U.S., India expected to sign defense pact

By Arshad Mohammed

NEW DELHI (Reuters) – The United States and India are expected to sign an agreement on Monday that would take a major step toward allowing the sale of sophisticated U.S. arms to the South Asian nation, three senior U.S. officials said.

Known as an "end-use monitoring" agreement and required by U.S. law for such weapons sales, the pact would let Washington check that India was using any arms for the purposes intended and preventing the technology from leaking to others.

The deal would be a tangible accomplishment of Hillary Clinton's first trip to India as U.S. secretary of state and it could prove a boon to U.S. companies such as Lockheed Martin Corp and Boeing Co.

Both U.S. defense contractors are in the running to compete for India's plan to buy 126 multi-role fighters, which would be one of the largest arms deals in the world as India takes steps to modernize its largely Russian-made arsenal.

The two U.S. companies are competing with Russia's MiG-35, France's Dassault Rafale, Sweden's Saab KAS-39 Gripen and the Eurofighter Typhoon, made by a consortium of British, German, Italian and Spanish firms, for the contract.

The U.S. officials, who spoke on condition that they not be identified, said the defense agreement was not finalized as of late Sunday but that they expected it to go through in time for Clinton's signature on Monday.

"If we don't sign that, it will be a definite slap in the face," said a U.S. congressional aide ahead of Clinton's visit to New Delhi, where she met Prime Minister Manmohan Singh and was to see External Affairs Minister S.M. Krishna in the evening.

Clinton's visit aims to deepen ties with India, a country whose economic power and political stability make it a natural U.S. ally, according to analysts, despite the long history of U.S.-Indian tensions during the Cold War, when Washington at times tilted toward India's rival Pakistan.

Before her official meetings, Clinton on Monday spoke to students at Delhi University and said both sides should try to get past stereotypes to build on strong U.S.-Indian links.

"People watching a Bollywood movie in some other parts of Asia (may) think everybody in India is beautiful and they have dramatic lives and happy endings," she said to laughter.

"And if you were to watch American TV and our movies, you'd think that we don't wear clothes and we spend a lot of time fighting with each other," Clinton said.

U.S. officials hope for two other tokens of a closer relationship to be confirmed during Clinton's trip: an Indian announcement of two nuclear sites reserved for U.S. companies to build reactors and a broad strategic dialogue to be led by the U.S. secretary of state and the Indian foreign minister.

Clinton hinted at the latter, telling the students that the two sides would announce "a comprehensive strategic approach" to cover a breadth of issues in their relationship.

U.S. officials estimate that the nuclear sites represent up to $10 billion in business for U.S. nuclear reactor builders such as General Electric Co. and Westinghouse Electric Co, a subsidiary of Japan's Toshiba Corp.

In addition to her official talks with Singh and Krishna, Clinton planned to meet Sonia Gandhi, the head of the ruling Congress party, and with L.K. Advani, the aging leader of the opposition Bharatiya Janata Party, on Monday.