US enraged over India shooting down F-16, F-18

US enraged over India shooting down F-16, F-18

That the Obama administration, business and industry are deeply disappointed over being rejected for the multi-billion 126 Medium Multi-Role Combat Aircraft deal is a no-brainer. It is palpable.

But there was also seething anger among the senior administration officials -- at State, Commerce and the Pentagon -- and representatives of business and industry that New Delhi's decision was wholly political and much of the finger-pointing was at Defence Minister A K Antony and the Defence Research and Development Organisation.

However, none of the administration officials, business and industry representatives, including those at Boeing and Lockheed that rediff.com spoke too were willing to go on record with their disappointment and angst, and noted that beyond the notification that they had received from the Indian authorities, they were still "in a fact-gathering mode right now'.

Senior diplomatic sources in Washington told rediff.com, "We are awaiting guidance from Delhi before we make any comments."

Meanwhile, speculation was rife that US Ambassador Timothy Roemer's decision to resign was a fall-out from India's decision, particularly since this was apparently one of his topmost priorities to clinch the deal in favour of the United States.

It may be noted here that US President Barack Obama had made a strong pitch in a secret letter to Prime Minister Dr Manmohan Singh making a strong case on behalf of the American defence giants, saying it would cement the Indo-US strategic partnership and be mutually beneficial in creating several thousands of jobs both in the US and India.

One administration official said, "This was always very important for everybody and one needs to take a step back and realize what was at stake here."

"We all should understand that this was far bigger than just another big defence programme. This was the alignment of two of the largest free-market democracies. That's how we had always couched it."
The senior State Department official said, "Given where we are with the military to military ties, counterterrorism collaboration, dialogue on regional security, I mean, everything we've talked about, where there is the logic and momentum to a deeper and strategic relationship between India and the United States. This deal was really seen as something that would go a long way towards building a strong partnership capacity with a key nation in a strategically important region of the world."

"You bet, it was being looked at as an integral pillar of the whole strategic partnership," the official added.

The official continued, "It was seen as an important pillar of the future relationship -- it was seen as a political and strategic alignment if you will, because that's what it signifies. It's a huge programme. It's a 40-year alignment of product and technology, of industrial collaboration."

Another official, pointed out, "Remember, there were only 18 aircraft, which was going to be delivered in fly-away condition. The other 108 have to be manufactured under co-production license with HAL. You are talking about a very high order of magnitude when it comes to industrial collaboration between two countries."
"So, it was not just the companies -- whoever was to win it -- but two countries. The forces of those two countries, sharing information and technology, know-how, capacity building, training with the Indian Air Force, all of which leads to an expanded strategic relationship."

Referring to Obama's personal letter to Dr Singh pushing for the deal, the official said, "It's not often that the President of the United States directly advocates for a key programme."

Industry sources said that both Boeing and Lockheed Martin would be requesting to receive a formal de-brief from the IAF based on the letters they had received, which they acknowledged were similar to the intimation sent to the US ambassador in Delhi.

In a statement, Roemer, acknowledging that he was "deeply disappointed," said he had been assured at the highest levels of the Indian government that the procurement process for the fighter aircraft 'has been and will be transparent and fair'.

The embassy statement said it "was informed on Thursday that the two aircraft offered by the US government through the Foreign Military Sales process were not selected for procurement by the Indian Ministry of Defence."

"We are reviewing the documents received from the Government of India and are respectful of the procurement process," the statement said, but added, "We are, however, deeply disappointed by this news."

Boeing, which had its F-18 on offer, put out a statement saying that "Boeing today was notified that our Super Hornet proposal for India's MMRCA competition was not short listed in the initial down select. We are obviously disappointed with this outcome."

"Our next step is to request and receive a debrief from the Indian Air Force. Once we have reviewed the details, we will make a decision concerning our possible options, always keeping in mind the impact to the Indian Air Force," the statement said.

Boeing added, "We believe we offered the Indian Air Force a fully compliant and best-value multi-role aircraft for the defined mission. We will continue to look for opportunities to help India modernise its armed services and enhance its aerospace industry."

Lockheed, which was hoping that India would pick its F-16 fighter aircraft, had not put out a statement at the time of going to press.

India apparently had short-listed the Eurofighter and the French Rafale as the leading contenders for the deal.

