The many benefits of India’s growing ties with Saudi Arabia and UAE

The many benefits of India’s growing ties with Saudi Arabia and UAE

When Aramco President and CEO Amin Nasser cut the ceremonial ribbon in New Delhi to inaugurate the state-owned global energy giant’s newest office last year, the event captured only a smattering of headlines. That launch, however, should be seen as a defining moment in a relationship accelerating at dizzying speed, leading one Indian columnist to describe Saudi-India ties as “one of the most happening bilateral relationships of 2018.

The feeling seems to be mutual in Riyadh. India was selected as the guest of honor at the 2018 Janadriyah Festival — a culture and heritage gathering held every year near the Saudi capital. Saudi Arabian Airlines also did some ribbon-cutting recently, inaugurating a new office in New Delhi in February, while Saudi Basic Industries Corp is eyeing a major stake in a petrochemicals plant in western India.

In April of this year, Saudi Aramco announced a blockbuster deal to take a 50 percent stake in a proposed $44 billion mega-refinery in western India that will be capable of refining 1.2 million barrels of crude oil per day. In the summer, the deal grew even sweeter for India when it was announced that the Abu Dhabi National Oil Company would join Aramco in jointly taking the stake. What could be better for a rising, energy-hungry nation of some 1.3 billion than joining forces with two of the world’s most reliable oil suppliers?

In fact, Saudi Arabia and the UAE seem to be accelerating their strategic ties with India at the same time. Both countries have long hosted millions of Indian expatriates, from construction workers to senior executives, and both have long sold significant quantities of oil to India, but the moves that have been made over the past year suggest a far more strategic relationship is brewing.

In May, a tanker carrying 2 million barrels of UAE crude set sail for India as part of an agreement signed earlier in the year to lease 6 million barrels of storage capacity at an underground facility in Mangalore. That storage facility will serve as both part of India’s growing ambition to become a regional trading hub for oil, as well as a key source to replenish the country’s strategic reserves.

Accelerating ties between India and Saudi Arabia and the UAE driven firstly by commerce, but they could contribute significantly to regional stability and prosperity.

Afshin Molavi

For ADNOC, the deal further enmeshes it with a country that is, according to BP’s definitive annual survey of global energy, the most important growth pole for energy through the year 2040. India will see 165 percent growth in energy consumption in that time, according to the BP report, and the vast majority of that energy will still come from fossil fuels.

In February, another milestone in the UAE-India relationship was achieved when a consortium of Indian oil companies purchased a 10 percent stake in a major offshore oil concession near Abu Dhabi. The agreement, signed during the visit of Prime Minister Narendra Modi to the UAE, marked the first time an Indian company had entered the UAE upstream oil sector.

To be sure, the UAE-India relationship is not solely paved with energy. The city of Dubai has long served as something of a Hong Kong for India, being a hub for trade, travel and logistics. Dubai International Airport has become India’s most important air hub, connecting millions of passengers each year to other destinations, while also attracting millions to the city-state’s attractions. Indian tourists are now the No. 1 visitors to Dubai, according to recent figures. Dubai-based companies like DP World and Emaar have been significant investors in India, and Indian companies have long used Dubai as a trade hub.

The Indian expatriate community — ranging from construction workers and services staff to senior professionals and technocrats — has been an integral part of the UAE’s development story. UAE-based Indian merchant families and industrialists have become major investors across the emirates, building companies that have grown across emerging markets from their base in Dubai or Abu Dhabi. One of those companies, Lulu Group, is now expanding into the Philippines.

Saudi Arabia has also long hosted a large Indian expatriate community, and has been a major oil supplier during India’s economic rise over the past three decades. In the year 2016, in a sign of growing ties, Modi became the only Indian leader toreceive Saudi Arabia’s highest civilian honor.

For years, the Saudi Arabia-India relationship had always been shadowed by the Kingdom’s close ties with Pakistan. That has changed. While Riyadh retains strong ties to Islamabad, there is no longer an “either-or” element, and the Kingdom has demonstrated geopolitical diversification in its relations with South Asia.

It now seems clear that both India and Pakistan should play a role in the stabilization of Afghanistan, and thus Abu Dhabi and Riyadh can serve as neutral mediators between New Delhi and Islamabad. Strategic ties, rather than tactical ones, will give Saudi Arabia and the UAE more political clout in India. The growing ties also come at a time of unprecedented cooperation between Riyadh and Abu Dhabi across the spectrum of economic and foreign policies.

As China makes a massive investment in the future of Pakistan with its $60 billion infrastructure investment drive, the geopolitical chessboard in Asia is shifting. A new move is being made on that chessboard: The accelerating strategic ties between India and Saudi Arabia and the UAE. It’s a move driven firstly by commercial considerations, but one that could contribute significantly to regional stability and prosperity.

 

  • Afshin Molavi is a senior fellow at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies and co-founder of emerge85, an initiative dedicated to exploring change in the emerging world and its global impact. Twitter: @afshinmolavi
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