Flight Control

THE ANNOUNCEMENT ON 31 JANUARY 2012 that India had awarded Dassault Aviation exclusive negotiating rights for an estimated $10.4-billion contract to supply 126 Medium Multi-Role Combat Aircraft was hailed by the French as a lifeboat for the shipwrecked. The country is facing hard times: In January, Standard & Poor’s stripped France of its AAA credit rating. Economic growth for the next 18 months is expected to stall, and unemployment, already at a 12-year high of 9.3 percent at the end of 2011, is projected to climb to 10.7 percent by the end of 2012.

There was a time, not so long ago, when India’s role in Western political campaigns was limited to that of a scapegoat, with outsourcing of jobs to India serving as a popular bogeyman on which to pin the blame for domestic job losses. But this time around, the government led by President Nicolas Sarkozy has drafted India onto the stage to play a knight in shining armour. Though Dassault has cautioned that it may be too soon to pop the champagne corks—the negotiations are just beginning at this point—the company’s stock soared 18 percent on the Paris Bourse upon news of the announcement.

For Sarkozy, the Dassault announcement could not have come at a better time. His approval ratings have remained steadily dismal in the months leading up to the May 2012 presidential elections, and polls indicated that opposition Parti socialiste (PS) candidate François Hollande would win the final round of voting by a margin of as much as two to one over Sarkozy. Sarkozy’s party, the conservative Union pour un Mouvement Populaire (UMP), took a beating in last September’s elections, which gave the Socialist Party its first absolute majority in the French Senate since the founding of the Fifth Republic in 1958. Working-class voters are expected to be the critical swing vote that will carry France’s next president to victory, and they have been hit hard during Sarkozy’s presidency: A report published in the French business daily Les Echos in December 2011 revealed that 880 factories in France had shut down between 2008 and 2011, throwing 100,000 workers onto the unemployment rolls—the worst manufacturing contraction in France since the oil shock of 1973. The PS quickly dubbed Sarkozy the “president of deindustrialization”. “Made in France” became every candidate’s campaign slogan, including Sarkozy’s.

The expected deal to purchase Dassault’s Rafale jetfighters would mean that a few thousand French jobs wouldn’t be immediately lost. And if the UAE and Brazil get inspired to follow in the footsteps of India—currently the world’s largest arms importer—thousands more manufacturing jobs could be added.

But whether this will translate into political gain for Sarkozy and the UMP remains to be seen. The links between Dassault and the UMP are strong. Both Serge Dassault and his son Olivier, who in 2011 was anointed the head of the Groupe Industriel Marcel Dassault SA (GIMD), are UMP senators. As he was leaving the French Senate on the day the deal was announced, Olivier Dassault expressed his “very great joy” about India’s choice—one that also saved the Rafale from the French government’s fiscal guillotine. France’s Minister of Defence, Gérard Longuet, had warned in December 2011 that he would put the brakes on production of the Rafale if it couldn’t pull off any foreign sales. For 11 years, the French military has been the Rafale’s only buyer—at a cost of ¤40 billion to the treasury. India’s rupees will allow Dassault to keep its factories running without having to rely on funding from an indebted French government.

The terms of the putative deal further confirm both the desperation of the French defence industry and India’s emerging status as the preeminent patron of global weapons manufacturers—with projected purchases of $80 billion between 2011 and 2015. Dassault went to unprecedented lengths to edge out its rivals: the Rafale will be offered to India for $3-5 million less per aircraft than the Eurofighter Typhoons manufactured by the second-lowest bidder, EADS/BAE. Only the first 18 of 126 jets will be manufactured in France, with the remaining produced in India. More remarkable still, Dassault will provide substantial transfers of technology, guaranteed by the French government, to Indian government-owned Hindustan Aeronautics Limited. Private Indian companies also stand to reap considerable benefits from the deal while Dassault expands its lucrative connections in India, as demonstrated by the agreement signed between Reliance Industries and Dassault on the heels of the Rafale announcement.