A senior Pentagon official, who recently visited Delhi and met with senior Defence Ministry officials, including Minister Antony and the IAF leadership, told rediff.com: "We have always said that an American selection would have dramatically transformed the strategic relationship for generations to come."

"I mean that's what you talk about. You talk about the deeper and the more meaningful industrial and technology collaboration between the two industries. It would have set a new tone for the geopolitical future for the next 40 years."


The official acknowledged, "We always recognised that yes, you always have the technology decisions, but the political decision was always going to be a major function of this."

"It was always going to come down to a major political decision. That's where the United States as a whole -- not just the US government -- is somewhat dismayed and obviously disappointed with this outcome. Because we truly believed that we had the two best aircraft in the competition, in terms of what is proven, what is operationally there and the level of technology."

This official asserted, "The level of the technology, which was blessed by us from an export control standpoint, is something we provide only to our closest allies. We had gone through a lot of pushing and pulling in our system to get that level of technology blessed. The people in India must realise that that took a lot."
An industry source just couldn't stop talking about the superiority of the American aircraft, and obviously was totally dejected over the Indian rejection and was finding it difficult to accept it.

"After all," he said, "what were we so proud of? We are proud of the fact that what we had offered to the Indian government were two of the most advanced multi-mission combat aircraft in the world. These aircraft, more than anything else, by the way, have demonstrated military advantage over any current fourth-generation aircraft which was in the MMRCA competition, without any of the risks of technology that's not fully developed or even on the drawing board stage."

The source said, "Let's face it, even some of the other aircraft, even the ones that are selected, having any sort of AESA (Active Electronically Scanned Array) radar, which are still in the drawing board stage."

"Our aircraft have an operational and capable AESA radar that has been flying for the last several years, It's the most advanced technology out there today and its these most proven -- operationally proven, combat proven, and that's the most important thing -- aircraft in the world."

Case for rupee trade with Dhaka

Case for rupee trade with Dhaka

New Delhi, April 19: When India’s commerce minister Anand Sharma calls on Bangladesh Prime Minister Sheikh Hasina next week to discuss a new trade deal, he won’t be talking about the possibility of trading in rupees.

However, many Indian and Bangladeshi businessmen would welcome trade in the rupee instead of the volatile dollar with its attendant exchange risks.

India sells some $2.5 billion of merchandise annually to Bangladesh and buys about one-tenth of that from its eastern neighbour, a trade imbalance which Sharma will try to address during his visit with promises of opening up to more duty free imports.

Attiur Rahman, governor of the Bangladesh Bank, the coastal nation’s central banker, told The Telegraph that he would not rule out trade in rupees, “provided the currency became fully convertible”.

For a currency to be acceptable globally by businesses and made part of reserves which central banks around the world buy and keep, it has to be normally fully convertible and stable against most major currencies.

“Trade in local currencies with neighbouring countries would cut down forex risks and may be the way forward, but for the rupee to be acceptable in the wider world, convertibility would be a must,” said D.K. Joshi, chief economist of Crisil.

Till June 6, 1966, the Indian currency was officially or unofficially the acceptable tender over a wide area from Beirut to Hong Kong. In 1966, India devalued the rupee, forcing itself out of global markets.

Aden, Oman, Bahrain, Qatar, Trucial Gulf states (present day UAE), Tanganyika (former name for Tanzania), Uganda, Seychelles and Mauritius were among the nations where the rupee was legal tender. But the currency as global tender is now history and accepted only in neighbouring countries such as Nepal, Bhutan and Afghanistan.

“The Chinese are doing trade deals in renminbi with many countries and we should do the same,” Joshi added.

Though none of the Brics (Brazil, Russia, India, China and South Africa) countries have convertible currencies, they have agreed to their development banks opening lines of credit in their respective currencies for mutual trade.

“Rice trade in rupee could cut out exchange risks and keep the business coming,” agreed D.N.Pathak, executive director of the All India Rice Exporters Association. Though official trade between India and Bangladesh was less than $3 billion, unofficial trade across the border — often by smugglers in medicines, cattle, rice and even eggs — was estimated at over $1.5 billion. This trade is carried out in rupee and taka (Bangladesh’s currency) without any foreign currency payments being involved.

