985. After protracted negotiations
last spring, we believe that the USSR lowered the
price it charged India for oil-as it did for other
countries outside the Council for Mutual Economic
Assistance (CEMA~-to world market levels. The
change resulted in a 50-percent drop in the value of
Soviet oil sold to India. The savings from lower oil
prices almost certainly have given New Delhi unex-
pected flexibility in coping with its debt to Moscow
for military equipment purchased during the 1980s.
Moscow appears reluctant to let New Delhi use its
current trade surplus to reduce its dependence on the
Soviet Union and is pressing India to purchase addi-
tional goods and military equipment to offset the
impact of lower oil prices. Soviet officials have indi-
cated to New Delhi that Moscow cannot maintain its
levels of imports without additional Indian purchases.
Trade talks in June that the Indians hoped would lead
to a doubling of Indian textile exports to the USSR
over the next few years resulted in little more than a
continuation of current levels. Soviet commercial im-
ports of Indian products for the first half of 1986 are
down 15 percent from the same period last year.
Figure 5
India: Arms Agreements,
1977-86
Changing Military Procurement Strategy
As Gandhi has modernized the Indian military, the
Soviet share of Indian military procurement has fallen
steadily. We estimate that, since the beginning of
1985, the Soviet share of India's purchases of foreign
military equipment declined from 80 percent to 55
percent. The West's share increased from about 20
percent to 45 percent. New Delhi purchased $1.7
billion worth of arms from Western Europe in the 18
months after Rajiv assumed office, compared with
deals totaling $2.5 billion signed with Moscow during
the same period. In recent months the Indians have
discussed with the United States potential purchases
of military equipment valued at several hundred
million dollars.
Gandhi has accelerated purchases of Western military
equipment in order to upgrade India's capacity to
design and manufacture its next generation of tanks,
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combat aircraft, helicopters, and warships. New Delhi
has asked the United States and other Western
vendors to sell prototypes, transfer technology, and
help with the design and development of Indian
equipment for the 1990s and beyond.
The purchase of Western equipment by New Delhi
has improved its leverage in its arms negotiations with
Moscow. Moscow has offered new weapons on even
more concessionary terms since India's turn to the
West for military equipment. India has become the
first foreign customer for the MI-26 heavy-lift heli-
copter and the new IGLA-IM man-portable surface-
to-air missile.
Moscow, according to US Embassy and
~s worried-rightly, we believes
Western offers of sophisticated technical assistance
and equipment for India's indigenously designed
weapons ultimately will reduce New Delhi's depen-
dence on Moscow. West German firms, for example,
have become the chief foreign design consultants for
the Arjun main battle tank, the advanced light heli-
copter, and the light combat aircraft projects. The
Soviets appear to be the leading partner only in a
program to produce a 6,700-ton frigate in the 1990s.
The Indians have said that they hope to slow the rapid
growth of India's armed forces and believe that the
need for large quantities of new Soviet equipment will
diminish as this expansion slows. Gandhi has said he
expects to substitute indigenous production for Soviet
imports as well as to acquire advanced subsystems
and production technology from the West. On the
basis of our estimate of current Indian military
inventories and signed contracts, we calculate the
proportion of Soviet-supplied combat aircraft to fall
from 70 percent of India's active inventory in 1985 to
56 percent in 1995. Similarly, we calculate the Soviet
share of major Indian warships to decline from 70
percent to 55 percent and of armor to remain about
Diverging Strategic Perceptions
Both Gandhi and Gorbachev have sought to reduce
tension on their borders, but each has reacted nega-
tively to the other's actions. Secretary Gorbachev's
Vladivostok speech in July 1986 revived the USSR's
long-stagnant Asian security pact designed to project
Moscow as a political and economic-not just a
military-power in Asia. In the speech Gorbachev
lavished praise on Beijing and offered to discuss the
withdrawal of Soviet troops from the Sino-Soviet
border and Mongolia. The Chinese have reacted
cautiously to Moscow's overtures-so far agreeing
only to reopen border talks broken off in 1978.
Although the Indian press has reported from Moscow
that Gorbachev expects India to play a crucial role in
his proposed Asian security forum, New Delhi has not
been enthusiastic about Gorbachev's initiative. New
Delhi does not welcome Moscow's efforts to bring
South Asia under its security umbrella,
are concerned that Sino-Soviet rapprochement will
diminish New Delhi's importance in Moscow.
the same over the same period.