On purely technical grounds, the Rafale had a lot going for it. It is a nimble, responsive aircraft, a “pilot’s plane”, that proved itself during French forays in Libya during the 2011 NATO air campaign against Muammar Gaddafi. The American F-16 Fighting Falcon, manufactured by Lockheed Martin, was a no-go from the outset—India was unlikely to buy the same plane sold to Pakistan—and the Boeing F/A-18IN Super Hornet didn’t offer much more than the F-16. Swedish manufacturer SAAB’s next generation JAS 39 Gripen NG/IN also did not make the final cut. Having survived to the final round, the British were sorely disappointed India did not opt for the Eurofighter Typhoon—BAE Systems, a private company with deep British roots that ranked second in global arms sales in 2010, has a 37.5 percent stake in the Eurofighter—and British Prime Minister David Cameron immediately vowed to try to get the Indians to reconsider. India demurred.

Military hardware sales of this magnitude are rarely made solely on technical grounds. Combat aircraft have a long lifespan, and maintenance and upgrade packages inevitably cement ties between the supplier and the purchaser nations. Putting aside allegiances of circumstance, France has been a stalwart supporter of India for decades. When India performed its first nuclear test in 1974, Canada cut off aid to India’s nuclear programme and the US imposed restrictions on the country’s access to nuclear fuel and technology. France, on the other hand, sent a congratulatory message to the Indian Atomic Energy Commission. France was also the first major Western power to forge a strategic partnership with India, announced during French president Jacques Chirac’s 1998 Republic Day visit to India. France did not join the US in condemning India’s 1998 nuclear tests.

The most recent chapter of the Indo-French nuclear love affair is the government’s $9.3 billion deal with French nuclear giant AREVA to build two European Pressurised Reactors (EPR) in Jaitapur, Maharashtra. France is counting as much on the construction of these plants as it is on the Rafale deal to be inked. The 2011 nuclear disaster in Fukushima, Japan, and vociferous local protests, however, have put the project on unstable ground. AREVA’s plants in Finland and in Normandy, France, have been beset by serious cost overruns and safety questions. After reporting significant losses in 2011, AREVA announced layoffs in Germany and in France.

France’s survival as a major nuclear supplier is at least as important to India as its survival as a major defence supplier. The two have historically gone hand in hand. One of the Rafale deal’s sweeteners is rumoured to be future French assistance in helping India build nuclear-powered submarines. France secured a contract, worth $3 billion, with India for conventional Scorpéne class submarines in 2005.

On 8 February 2012, Bernard Bigot, head of the French Alternative Energies and Atomic Energy Commission, travelled to India to reiterate France’s commitment to ensuring the safe operation of the Jaitapur facilities. At the same time, Bigot was busy at home explaining to the French why they should continue to support an industry whose cost the country’s Court of Auditors is projecting will soar to alarming heights by 2025. The successful completion of the Jaitapur plants is as critical to AREVA and the future of France’s nuclear industry as it is to the UMP’s credibility and to India’s civil nuclear programme.

The GIMD owns the major French daily Le Figaro. Its Sunday magazine from 12 February 2012 featured a lavish cover story on the vision and values of the president. Sarkozy revealed that his campaign will hang on two issues: unemployment and immigration, both of which are concerns of working-class French voters, especially those attracted to the rightwing Front national (National Front Party) whose votes Sarkozy must secure if he is to win re-election. The Front national is overt in adding to the mantra “Made in France” the qualifier “by French people”.

Despite all the campaign chest-beating over unemployment and the flight of French manufacturing jobs overseas, Sarkozy’s government enjoys particularly cosy ties with Dassault, a family-controlled business whose scions are UMP party stalwarts. India is simply too big a prize for a company whose interests are as intertwined with those of the ruling party as it is with France’s defence industry.

The successful conclusion of the Rafale deal will inaugurate a new era of technological, diplomatic and commercial interdependence between India and France, with enormous implications for their relationship over the long term. Whether it will also trigger a boom in Europe’s defence industries comparable to the one under way in India, a boom that can resurrect France’s withering manufacturing base, protect its declining global power and advance a European defence project that even the Socialist Party has marked as a desirable outcome of the deal, is another question. What is clear is that France’s future, and perhaps that of Europe as well, will increasingly be made in India.