Mattis and Pompeo to Seek India Accord Amid Threat of Sanctions

(Bloomberg) -- U.S. Defense Secretary Jim Mattis and Secretary of State Michael Pompeo travel to New Delhi this week in an effort to seal a new defense cooperation agreement with their Indian counterparts despite tensions over threatened American sanctions.

Hanging over the meeting, planned for Sept. 6, is the prospect that the U.S. will impose economic sanctions on Prime Minister Narendra Modi's government unless it significantly reduces purchases of oil from Iran and cancels a planned $6 billion purchase of S-400 anti-aircraft missiles from Russia. Indian officials have said the Russian arms deal would go ahead as planned.

The first U.S.-India 2+2 Ministerial Dialogue is about expanding a strategic partnership rather than closing individual arms deals, according to a Defense Department official. Transfers of advanced defense technology would be boosted if the two sides are able to complete work on a proposed Communications Interoperability and Security Memorandum of Agreement.

Lockheed's F-16

Sales of U.S. arms, associated parts and logistics support to India have increased to an estimated $15 billion this year from zero in 2008 and could rise by an additional $3 billion by 2019, said the official, who briefed reporters on condition of anonymity. The prospects include a potential deal to build advanced F-16 fighter jets from Lockheed Martin Corp. in India.

Read More: India's Diplomat Shortage Leaves It Far Behind Rival China

Reflecting the importance of India as a strategic ally, Mattis this year renamed the U.S. Pacific Command as the Indo-Pacific Command. In hopes that India can be recruited to help the U.S. counter China's growing military and economic power, the Trump administration's National Defense Strategy published this year calls for bolstering “partnerships in the Indo-Pacific to a networked security architecture capable of deterring aggression, maintaining stability, and ensuring free access to common domains.”

But the threat of sanctions clouds the prospects for U.S.-India cooperation. The U.S. plans to reimpose sanctions on purchases of Iranian oil in November, after President Donald Trump quit the 2015 multinational nuclear deal with Iran. Meanwhile, a 2017 law imposed by Congress requires the president to penalize countries that conduct a “significant transaction” with Russia's defense sector.

Read More: As U.S. Alliances Fray, Russia Courts New Customers for Missiles

The U.S. won't issue blanket waivers for arms deals with Russia, and any exemptions from sanctions would require a significant reduction in reliance on Russia arms, a second U.S. official said. The S-400 is the same system Turkey plans to buy, a prospect that's roiled Ankara's relations with the U.S. and drawn condemnation in Congress.

India's foreign ministry declined to comment on any prospective deals during the U.S. dialogue. In mid-July, Defense Minister Nirmala Sitharaman said that India and Russia are close to concluding the S-400 deal and that India would go forward with the deal, adding that the new U.S. law isn't binding on India.

Indian officials previously told Bloomberg that they were willing to cut oil Iranian oil imports up to 50 percent in order to secure a waiver to continue shipments.

“These are both sensitive,” said Hemant Krishan Singh, a former Indian ambassador to Japan and current director general of the Delhi Policy Group think tank. “It will be the test of our nascent Indo-Pacific partnership to be able to walk this fine line together, and to find adjustments that take into consideration American interests and Indian interests.”

‘Significant Concerns'

U.S. officials didn't say whether Mattis and Pompeo will offer India options to buy U.S. systems instead of the S-400. Steve Zaloga, a missile expert with the Teal Group, an aerospace consulting firm in Fairfax, Virginia, said the equivalent U.S. systems are advanced versions of the Patriot air defense system built by Lockheed and Raytheon Co.

“We would still have very significant concerns if India pursued major new platforms and systems” from Russia,” Randall Schriver, the Pentagon's assistant secretary of defense for Asian and Pacific Security Affairs, said at the Carnegie Endowment For International Peace in Washington last week.

Nonetheless, the “the U.S. looks to discuss broadening” its existing “Major Defense Partnership” with India “and reach agreements on a series of proposals to enhance bilateral defense cooperation,” Schriver said last week in a statement.

Last month, India approved two key military purchases from the U.S., including a $1 billion surface-to-air missile system developed in part by Raytheon and a $2-billion government-to government deal for 24 naval helicopters from Lockheed.

--With assistance from N. C. Bipindra and Iain Marlow.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net, Larry Liebert, Ros Krasny

©2018 Bloomberg L.P.

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