Many neighbours often trade in a robust local currency if that reduces exchange related risks and helps save scarce foreign exchange. However, in the case of India and Bangladesh, with both currencies being defined by its relative value to the dollar, the currency risk would hardly be reduced by converting the trade to rupees.

Explained Matlub Hussein, chairman of diversified Nitol Nilay Group, which among other things assembles Tata trucks and vehicles in Bangladesh, “Unless we change the base (dollar), it won’t make sense but if we can do that then yes it’s a far better of way doing business.”

Silver, gold near lifetime highs, dollar loses ground

Silver, gold near lifetime highs, dollar loses ground

Silver and gold were within sight of historic highs on Friday and could resume an uptrend as the US dollar held near three-year lows against a basket of currencies on hopes US monetary policy would stay ultra loose, keeping inflationary price pressures high.

A fresh batch of U.S. economic data in the form of rising claims for jobless benefits failed to rescue the dollar, which had dropped to its weakest level since July 2008 against other currencies before recovering slightly.

Silver barely moved, standing at 48.32 an ounce by 0234 GMT, having rallied to a record at USD 49.51 an ounce on Thursday. Gold lost USD 1.10 to $1,533.85 an ounce after hitting a lifetime high around USD 1,538 an ounce in the previous session.

"If the dollar continues to weaken, then it's only likely to boost gold as well as silver as the inverse relationship between the two assets persists. I would say that for gold I am still looking for it to hit $1,600 this year," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.

"In the long term, I think if we see silver prices at such a high level, then it could hurt the industrial demand."

But dealers said strong investment demand for silver would keep the metal at record levels, while a lack of scrap sales in the physical market suggested that investors expected more gains. Year to date, silver was up almost 60%, sharply above gold's 8% gain.

A bullish target at USD 1,549 per ounce is still intact for spot gold, based on its wave pattern and a Fibonacci projection analysis, according to Wan Tao, who is a Reuters market analyst for commodities and energy technicals.

"There's some selling but I would say it's very light," said a dealer in Singapore, who trades gold and silver. "It had been a very busy week, and I am glad today is Friday. It's all quiet, finally."

The CME Group Inc, parent of the Chicago Board of Trade, said on Thursday it would raise maintenance margins for COMEX 5000 Silver futures by 13.2%, making it more expensive for silver speculators to trade in.

Soaring prices hurt the bottom line of certain manufacturers, including photography company Eastman Kodak, which said on Thursday a hike in raw material costs, particularly silver, led to a decrease in its film business revenue.

Trading was subdued in Asia, with Japanese financial markets shut for a public holiday. UK markets will be closed for the royal wedding. Premiums for gold bars were steady in Hong Kong and Singapore.

The dollar index, which tracks the currency's performance against a basket of major currencies, stood at 73.065 on Friday, having plumbed a three-year low of 72.871 on Thursday.

Sentiment for the dollar took a hit this week after the Federal Reserve said it was in no hurry to tighten its ultra-loose monetary policy, a move that gave investors the green light to keep using the dollar as a funding currency to buy higher-yielding assets.

"It all depends on the U.S. dollar, but I would say we only see a small amount of selling in the physical market," said a dealer in Hong Kong.

In the energy market, U.S. crude futures were steady in early trade on Friday, after rising to a 31-month high settlement in the previous session, as a weak dollar helped stem a slide in prices from slower economic growth in the United States in the first quarter.

India mulls rupee account for Iran oil payments

India mulls rupee account for Iran oil payments

With the UAE refusing to be India’s payment gateway for Iranian crude oil, New Delhi is working overtime to open a rupee account for the Iranians in the Reserve Bank of India.

“The finance ministry is working out the dos and don’ts of the rupee account…That is what this money can be used for by the Iranians and what it can’t. Once the contours are ready, the proposal would be brought before the Cabinet for approval,” said sources. They said the proposed norms would allow Iran to use the rupee to buy only non-strategic imports like railway projects or commodities. “It cannot be used for investing in India or in buying shares or companies here,” they added.

Until last week, India was hopeful of roping in the UAE as the payment conduit after Germany stopped last month accepting money from India for onward transfer to an Iranian-owned, Hamburg-based bank. But the hopes were dashed last week after Abu Dhabi informed the Indian ambassador that its hands were tied due to pressure from the US.