On April 27, a stealth frigate, the INS Teg, was commissioned in Russia. Three days later, India’s latest naval base, INS Dweeprakshak (Island Protector) was put into operation at Kavaratti in Lakshadweep, a tiny island chain southwest of India’s southernmost tip. Although, India had had a small presence on the strategically important island chain for the past decade, the Navy’s decision to open a permanent base was prompted by nearby recent incidents of piracy. Indeed, the Navy has in recent years captured scores of pirates and foiled several attacks.

“The Indian Navy has been operating a detachment at Kavaratti since the early1980s,” the Navy said in a statement. “With the commissioning of INS Dweeprakshak, the island territories would see calibrated strengthening of assets in step with their growing relevance to the security calculus of the nation. A firmer footing in the islands, which are spread out astride some of the busiest shipping lanes in the world, would provide the necessary wherewithal to the Indian Navy to discharge its responsibilities suitably.”

The establishment of the base is in keeping with an announcement made by Chief of Naval Staff Adm. Nirmal Verma at the end of last year, in which he noted that the Navy is also in the process of setting up so-called operational turnaround bases, forward operating bases and naval air enclaves along the coast with a view towards enhancing India’s surveillance efforts in the region.

“In 2011, the Navy has provided a renewed impetus and focus towards creation of operational and administrative infrastructure in the Andaman and Nicobar Islands and the Lakshadweep and Minicoy Islands,” Verma noted in December. “These islands are the country’s strategic outposts and augmentation of the facilities will enhance our reach and enable extended presence in the area.”

But it’s the INS Teg that gathered many of the headlines. The Teg will be followed by two more such stealth ships, to be inducted early next year. The 125 meter frigate displaces 4,000 tons and includes the BrahMos surface-to-surface missile system, a surface-to-air missile system, torpedo tubes and anti-submarine rockets. With its advanced weapons suite and sensors fully integrated with its combat management system, the ship is, in the Navy’s words, “well suited to undertake a broad spectrum of maritime missions.”

The commissioning of the Teg and the opening of a new naval base within days of each other, although technically unrelated, highlight the Indian Navy’s growing footprint in its broader area of influence, and its determination to boost its capabilities – especially in light of the recent stinging criticism of the military’s readiness dished out by the country’s army chief, Gen. V.K. Singh. The development of the Navy is seen as necessary to fulfill two roles: giving the country a blue water capability, while allowing it to effectively counter threats closer to its own shores.

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3. Why the Indian Ocean Matters

The government of Indian Prime Minister Manmohan Singh is balancing competing U.S., Israeli, and other Western concerns that, in the form of sanctions, can seriously harm the Indian economy. But Singh also wants to avoid harming India’s good relations with these countries at a time when Indians’ enormous energy needs and lack of alternative sources mean that they will need to continue to import some Iranian oil for years to come. Add to this the fact that India also wishes to remain on good terms with Tehran, and it’s clear why the U.S. and India don’t see eye to eye.

The differences risk coming to a head next month as India and the United States run up against an end of June deadline that will require the United States to impose sanctions on countries that haven’t significantly reduced their imports of Iranian oil. The Obama administration earlier announced that a dozen European countries had earned a waiver by reducing their Iranian oil imports. But only one Asian country, Japan, has so far qualified.

Many of the countries that haven’t complied share India’s objections that the supplementary sanctions are unfair and violate both their national sovereignty and pride. Members of the Indian parliament have strongly attacked the sanctions, and their influence shouldn’t be underestimated given how their refusal to accommodate foreign firms for liability exemptions has stalled international efforts to deepen nuclear energy cooperation with India.

Meanwhile, though, the Indian government has been quietly pushing its oil companies to reduce their crude imports from Iran. The government would like to receive a waiver before the sanctions take effect. One Indian official told the media that, “we believe we have a strong case” to receive the waiver. In addition, a senior U.S. official, travelling with Clinton, told reporters that, “Our assessment is India is making good progress, but we really need to receive assurances that they are going to continue to make good progress.”

