A nuanced strategic shift in India-Saudi ties
Strategically, New Delhi has begun exhibiting appreciation of the fact that the Saudis present a strategic option in the region that has, for long, been cultivated unsatisfactorily by India. This reorientation has also been reciprocated by diplomatic gestures on the part of MBS (like his efforts to present the India visit in February as a standalone one) which are widely interpreted in New Delhi as indicating a sensitivity that underlies valued strategic partnerships
Bilateral relations, where indices of energy or economic needs and strategic considerations coincide, exhibit a robustness which usually outlives the everyday flux of international politics. India’s relations with the Kingdom of Saudi Arabia (KSA) represent such an intersection.
Indo-Saudi ties presently are defined by the large Indian diaspora, the attendant remittances (11.6% of total inflow in 2018), the USD28bn bilateral trade and the 800,000 barrels of Saudi crude that New Delhi buys daily.
The dependence on oil imports is only expected to increase with India anticipated to overtake China as the world’s largest importer of oil by 2024-with dependence between 80 and 83%.
Increasing proximity between the two countries may be attributed to three chief developments:
- A more definitive West Asia policy about which India appears assertive
- A newfound conviction on the KSA’s part that their export basket needs to be diversified - an end to which India offers a large and stable avenue.
- India’s decision to comply with the sanction regime levied by the US on trade with Iran. Over the past month, New Delhi has negotiated additional purchase of 250,000mt of crude per month from the Saudis (in addition to the 5.6mt annual term contract), likely to be the first of many arrangements made to fill in for 23.5mn tonnes of crude presently made unavailable because of sanctions on trading with Iran.
Two broad categories could be outlined about the developing dynamic: Economically, there is an argument to be made in favour of India and KSA exploring complementarities in the diversification of energy verticals. This would build a more solid foundation for an increasingly important bilateral dynamic - a lucrative and stable partnership in refining and exports, in addition to the oil trade.
For KSA, this would pre-empt vagaries of international oil markets and challenges posed by new entrants into the export side. India, meanwhile, would be helped tremendously by the assurance of an energy partner with the kind of market clout the Saudis enjoy.
Saudi ARAMCO is looking to invest in petrochemicals and refineries to gain a permanent foothold that could transcend the buyer-seller dynamic. This is expected to manifest in the form of a growing Saudi stake in integrated downstream models, while capitalizing on the potential that India’s growing need for consolidating its strategic petroleum reserves represent.
The diversification that Saudi Crown Prince Mohammed Bin Salman (MBS) seeks is not exclusive to the domain of energy. In addition to technology and infrastructure, a possible Saudi investment in India’s agrarian sector - in the ancillary field of food processing - working towards fashioning a model of food security could become another cornerstone in expanding ties.
If India can capitalize upon its present camaraderie and bring the Saudis to the table favourably on the question of price fixing, it could usher in a phase of precious economic guarantees that would benefit India’s fiscal health - given the massive sums of foreign exchange spent on imports. India could here use the inducement of the firstmover advantage that it can currently offer the Saudis as a leverage.
Strategically, New Delhi has begun exhibiting appreciation of the fact that the Saudis present a strategic option in the region that has, for long, been cultivated unsatisfactorily by India. This reorientation has also been reciprocated by diplomatic gestures on the part of MBS (like his efforts to present the India visit in February as a standalone one) which are widely interpreted in New Delhi as indicating a sensitivity that underlies valued strategic partnerships.
Significantly, the enhanced scope of counter-terrorism exercises and exploration of defence partnerships suggests that India has come to the realization that it would do well to decouple its strategic defence cooperation from Riyadh’s other bilateral propinquities, unless there is an impingement on India’s national security.
Despite appearing instinctively uncomfortable to demonstrate the choice, there is compelling evidence to suggest that New Delhi may finally have made a nuanced strategic shift, which prioritizes the potential of Arab wealth funds and defence cooperation such as the one Riyadh represents over and above a legacy of symbolism.