India's Balancing Act in the Gulf

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 its future. More
 

Over the past several years, India has tried to reshape its engagement with the Middle East, a region that houses millions of Indians and is vital for its economic, energy, and strategic interests. Historically, India has been a passive player in the Middle East, though it had close bilateral ties with several countries in the region. But India’s policy has evolved over the decades. While its engagement was pinned on the non-aligned principle during the Cold War, it moved closer towards Israel and deepened economic cooperation with Muslim countries in the 1990s without disrupting the existing balance of its Middle Eastern presence.

After the September 11, 2001 terrorist attack against the United States, India’s approach to the region, and specifically with respect to the Gulf, gained a new strategic dimension, with counterterrorism at the forefront. The January 2006 visit to Delhi by the late King Abdullah bin Abdulaziz — the first Saudi monarch to make such a visit in 51 years — was an important watershed. From that point, the largely transactional relationship between the two sides began to change. India-Saudi cooperation was extended to areas such as counterterrorism while high-level mutual visits became more frequent. Manmohan Singh became the first Indian Prime Minister visiting Saudi Arabia in nearly 30 years when in 2010 he signed the Riyadh Declaration, which set the framework for enhanced cooperation in the security, defense, and economic spheres.[1] In 2016, Prime Minister Narendra Modi visited Saudi Arabia, further deepening India’s partnership with the kingdom.  

India’s Gulf agenda; however, was not — nor is it today — focused exclusively on Saudi Arabia, or on the Gulf Arab countries collectively. Even when New Delhi was reactivating its ties with the Sunni Gulf countries, it was careful not to be seen as siding with the monarchies on issues of strategic importance such as conflicts in the region and sectarian rivalry. Prime Minister Modi has also visited Iran, the Shiite majority country which is the main rival of the Saudi-led Sunni bloc in the region, where in May 2016 he signed a major agreement on developing the Chabahar port. Since the removal of nuclear-related sanctions against Iran in January 2016, India has also stepped up its trade ties with Iran, largely in the energy sector, signalling the importance New Delhi attaches to this extended neighbor for energy security. This balancing explains India’s core strategy towards West Asia. 

The Blossoming of India-Gulf Arab Relations 

Today’s India is not the India of the Cold War era. It is the third largest economy in Asia and the most dynamic power in South Asia. It is important for India to cultivate and sustain deep ties with both sides of the energy-rich, strategically important Gulf if it wants to fulfil its aspirations to become a global player. Take the case of Saudi Arabia and the United Arab Emirates, India’s most important trading partners of the six Gulf Cooperation Council (G.C.C.) countries. Saudi Arabia is India’s largest supplier of crude oil. Given India’s rapid economic growth, rising consumption of energy at home, and stagnant production, its dependence on energy imports is only going to go up in the coming years. In 2015-16, domestic oil consumption rose to 183.5 million tonnes, up from 165.5 million tonnes in the previous year. However, crude oil production at home in the same period fell 11 percent to 36.9 million tonnes, down from 37.5 million tonnes in 2014-15.[2]

This is more of a trend than an aberration. India’s crude oil production stagnated in 2000 at around 36 million tonnes, while consumption kept rising. Most estimates predict that India’s energy demand will soar in the coming decades as its economy expands at a fast clip. India, which meets more than 70 percent of its oil requirements through imports, has already surpassed Japan as the world’s third largest energy importer after China and the United States. It is estimated that by 2025-30, India will import as much as 80-85 percent of its oil requirements.[3] In this energy matrix, Saudi Arabia, the world’s largest oil producer and India’s largest supplier, is the most important country for New Delhi. Over the past many years, India’s energy dependence on Saudi Arabia has risen dramatically, from 268,000 barrels per day in 2001-02 to 774,000 bpd in 2013-14.[4] Saudi Arabia came to India’s rescue by stepping up supplies when the country cut back on imports from Iran due to international sanctions during 2008 to 2015. So this energy cooperation, which dates back to the Cold War era, is a salient feature of the India-Saudi partnership — one that New Delhi must sustain in the coming decades.