India’s behavior highlights a major problem with the Iran sanctions regime. Many countries face a different set of calculations than the United States, Israel, and many European and Persian Gulf governments, which have adopted supplementary sanctions on Tehran that supplement those imposed by the U.N. Security Council. Whereas the latter group can identify a plausible military threat from an Iran that possesses nuclear warheads and long-range ballistic missiles, India, China, Russia, and many other non-Western countries consider an Iranian attack on themselves a remote possibility.

The Indian government has thus opposed these additional sanctions on Iran and favored continuing dialogue and negotiations with Tehran to resolve the dispute over the Iranian nuclear issue without further sanctions. They strongly oppose even the threat of military action since that raises the costs of their oil imports – an actual war could wreck the Indian economy if it deprived India of oil from Saudi Arabia, Iraq, and other Middle Eastern countries as well as Iran.

From New Delhi’s perspective, an Iran with nuclear weapons would pale as a threat to India compared with China’s growing military power and even more so Pakistan, whose strategists try to terrorize India’s population behind Islamabad’s nuclear shield. Indians share with Americans and their allies fears of nuclear terrorism, but they see this danger as emanating from Pakistan’s militants rather than Iran’s Revolutionary Guards.

The Israeli equation is also important for India. Ties between New Delhi and Tel Aviv have improved markedly since the end of the Cold War and the decline of India’s commitment to nonalignment. The two countries share unease about being surrounded by a bevy of Muslim nations sympathizing with their Islamic adversaries. Against this backdrop, Israel has become a major supplier of weapons, intelligence, and high technology to India.

For governments like India that don’t see Iran as a major problem, a key consideration is how much they value maintaining trade and other ties with Tehran versus what costs they might suffer if they antagonize U.S. policy makers, who are leading the drive for global sanctions against Iran. In particular, they could lose business in the United States if Washington sanctions their firms for engaging in commerce with Iran. Some of these countries, such as India, also calculate what level of interaction with Iran will risk excessive costs in their ties with Israel, Saudi Arabia, and other Iranian adversaries.

The reality for New Delhi is that Iran is an important supplier of oil to India, which gets 70 percent of its oil through imports. Although Iran has now fallen one slot to become India’s third largest oil supplier after Saudi Arabia and now Iraq, Iran still provides around 9 percent of India’s hydrocarbon requirements, which amount to more than 500,000 barrels a day.

Saudi Arabia has been offering to sell additional oil to India to help weaken New Delhi’s ties with Tehran, but Indian energy managers insist they have no choice but to continue to import Iranian oil. One way Tehran has countered Riyadh is by offering various discounts and other concessions to its oil clients. In the case of India, the National Iranian Oil Company agreed earlier this year that India could pay for 45 percent of oil imports from Iran in rupees instead of dollars, which is an easier to convert hard currency, but harder to use in transactions involving Iran. Trading in rupees or through barter can avoid relying on international banks that are subject to the Western sanctions.

Still, in their boardrooms, the biggest factor leading some of India’s largest companies to forego commercial opportunities in Iran is the fear that these ties will endanger their business reputations, engage them in projects that will prove unprofitable due to constrained access to Western technology and financing, and entangle their foreign operations in the extensive network of secondary sanctions that the United States has constructed to entrap all entities that have any ties with Iran’s illicit nuclear activities.

However, some Indian business managers are eager to exploit Iran’s isolation from international markets, which the sanctions will deepen, for their own profit. This is particularly true of small businesses that don’t have commercial ties with the United States, Europe, or Western companies. But even some larger Indian firms seem to hope that they can conceal their business ties with Iran and slip below the U.S. Treasury’s radar.

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1. India Lets U.S. Down on Iran
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3. U.S. Wrong on India’s Iran Policy

At the center of the debate has been a heated discussion over whether India should have a unified command system under which the chiefs of the Army, Navy and Air Force, could operate coherently and to mutual benefit. But the debate should be even louder than it is now.

