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The importance of Saudi Arabia to India

  • Category
    International Relations
  • Published
    22nd Sep, 2023

Context

Amid the announcement of the India-Middle East-Europe Economic Corridor, a massive infrastructure project that would connectIndia to Europe via West Asia makes Saudi Arabia a critical partner for India in recent times.

So, let us take a look at their bilateral relations.

Background

  • 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.
  • The rise of jihadist extremism, the gradual decline of American power, and the rise of China have brought about transformational changes in India’s engagements with the Gulf region.
  • India’s Prime Minister has demonstrated an increased willingness to cooperate with Saudi Arabia on a variety of security issues such as joint military exercises, intelligence sharing, counterterrorism, anti-money laundering, and terror financing.
  • On the face of it, much of the deliberations have been shrouded over “terror talks”: The historic visit of King Abdullah to India in 2006 had laid solid ground for the India-Saudi relationship.
  • The “Delhi Declaration,” signed between the two countries during his visit, stressed that terrorism was a scourge that “the governments would closely and actively cooperate” to fight against.
  • The “Riyadh Declaration” signed in 2010 during then Prime Minister Manmohan Singh’s visit to Saudi Arabia emphasized cooperation on information exchange on terrorism.
  • Enhanced security cooperation has added a new dimension in the bilateral ties between New Delhi and Riyadh.
  • Saudi Crown Prince held bilateral talks with PM Modi after the recently concluded G-20 summit.
  • India-Saudi Arabia has further deepened their strategic relationship by forming Strategic Partnership Council (SPC).

India-Saudi Arabia Relations:

  • Economic Ties:
  • India and Saudi Arabia enjoy strong economic ties, with Saudi Arabia being India's fourth-largest trade partner, and India ranking as Saudi Arabia's second-largest trade partner.
  • Indian companies have made substantial investments in Saudi Arabia, with approximately 2,783 Indian companies registered as joint ventures or wholly-owned entities in the kingdom.
  • Leading Indian corporate giants like L&T, Tata, Wipro, TCS, TCIL, and ShapoorjiPallonji have established a robust presence in Saudi Arabia, contributing to the economic partnership.
  • Saudi Arabia has made significant direct investments in India, totaling around 3.15 billion dollars as of March 2022.
    • Key investors include prominent Saudi entities like Aramco, SABIC, Zamil, e-holidays, and the Al Batterjee Group.
    • The Public Investment Fund (PIF) of Saudi Arabia has also ventured into Indian startups through SoftBank Vision Fund, making investments in companies like Delhivery, Ola, Paytm, and Policy Bazaar.
  • Energy Cooperation:
  • Saudi Arabia is a key partner for ensuring India’s energy security, and was its third largest crude and petroleum products source for FY23.
  • India imported 5 million metric tonnes (MMT) of crude from the country in FY23, amounting to 16.7% of India’s total crude imports.
  • India’s LPG imports from Saudi Arabia stood at 7.85 MMT, and 11.2% of its total petroleum product imports, in FY 23.
  • Defense Partnership:
  • There is extensive naval cooperation between India and Saudi Arabia, and two editions of the bilateral naval exercise, Al Mohed al Hindi, have been concluded so far.
  • Both sides also cooperate closely in the domain of defence industries and capacity-building.
  • On defence ties, the joint statement said that the two sides commended their deepening cooperation, and agreed to continue work including joint exercises, training and high-level visits, and to “consider possibilities of joint development and production ofdefence equipment.
  • Indian Diaspora
  • The Indian community in the kingdom is more than 4 million strong, widely respected for its contribution to the development of Saudi Arabia, and seen as a living bridge between the two countries.

Significance:

  • Counter Terrorism Cooperation-Saudi Arabia has a substantial influence over Pakistan. India can use this influence to bring Pakistan to negotiating table for talks on terrorism.
    • Saudi Arabia has shown an understanding of India’s terrorism-related concerns and has agreed to work with India in countering the global menace.
  • Saudi Arabia’s Vision 2030-Vision 2030 plan of Saudi Arabia calls for diversification of the oil-dependent economy by attracting tourism and foreign investment and turning it into a global hub for business and culture.
    • Saudi Arabia needs India’s technological assistance to execute Vision 2030.
    • This Vision opens up immense opportunities for Indian businesses like the IT sector and the infrastructure businesses.
  • Saudi Arabia has one of the largest Sovereign Fund in the World- It is an important nation to invest fund in India particularly in National Infrastructure and Investment fund (NIIF).Saudi oil giant Aramco and the AbuDhabi National Oil Companyhave acquired 50% stake in the 44 billion dollars project in Ratnagiri, Maharashtra.

What are the Challenges in India Saudi Arabia Relations?

  • Complexity of Middle East Politics-The politics of the Middle East are complex and multidimensional. There exist several fault lines like Saudi Arabia-Iran Rivalry, Saudi Arabia-Israel animosity. India faces a complex challenge to manage its relationship with all these countries without antagonizing others.
  • Pakistan Factor-The Pakistan factor is also an important challenge in the development of strong India-Saudi Arabia relationship. Saudi Arabia is one of the largest granter of loans to Pakistan. Pakistan has been using its territory to breed terrorism and hatred towards India.This has also led to some discomfort in deepening of India Saudi Arabia Relationship in the field of counter terrorism.
  • Nitaqat Program of Saudi Arabia-The Nitaqat program was introduced in 2011 in order to increase the employment of Saudi nationals in the private sector.Saudi policy of ’Nitaqat’ have upset the large expatriate community of Indian working in the Kingdom.

Way forward

  • Greater Integration of economies-Some labour-intensive establishments from Saudi Arabia can be shifted to India which would reduce Kingdom’s expatriate population. This would also eliminate the need to bring Nitaqat Policies.
  • Increased Cooperation in Space-With India’s growing space prowess, space becomes an important domain of cooperation between the two countries.Newly established Saudi Space Agency can engage with ISRO.
  • Increase in defence cooperation- India Saudi Arabia can uplift cooperation in the maritime security domain to safeguard the global oil supply chain.
  • Expanding the areas of bilateral cooperation- India Saudi Arabia should expand the potential areas for next stage of bilateral cooperation in Indian infrastructure, agriculture, start-ups, skilling and IT.
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