INDIA IS ONE OF THE MOST important customers for two of the world's major arms producers: France and Russia. Both nations have recently had fairly good success in this market and are competing there along with four other U.S. and European suppliers for a large export contract for fighter aircraft.

Russia's record in India as of late has not been stellar, but for all of their mistakes the arms brokers in Moscow have been smart enough to realize the cardinal rule of success in this huge market: you cannot sell to India and Pakistan at the same time. Unfortunately for firms like Dassault Aviation SA, officials in Paris have not yet learned this lesson. It may be the costliest mistake--both financially and diplomatically--since the fracas over French opposition to the U.S. invasion of Iraq.

Tales about Russia's state arms export agency, Rosoboronexport (ROE), and its predecessor organizations managing to do more to prevent arms exports by Russia's defense industry than to promote them have been legion in post-Soviet Russia. Like any other export product that generates large amounts of hard currency (gold, caviar, diamonds, sable furs, natural gas) the foreign sale of weaponry has been tightly controlled so that the profits all ends up in the hands of a select few.

But this cabal of former (and active) intelligence officers and ex-military officials generally receives poor marks from many in the Russian defense industry and is credited with little more than the capacity to line their own pockets. One of the 1990s arms export organizations that ROE was born out of was called Rosvooruzheniye, which is a combination of two words that meant "Russian armaments." Russian defense industry officials almost immediately began referring to the employees of this organization as "Rosvori," which sounded like a catchy little abbreviation of the agency's name, but actually meant "Russian thieves."

Not surprisingly, some of the high-profile contracts that ROE previously signed with one of Russia's most important customers, India, are now in deep trouble--behind schedule and way over budget. Officials in New Delhi now talk more often about "diversifying their supplier" base, which is an oblique way of saying they are fed up and want to find another nation besides Russia from which to purchase arms.

In theory, French industry should be best positioned to benefit from ROE fumbling the ball in India. France has already sold submarines, fighter aircraft, and a host of other weapon systems to New Delhi, making it one of the top three sellers of defense exports to the subcontinent.

Like ROE in Russia, France's Délégation Générale pour l'Armement (DGA) is the state agency responsible for regulating and promoting defense exports. But, DGA is, in theory, an agency that is quite a bit more professional in its orientation than its Russian counterpart. The function of DGA is to offer "packages" of weapon systems from several arms producers to create synergies that would not be possible if the individual French defense firms were all marketing the materiel independently.

However, real-world practice has turned out to be quite different. When asked if DGA has at times been as counterproductive to industry's efforts at selling abroad as Rosoboronexport (ROE) has been to Russian defense firms, several French company representatives replied "that is not an entirely inaccurate or bad analogy."

Dassault Aviation SA, producers of several generations of the Mirage-series of fighter aircraft, have probably suffered more than others in this regard, having been roundly frustrated in their efforts to sell the firm's next-generation Rafale omnirole fighter abroad. Last year the company saw defeat snatched from the jaws of victory in Morocco, where the sale of the Rafale had been thought to be a foregone conclusion.

In what appears to have been a classic case of the left hand not being aware of what the right hand is doing, DGA made one of its packaged offers to Morocco, which included two frigates and 18 Rafale fighters.

Unfortunately, DGA forgot to inform Dassault and its industry partners that it had tendered the offer to the Moroccans. Dassault, et. al. only learned of the DGA offer when they made their own proposal to Morocco for 18 Rafales some weeks later. They then discovered that DGA's proposal was €500 million less than what the standard kitted out complement for this number of aircraft should be.

The consequence of this fiasco is that Morocco will buy one frigate, but will opt for a purchase of the Lockheed Martin F-16 instead of the Rafale. "This is more or less the legacy of the DGA to date," commented one French industry observer. "There are frigates being sold everywhere, but no fighters." "One frigate has managed to shoot down 18 Rafales," added one of the editors of France's Libération newspaper.