Our strategic and super power ambitions are manifest in all three armed forces: the Air Force, which is in the process of one of the largest arms deals ever in the acquisition of the Medium Multi-Role Combat Aircraft (MMRCA); the Navywhich has developed so-called blue water capabilities far beyond coastal defense; and the Army, which is raising two strike corps capable of offensive operations into Tibet and for possible use against China. Yet we still don’t have the necessary organizational structure to wield such massive fire power as a coherent force, one that can either repel external aggressors or project India’s power overseas.

The reasons are many, but the most problematic one is the archaic World War II defense institutions around which our armed forces are organized. They were adapted from the needs of a colonial power, whose main concern was the subjugation of the indigenous population, and not designed to repel external aggressors. There has been little or no change since then. Post-Kargil conflict in 1999 to 2000, the Kargil Review committee headed by noted strategist R.K. Subrahmanyam also recommended a unified command. This organization needs to be restructured and updated, and the quickest way to start is to have a Joint Chiefs of Defense Staff to co-ordinate and synergize operations and equipment.

In war, the application of maximum combat power at decisive periods influences the outcome of battle. Maximum combat power, however, isn’t simply the sum of the forces used – it’s the product of synergies generated by using arms and services coherently. Today, the three services are autonomous, and any synergy that does exist is pure chance. Examples are the lack of, or minimal use of, the Air Force in 1962 against the Chinese and in 1999 during the Kargil incursion by Pakistan. In both instances, the Indian Air Force resisted the use of air power on various grounds, hurting India’s war effort. In 1962, air power wasn’t used at all, while in 1999, the Air Force came in many days too late, perhaps on the orders of the civilian government in New Delhi.

India doesn’t follow an integrated command system during peace or in times of combat, so each armed force prosecutes war as they see appropriate (and possibly in a manner where they get the most glory). There have been very few instances when the combat power of one force was deployed under a commander of another (the Andaman Command is a notable exception).  

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Among the problems Singh pointed to were the claim that the Army’s entire fleet of tanks is “devoid of critical ammunition to defeat enemy tanks,”the suggestion that the country’s air defense were “97 percent obsolete,” and criticism that the Elite Special Forces was “woefully short” of “essential weapons.”

After the initial din died down, however, the import of the Army Chief’s letter gradually dawned on lawmakers asked the government and the Army to explain why the shortages haven’t been addressed. Indeed, the shortages are all the more baffling because India’s Defense Ministry reported it had spent its full quota of funds in each of the last three financial years, while the Stockholm-based International Peace Research Institute (SIPRI) said recently that between 2006 and 2010, India ranked first in terms of arms imports.

So why all these shortfalls?

The answer lies in the convoluted and often excruciatingly slow acquisition process that exists within the Defense Ministry. By even some conservative estimates, it can take anywhere between three and five years for a proposal mooted by a service headquarters to come to fruition. This snail’s pace has been noted by lawmakers in the past.

The Standing Committee on Defense (2008-09), a cross-party body of lawmakers, said in its report: “In the opinion of the Committee, the present state of affairs in the Ministry is clearly indicative of lack of seriousness towards timely finalization of plans, which ultimately leads to adverse bearing on modernization process in the armed forces.”

In his first interview on assuming office on April 1, 2010, Singh told me bluntly: “Our biggest challenge is how to remove our hollowness in terms of deficiencies in various fields, and the second one is modernization. Both need to be addressed (as a) priority so that whatever the Army requires that makes it battle worthy is there.

“When I talk of ‘hollowness,’ it is when you authorize something, but it may not be there because over a period of time, the procurement (process has) delayed acquisition,” he said, adding that such delays inevitably mean that some of the equipment is obsolete by the time it is available for combat units. 

Two years on, and it’s clear that despite the voicing of such concerns, even the day-to-day requirements of many combat units are at dangerously low levels. Singh wrote first to Defense Minister A.K. Antony and then to the prime minister to highlight this fact.

But it shouldn’t have taken a letter from Singh to make clear shortcomings that were already obvious to many. Numerous commentators and analysts had already pointed out the sorry state of India’s air defenses and artillery. Gurmeet Kanwal, until recently director of the Army’s think tank, the Centre for Land Warfare Studies, has written:

“Sadly, the Indian Army has almost completely missed the ongoing Revolution in Military Affairs…The Corps of Army Air Defense is also faced with serious problems of obsolescence. The vintage L-70 40 mm AD gun system, the four-barreled ZSU-23-4 Schilka AD gun system, the SAM-6 (Kvadrat) and the SAM-8 OSA-AK have all seen better days and need to be urgently replaced by more responsive modern AD systems that are capable of defeating current and future threats.”