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Figure 6
India: Arms Inventory,e
1985-95
Legend
^ Indian designed
Western designed
^ Soviet designed,
produced in India
under I icense
^ Soviet designed
We believe that Moscow has tried indirectly to dis-
rupt Gandhi's efforts to improve relations with
Pakistan, the United States, and China by playing on
longstanding worries in the minds of many Indian
officials, politicians, and journalists. The Soviet disin-
formation apparatus in India has placed articles in the
leftist Indian press cautioning New Delhi against
rapprochement with Pakistan. The articles repeatedly
charge that the nuclear weapons program of Pakistan
and its alleged meddling in Punjab are a threat to
India. Moscow has warned New Delhi that its pur-
chase of Western technology is opening the door to
manipulation by multinational corporations that will
exploit India. The Soviets have also tried to discour-
age Gandhi's efforts to improve relations with China
independent of Moscow's lead. The Soviets continue
to characterize Chinese intentions toward India as
Despite bilateral strains, we expect New Delhi and
Moscow during the coming months to try to protect
the advantages they each have won as a result of
nearly 30 years of close ties. New Delhi's preparations
for Gorbachev's visit in late November suggest that
the Indians are intent on protecting their access to
traditional types of Soviet economic and military
assistance. Although New Delhi has welcomed Soviet
officials marketing Soviet nuclear power plants, com-
puters, and telecommunications equipment, the Indi-
ans are unlikely to make more than token purchases
because of their preference for Western technology.
They are, however, likely to sign agreements outlining
continued cooperation in public sectors of the Indian
economy-railways, electrical power, and steel-
where the Soviets have long provided assistance.
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"Doing Business With Weinberger: Dangers To Avoid
... A note of warning should be in order and a
cautious approach called for in any pursuit for high
technology from the USA whether in the acquisition
ojweapons or in the.field ojmodernisation of the
production process necessary for ushering India into
the 21st century. Just as one cannot fjord to put all
the eggs in one basket as jar as arms transfer is
concerned, it is even more true in the case of the
United States, given the record of broken promises
not only in relation to India but also some ojour
neighbors. "
Link magazine
l 2 October / 986
"As a matter of fact, our imperialist enemies, the US,
in the first place, have consistently tried to change the
leadership in order to change the basic policy of our
country. It has tried to do so by cajoling, coercion,
and, in the most recent period, by physical removal.
It is employing the same approach toward our present
Prime Minister. "
The Patriot
8 October t 986
"The Pakistani Army ...has become a kind of
'vanguard' of the US Rapid Deployment Force in the
Near and Middle East. Pakistan has not only become
a forward military springboard in the 'undeclared
war' against Afghanistan but trains and arms terror-
ists of the separatist underground in Punjab. "
Press Trust of India in
The Patriot
? The Soviets scheduled a Festival of India for the
USSR in July 1987 to match the favorable publicity
generated by such festivals during 1985 in France
and the United States.
? Moscow quickly offered to launch additional Indian
satellites following launch failures in France and the
United States that affected the Indian space
program.
? The Soviets have sent technical and military teams
to India in direct response to visits by equivalent US
officials.
The Soviets have said they are looking to increase
exports to India's private sector and are considering
joint ventures with Indian companies. An Indian-
USSR Chamber of Commerce and Industry was
established last year to promote cooperation in the
private sector. Although about 90 percent of India's
exports to Moscow come from the private sector,
almost all of India's imports from the Soviet Union go
to the public sector.
The Soviets have launched a more ambitious propa-
ganda offensive, aimed at discrediting the economic
and technological assistance that India is seeking 25X1
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India by Soviet officials selling equipment with copi-
ous press placements highlighting Soviet technological
achievements. These propaganda pieces impugn the
quality and reliability of Western equipment and
warn of the dangers of economic imperialism and 25X1
political interference that such cooperation
encourages.
We believe that Moscow's moves to counter Gandhi's
turn toward the West demonstrate that it is not
complacent about the Soviet position in India. Never-
Moscow has responded to Gandhi's turn to the
West-and most specifically warming US-Indian
ties-with both old and new tactics designed to
protect its interests in India. The Soviets have point-
edly countered every Western initiative with a Soviet
move:
? Moscow accelerated negotiations on the MIG-29
sale when Gandhi showed an interest in Western
assistance for the development of an indigenous
light combat aircraft.
