Economy /
India and France Strengthen Strategic Partnership Amid Corruption Scandal
As Indian Prime Minister Modi landed in Paris last week prior to attending the G7 summit, he might have expected to come under fire from fellow world leaders over the politically explosive situation in Kashmir. But the Elysée palace was quick to take a measured tone.
“We have a strategic partnership with India, which means that we trust each other,” said a French government representative. “We are not going to attack India, but we expect the Prime Minister to explain how he sees the situation now and in the future. We will remember our role, which is to resolve the situation through dialogue. And we call on all parties to abstain from any action that could escalate tensions on the ground.”
The strategic partnership between France and India is founded on trade and business deals widely thought to be at the top of the agenda as French President, Macron, and Modi dined together near Paris last Thursday night. The most public of these deals has become known as the Rafale corruption scandal.
When Modi announced a deal with French aircraft manufacturer, Dassault, on an official visit to France in 2015, India had long been aware of a growing gap between its own military capability and that of China and Pakistan, and planned to upgrade its military aircraft to match its neighbours. Still Modi’s deal came as a surprise. Since 2000, before Modi was prime minister, an agreement had been in the works with Dassault, partnering with state-run Hindustan Aeronautics Limited (HAL) who could produce jets in India, creating jobs and industry there. But Modi’s €7.8 billion deal, for 36 fighter jets, had a twist: although Dassault was still the French partner, HAL had been cut out of the deal. While then-president Françoise Holland announced that India and France were now “united by the most beautiful kind of relationship, a relationship of trust”, Indian politicians were raising questions over the involvement of the new partner in the deal: Indian businessman Anil Ambani.
The Rafale agreement included a 50% offset clause, requiring Dassault to reinvest 50% of the contract value back into the Indian economy. Following the signing of the deal, the main benefactor of this clause was announced to be Reliance Group, owned by Anil Ambani. The fact that Reliance Group had no aeronautical expertise, and that Ambani’s other businesses were known to be struggling, raised questions about replacing state-run HAL with privately-owned Reliance Group. The fact the Ambani and Modi were known to be friends pushed questions into speculation about corruption, even before a Dassault executive was quoted as saying that working with Reliance was an “imperative and obligatory” condition for securing the Rafale contract. This was later corroborated by Hollande during a trip to India. Speaking to Mediapart in September 2018, he said: “It was the Indian government who proposed this Reliance service group, and Dassault who negotiated with Ambani. We did not have a choice, we took the interlocutor who was given to us.”
Corruption claims which already dogged the deal got worse as new reports emerged. Firstly, it was found that French tax authorities exceptionally wrote off a tax debt of more than €140 million for Ambani’s businesses around the time of the deal. Then it was claimed that Modi was holding parallel talks with the French government while the Indian Ministry of Defence were also trying to negotiate the deal with them. Further muddying the waters were disputes over the price of the Dassault jets. While Modi’s 36 fighter jets are estimated to have cost India around €8 billion, in January of 2019, the French government placed its own order for 28 upgraded jets from Dassault, at the considerably lower price of €2 billion. The exact details of how much the Indian government paid Dassault have never been revealed, a choice which was initially touted as a security measure, then part of a 2008 confidentiality agreement between France and India, which was renewed in 2018.
“It is a corporate warfare, and the PM is working for Anil Ambani,” stated Congress President Rahul Gandhi in February 2019, going on to outright accuse the Prime Minister of “interference in the Rafale deal” which “single-handedly undermined India’s position.”
Yet, hopes of getting to the bottom of the accusations are slim. Documents related to the Rafale fighter jet deal are no longer available from the Indian Defence Ministry as they’ve been stolen, and the Indian government has threatened newspapers under the Official Secrets Act for publishing articles based on them. Although the scandal has provided years-worth of political ammunition for Modi’s opposition, it did not prevent the prime minister from successfully getting reelected in India’s general election in May 2019.
Dassault insists that they “freely” chose Reliance Group as an industrial partner in the deal, and Ambani has always denied any wrongdoing.
President Macron seems keen to draw a line under the scandal, telling the UN general assembly in 2018, “I will be very clear. It was a government-to-government discussion. I don’t have any other comment. I was not in charge at that time.”
Meanwhile, India and France’s strategic partnership remains strong. On Thursday, Macron confirmed that the first of the Dassault fighter jets will be delivered in September, and Indian media reports claim that, when the two leaders met in Paris last week, he tried to start negotiations with Modi for a second order of jets from Dassault. Plans are already in the works for a joint venture between The Nuclear Power Corporation of India Ltd (NPCIL) and Electricite de France (EDF) building what, upon completion, would make India home to the world’s largest nuclear power plant, and there are more deals between the two partners expected.
“India offers great opportunities for French companies,” Modi tweeted last Thursday night. “There is scope for immense cooperation in skill development, aviation, IT and space. The strides made in India-France defence cooperation are promising. Our nations are also working on maritime as well as cybersecurity.”