One of the key reasons for the military shortfalls has simply been the duplication of effort in processing a procurement proposal at both the Service Headquarters and the Defense Ministry, since the two aren’t integrated at the functional level.  As a result, files are typically initiated and processed at the service headquarters before undergoing the same process at the ministry. 

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After the withdrawal of the British in 1947, and its subsequent partition, India has perpetually grappled with various forces of endogenous unrest.  From the long-standing insurgency struggle in India’s northeast, to the slow-burning conflict waged against the Naxalite movement in large swathes of its interior, to the separatist struggles in Punjab and Kashmir, the Indian state has found itself compelled to deploy a large number of ground troops in order to maintain a unified state. India’s inward-looking security mindset was further solidified during the 1962 Sino-Indian conflict, as Indian troops were overrun by a lightening Chinese assault across the freezing plateaus of Ladakh and the mountain passes of India’s northeast. New Delhi’s embarrassment at its lack of preparedness in 1962, when coupled with the simmering tensions along the Pakistani border, assured the Army and Air Force positions of relative inter-service strength. Indeed, the Indian Navy’s share of the defense budget in 2011 hovered at 15 percent in comparison to the Army and Air force’s shares of 51 percent and 28 percent, respectively.

Unlike past budgets, the Navy is the only service to increase its share of total defense allocation – up to $4.77 billion from $2.74 billion last year. The Army’s budget at approximately Rs. 97,302.54 crore ($19.46 billion) accounts for 50 percent of the defense budget, followed by the Air Force with Rs. 48,191.16 crore or 25 percent and the Navy at 37,314.44 crore or 19 percent. While the Army’s share of the defense budget is eaten away in revenue expenditure, or allowance for the armed forces, the Navy’s spending is primarily driven by capital expenditure, which is spent on the modernization of the naval armed forces. The Navy received a 72 percent hike in its modernization budget, in comparison to its sister services at +0.5 percent in the Air Force and -3 percent in the Army. The hike in the Navy’s budget allows it to boost spending by 74 percent in the next financial year.

The upswing in spending doesn’t necessarily amount to a long-term prioritization of the Indian Navy over its sister services. Much of the new spending allocated to the Navy will be used to pay off previously acquired naval platforms, platforms which have become increasingly expensive with the depreciation of the rupee and constant price renegotiations.

As noted by Defense News, last year, after a series of cost discussions and setbacks with the Russians, an agreement was finally made for an extra $1.6 billion for the Russia aircraft carrier Admiral Gorshkov, originally priced at $2.6 billion. Furthermore, as prices of raw materials rise, particularly steel from Russia, indigenous production has seen a substantial increase in program cost. The French Scorpene submarine program at the state-run Mazagon Dock Limited has seen an increase of $1 billion. Additionally, 46 new warships are currently underway in Indian naval shipyards including three destroyers at MDL priced at $3.5 billion and four corvettes at the state-run Garden Reach Shipbuilders and Engineers (GRSE) for about $2.2 billion.

Yet while New Delhi’s traditional “sea blindness” may appear to be dissipating, a historical continentalist bias still permeates the Indian bureaucracy. The Indian Ocean remains largely absent in official Indian national security policies, despite the best efforts of former naval officers to articulate the necessity of including the Indian Ocean in larger strategic thinking. India’s ability to forestall a looming “Hormuz dilemma,” secure energy resources, maintain soft power within the Indian Ocean region, and preempt interstate conflict is partially dependent on the Indian Navy assuming a position of equal inter-service strength. However, in order for such a change to happen, there needs to be larger reforms that foster a healthier civil-military dynamic.

