Bilateral Relations of India and Saudi Arabia

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TOPIC: General studies 2:

• Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.
• Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora

During the Cold War the relations between India and Saudi Arabia were largely shaped by the Pakistan factor which in turn inhibited both sides from exploring the importance and value of one another. As a result, the relations were largely transactional and marginal.

The end of the Cold War coincided with two interesting developments, namely, significant growth in India’s economic power and influence and the de-hyphenation of Pakistan from its Middle East policy. This resulted in greater political engagements between India and Saudi Arabia and was strengthened by the growing energy trade ties.

Saudi Arabia is a unique country at least in two specific details –

• Possesses more than a quarter of the global oil reserves and has been the largest oil producer for over half-a-century (plus the only country with a spare production capacity).
• The holiest Islamic shrines are located in Makkah and Medina, placing the country in the epicentre of the Muslim sacred space.

Trade has been the dominant factor in India’s relationship with Saudi Arabia, with the import of oil being a major component. In 2013 India had already become the third largest energy consumer in the world. Such a condition has always directed India to the Middle East, which is both geographically close and strategically important.

India views Saudi Arabia as a country with which it can forge security ties in order to deal with terrorism, piracy and criminal elements. Diplomatically, it could be a gateway for India into the wider Arab and Islamic world. In recent years, Saudi Arabia has reciprocated India’s initiatives relating to issues of mutual interest. India’s Saudi policy, however, face many challenges most importantly the regional instability, the Iran factor, low oil price and the international dynamics. Although some hurdles remain, it is time for both countries to work towards building a strong strategic partnership.

India and Saudi Arabia have more opportunities today to tap into than ever before.

Trade Story

The bilateral trade for 2017-18, in excess of $27 billion, will accelerate as Saudi Arabia and India engage in a host of new areas such as information and communications technology (ICT), health care, defence, biotechnology, education and infrastructure among others. India is one of the top countries on the Kingdom’s preferred list with great potential for investment in organic and food processing industries.

Energy partnership

As of October 2018, Saudi Aramco has nearly $2 billion in material-service sourcing with Indian companies, and investing in India’s value chain from oil supply, marketing and refining to petrochemicals and lubricants is a key part of its global downstream strategy. The $44 billion integrated refinery and petrochemicals complex at Ratnagiri in Maharashtra, being jointly developed by Saudi Aramco, Abu Dhabi National Oil Company (ADNOC) and a consortium of Indian public sector units (PSUs) consisting of Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL), is yet another milestone.

• Expansion of trade and investment: Saudi has shown interest in expanding trade and investment in India and collaboration in the energy sector. India could likely absorb $100 billion in Saudi investment.
• Ratnagiri refinery and petrochemicals complex joint venture: Saudi Aramco is set to partner with the Abu Dhabi National Oil Company in developing an integrated refinery and petrochemicals complex at Ratnagiri in Maharashtra, a $44 billion joint venture with Indian public sector involvement.
• Largest supplier of oil: Saudi Arabia is already one of the three largest suppliers of oil to India.
• Strategic Partnership Council: Both the countries have a strong independent strategic partnership and it will be further strengthened with the launching of the Strategic Partnership Council.
• People-to-people relations: There were announcements of the release of 850 Indians from Saudi jails, a hike in the quota for Indians making the Haj pilgrimage and an annual upscaling of airline seats to and fro.
• Comprehensive security dialogue and counter terrorism: A comprehensive security dialogue between the national security advisers of the two nations has been announced, besides a joint working group on terrorism.
• Inaugural joint naval exercises soon: Both agreed to hold their inaugural joint naval exercises at the earliest.

The Saudi-India-Pakistan triangle

The Saudi Foreign Minister’s statement in Islamabad during MBS’s visit that Riyadh is committed to “de-escalating” tensions between India and Pakistan over Kashmir must not be read as an endorsement of the Indian stand but as an attempt to intervene in the dispute rather than accept its bilateral nature. New Delhi should, therefore, not be overly optimistic that growing Saudi-Indian relations in the economic sphere will succeed in prying Riyadh away from Islamabad.

• Pakistan is far too important to Saudi Arabia for internal security reasons for Riyadh to sacrifice its stake in Islamabad in order to appease New Delhi. The Pakistan Army has more than once acted as the Saudi rulers’ praetorian guard and given the uncertain hold of MBS on his country, despite impressions to the contrary, he may need the services of Pakistani mercenaries in the near future.
• Afghanistan has been a point of strategic convergence for Pakistan and Saudi Arabia going back to the 1980s when the Saudis used Pakistan as a conduit for material assistance to the Islamist forces fighting the Soviet Union and its proxy government in Kabul. With U.S. withdrawal from Afghanistan and the consequent expansion of Taliban influence very much on the cards, Pakistan’s strategic value as the Taliban’s patron has grown exponentially. Saudi Arabia is interested in curbing Iranian influence in Afghanistan and needs Pakistan to contain Tehran’s ability to influence events in that country after the American withdrawal through its Tajik and Hazara allies.

One of the most important pillars for India’s great power aspiration is widened strategic influence. New Delhi has to increase the bandwidth of its foreign policy and find more areas of mutual interest and strategic convergence in the Middle East without disrupting the balance it has created in the region in terms of both bilateral and multilateral engagements.

Connecting the Dots:

1. India should take advantage of any benefit that accrues from India’s economic relations with Saudi Arabia but should not pin much hope on Riyadh in the political-strategic sphere. Discuss.
2. India’s “Link West” policy has seen both continuity and change. Comment.