India’s Rafale Fighter Scandal Builds: Cherchez la Femme

It would have seemed improbable if not impossible when he became India’s prime minister in 2014 that Narendra Modi would personally face allegations of crony capitalism and possible corruption involving a French actress, a former French president, one of India’s most unsuccessful debt-ridden prominent businessmen and a contract for fighter jets.

Yet that is what has built up in recent months and has been escalated by a statement made by former French president Francois Hollande to Mediapart, a French news website that is investigating a contract for 36 Dassault Rafale jets arranged by Modi when he visited Paris in April 2015.

Hollande was still in power in 2015 and the contract later generated work for Anil Ambani, one of two Mumbai-based brothers who run separate businesses with the name Reliance. Ambani is close to Modi and his heavily-indebted Reliance Group part-funded a film in 2016 planned by Julie Gayet, a French film actress and producer who is Hollande’s partner.

Julie Gayet and Francois Hollande

Clearly anxious to dismiss a report that there was a link between the Rafale deal and the film financing, Hollande told Mediapart that the Indian government “proposed” Reliance. “We did not have a choice, we took the interlocutor who was given to us.”

The India government, equally anxious to dismiss crony links between Modi and Ambani, has repeatedly insisted that Ambani was chosen by Dassault as its joint venture partner for supplying components under an offsets deal.

This seems unlikely because Ambani and Reliance have no experience in the defense sector, let alone aircraft component engineering. It is widely assumed in Delhi that Dassault came under considerable political pressure – presumably being assured that it would have effective management and financial control, even though Reliance has a 51 percent against its 49 percent.

Hollande’s statement was a blow for Modi, but equally significant is Mediapart’s investigation because it increases the likelihood that the scandal will haunt Modi and the BJP government up to the general election that is due by next April.

The Congress Party, led by Rahul Gandhi, wants to build the contract into India’s biggest defense scandal since the mid-1980s. That was when allegations built up against his father, Prime Minister Rajiv Gandhi, of the equivalent of US$50 million in bribes on a US$1.4 billion howitzer contract with Bofors of Sweden, leading to a scandal that continues to haunt the dynasty.

Bofors developed into a major issue because it was pursued not just by the Indian media but also became a big media and political issue in Sweden. Similarly, an Augusta Westland VVIP helicopter contract scandal during the last Congress government has run for years because it was also being pursued in Italian courts. When I last wrote about Rafale in July, I said that there was no sign of such action in France building new roots for the current allegations.

That has now changed with Mediapart taking up the story. Interested because of the French political implications of Hollande’s involvement, its report says:

"One day, the Indians came and the film could be made," recalled one of the production team of the film Tout là-haut (To the Top), co-produced in 2016 by the actress Julie Gayet, the partner of then French president François Hollande. The film’s budget was €10 million and the Indian funding – initially to be €3 million but later reduced to €1.6 million – was a lifeline.

The Indian government yesterday “reiterated that neither GoI nor French Govt had any say in the commercial decision.” Today it has implicitly accused Hollande of a “conflict of interest,” suggesting that his statement “perhaps needs to be seen in its full context – where the French media has raised issues of conflict of interest involving persons close to the former President”.

In fact, the positions being taken by all sides are perfectly tenable and in line with each other. It is alleged that Modi personally said in Paris that Ambani should have the joint venture contract, so the Indian government can claim not to have been involved.

Equally, Hollande can say he had no role because Modi could have told Dassault, or made sure it got the message. That left Dassault and Ambani to do their joint venture deal later, separate from the government-to-government main contract. It could also be argued that Ambani, who accompanied Modi on his Paris visit and who had a company involved in film financing, met Julie Gayet while he was there and became interested in helping with her film.

But that is not how political scandals and battles develop because Modi and Hollande were performing as prime minister and president and were close, respectively, to Ambani and Gayet. It is also alleged Modi breached established defense procurement procedures by striking the sudden deal.

In its attempt to fight off the Congress assault, the government is now alleging corruption involving the last Congress-led government, which struck an earlier deal for 126 Rafale jets in 2012. That deal was never concluded and was cancelled by Modi when he went to Paris.

No price was announced for the 36 aircraft during the Paris visit, but after long negotiations a government-to-government contract was eventually signed in September 2016 for then €7.85 billion), which equaled an average of €216 million for each aircraft. Congress and other critics say that is far more than the per-aircraft price for the 126 aborted order, which means that Modi has gone back on a statement he made in Paris that the 36 aircraft price would be less.

That led to pressure on the government to announce the final contract price, but it has repeatedly refused to do so, saying it had to remain secret for security reasons. Its obfuscations have increased suspicions that it has something to hide.

If it had revealed the figure months ago, the political momentum might not have built up around the alleged cronyism of Modi, Ambani, the former president and his film star partner – and Modi might not have become saddled with a potential heir to the Bofors affair.

John Elliott is Asia Sentinel’s South Asia correspondent. He blogs at Riding the Elephant.