The recent sensationalistic reports of a military coup highlight how detached New Delhi’s civilian leadership has become from the military. It’s unlikely that a bloated, overextended, historically distrustful bureaucracy will give the military greater autonomy. Without the capacity to effectively operate and quickly purchase the necessary acquisitions for modernization, it’s unlikely the Indian military, and more precisely the Indian Navy, will achieve the pan-oceanic, blue-water navy that India’s Maritime Military Strategy staunchly advocates.

Does the Navy’s greater share in defense allocation suggest a tilt towards the sea by a historically “inward-looking” New Delhi bureaucracy? It’s too early to say that that the 2012-2013 defense budget allocation signals an enduring rebalancing towards the Navy – only time will tell.  In the meantime, however, the increase in allocation seems to be an encouraging step in the right direction.

Jennifer McArdle was a visiting fellow at the Observer Research Foundation in New Delhi.

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Of course, India has since (reluctantly) voted for a U.N. Security Council resolution condemning Syria, and it’s abstention (along with China) ended up meaning little in the grand scheme of intervention in Libya – European assistance to Libyan rebels still changed the balance of power in the conflict, and paved the way for the Libyan rebels to overthrow the Gaddafi regime.  And, although Libya is far from stable, the rebels’ eventual victory to a certain extent negated any immediate harm that might have come from India’s reticence.

And yet it’s clear that India’s vote will have long-term consequences for the country’s strategic standing. 

As the world’s largest democracy, India should have key advantages in dealing with the turmoil resulting from the Arab Spring. India’s status as a large yet stable developing country without some of the baggage of Western countries should have left it well-placed to offer guidance and exercise some “soft power” in these tumultuous times. Yet India clearly missed the boat. Indeed, far from being a role model, India decided to side with authoritarian states such as China and Russia, in seeming opposition to the democratic revolutions reflecting values that India claims to uphold. 

Second, though not all of these democratic movements have succeeded, the spread of democracy in the Middle East is clearly something that will boost the prospects for stability in the medium and long term. India might be uncomfortable with the idea of “democracy promotion,” something that’s easy to understand. But India’s actions surrounding the Arab Spring have made India look as if it is standing against the spread of democracy itself.  India’s abstention over Libya might not have impeded progress in the end, but it did nothing at all to help, and left it complicit in efforts to crack down.

Third, India’s abstention and its only reluctant support in the Syrian case have won it no friends in the capitals of the world’s democracies.  Even if India’s reluctance to assist in the spread of an ideology is well-known, Western capitals were surprised by a vote that actually impeded its spread. Ironically, India’s “moral” position ended up hurting India’s own moral standing in the international community.  

The Libyan vote was a particular disappointment to India’s friends in the United States. The U.S. remains an important strategic partner for India, but the decision over Libya was embarrassing to those in Washington who have championed closer ties. All this has only been compounded by India’s softly-softly approach to Iran. As a result, there are increasing doubts in Washington about the value of the partnership with New Delhi. 

What is particularly problematic about the Libya decision is that India failed to support action that was backed by the Arab League and the Organization of Islamic Conference (OIC). It was also action that would have come under the U.N. umbrella, sending a signal to other countries, including in India’s own troubled neighborhood, that India expects other nations to adhere to certain universal principles.  This might have prevented India having to vote against Sri Lanka at the United Nations recently – had it seen its giant neighbor backing U.N. action in Libya, Colombo might have thought twice about its resistance to addressing its treatment of its Tamil minority in the closing days of its civil war. And Delhi would also have looked more consistent, appearing to use a similar yardstick when measuring the severity of human rights violations. Instead, the United Progressive Alliance government ended up looking like it was playing domestic politics and buckling under pressure from Tamil political parties at home.

A year on, and it’s clear that India’s decision to step aside over Libya gained it little, and may have done significant damage to its international standing. If Delhi is to meet its aspirations of becoming a significant regional, let alone global, player then it needs to think more carefully about the message its positions send.

India might not want to promote democracy. But at the very least, it shouldn’t stand in its way.