29 September 1986
theless, the Soviets are probably confident that the
key element in the relationship-India's concern over
the threats from Pakistan and China-remains valid.
The US Embassy in Moscow reports that, following
considerable initial nervousness after Rajiv Gandhi
became Prime Minister, the Soviets have been reas-
sured by the limited results of his efforts to expand
relations with the West and to improve them with
Pakistan and China. We are confident that they will
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continue to seek to protect their role in the Indian
economy and military with offers of additional eco-
nomic aid and advanced Soviet military equipment
such as SA-Ss, air-to-air missiles, and MIG-31s. The
Soviets probably will grudgingly accept some foreign
policy and economic reorientation by Gandhi as long
as they perceive that India's long-term security inter-
ests still tie it to Moscow.
Several potential developments could increase the
strains in Indo-Soviet relations, although none is
likely to lead in the near term to a major problem in
relations.
A More Aggressive Soviet Role in
Afghanistan/ Pakistan
A more aggressive Soviet campaign in Afghanistan-
or increased military and political pressure on
Pakistan-might convince the Indians that Soviet
aspirations in the region were no longer compatible
with India's. From New Delhi's perspective, Soviet
efforts to destabilize or conduct military operations in
Pakistan would violate a sensitive Indian threshhold.
Soviet moves into Pakistan would place Moscow at
odds with India's desire to be the preeminent power in
the Indian Ocean region, and Moscow might come to
be perceived as a significant threat along with
Pakistan or China.
A decision by Gandhi to change his Afghan policy in
response to Soviet involvement in Pakistan probably
would prompt Moscow to reevaluate its arms transfer
policy. Although we do not expect it in the near term,
if New Delhi publicly presses Moscow to accept a
negotiated settlement in Afghanistan-including an
early timetable for the withdrawal of Soviet troops-
and privately considers offering support to a Pakistan
threatened by the Soviets, we would expect Moscow
to be less generous in pending arms negotiations,
deliveries of spare parts, and transfer of production
technology to India
Paradoxically, although it is unlikely, a settlement of
the Afghan issue or the replacement of the Zia regime
by a government less committed to supporting the
Afghan resistance could lead to problems in Indo-
Soviet relations because it would remove the major
irritant in Soviet relations with Pakistan. The closer
ties between Moscow and Islamabad that might ensue
could be perceived by the Indians as a threat to their
security, even though, when forced to choose between
India and Pakistan in the past, the Soviets have
always chosen India. Some Indians might have less
confidence in Soviet support in any future Indo-
Pakistani war.
An Expanded Soviet Role in Asia
We expect Gorbachev's recent campaign to inject the
USSR more forcefully into Asian affairs generally-
along with Afghanistan-to be among the few contro-
versial subjects on the agenda during the Soviet
leader's visit to India. The Soviets probably will press
New Delhi to agree to explore the proposed security
pact. New Delhi, however, is likely to risk Soviet
displeasure and to refuse to agree to include a specific
reference to the Asian security pact in a final commu-
nique, although it may substitute general calls for
greater cooperation among Asian states in the interest
of peace.
Soviet Meddling in India
To the extent that Gandhi improves ties to the West,
particularly the United States, as part of his modern-
ization drive, Moscow may be tempted to stir up
domestic troubles for him. The Soviets might calcu-
late that growing domestic dissent would force
Gandhi to blame the United States-as well as
Pakistan-for his difficulties and to placate his critics
who favor preserving close ties to the Soviet Union.
Should Gandhi's domestic problems worsen, the Sovi-
ets could expand their use of bribes to buy or at least
rent a wider spectrum of supporters in the Congress
Party, the Indian business community, the press, the
bureaucracy, and other opposition political parties,
according to US Embassy reports. The Embassy
claims that pro-Soviet members of Gandhi's Congress
Party are behind criticism of Gandhi's efforts to lift
restrictions on the import of Western technology. In
addition to disinformation campaigns, large Soviet
purchases of tea from the politically troubled Darjee-
ling district of West Bengal and textiles from Punjab
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Coping Without Soviet Military Assistance
Although we do not expect a break in military ties,
we believe India could cope with a cutoff of Soviet
military assistance. A cutoff in the near term would
reduce the operational readiness of India's Soviet-
built equipment, but the Indians could take several
steps to minimize this problem. They could immedi-
ately curtail training and normal peacekeeping opera-
tions and step up the production of spare parts for
those weapons produced under license. New Delhi
could also attempt to purchase subsystems and spare
parts from non-Soviet sources, including Egypt,
Yugoslavia, and North Korea, as well as Western
arms manufacturers that have helped India and other
Third World countries to maintain and upgrade
Soviet-model equipment. Soviet contractual limita-
tions on third-party sales of military equipment
produced under Soviet license probably would limit
Indian options for finding replacement sources.