The loss is particularly annoying to Dassault, which had previously been part of an industry team program to modernize the Moroccan Mirage F1 fleet. This contract had been thought to put the French firm in the prime position to make a Rafale sale.

At the time, this proverbial "last straw" prompted French president Nicolas Sarkozy to completely reorganize France's defense export administration. Le Figaro reported late last year that a new high-level arms export task force would now oversee the DGA's activity, and would be headed by the president himself plus the prime minister, the ministers of defense, foreign affairs, and finance, and the commander-in-chief of the army.

All of which sounded like a great idea at the time except that it appears to have had no positive effect.

Bruno Berthet, assistant director for international development at the French Defense Ministry, announced this week that despite negative reporting on this issue for several months, DGA intends to sign a provisional deal that would allow Pakistan to obtain MICA air-to-air missiles (AAM) from France's MBDA and the RC400 radar from Thales, the French defense electronics conglomerate.

"The talks are on the right track, and there are diplomatic comings and goings between the two countries," Berthet told the Associated Press earlier in the week, but added that it was too early to say when a memorandum of understanding might be signed. The MICA AAMs and Thales radars would equip the joint Sino-Pakistan JF-17/FC-1 fighter that is being built by the Pakistan Aeronautical Complex and China's Chengdu Aircraft Design Institute.

"If you are serious about continuing to do defense business in India," said one French industry representative, "then this deal makes no sense. The MICA missiles are the same as on the Dassault Mirage 2000 aircraft that have previously been sold to India, and the RC400 radar is the same as the RDY-3 model design that Dassault have proposed to install in the Indian Mirages as part of an upgrade program. DGA are essentially selling the Pakistanis--at a time of heightened instability in that country--the same radar and missile technology that has already been sold to India. This will compromise a good portion of the IAF's fighter force."

If the contract with Pakistan is signed it may irreparably damage Dassault's chances to successfully bid the Rafale for India's current fighter aircraft contract competition. This program, called the M-MRCA (Medium-Multirole Combat Aircraft) procurement, is projected to add up to 200 or more aircraft by the time the initial contract and follow-on sales are tallied up--making it the biggest arms export deal in more than three decades. "This is a high opportunity cost--if you are French industry--just to sell some accessory items to the Pakistani Air Force," commented one industry insider.

Diplomatically, the fallout could be even worse. The JF-17/FC-1 is a program in which Pakistan and China have always shared technology acquired by one partner with the other. Chinese industry would be almost certain to acquire this technology. This not only gives Beijing a path to circumvent the EU arms embargo that has been in place since the suppression of the 1989 Tiananmen Square demonstrations, but it also spells bad news for Taiwan.

The Taiwan Republic of China Air Force (ROCAF) operates 60 Dassault Mirage 2000-5 fighters that are equipped with the same MICA AAM (Taiwan purchased almost a thousand units of this weapon) and the Thales RDY radar. Thus, the signing of this deal between France and Pakistan would essentially make these ROCAF Mirages useless in any defense of the island nation by an attack from the mainland. This is potentially another loss for Dassault in that Taiwan is also in the market for more fighters. If the DGA sabotage the ROCAF Mirage fleet with this Pakistan program then Taipei will more than likely opt to purchase more of the Lockheed Martin F-16s that they also operate.

Paris can be a very political place, as the saying goes, but nothing about the politics of DGA seems to square with the interests of France's industry or the desire of President Sarkozy to try and repair strained relations with the United States. Crippling the air force of Taiwan, one of America's oldest allies, and handing over advanced military technology to a government in Pakistan that is less stable by the day probably falls into the category of actions that would displease Washington.

Which is why DGA probably now deserves the "worse than Rosoboronexport" label. Both nations' state arms agencies have torpedoed export sales opportunities that they should have been able to close. However, the Russian agency has yet to do such a thorough job of damaging ties with long-standing clients and aggravating Washington to the level that DGA seems determined to reach. Sarkozy needs to step in and put an end to this deal--while there is still enough of a French military aerospace industry in existence to be saved by his actions--and prevent another diplomatic row with the United States.