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Yet, when it comes to India, the administration is dropping the ball. Although trade between the United States and India has increased, the economic relationship hasn’t yet reached its full potential. To do so, the administration should finalize a mutually beneficial investment treaty with India, and move forward on steps to negotiate a comprehensive Free Trade Agreement. These pacts would link American companies – and American workers – to important opportunities presented by India’s growing economy. In turn, this would lead to new jobs, and further link the United States to a critical Asia-Pacific partner.

To be sure, trade with India is on the upswing. Bilateral trade reached $48 billion in 2010, according to data from the Commerce Department, and the United States has become India’s third largest economic partner. With the exception of the global recession in 2009 and the burst of the dot-com bubble in 2001, total trade between the two countries has increased every year since 1991.

India’s economic transformation has been a boon for American companies and workers. In less than a decade, U.S. exports have quadrupled to $19 billion. While a broad array of American businesses now trade with India, few have benefited more from the relationship than U.S. manufacturers. The Office of the U.S. Trade Representative says that three manufacturing sectors – namely, machinery, electrical machinery, and aircrafts – account for three of the top five export categories to India. In the past two years, for example, India’s low-cost carrier, SpiceJet Airlines, purchased 33 new generation 737s from Boeing; India’s Ministry of Defense bought 10 Boeing C-17 Globemaster III airlifters; and Reliance Power ordered six turbines from General Electric Co. as part of a deal worth $750 million.

Equally important, yet seldom noticed, are the investments that Indian companies are making inside the United States. From 2000 to 2010, India was the United States’ second fastest growing foreign investor, with an annualized growth rate of 53 percent. In 2009 alone, Indian companies invested $4.4 billion into wide-ranging American sectors like pharmaceuticals, oil and coal, iron and steel, and telecommunications.

The tangible results of these investments can be seen across the United States. In Ohio, for example, subsidiaries of TATA, India’s largest company, employ over 1,200 people at diverse production facilities that manufacture steel products in Warren, and develop and deliver software technology in Milford. The same can be said in northeast Minnesota, where in 2008 India’s Essar Steal broke ground on a $1.6 billion steel plant on the state’s Mesabi iron range.

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Never mind that New Delhi just announced a hefty 13 percent defense budget increase for 2012-13, or that the country is now the world’s biggest importer of military systems. Most Indian commentators seem to have digested these two pieces of news by focusing on the downside: that the country’s $39 billion defense budget remains quite modest compared with the $106 billion military budget at China’s disposal.

The critics should bear two things in mind before giving into defense budget envy. First, a 13 percent increase is actually very generous in the context of an Indian economy that’s only expected to grow by7.6 percent in the coming year. Larger increases aren’t only unaffordable but also strategically untenable, as they would alarm neighboring countries.

Second, the Indian military has long since accepted two facts of strategic life: that the Chinese military will always be bigger; and that it will always be richer.

That doesn’t mean the Chinese military will necessarily be better, and overcoming the comparative disadvantages of wealth and scale is what Indian military strategy, at least vis-à-vis China, is all about. The solution comes in two parts. First, the Indian military knows it has to focus on quality rather than quantity, investing in weapon systems that China, hindered by international arms embargoes, cannot match. It then also means capitalizing on regional unease about China’s rise and on forging smart alliances. China might be more powerful, but India knows it can be more popular.

The Indian media is therefore over hasty in viewing defense matters through the China inferiority lens. The Times of India, for example, headlined last week’s defense budget announcement by bemoaning the fact that the “Military plays catch-up but China [is] a long march ahead.”

That’s a self-defeating way to look at things. The important questions Indians should be asking are whether their government is giving defense the resources it needs – and based on successive double-digit spending increases, you’d have to say that it is; and whether that money is being used wisely to bankroll a coherent military modernization strategy. It’s when you look more closely at this second point that you begin to appreciate that India – not China – is its own worst enemy.

Writing in the Business Standard, Ajai Shukla observed this week that the Indian Army is being starved of funds, while the Navy and Air Force soak up all the investment. Indeed, the numbers don’t look good from the Army’s perspective. The Air Force has a capital expenditure to operational cost ratio of two to one; the ratio for the Navy is about three to two. By contrast, the Army spends six times as much on day-to-day running costs as it does on new equipment.