Over the longer term, the Indians would increase the
number 4` Western-made weapons in their inventory
and would step up indigenous development and pro-
duction of weapons designed with Western assistance.
Alternatively, the Indians could produce fully devel-
oped Western systems to reduce their development
We estimate that it would cost the Indians at least
$I S billion to replace the major Soviet weapon
systems in their inventory with comparable Western
arms. The Indian economy could not sustain alarge-
scale program of Western arms purchases, in our
judgment, unless the government received substantial
financial help from the West and spread the costs
over a long period.
New Delhi's acquisitions of Western arms during the
1980s would not necessarily help India cope with the
immediate effects of a Soviet cutoff By the end of the
decade, India probably will have only an embryonic
collection of new Western attack helicopters, remote-
ly piloted vehicles, light tanks, and minesweepers, in
addition to towed and seU-propelled artillery, diesel
submarines, Mirage 2000 and Harrier fighters, and
maritime patrol aircr~'t. Moreover, some new weap-
on programs utilizing Western technology will still 6e
several years from entering production at the end of
the decade.
costs.
give Moscow indirect leverage to manipulate domestic
events in those two troubled states.
We believe that increased Soviet meddling in domes-
tic matters would strengthen Gandhi's resolve to put
distance between New Delhi and Moscow. Overzeal-
ousness from Moscow would almost certainly damage
its reputation among Indians for reliability and nonin-
terference. Gandhi did not hesitate early in 1985 to
expel Soviet diplomats involved in a covert operation
to acquire information about Indian military procure-
ment plans and contracts with the West. He has also
cautioned Indian editors of the main English-lan-
guage newspapers to avoid publishing blatantly anti-
Persistent Strains in Economic Relations
Difficulties in expanding trade could lead to strains in
the economic relationship. Lower world prices and
ample world supplies of oil and other raw materials
are likely to hold down the value of these Soviet
exports to India. Although the Soviets will press the
Indians to purchase advanced Soviet technology to
make up the shortfall, New Delhi is likely to look to
the West for sophisticated technology and for markets
for its exports to earn hard currency. Moscow will be
tempted to hold the Indians to their commitments to
pay for commercial and military imports, while New
Delhi will look for maximum flexibility. We expect
both sides to engage in protracted negotiations-the
Soviets on deliveries and the Indians on payments-to
Western articles.
protect their interests.
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If the growth in trade is slowed, New Delhi could face
increased indebtedness to the Soviet Union. Soviet
trade statistics indicate that, in the last six years,
India's exports to the Soviet Union exceeded imports
by less than $300 million compared with about $700
million in the years 1974-79. We estimate that annual
payments due to Moscow during 1980-85 for military
equipment alone ranged from $350 million to $600
million compared with $150-350 million during
1974-79. India met or exceeded the level of imports
from the Soviet Union specified in the trade protocol,
while Moscow fell below its quota for purchasing
Indian exports, especially after 1982.
Another Indian complaint is that certain Soviet trad-
ing practices force New Delhi to spend its hard
currency. Moscow imports some Western goods
through Indian firms, paying in rupees, while the
Indians bear the hard currency costs. In addition, the
Soviets reexport Indian goods to the West for hard
currency in direct competition with Indian exports,
undercutting India's hard currency earnings.
Prime Minister Gandhi's emphasis on modernizing
India's economy through increased imports of
Western technology probably is Moscow's major eco-
nomic concern. Indian officials and businessmen have
for several years resisted Soviet pressure for a major
increase in imports of machinery and equipment
because of poor quality.
A source of future friction could involve India's
efforts to export military equipment produced under
Soviet license to other Third World countries seeking
to reduce their dependency on Soviet-supplied arms
and spare parts. New Delhi wants to earn hard
currency for its arms industr
terms and spare
parts are not competitive with European suppliers.
Moscow will not want its client states to arrange
alternative suppliers, however, and could find itself
having to thwart New Delhi's plans.
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