Forecast International,
NEW DELHI: The Indian Navy has been stunned by a Russian demand for an additional $700 million payment for the completion of the reconstruction of the aircraft carrier Admiral Gorshkov. This brings the total demanded by the Russians to $2.9 billion, more than three times the originally-contracted price and a truly outrageous sum by any international standards.
In addition to this latest demand, the Russians have confirmed that the ship will not be completed until 2012, four years later than originally planned.
These latest demands come as a savage blow to the Indian delegation that was planning to negotiate over the original Russian demand for an additional $1.2 billion. The delegation was hoping to find some middle ground over this extra demand but the new imposition seems to end any such hopes. India has already paid $500 million as per terms of the initial contract.
The Russian delegation has said that regardless of the outcome of this round of negotiations, Sevmarsh wants an immediate payment of $190 million to continue work that's underway.
To put these sums and times into context, India could purchase a new carrier from the U.K. or France for $2.9 billion and probably get it delivered as quickly as the Russians are proposing.
The sum demanded by the Russians in unconscionably high for a ship that is already twenty years old, had been laid up for a decade and has suffered damage from at least two serious on-board fires. The rapidly escalating cost of rebuilding this ship can also be seen as an admission of the ship's bad condition after this long period of neglect.
A logical Indian response to this latest demand would be to tell the Russians that they can keep their hulk and either find a new supplier or accelerate the Indian indigenous aircraft carrier program.
While the progress on that program has been slow and the date of completion has now been pushed to 2014-15, directing $2.9 billion of additional funding into that effort could well serve to accelerate progress nicely. Alternatively, there are plenty of shipyards that could build a new carrier for the same sum.
What really matters now is whether the Indian Navy will be so scandalized by these latest demands that it will be politically possible for them to walk away from the Gorschkov.
Undoubtedly, doing so would be the sensible course of action. After all, there is an old naval adage that is very relevant: “Reconstruction Never Pays.”
