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New Energy In India-Saudi Arabia Ties – Analysis

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India and Saudi Arabia are re-defining their foreign policy priorities: For New Delhi, Saudi Arabia and the Arab Gulf states are becoming key interlocutors in the Middle East. For Riyadh, India is one of the eight major powers with which it wants to forge strategic partnerships as part of its Vision 2030.

By Harsh V. Pant

In a sign of how dramatically India’s ties with the largest nation in the Gulf have evolved in the last few years, Prime Minister Narendra Modi was in Saudi Arabia this week for his second visit in three years. If during his first visit in 2016, King Salman conferred Saudi Arabia’s highest civilian award on him, his second visit saw him participate in the high-profile Future Investment Initiative Summit, dubbed the ‘Davos in the desert’, an initiative of Saudi Crown Prince Mohammed bin Salman. The Crown Prince had also visited India in February.

The fact that Modi’s recent visit happened against the backdrop of India’s decision to abrogate Article 370 in Jammu and Kashmir and Pakistan’s desperate attempt to internationalise the issue, makes it even more significant.

In Riyadh, Modi made a strong pitch seeking investment in India’s energy sector by underling that India will be investing around $100 billion in oil and gas infrastructure by 2024 in creating additional oil refining capacity, laying new pipelines and building gas import terminals to meet energy needs of an economy that is being targeted to nearly double in five years.

Modi assured investors that “due to political stability, predictable policy, and big diverse market, your investment in India will be most profitable.” He highlighted the fact that New Delhi has set an investment target of spending $1.5 trillion on infrastructure development in the next few years, which includes oil and gas plus other infrastructure such as roads, airports, and ports. He used the example of Saudi national oil company Aramco, which is investing in the 60-million-tonnes-a-year West Coast refinery project in Maharashtra, potentially Asia’s biggest refinery.

India’s trade ties with Saudi Arabia have been growing and the relationship is no longer merely a buyer-seller one though energy remains the driver of the engagement with Saudi Arabia being India’s second-biggest supplier of oil after Iraq.

Saudi Arabia is now India’s fourth-largest trading partner with bilateral trade at $27.48 billion in 2017-18 and Saudi investment to the tune of around $100 billion is in the pipeline in areas ranging from energy, refining, petrochemicals and infrastructure to agriculture, minerals and mining. This is a partnership which is becoming truly strategic as Modi himself underscored in his remarks in Riyadh.

During Modi’s visit two important pacts were signed: the first was a preliminary agreement between Indian Strategic Petroleum Reserves Ltd and Saudi Aramco that will result in a greater Saudi role in setting up a second fuel reserve facility in Karnataka. The second was between the West Asia unit of India’s Indian Oil Corp. Ltd and Saudi Arabia’s’ Al Jeri company for downstream sector cooperation. Modi also announced the formation of the India-Saudi Strategic Partnership Council that will be led by the leaderships of both countries to “help India address its expectations and aspirations.”

India is the source of the largest expatriate community in Saudi Arabia with a 2.6 million-strong Indian diaspora. Unlike in the past, New Delhi is no longer diffident about leveraging its diaspora in its bilateral engagements. Modi pointedly referred to the “hard work and commitment” of the Indian community in Saudi Arabia in strengthening the bilateral ties between the two nations. He reached to the community by underlining that “India is proud of the place that you have made for yourself in the Kingdom, and your hard work and commitment have helped to generate a lot of goodwill for the overall bilateral relationship.”

India’s sustained outreach to Saudi Arabia has paid rich dividends on the political front with Riyadh taking a positive approach on the Kashmir question since Modi government’s decision to abrogate Article 370 on August 5. Unlike Turkey and Malaysia, it has cautioned Pakistan against escalating the crisis. Despite Pakistan Prime Minister Imran Khan making a personal visit to Riyadh and traditionally close Saudi Arabia-Pakistan ties, Riyadh has signalled that it understood New Delhi’s concerns and sensitivities on the issue.

Pragmatism is dictating Saudi posture as the future of its economic model is at stake. It needs new partners such as India. It is not without significance that within a week of India’s move in Kashmir, one of the biggest ever foreign investments in India was announced by New Delhi. Reliance Industries Ltd (RIL) decision to sell a 20 per cent stake in its oil-to-chemicals business to Saudi Aramco at an enterprise value of $75 billion made it one of the biggest Foreign Direct Investment (FDI) deals in the country.

Both India and Saudi Arabia are re-defining their foreign policy priorities at a time of global and regional turmoil. For New Delhi, Saudi Arabia and the Arab Gulf states are becoming key interlocutors in the Middle East. For Riyadh, India is one of the eight major powers with which it wants to forge strategic partnerships as part of its Vision 2030. It is not surprising, therefore, that there is a new energy in India-Saudi Arabia bilateral partnership.


This commentary is originally appeared in Money Control.

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ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

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