India and Saudi Arabia Deepen Ties


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May 6, 2009
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29 Mar 2010

Visits by Indian heads of government to Saudi Arabia are rare. In fact, when Prime Minister Manmohan Singh arrived in Riyadh on Feb. 27 for a three-day visit, it was the first time an Indian premier had been to the kingdom in 28 years. However, this is one bilateral relationship where substance has clearly preceded style. Not only has Saudi Arabia emerged as India's largest supplier of crude oil, the desert kingdom is also looking to increase its commercial ties with a rising India as a way to diversify its economy.

The visit culminated in a joint declaration (.pdf) that proclaimed a "new era of strategic partnership" between the two countries, in effect recognizing that India's security perimeter -- now, as in colonial times -- begins in the Middle East. In some ways, this also marks a triumph of Singh's new "Look West" policy, whereby India has sought to raise its profile in both economic and military terms in the Persian Gulf -- a region that provides 70 percent of India's oil and hosts 5 million Indian expatriates. Of late, India has been assiduously putting into place economic and security pacts with various Gulf states, but Saudi Arabia represented the key link to complete the chain. In fact, Saudi Arabia may be replacing Iran as India's key backer in the Organization of the Islamic Conference and has once again agreed to lobby for India's long-desired observer status in the grouping.

But if the deepening of bilateral relations is a result of Singh's "Look West" policy, it also reflects King Abdullah's "Look East" policy. It was the king's visit to India in 2006 that broke new political ground between the two countries, serving to de-hyphenate India from Pakistan in the Saudi worldview. This pragmatism grew out of Riyadh's realization that China is not the only rising giant in Asia capable of playing a significant role to help Saudi Arabia transition to a more mature economy before the oil runs out. India's robust economic performance in the wake of the global financial crisis has only served to underscore this view.

In the four years between Abdullah's visit to Delhi and Singh's visit to Riyadh, trade between the two nations has grown steadily, reaching $25 billion in 2008-2009 up from $3.4 billion in 2005-06. Indian companies are now involved in some 500 joint ventures, totaling $2 billion, in the kingdom. However the economic relationship is still lopsided, mainly characterized by Saudi oil exports heading to India and Indian capital investment heading the other way. Both sides have agreed to remedy the situation, and for starters, Saudi oil giant Aramco will be setting up a procurement office in India. Moreover, India is also seriously considering Arab proposals for allowing Islamic banking practices within its territory, which could become a key source for channeling Saudi money into India's burgeoning petrochemicals sector.

A slew of cooperative agreements have also been signed in areas including space and information technology. Riyadh is particularly keen on IT cooperation given its desire to build a modern service sector. The Saudis also highlighted their state-of-the-art King Abdullah University of Science & Technology, in an attempt to show that they, too, bring something to the table on the technological front.

While economic ties have certainly laid the foundation for the relationship, geopolitical coordination seems to be increasing as well. The two parties' positions at the recently held London conference on Afghanistan showed surprising convergence, with both maintaining that a hasty pullout of multilateral forces from the country would be a mistake.

Convergence on Afghanistan may also mean that the Saudis are lending India a helping hand when it comes to dealing with Pakistan as well. Indeed, at the time of Singh's visit, India's minister of state for external affairs remarked, "We feel Saudi Arabia has a long and close relationship with Pakistan, and that makes Saudi Arabia even a more valuable interlocutor for us."

The comment touched off a controversy in India, due to sensitivities over the involvement of third-party mediators in what is considered a bilateral Indo-Pakistani dialogue. But the fact remains that both New Delhi and Riyadh are now seriously concerned about terrorism emanating from the Afghanistan-Pakistan region, a concern that manifested itself in the signing of both intelligence-sharing accords as well as an extradition treaty. India specifically sought the latter due to a history of homegrown terrorists and criminals seeking refuge in Saudi Arabia.

Discussions also included the strategic situation in the Middle East, with a focus on Palestine and Iran. Although Singh had stated in an interview with the Saudi Gazette just prior to his visit that "support for Palestine was an article of faith for India," the Riyadh declaration reiterated support for a two-state resolution to the Palestinian conflict, in essence reflecting the ties that both countries now have with Israel, whether overt or otherwise.

This position is in marked contrast to the steadfast refusal of the Iranian regime to recognize Israel's right to existence. Nevertheless, the declaration's conciliatory approach to Iran's nuclear program somewhat belied unstated Saudi anxieties, probably reflecting India's desire to be at the center of a rapprochement between the Gulf Arabs and the Persians.

Indeed, as the Pentagon's "Joint Operating Environment 2010" observed, India's planned military upgrades, "combined with its proud martial traditions and strategic location in the Indian Ocean, will make it the dominant player in South Asia and the Middle East." As of today, China does more business with both Saudi Arabia and Iran, but Singh's visit is a signal that India hopes to progressively match China's economic profile in the region, while simultaneously emerging as a net provider of security, before China overcomes its capability gap in the latter regard due to its geographic distance.

What remains to be seen is how Singh will harmonize India's ambitious new agenda with Saudi Arabia with its historic ties to Iran.

Saurav Jha studied economics at Presidency College, Calcutta, and Jawaharlal Nehru University, New Delhi. He writes and researches on global energy issues and clean energy development in Asia. His first book for Harper Collins India, "The Upside Down Book of Nuclear Power," was published in January 2010. He also works as an independent consultant in the energy sector in India.

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