Think West to Go West: Origins and Implications of India’s West Asia Policy Under Modi (Part II)

India’s interests and capabilities extend well beyond the sub-continent. This essay is part of a series that explores the geopolitical dimensions, economic ties, transnational networks, and other aspects of India's links with the Middle East (West Asia) — a region that plays a vital role in India's economy and future. More ...

The first part of this article outlined how the newly-elected Narendra Modi government had no sense of where West Asia, including the Persian Gulf, fit into its larger foreign policy. However, this view changed radically following overtures from the Abu Dhabi royal family and the August 2015 state visit by Prime Minister Modi to the United Arab Emirates (U.A.E.). This second part details how India's relations with West Asia, and particularly with the Gulf monarchies and Iran, have evolved since that historic visit.

Think, Link and Go

Modi’s visit to the U.A.E. was a turning point. West Asia came to be seen as not only important but even crucial to the success of his economic agenda. “The Persian Gulf is now important as a source of investment and less as a source of energy,” said a senior Indian diplomat. Within this, of course, Abu Dhabi occupied a special place. As the relationship unfolded over the coming year, Indian officials said that in their view U.A.E. had made a strategic commitment to help India’s rise as a regional player, the sort of language they had used in the past only for Japan and the United States.

Thus, the U.A.E. was accorded a special place by the Modi government, which increasingly saw foreign policy as a means of securing international partners in order to serve its domestic agenda. Relationships with countries regarded as having great potential to advance this agenda were described as “transformational” or “transformative.”

As Foreign Minister Sushma Swaraj explained in August 2016, “In our diplomatic engagements in the last two years, you will therefore find that a major focus now is using international partnerships to advance domestic flagship programmes … This tight meshing of domestic and diplomatic goals is in fact one of the hallmarks of the Modi Doctrine.” One of her junior ministers also spoke similarily of “making foreign policy increasingly a tool ot assist with our domestic economic transformation.” There was, he argued, “a clearer recognition that diplomacy is above all an enabler of domestic growth.”[1]

Even during the government of Modi’s predecessor, Manmohan Singh, a similar distinction had been made with two countries — the United States and Japan — as being capable of fundamentaly changing the growth trajectory of India. Under Modi this list now also includes the U.A.E.

Indian Foreign Secretary S. Jaishankar laid out India’s foreign policy agenda in a speech in March 2015.[2] After speaking of the depth and breadth of New Delhi’s engagement with Southeast Asia and Japan, he argued India was becoming more active in the areas to its west. He noted that India’s West Asia policy in the past had been “an evolutionary happening that was relatively autonomous of strategic calculations.” Even India’s energy dependence was dictated “more by markets than by policy.” He spoke of India developing a “Think West” policy where it leveraged growing overseas interest in India to develop connections to other parts of the world.

While Modi had used the phrase “Link West” in earlier speeches, he had tended to incorporate all regions on that side of India, including Europe and North America. [3]The phrase began appearing regularly in official statements by late 2016. [4] In May 2017, the Indian foreign ministry spokesperson promoted the policy further by referring to a “Go West” connectivity and outreach policy with West Asia.[5]

Tehran Drift

The Modi government’s key point of strategic convergence with Iran was supporting the Kabul government in Afghanistan against the Pakistani-backed Taliban insurgency. The most important and tangible manifestation of this cooperation was the transport and trade corridor that India was trying to put together from the port of Chabahar on the Persian Gulf to Herat in Afghanistan.

India and Iran had also been cooperating on the building of a more ambitious International North-South Transportation Corridor that would link the Iranian port of Bandar Abbas to Central Asia, the Caucasus and Russia. This had become important to India because of its opposition to China’s continent-spanning Belt and Road Initiative (BRI). New Delhi had hoped eventually to link the Chabahar and North-South projects.

The Chabahar corridor was conceived by New Delhi as a means to reduce Afghanistan’s geographical dependence on Pakistan. However, it had taken a dozen years just to get the first trial runs of container movement to take place in 2014. The contract for building just two additional piers in Chabahar went back and forth between Indian and Iranian builders. Tehran and New Delhi had regularly sniped at each other via the media, claiming the other side was the obstacle. Iranian and Indian officials privately blame their respective bureaucracies and a lack of sustained political interest in both capitals.

Fortunately for Modi, he came to power just as the corridor seemed to be coming together. In May 2016, he traveled to Iran to sign a transport and transit agreement between India, Iran and Afghanistan. Iranian support for the corridor had been enhanced by the reduced U.S. military role in Afghanistan — a source of difference between India and Iran, its concerns about signs of a Taliban resurgence and its deteriorating relations with Pakistan. The North-South Corridor was also beginning to see forward movement, with the Central Asian republics and Russia taking a renewed interest in the idea in 2017.

