Middle East Report: Indo-Israeli Defense Ties and Corruption Probes

By Dominic Moran and Animesh Roul in Tel Aviv and New Delhi for ISN Security Watch
In a major boost for bilateral strategic ties, the Indian and Israeli defense industries signed two major deals ahead of this month's Israeli-built spy satellite launch. This as scandals involving alleged kickbacks and corruption in Indo-Israeli defense purchases continue to fester.

Defense ties have progressively grown in importance for both sides. India is achieving a significant boost in its high-tech weapons stocks and in aerospace development, while the Israeli defense industry is receiving a welcome boost as it builds capacity and lucrative specializations following the crises of recent decades.

Yiftah Shapir, from Tel Aviv's Institute for National Security Studies, told ISN Security Watch: "The strategic relations between Israel and India have become in the past 15 years very, very deep and very important for both parties.”

Israel recently surpassed France as India's second-largest arms supplier, second only to Russia.

"Israel cannot supply India with major quantities of weapons systems like aircraft and tanks […] but does supply India with modern technology and various strategic assets that otherwise the Indians cannot achieve,” Shapir said.

Twin deals

In one of the largest Indo-Israeli defense deals to date, the Israel Aerospace Industries (IAI) agreed to provide 2,000 of the latest version of its Barak ground-to-air missile at an estimated price tag of US$1.4 billion. Under the terms of the agreement, a third of the value of the deal will be spent or invested in India, where the IAI will make offsetting purchases from Tata.

The Mumbai-based multinational's wholly owned subsidiary Tata Advanced Systems (TASL) is forging a direct partnership relationship with the IAI that is expected to be wide-ranging, involving missiles, drones, radars, electronic warfare systems and homeland security systems – all areas of Israeli defense industry specialization.

Under the deal, which was signed on 27 February, the IAI confirmed that it would develop and manufacture seaborne and shore-based Barak anti-missile systems.

"The Barak has been fielded operationally by the Israeli navy for more than 15 years […] It has been refined over time and it could well be attractive for certain land-based applications, STRATFOR military analyst Nathan Hughes told ISN Security Watch.

The IAI deal comes shortly after a 25 March agreement between the Israel Military Industries (IMI) and India's state-owned Ordnance Factory Board (OFB) for the building of five munitions factories in the next three years in the Indian state of Bihar. The IMI has pledged to utilize both Israeli and Indian sub-contractors in the fabrication of the artillery munitions plants.

The IMI boasts that it is experienced in the production of both "western and eastern calibers," of tank and artillery munitions, an important selling point for India given its long-established mass defense procurement relationship with Russia.

Spy satellites

The Indian defense purchases come as New Delhi moves rapidly to bolster its aerospace ties with Israel. On 20 April, the Indian Space Research Organization (ISRO) launched the IAI-fabricated RISAT-2, India's first radar imaging satellite, utilizing India's Polar Satellite Launch Vehicle.

While ISRO has sought to place emphasis on the utility of the RISAT-2 in disaster relief, it is the defense utility of the satellite that has understandably drawn the greatest attention.

The importance of the satellite lies in the ability of its Synthetic Aperture Radar (SAR) imaging system to produce high-quality images both at night and in any weather. The satellite itself is based on the IAI's TecSAR and will greatly enhance India's ability to track militant infiltration in Jammu and Kashmir and to view movement on the ground in Pakistan.

The strategic ties between Israel and India reached new heights when ISRO launched TecSAR into orbit early last year. The January 2008 launch put India firmly in a lucrative and competitive satellite launch market, currently dominated by countries like France and Russia.

The TecSAR launch was also a major boost for the Israeli spy satellite program, which had previously relied on east-west launches (commercial Eros imaging satellites were launched from Siberia), that allowed only limited payloads to be positioned at the correct orbit.

The Indian purchase of the Israeli satellite is also a signal that TecSAR's operations have been dubbed a success by both countries.

Asked what the benefit of the satellite sale was to India, Shapir said: "They achieve the most advanced technologies […]. They cannot buy these in the US and some of this technology is unique."

The two launches emphasize the growing trust and inter-reliance of the two countries’ space programs and a wider correlation of defense and intelligence interests.

Strategic implications

According to an Asia Times report, it was the absence of a space radar-imaging capacity that prevented India from identifying the movement of Pakistani militants into Indian-controlled Kashmir before the 1999 Kargil conflict. Israeli-Indian defense relations were boosted significantly after Israeli purportedly provided counter-militancy aid in that conflict.

While the decision to go with the Israeli-built system was likely a direct result of development problems with the Indian RISAT-1, the recent Mumbai attacks and growing instability in Pakistan are almost certainly important supporting developments for New Delhi in seeking an immediate SAR capacity.