However, such ratios are a fact of life when you have an army of over a million active personnel whose poor pay and conditions you are attempting to upraise over time. China, with its 2 million increasingly well-paid troops, has exactly the same headache of rising everyday bills eating away at budget increases. And there’s also no getting away from the fact that India, despite its expanding resources, can’t buy everything at once. With several costly Air Force and Navy programs currently underway, such as the procurement of the Dassault Rafale fighter and new naval frigates, the Army has been obliged to wait in line. Now, it can rightfully claim to have moved to the front of the queue.

Of greater concern is the tenacious ineptitude of India’s defense bureaucracy. In the last financial year, as in most others, the Defense Ministry failed to spend all of the cash at its disposal thanks purely to red tape. That’s the first thing that needs to be fixed.

The government then needs to redouble its efforts to introduce a functioning procurement system. More often than not, India’s attempts to buy equipment become tortuous and wasteful. In January, Army Chief Gen. V.K. Singh, himself a recent victim of his country’s eccentric bureaucracy, suggested wearily that, “the procurement game is a version of snakes and ladders where there is no ladder but only snakes, and if the snakes bite you somewhere, the whole thing comes back to zero.” His exasperation centered on the army’s efforts, initiated 10 years ago, to buy new artillery; the process has just resulted in the blacklisting of six foreign defense contractors but, as yet, no new guns.

Another example is the acquisition of 75 much-needed Pilatus PC-7 Mk II trainer aircraft, announced last year, which now faces delays – like so many procurements before it – over allegations of irregularities in the bidding process. Worryingly, though perhaps predictably, questions are now also being asked about the flagship Rafale procurement.

Third, the government should re-evaluate the role of the domestic defense industry, which currently does a lot of things badly. It should be made to start doing a few things well. India’s Defense Research and Development Organization (DRDO) recently complained that it doesn’t have enough money – but that has never been its problem. The agency has a track record of initiating overambitious programs and then executing them poorly, as the travails of the Tejas light combat aircraft, to name but one example, continue to demonstrate. For the sake of both the taxpayer and the military, the Defense Ministry should focus the DRDO and the defense industry on developing a realistic core of indigenous capabilities, and then just import everything else.

So India is wrong to feel inferior just because China has more soldiers and more money. The problem is the incoherence of India’s defense establishment, from industry through to government – therein lies the inferiority. It’s a danger to Indian security that has nothing to do with China, and that’s within India’s own power to put right.

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In Washington, opposition from the non-proliferation community nearly sank the deal during negotiations. In Delhi, the signing of the deal was so controversial it almost brought down the Congress Party’s coalition government in the 2008 vote in parliament. An upside to the tortuous negotiations was supposedly the empathy and understanding Indian and U.S. diplomats developed for the political constraints the other side operates under.

The Indian policy establishment and strategic community were therefore taken aback when Nicholas Burns, former undersecretary of state and the chief American negotiator on the nuclear deal, slammed India for its Iran policy in The Diplomat. Having reaffirmed India’s “immense strategic importance to the United States” in the Boston Globe a mere 10 days prior, Burns now argued that Delhi’s unwillingness to support U.S.-led sanctions amounted to a failure “to meet its obvious potential to lead globally,” thereby equating, in a spurious sort of way, India’s leadership ambitions with toeing the American line. Despite recognizing some of India’s votes against Iran at the U.N., Ambassador Burns went further in accusing India of “actively impeding the construction of the strategic relationship it says it wants with the United States.”

In actuality, it’s Washington’s unbending attitude towards accommodating India’s vital interests in Iran that potentially threatens the Indo-U.S. bilateral relationship. Burns and others U.S. critics of India’s Iran policy are, in effect, forcing Indo-U.S. relations back into a version of the old, inappropriate, and eminently discardable, “If you are not with us, you are against us” policy mold. By framing the issue in dichotomous terms, critics in Washington ignore the economic and domestic context in which India’s Iran policy is made.

