Saudi Arabia And India: The Next Major Partnership In The Making

Dr. Tara Kartha Oct 27, 2020

At a time when the global economy is reeling from the effects of the Covid-19 pandemic, an important relationship saw an uptick. Recently, both India’s National Security Advisor Doval and Foreign Minister Jaishankar chose to attend Saudi National Day celebrations in Delhi, in an unusual departure from precedent, signalling just how important Riyadh has become to Delhi in recent years.

The Modi government had already set the path for the relationship to go beyond a simple energy buyer-seller dynamic, to one that is truly strategic. But at a time of severe stress, both Delhi and Riyadh have to hurry to diversify the relationship at a time when falling crude oil prices will push Riyadh to look for friends who can deliver, and not just debate.

Modi government’s focus on Saudi Arabia has led to two visits in three years, and the signing of a raft of agreements in 2019 that finally put the ‘strategic’ into the relationship as originally envisaged in the Riyadh Declaration of 2010. That is fortuitous. India’s crude imports continue to slump, in line with global trends. That doesn’t mean that Delhi does not value assured oil imports. It’s that more is needed to buoy up an important relationship. Fortunately, there is a guiding hand available in the Strategic Partnership Council (SPC) chaired by Crown Prince Mohammed bin Salman (MBS) and the Prime Minister of India. This has two parallel tracks. One deals primarily with political, security matters and is headed by the Foreign Ministers on both sides. The other is on Economy and Investment, headed by the OPEC veteran and technocrat Prince Abdulaziz Bin Salman and India’s Commerce minister.

The first ‘strategic’ track is thriving. Recently PM Modi spoke to the King appreciating the Kingdom’s presidency of the G-20. Meanwhile, India is to be a hub for food security for the Kingdom that is almost entirely import dependent. In turn, Indian firms have quickly filled up critical oil reserves with cheap oil.

‘Strategic’ is also implicit in the strong counterterrorism support that the Kingdom has provided, beginning in 2012 with the extradition of Abu Jundal, key to the Pakistani- Lashkar e Taiba connection. Quiet intelligence cooperation reflects the reality that Islamic State ‘look alike’ are a threat to the kingdom. The Kingdom is also the first Arab country to be given full membership in the Financial Action Task Force (FATF) that has been holding Pakistan to account for terrorist financing. Riyadh also wants Defence production, particularly on small arms, radars and vehicles. Hopefully, the Ordnance Factories will kickstart joint production of the newest AK-47 series, agreed to during Defence Minister Rajnath Singh’s recent visit to Moscow. But the Indian army needs some 770,000 for its own use, making it unlikely that this will be immediately available for export.

Unlike Pakistan, which has an impressive record in small arms export, Indian production even for domestic use remains sluggish. Bilateral naval exercises have been postponed due to the pandemic, but there is strong interest in energising this relationship. The Saudis are also part of the Indian Ocean Naval Symposium. Meanwhile, the navy could consider docking a hospital ship at any of its ports.

Delhi could also consider outsourcing training and logistics chains to private security firms, under strict oversight. That is aimed at speedy delivery, in an entirely different mode.

The second track of investment and energy, is likely to hit some roadblocks. Aramco, recently suspended its $10 bn refinery in China, as it posted losses of upwards of twenty five per cent in its first quarter. So far it remains committed to plans for a $15 bn stake in Reliance Industries chemical and refining business. Meanwhile, it holds a fifty one per cent stake together with the Abu Dhabi National Oil Company, in what has been touted as the world’s largest refinery at Raigad. However procedural delays have halted the project from taking off the ground completely.

Though Saudi Companies are on the ground in Mumbai and Karnataka, a delay in this flagship project may affect investment appetite in a kingdom accustomed to quick decision making. Delhi needs to take this up urgently, shifting to an entirely a different location if need be.

Saudis are talking of their investment potential at bilaterals and business meetings. The kingdom has set a gruelling pace to make it to the top ten ‘most improved’ in Ease of business ratings. Some 322 Indian companies are operating, but the Saudis want more. Delhi could upgrade its already impressive medical signature - apparent in special flights bringing back Indian medical personnel to the kingdom - by opening pharma and hospital chains. There is interest in promoting small scale industry, solar energy, as well as water treatment and distribution. All this needs to be spared paralysing delays. India’s bleeding tourism industry also has an opportunity to invest in Vision 2030 creating a crucial economic opportunity for both nations. This runs on the determination of the royal house, not bureaucratic red tape.

This is an important relationship for both capitals. For MBS, maintaining the current pace of modernisation is vital to achieve their ambitious Vision 2030 goals and the consequent wave of change it brings across the Kingdom. India sees the Saudis as their ace in West Asia, at a time of tumult in the Arab world.

At this time, reviving the economies of both is the top priority. Encouraging a new generation of skilled Indians to invest or work in Saudi Arabia will need Riyadh and Delhi to actually market each other’s potential, far more imaginatively, helmed by the Saudi-India Business. Finally, India is still among the largest economies with a GDP of $2.7 trillion. That makes for a certain weight. Riyadh needs to decide how it wants to use this new power status to the full.

About the author: Dr. Tara Kartha was earlier in the National Security Council Secretariat; she is now a Distinguished Fellow with the Institute of Peace and Conflict Studies.