U.S. OKs record $2.1 billion arms sale to India

WASHINGTON Mon Mar 16, 2009 10:53pm EDT

A member of the public walks past models of Boeing military aircraft at the Australian International Airshow in Melbourne March 10, 2009. REUTERS/Mick Tsikas

A member of the public walks past models of Boeing military aircraft at the Australian International Airshow in Melbourne March 10, 2009.

Credit: Reuters/Mick Tsikas

WASHINGTON (Reuters) - President Barack Obama's administration has cleared a $2.1 billion sale to India of eight Boeing Co P-8I maritime patrol aircraft, the largest U.S. arms transfer to India to date.

The State Department said in a March 12 notice to the U.S. Congress that it would license the direct commercial sale having factored in "political, military, economic, human rights and arms control considerations."

The Indian navy was the first international customer for the P-8, a long-range maritime reconnaissance and anti-submarine warfare aircraft.

Boeing says it can operate effectively over land or water while performing anti-submarine warfare; search and rescue; maritime interdiction; and long-range intelligence, surveillance, target acquisition and reconnaissance.

India chose it over several rivals, including EADS Airbus A319, according to Flightglobal.com, an online aviation-trade publication.

Boeing has said it would deliver the first P-8I within 48 months of a contract signing, and the remaining seven by 2015. Derived from Boeing's commercial 737 airframe, its is similar to the P-8A Poseidon that Boeing is developing for the U.S. Navy.

In January 2008, Washington and New Delhi sealed India's previous largest U.S. arms purchase -- six Lockheed Martin Corp C-130J Super Hercules military transport planes valued at about $1 billion, including related gear, training and spares.

Boeing's P-8I contract is with the Indian Ministry of Defense. The sale includes associated support equipment, spares, training and logistical support through June 2019, the State Department said in its notice.

It said direct arms-trade "offsets" were expected to include engineering service, manufacturing and integrated logistics-support projects totaling $641.3 million.

Lockheed and Boeing, respectively the Pentagon's No. 1 and No. 2 suppliers by sales, are among warplane makers vying to sell India 126 new multi-role fighters in a deal that could be worth more than $10 billion.

Boeing is offering its F/A-18 E/F Super Hornet. Lockheed is pitching its F-16. They are competing with warplanes built in Russia, France, Sweden and by a European consortium.

One stumbling block for Boeing and Lockheed has been Indian qualms about standard "end-user" pacts designed to prevent leakage of sensitive U.S. technology to third countries. Such agreements are a routine part of U.S. government-to-government arms sale.

A similar form, known as DSP-83, had to be signed by Indian authorities for Boeing to have submitted its license request for the P-8I deal.

(Reporting by Jim Wolf; editing by Bernard Orr)

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