In downplaying Delhi’s economic interests in Iran, Burns dismisses the fact that India gets 12 percent of its oil from Iran as a “weak defense” of its policy, because Delhi has had many years to find new suppliers. This ignores the fact that many of India’s government-owned refineries are geared to processing Iranian crude. If India were to switch to other sources, this would require a substantial upfront investment to retrofit its refineries to process other types of crude. Already facing a budget shortfall that is equal to 5.6 percent of GDP, the Singh administration is in no mood to incur these costs.

Moreover, it’s not at all clear that India could procure enough oil from other sources to make up for its loss of Iranian crude. Many suggest Saudi Arabia as both willing and able to make up the gap. But Riyadh’s spare capacity has come under severe strain after a decade of global supply interruptions elsewhere, and the rapid increase in demand caused by rising powers like India and China. Meanwhile, Saudi oil production is already at historically unprecedented levels, and it was unable to supplement the loss of Libya’s rather insignificant oil exports last summer, forcing Western nations to tap into their strategic reserves. Furthermore, both the International Energy Agency and the U.S. Energy Information Administration see Riyadh’s spare capacity continuing to diminish throughout 2012.  

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3. The Coming U.S.-India Train Wreck

President Asif Ali Zardari is the latest in a 60-year line of leaders whose powers and legitimacy have been redefined by an amended constitution.  In April 2010, the Eighteenth Amendment effectively restored the 1973 Constitution, which had been overturned by Gen. Zia and Gen. Pervez Musharraf.  The new Constitution strips away presidential powers and restores the authority of the prime minster, making it more difficult for military chiefs to throw out a civilian government.

It seems surprising to outsiders that Zardari has managed to stay in this position for so long when others before him have been deposed, imprisoned or even executed for the mere suspicion of the crimes for which Zardari has been accused.  It’s also surprising that he was even elected to the presidency after the assassination of his wife Benazir Bhutto, given his less than illustrious past, when he was known as “Mr. Ten Percent” for his alleged profiteering, corruption and misuse of public funds.  Once elected, he quickly became unpopular with his own party after replacing Bhutto’s advisers with his own team, and he has since proved slow to respond to Pakistan’s crises.

But figurehead or not, Zardari continues to travel the world, seeking funds from the IMF, China and Saudi Arabia to respond to Pakistan’s dire need for capital assistance, and negotiating with Iran a gas pipeline that will benefit both nations.

Zardari has actually previously been convicted of corruption, and has spent a total of eight years in jail, and there are still outstanding indictments that are creating tensions in the National Assembly today.  An article in the New York Times entitled House of Graft: Tracing the Bhutto Millions, spells out in uncomfortable detail the shadowy world of the Bhutto-Zardari fortunes.  Documents offer an extraordinarily revealing look at high-level corruption in Pakistan, “a nation so poor that perhaps 70 percent of its 130 million people are illiterate, and millions have no proper shelter, no schools, no hospitals, not even safe drinking water.”

Among the deals that have come to light are a $200 million deal with French military contractor Dassault Aviation, which fell apart only after Bhutto’s government was dismissed; a leading Swiss company paid millions of dollars into offshore companies controlled by Zardari and Bhutto’s mother Nusrat; a gold bullion dealer in the Middle East apparently paid $1 million into a Zardari bank account.

There’s also evidence that the family amassed more than $1.5 billion in illicit profits through kickbacks in virtually every sphere of government activity, with accounts and transactions managed by a network of Western friends, lawyers and property companies.

Among the transactions Zardari exploited were defense contracts, power plant projects, the privatization of state owned industries; the awarding of broadcast licenses; the granting of an export monopoly for the country’s huge rice harvest; the purchase of planes for Pakistan International Airlines; the assignment of textile export quotas; the granting of oil and gas permits; authorization of sugar mills and the sale of government lands.

In 1993, he was convicted of money laundering, and in a separate case he and 128 others were indicted for conspiracy to murder his wife’s brother, Murtaza Bhutto. His release, re-arrest and the release again led to his exile in Dubai in 2005. Zardari has spent several years in jail, from 1997 and again from 1999 when he was sentenced over his connection to a Swiss company that had been hired to investigate corruption in the collection of customs duties. 

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