However, India and Iran sparred over other issues as well. The Modi government was determined that, following the lifting of United Nations sanctions against Iran, Tehran fulfill an earlier commitment to provide India an equity share in the Farzad B gasfield. Iranian prevarication led India to retaliate by reducing its purchases of Iranian crude, an aggressive stance that Indian officials say had sanction from Modi.[6]

While India and Iran continued to cooperate on Afghanistan, the economic trajectory of their relations struggled. While Iran was seen as strategically important, Tehran did not contribute directly to the Indian leader’s domestic agenda and its foot-dragging over its only tangible economic contribution did not improve its standing with New Delhi. In any case, India’s push for renewable energy, its desire to diversify energy supplies away from the Persian Gulf, and the lack of a sizable Indian diaspora in Iran — all made Tehran less salient to the Modi regime. Iran has its own scepticism regarding New Delhi. Indian banks and firms have remained wary of doing business in Iran because of U.S. sanctions. Tehran is also uncomfortable with India’s increasing closeness to the United States and Israel.

Slow Boat to the Gulf

The last two years have seen the Persian Gulf go from the back office of Modi’s foreign policy to the front desk. A newfound relationship with the U.A.E. is at the heart of this sea-change. However, New Delhi may have to be patient as to when it can expect tangible results from this bond, especially in the economic arena.

The U.A.E.’s main wealth fund, the Abu Dhabi Investmant Authority (ADIA), has been tasked to be the agency to handle the billions of investment that the two governments have agreed upon. However, ADIA has been cautious. While Abu Dhabi has long maintained relatively large exposures to the Indian equity market, it has suffered major losses in its past investments in India because of regulatory changes and political instability.

Abu Dhabi has sought to funnel its investments through the Modi government’s newly created National Infrastructure Investment Fund (NIIF), a state-run body designed to collect foreign capital and handle the more difficult task of choosing, finalizing and monitoring large-scale infrastructure investments. The National Investment and Infrastructure Fund (NIIF) has struggled with its own nascent capacities as well as the sheer size of ADIA’s requests; for example, projects with a minimum investment size of $500 million. In closed door meetings in December 2016 between Abu Dhabi and Indian representatives, the Emirati side indicated they were looking at an initial investment flow of one or two billion dollars a year as being likely. It was only in September 2017 that reports emerged that ADIA and the NIIF had hammered out a framework for Abu Dhabi’s investments into India, largely in transport infrastructure. The article spoke of investments of roughly $5-10 billion over the next few years.[7] The investment plans of Qatar and other Gulf states remain even more tentative.

Still, New Delhi has begun trumpeting the NIIF connection. In a speech in January 2017, Minister of State for Exernal Affairs V.K. Singh spoke of how “the flagship initiatives of the government have provided the conceptual basis through which partnerships have been forged.”[8] As an example, he said, “infrastructure investments have been launched with commitments by major economies like UAE, USA, UK and Japan.” These were the first four foreign governments to invest funds in the NIIF. However, in recognition of the difficulties India poses to any foreign investor, especially to sovereign wealth funds which tend to be thin on risk analysis capacities, the Indian government set up an inter-agency monitoring group to facilitate and help large-scale overseas investments, including those from the Gulf.[9]

India has been cautious about expanding its military presence in the Gulf and Arabian Sea area. The region’s various governments are sharply divided in their support for the various local protagonists in the civil wars of Syria, Iraq and Yemen. Any Indian military activity, regardless of how low-key, would be interpreted as favoring one country or another, something New Delhi remains sensitive about.

Its primary security focus remains the continuing conflict in Afghanistan, hence its interest in developing a trade route through Iran to Afghanistan and diluting Pakistan’s ties to the Gulf monarchies. Denying safe haven to Pakistani-backed terrorists in the Gulf and even the wider West Asian region is a priority as is the repatriation of terror suspects back to India. Much of India’s plans for expanded military engagement in the region will be designed to reduce Pakistan’s military footprint.

The Islamic State (ISIS) remains a secondary concern for India because of its geographic distance, its military retreat over the past few years and its limited appeal, so far, to Indian Muslims, only a few dozen of whom have joined it. India’s only genuine military relationship in the area is to Israel, and that too exists in the form of arms purchases, training and technology with minimal strategic content.  Modi, who will be the first Indian prime minister to visit Israel in July, has also largely isolated the Indo-Israeli relationship from India’s relations with the Arab world and Iran, thanks in part to shifts in the region’s geopolitics that have demoted the importance of the Arab-Israeli divide.

India is contemplating holding military exercises of a variety of types with the Gulf countries with which it has signed security agreements. Reports say India is considering the possibility of a permanent naval presence in the region, depending on how its regional relations unfold, and has explored the possibility of a naval presence at Chabahar. This follows from a more forward-looking Indian Ocean strategy under the Modi government, drawing from both an uncertain U.S. maritime commitment to the area as well as concerns about rising Chinese influence.

