The U.S. is “deeply disappointed” after India told it yesterday that Boeing Co. and Lockheed Martin Corp. “were not selected for procurement” in the world’s biggest fighter-jet order in 15 years, the embassy said in a statement citing Ambassador Timothy Roemer. India’s Defense Ministry plans to issue a statement on news reports that it has shortlisted aircraft made by France’s Dassault Aviation SA and the European Aeronautic, Defense & Space Co., ministry spokesman Sitanshu Kar said by phone.

The U.S. is “respectful of the procurement process” and will continue to “develop our defense partnership with India,” Roemer said in the statement. With Indian cabinet approval required following the Defense Ministry’s final recommendation, the U.S. could continue efforts to persuade Prime Minister Manmohan Singh’s government to buy a U.S.-built aircraft, said Kapil Kak, a retired Indian air vice marshal who is additional director of the Center for Air Power Studies, a New Delhi think-tank.

“A remaining uncertainty is that the defining nature of the U.S.-Indian strategic partnership might trump the purely operational and technical considerations” that have given an advantage to the European companies, Kak said in a phone interview. Lockheed, headquartered in the Washington suburb of Bethesda, Maryland, has offered its F-16 fighter, while Chicago-based Boeing is selling the F/A-18 Super Hornet.

Boeing ‘Disappointed’

Boeing said in a statement it was disappointed and will request a debriefing from the Indian air force on the decision.

Sweden’s Saab AB said in a statement yesterday its Gripen fighter had been dropped from consideration for the planned purchase of 126 jets, a deal that Kak said may expand to 200 or more because of attrition among the Indian air force’s fleet of MiG-21 aircraft, some of which were built in the 1970s.

A spokesman for Russia’s state arms export agency, Rosoboronexport, Vyacheslav Davidenko, declined in a phone interview to comment on the reported exclusion of state- controlled OAO United Aircraft Corp.

Arms Buildup

Foreign governments and companies struggling to recover from global recession are competing to sell the $120 billion worth of arms that India may spend from next year to 2017 according to an estimate last year by the Confederation of Indian Industry and Deloitte Touche Tohmatsu India Pvt.

India has tripled its defense budget over the past decade to $32 billion this year, the world’s 10th-largest, as it tries to counter a quadrupling of spending in the same period by neighboring China.

Obama led a delegation of CEOs, including Boeing’s Jim McNerney, on a November visit to India in which Obama urged increased trade between the two countries that he said will support tens of thousands of U.S. jobs. French President Nicolas Sarkozy arrived a month later with the CEOs of Dassault and EADS, and Russia’s President Dmitri Medvedev followed to lobby for military sales.

India’s Defense Ministry issued letters to EADS and Dassault asking them to extend the validity of their bids for the warplane contract, the Press Trust of India reported, citing company sources it didn’t identify. The New Delhi-based military affairs website Stratpost said the letters were issued yesterday, “effectively making up the shortlist” for the purchase.

Depleted Squadrons

“We’ve seen indications for nearly two months now that the Indian air force seems inclined to shortlist the Eurofighter and Rafale,” built respectively by EADS and Dassault, said Kak. India’s air force can operate only about 30 of its desired 40 air squadrons because of the aging of its MiG-21s and Dassault Mirage 2000s, he said.

Twenty-one air force MiGs crashed between 2007 and 2010, Indian Defense Minister A.K. Antony told parliament last year.

India’s arms-buying has been slowed by officials’ sensitivities over corruption scandals in previous purchases, including one that helped drive Singh’s Congress Party to defeat in 1989 elections, say analysts such as Rahul Roy-Chaudhury, senior fellow for South Asia at the International Institute for Strategic Studies in London.

Since the 1980s, no Indian government has made an open-bid arms purchase valued at as much as $100 million, or about 1 percent of the fighter deal’s size, Roy-Chaudhury and other analysts say.

“I have been personally assured at the highest levels of the Indian government that the procurement process for this aircraft has been and will be transparent and fair,” Roemer said today. His statement was released by the U.S. Embassy hours after it announced that he has offered his resignation for “personal, professional and family reasons.”