The RISAT-2 will be able to identify ballistic missile launches but it is likely that the short flight time of missiles from Pakistan would make necessary the development or purchase of integrated ground radar systems and anti-missile technologies. The US may be chary of supporting the development of Indian anti-missile defenses in lieu of major changes in Pakistan.

The two launches could well prove a boon for the Indian space program both in terms of fostering wider international interest in its launch capacities and through the indigenization of advanced Israeli technologies.

Israel's trust in the future stability of India and its reliability as a strategic partner is implicit in the sale of what is a cutting edge spy satellite technology of vital import to Israel in maintaining its strategic edge over regional rivals.

Although the nature of information-sharing is unknown, it is likely that the Israeli and Indian intelligence services have agreed a level of cooperation and interconnectivity in the operation of both satellites. This allows both sides to gain a significant boost in space imaging capacity and, just as importantly, a measure of independence from reliance on the established US spy satellite program.

Shapir made an important point with regards to wider strategic implications: "India's very good ties with Russia on one hand and with Iran on the other could be very important [for Israel] in the future."

Political football

The case of two Israeli firms – IAI and IMI – being involved in supply of weapons as well as industrial tie-ins with Indian firms has come to light at a time when India is engaged in staggered parliamentary elections.

Parties like the Communist Party of India (Marxist) (CPI-M) have sought to make it a polling issue in a bid to galvanize and channel extant popular concern for the plight of the Palestinians and angst at the country's deepening security and military collaboration with Israel.

“It is obvious that political motives would play a critical role in such issues, especially as we know the left parties' antipathy toward anything with a US and Israel tag,” Deba Ranjan Mohanty, senior fellow at the New Delhi-based Observer Research Foundation, told ISN Security Watch.

He added that if the recent IAI deal was fostered by an undisclosed intergovernmental agreement, "then the left parties’ demand to know details about these cases make sense."

On Friday, the CPI-M politburo excoriated the Manmohan Singh administration for “forging a deep security and military collaboration with Israel” and accused it of forging a tripartite axis with the US and Israel through the satellite launches.

Defense Minister A K Antony hit out at the left earlier this month for carping on ties with Israel while courting Israeli investment in West Bengal, which has a left-wing government.

"If the opposition comes to rule, as in the past, there is a tendency to reopen/cancel all deals engaged in by the previous government," former Indian navy officer Vijay Sakhuja, now with New Delhi's Center for Air Power Studies, told ISN Security Watch.

While likely to resonate with supporters, the actual political impact of the CPI-M allegations is likely to be counteracted somewhat by the clear military utility of the Israeli purchases, and the usual popularity of satellite development, particularly in light of the perceived Pakistani threat.

Corruption allegations

Alleged irregularities and a grinding corruption scandal over previous Indian defense purchases bolster the political utility of the Israeli-Indo defense relationship to the Indian left.

"Issues of corruption, incompetence or unfairness must always be addressed, but it is also important for the military to be able to purchase hardware that it needs in a timely and efficient manner," Hughes said.

The Indian defense procurement policy of 2008 mandates an offset clause under which 30 percent of all defense deals of over INR3 billion (US$60 million) have to be reinvested in the country.

Both the IMI plant sale and the IAI Barak deal have courted controversy in India. The IMI deal forgoes the mandatory offset clause. The recent deal with the IAI became the center of a hot political catfight due to a pending Central Bureau of Investigation's (CBI) probe into a previous missile deal between the two countries where there were allegations of massive corruption.

CPI-M General Secretary Prakash Karat, who is demanding an investigation into the deals, said that there was strong reason to suspect that kickbacks and commissions were involved in the recent arms deals with Israel.

The most recent IAI missile deal also reportedly contained a clause for the Israeli payment of a six percent "business charge," which was criticized politically as an illegal commission. Local media alleged that Antony channeled the US$120 million business charge into the Congress election fund.

Rebutting allegations of corruption, Antony said the contract signed by his government was "transparent" in all respects, while pledging to bar the IAI from defense contracts with India for five years if improprieties were uncovered. To Mohanty, “India's arms procurement and decision-making are still done in a non-transparent manner, contrary to the government's claims.

“Not much information flows out on arms purchases,” he lamented.

Sakhuja is more guarded in his observations: “The new government guidelines on procurements including offsets are stringent enough to obviate malpractices,” he said. However, he allowed that “the refinement of such guidelines is a continuous process because the vendors are always willing to proffer to get the deal through.”

Asked for the Israeli angle, Shapir said: "Some money does go to private hands on the way. It is really not a big surprise and I think many [involved] Israelis would tell you: ‘Look, in some countries if you want to sell you need to bribe your way.’ You just need to otherwise you don't sell.”
the report is available at.