Plans to have India and the U.A.E. work together in defense production and arms purchases are not expected to take place in a hurry. Similar agreements signed a decade earlier remained paper commitments. That was partly because the geopolitical underpinning of the earlier agreements — the spike in Indo-U.S. relations during the George W. Bush presidency — proved short-lived. The U.A.E. and India have similar defense production profiles: large-scale import of overseas weapon platforms merged with an aggressive offset requirement.  India’s indigenous defense industry and that of the U.A.E., in other words, both live off subcontracts of components and assembly with little in the way of original equipment capability. The U.A.E., say Indian defense firms, also has a deeply entrenched arms relationship with large Western defense firms, which makes it difficult for them to win tenders.[10]

In Crowns We Trust

Compared to the first three years of the Modi government, there has been a fundamental shift in the traditional drivers of India’s West Asia policy.

New Delhi’s traditional priority regarding the Persian Gulf has been the stability of oil and gas prices and supplies from that region. It assumed the U.S. would handle the security of the region and was cognizant Pakistan had closer military ties to the Sunni monarchies. The remainder of its economic relations revolved around exporting goods and ensuring remittances from its diaspora in the Gulf regions.

The Modi government increasingly sees its Gulf policy as a source of strategically-driven, long-term investments. While it still has energy interests, New Delhi finds itself in a buyer’s market with multiple sources of oil and gas. Its own domestic energy policy, in the mean time, has come to focus almost exclusively on renewable energy.

The Indian foreign secretary, in a 2016 speech, said energy “has seen the greatest activism in our recent diplomatic interactions. Where fossil fuel is concerned, one objective is to obtain assured upstream access in producing economies” but besides listing four Gulf countries he added Russia and Mexico as targets of Indian energy diplomacy.[11] More importantly,  he went on to stress the importance of renewables, including nuclear power, to India’s future.  Not mentioned were India’s multi-billion dollar oil and gas investments in other countries, such as Australia and Mozambique. Senior Indian officials privately speak of hydrocarbon imports from the Gulf as yesterday’s story.

Uncertainty over the U.S.’s continuing commitment to West Asia and Pakistan’s loss of standing as a credible security provider have helped to increase India’s leverage. The slump in West Asia’s oil- and gas-fed economic growth has led to less demand in the region for Indian migrant labor.[12] While the Indian prime minister uses the diaspora to promote his domestic agenda, keeping doors open for Indian overseas workers does not dominate New Delhi’s thinking as it once did. The Indian government now invests more in ensuring the proper treatment and, occasionally, the humanitarian evacuation of its nationals.

India is also reassessing the sort of political regimes it feels it can work with in West Asia. Broadly speaking, in the past India had been most comfortable with regimes such as those led by Saddam Hussein and Hafiz al Assad, who were seen as a check on Islamicist tendencies and guarantors of regime stability. Oman’s royal family was the sole exception to this rule.

In a similar vein, New Delhi was willing to support the secular Palestinian nationalism of the 1960s and 1970s, but was repulsed by the Muslim Brotherhood or other Islamicist Palestinian groups. In private, Indian officials have been generally critical of the U.S. invasion of Iraq, the Arab Spring and foreign interventions against the Assad regime — events which they feel precipitated the complete collapse of a regional status quo that India was generally comfortable with.[13]

The fall of most of these one-party regimes had led India to reluctantly engage with the Gulf monarchies and the short-lived Brotherhood regime in Egypt, though it was often the Arab side that had to make the initial overture. This was evidenced by the state visit of the then Saudi king, Abdullah bin Abdulaziz Al Saud, to India during the Manmohan Singh government in 2006. This acceptance has accelerated under the Modi regime, which now sees the Gulf monarchies as future partners in India’s economic and strategic future. India has provided food aid assistance to the Abdel al-Sisi regime in Egypt in a throwback to its past preferences, but it is the shaykhs and emirs which have received the most attention. Partly this is because of Modi’s insistence that foreign relations be measured by the contribution it makes to his domestic development agenda. It has been helped by the fact that Indian Muslims have largely remained unmoved by extremist Islamist thinking.[14]

The Persian Gulf, and West Asia in general, is now much more integral to Modi’s foreign policy than it was when the Indian prime minister was first elected. But the nature of the relationship has changed from what it was in the past. Large-scale investment and maritime security are now much more central to India’s interests while energy and diaspora, while still important, are lower down the priority list.

New Delhi is also increasingly of the belief it must be more active in shaping developments in the region, though it remains unclear how to convert thought into action. Speaking about West Asia in March 2015, the Indian foreign secretary said, “we are no longer content to be passive recipients of outcomes … Our growing capabilities and stronger national branding, in fact, makes us a credible partner.” Later, in his annual summary of Indian foreign policy in January 2017, he gave an indication of how much more thought was being given to West Asia. [15] “While the East was more an exercise of consolidation with ASEAN, the reaching out to the Gulf Cooperation Council and Iran have been among one of the hallmark initiatives of the current government,” he said. “As a result, India is involved in the Middle East in a manner in which it has not been for many decades.”