India and U.S. agree on defense pact

NEW DELHI Mon Jul 20, 2009 3:32pm EDT

1 of 7. U.S. Secretary of State Hillary Clinton (L) smiles as Chief of India's ruling Congress party Sonia Gandhi looks on before their meeting in New Delhi July 20, 2009.

Credit: Reuters/B Mathur

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NEW DELHI (Reuters) - The United States and India said Monday they had agreed on a defense pact that takes a major step toward allowing the sale of sophisticated U.S. arms to the South Asian nation as it modernizes its military.

Secretary of State Hillary Clinton said Delhi had also approved two sites for U.S. companies to build nuclear power plants, offering American companies the first fruits of last year's landmark U.S.-India civil nuclear cooperation pact.

The announcements gave Clinton tangible accomplishments as she ended a trip to India designed to deepen ties and to demonstrate President Barack Obama's commitment to India's emergence as a player on the global stage.

"We will work not just to maintain our good relationship, but to broaden and deepen it," Clinton said at a joint news conference with Indian External Affairs Minister S.M. Krishna.

In a clear gesture of U.S. favor, Clinton said that Indian Prime Minister Manmohan Singh had accepted an invitation to make a state visit to Washington on November 24 in what would be the first such visit by a foreign leader under Obama.

A key element of Clinton's trip was the announcement that the two sides reached an "end-use monitoring" pact that she said would pave the way to broader defense cooperation.

Required by U.S. law for the sale of sophisticated weapons systems, the pact would let Washington check that India was using any arms for the purposes intended and was preventing the technology from leaking to others.

India is expected to spend more than $30 billion over the next five years on upgrading its largely Soviet-made arsenal, roughly a third of which will be a contract to buy 126 multi-role fighters.

That could prove a boon to U.S. companies like Lockheed Martin Corp and Boeing Co.

The two companies are competing with Russia's MiG-35, France's Dassault Rafale, Sweden's Saab JAS-39 Gripen and the Eurofighter Typhoon, made by a consortium of British, German, Italian and Spanish firms.

SHOWING CONTINUITY

The defense pact, unveiled by Indian External Affairs Minister S.M. Krishna and Clinton, was not formally signed because it takes the form of agreed language to be included in contracts for future defense sales, a U.S. official said.

While it is a step toward high-technology U.S. arms sales, at least one other must be concluded on communications and information security to permit such deals.

There is also one more hurdle to overcome before U.S. firms will bid to build nuclear reactors at the two sites approved by India -- liability protection. Clinton said she hoped the Indian government could secure this soon.

U.S. officials estimate the two nuclear sites represent up to $10 billion in business for U.S. nuclear reactor builders such as General Electric Co. and Westinghouse Electric Co, a subsidiary of Japan's Toshiba Corp.

As part their efforts to strengthen ties, the two countries agreed to form a "strategic dialogue" led by Clinton and Krishna who will meet annually. They agreed to make it easier to launch sensitive U.S. technology on Indian rockets.

Analysts said both countries wanted to dispel any belief that the Obama administration might have neglected India in its early months as it focused on getting Pakistan's military to battle insurgents on its western border with Afghanistan.

"This is clearly a response from Washington to the perception in Delhi that the U.S. had forgotten India," said Siddharth Varadarajan, strategic affairs editor of The Hindu newspaper.

Clinton leaves New Delhi Tuesday morning for Bangkok, where she was scheduled to meet Thai officials before traveling to Phuket for a regional conference.

(Additional reporting by Krittivas Mukherjee, Matthias Williams and Bappa Majumdar in New Delhi; Editing by Ralph Boulton)

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