The ongoing visit of Custodian of the Two Holy Mosques King Abdullah to India has been universally described in the government and media circles as a historic landmark and very important milestone in upgrading the entire gamut of bilateral relations between India and Saudi Arabia.
The visit at the head of government level from Saudi Arabia after a gap of 51 years has raised great expectations in India. Surely, the Indian side is viewing the visit not merely from an economic point of view, but as an event which could kickstart a process that could ultimately lead to the establishment of a long-term strategic partnership that would enable the two countries to jointly cooperate in addressing serious geopolitical issues of the region as well as to play a constructive role in countering the menace of international terrorism.
Indian Prime Minister Dr. Manmohan Singh has put his long-term vision of India’s relationship with the Kingdom thus: “I envision that our relationship would remain dynamic and broadbased, acquiring greater depth and diversity, with both countries actively cooperating in promoting peace, prosperity and security in the region.”
Another significant aspect of King Abdullah’s maiden visit abroad after ascending the throne is the choice of his four countries, which are all in Asia. The tour represents a widening of Saudi Arabia’s geopolitical vision and a reaching out to additional, potential strategic partners rather than a marked shift in Saudi foreign policy away from the West.
As I see it, the Asia tour is a firm entrenchment of Saudi Arabia’s “Look East” policy, which is being advocated in several Gulf Cooperation Council states since the past one decade, and slow but steady steps are being initiated since then. Certainly, I do not regard this policy as a knee-jerk reaction to Sept. 11 attacks or the events that followed it. As a diplomatic officer who has dealt with several GCC countries and handled economic work, I would tend to explore economic rather than political reasons for the phenomenon.
If one analyzes the Kingdom’s exports during 2004, the latest figures as available from the Saudi Ministry of Economy and Planning, it can be seen that the Asian countries have emerged as the leading markets for Saudi exports. In 2004, Asian countries accounted for 44.62 percent of Saudi global exports i.e. SR210.85 billion out of the total exports of SR472.49 billion. Significantly, six of these Asian countries — Japan, South Korea, India, China, Singapore and Taiwan — have consistently remained among the Top 10 markets for Saudi exports since 2001.
The high potency of the Asian market for Saudi exports can be gauged from the fact that Saudi exports to Asia have grown by over 35 percent between 2003 and 2004. During the same period, exports to India grew by 33 percent, to Japan by 36 percent and those to China by 48 percent.
Crude oil, certainly, plays an important role in shaping up the long-term strategic relationship of the Kingdom with Asian countries. With one-fourth of the world’s proven oil reserves and some of the lowest production costs, Saudi Arabia is likely to remain the world’s largest net oil exporter for the foreseeable future. The Kingdom meets 15 percent of the US crude oil imports, 26 percent of India’s oil requirements, 25 percent of Japan’s crude imports and 14 percent of China’s requirement. China, Japan, South Korea and India are the top consumers of oil in Asia and they also figure among the Top 10 consumers of oil in the world. By 2010, India is projected to emerge as the fourth largest consumer of energy after the US, China and Japan.
The International Energy Agency has projected China’s oil demand to reach 14.2 million barrels per day (bpd) by 2025 from the current level of seven million bpd, while India’s oil demand is expected to rise from 2.83 million bpd in 2006 to 5.5 million bpd. Much of this requirement of Asian countries would be met by imports from the Middle East, mainly Saudi Arabia. This increase in their oil demands would prompt both India and China to focus on forging strategic partnerships with Gulf countries, mainly Saudi Arabia. Undoubtedly, cooperation in the hydrocarbons sector with Asian countries is in line with the Saudi thinking of enhancing cooperation between the producers and consumers of petroleum.
From the Indian perspective, the Saudi policy complements the vigorous “energy diplomacy” triggered by India’s Minister of Petroleum Mani Shankar Aiyar, in which he has unveiled India’s long-term vision to make 21st century “The Asian Century,” with New Delhi-Riyadh as its axis. Indian President Dr. A.P.J. Abdul Kalam, while addressing a joint session of Parliament on the opening day of the budget session, emphasized that India’s growing energy security needs form an integral part of our foreign policy and said “India would give importance to synchronizing our diplomatic activity with our need for energy to fuel our development needs.”
Coincidentally, Saudi Arabia’s “Look East” policy is matched by the newly unveiled “Look West” policy of India which envisages promotion of trade and investment and formation of strategic partnerships with countries in West Asia. Dr. Manmohan Singh described the Gulf region as “part of India’s natural economic hinterland” and advocated closer economic relations with the GCC states. He said: “India has successfully pursued a ‘Look East’ policy to come closer to the countries of Southeast Asia. We must, similarly, come closer to our western neighbors in the Gulf.”
Already, India has begun negotiations with the GCC to conclude India-GCC Free Trade Agreement. In tune with the “Look West Asia” policy, India has appointed former senior diplomat Chinmaya Garekhan as its special envoy to the Gulf region to promote cooperation in not just trade and investment but also in areas like IT, education, culture and tourism.
Today, India has emerged as the sixth biggest foreign investor in the Kingdom with investments exceeding $470 million in over 82 joint ventures or 100 percent Indian-owned companies in Saudi Arabia in different sectors such as management and consultancy services, construction projects, power, telecommunications, information technology, pharmaceuticals and other sectors.
There is a growing synergy between the two countries in the hydrocarbons sector. The Kingdom’s commitment to remain a reliable supplier of crude oil to fulfill India’s burgeoning energy requirements binds the two countries in a unique strategic relationship. Several areas of cooperation are under discussion between the two sides such as participation in LNG projects, exploration for gas, possibility for acquiring oil and gas acreages overseas, bilateral investment in each other’s oil refineries and construction and consultancy services in the petroleum and natural gas sector.
Another possible area of cooperation could be setting up of Strategic Petroleum Reserves on the east and west coasts of India as well as setting up of storage facilities for oil and gas in various parts of India. India’s minister for petroleum has proposed a long-term strategic energy plan to boost Saudi and Indian investments in both countries, both in the upstream and downstream sectors.
King Abdullah’s maiden visit to India would, undoubtedly, boost bilateral cooperation in several other diverse fields such as information technology, biotechnology, pharmaceuticals, hydrocarbons, automobiles, engineering, education and tourism.
Apart from the bilateral agreements on Bilateral Investment Promotion and Protection (BIPA) and Avoidance of Double Taxation Agreement (DTAA), half a dozen other commercial memorandums of understanding are also expected to be concluded during the king’s visit. These include: (i) MOU between Gujarat State Petroleum Corporation Ltd. (GSPC) and FAS Saudi Holding Co., Riyadh in the field of upstream oil and natural gas, (ii) Agreement between SBI Capital Markets and Al-Hokair Group to set up an investment bank in a joint venture in Saudi Arabia, (iii) Agreement between Engineers India Limited (EIL) and Al-Hokair Group to set up a joint venture in the field of construction and consultancy services in the oil and gas sector, (iv) MOU between Apollo Healthcare, the largest and one of the most prestigious health care service providers in India, and Al-Hokair Group to set up three specialized hospitals in three major cities of Saudi Arabia and (v) MOU between the Federation of Indian Chambers of Commerce & Industry (FICCI-WRC)-Medical Tourism Council and Batterjee Holding Co. to provide health related services to the tourists and patients coming from Saudi Arabia.
Indeed, both sides should take full advantage of existing synergies in various fields to open a new chapter in the bilateral economic relations and create a strong, lasting and multifaceted strategic partnership.
(Dr. Ausaf Sayeed is a career diplomat. He is currently posted as the consul general of India in Jeddah.)