Trade numbers with the United Arab Emirates (U.A.E.) are more vibrant. The U.A.E. is India’s third largest trading partner after China and the United States. Bilateral trade stood at $50 billion in 2015-16, which the U.A.E. wants to double in the coming years.[5] Unlike Saudi Arabia, with whom India has a huge trade gap, the U.A.E. is the country’s second largest exports destination. India’s energy imports from the U.A.E. have also risen dramatically over the past decade, from 153,000 bpd in 2001-02 to 283,000 bpd in 2013-14. Together, the G.C.C. countries supply 45 percent of India’s petroleum requirements[6]. Besides the energy partnership, the G.C.C. countries host around seven million Indian expatriate workers. Indians are the largest expatriate community in the G.C.C., with Saudi Arabia and the U.A.E. hosting most of them.[7] Tens of thousands of Indians are working in other Gulf countries such as Bahrain, Oman, and Kuwait as well. Together the expatriate workforce in the Gulf sends over 50 percent of India’s foreign remittances, which have significantly helped the country’s economic growth story.[8]      

Another important aspect of the partnership is counterterrorism. The emergence of terrorism as a major global threat and the changing dynamics in West Asia in recent years helped both India and the Gulf monarchies to leave the Cold War mistrust behind and chart a new course. If the traditional Arab support for Pakistan remained a thorn in India’s West Asia policy throughout the Cold War, over the past decade the Gulf counties appeared to be willing to build trust with India without altering the fundamentals of their Pakistan policy. This change in attitude was on display when, in 2012, Saudi Arabia deported a number of terror suspects, including Fasih Mohamood, an alleged Indian Mujahidin operative with links to the 2010 Bangalore blast.[9] The U.A.E. also followed suit by extraditing several Indian terror suspects. By deporting suspects, these countries were sending a clear message that their soil was no longer safe for anti-India operations. This change in approach and the growing trust in bilateral relations reflected in the recent joint statements issued by India and its key Gulf partners.    

The India-U.A.E. joint statement, issued in 2015 after Prime Minister Modi’s visit to Abu Dhabi, calls on “all states to reject and abandon the use of terrorism against other countries, dismantle terrorism infrastructure where they exist and bring perpetrators of terrorism to justice.”[10] The 2016 joint statement issued by India and Saudi Arabia echoes the same sentiment. It “called on all states to reject the use of terrorism against other countries, dismantle terrorism infrastructure where they happen to exist and to cut off any kind of support and financing to the terrorists operating and perpetrating terrorism from their territories against other states…”[11] It is evident from the selection of words that both statements were indirectly referring to Pakistan, given New Delhi’s stated position that Islamabad is letting terrorists operating against India use its soil and other resources. This shows that the Gulf monarchies are ready to accommodate India’s most sensitive security issues and take a moral position against, though without specifically naming, Pakistan. This cooperation in the field of counterterrorism will acquire greater significance considering the challenges the Islamic State poses to countries in West Asia and elsewhere. The terror group has attracted several youths from West Asia and the outside world to its rank-and-file. Given the huge number of Indians working in the Gulf, it is possible that some of them could be influenced by the Islamic State’s propaganda.[12] Therefore, retaining close intelligence and counterterror cooperation to tackle this challenge is a security imperative for both India and the Gulf Arab countries. The U.A.E. has already deported at least half a dozen Indians for alleged links with the Islamic State.   

India's Stake in Constructive Relations with Iran

It is of vital importance to India that it maintains close ties with the Gulf Arab countries in order to ensure energy security, the continued flow of remittances, the well-being of the Indian expatriate workforce, and the tackling of the terror threat. Equally important to India; however, is having a friendly government in Tehran. India had in fact realized the strategic potential of Iran much earlier than its actual pivot to West Asia following the end of the Cold War. In fact, efforts to strengthen bilateral relations had begun not long after the Iranian revolution. From a realpolitik perspective, Iran’s importance for India derives from its immense energy resources, strategically important location linking West Asia with Central Asia, and the possibility of building a friendship not disturbed by the “Pakistan factor.”

Historically, Iran has taken a more nuanced position towards Kashmir compared to other Muslim-majority countries in West Asia. In 1994, for example, Iran blocked a consensus on a resolution on Kashmir, pushed by the Organization of Islamic Countries, in the U.N. Commission on Human Rights, effectively bailing out India. Had the resolution passed, the UNCHR would have referred the “human rights violations in Kashmir” to the U.N. Security Council seeking punitive measures against India.[13]

Regarding energy ties, Iran used to be India’s second largest oil supplier after Saudi Arabia till New Delhi slashed imports in the wake of the international sanctions imposed on the country over its controversial nuclear program. Recent data shows energy imports from Iran are rising again, after sanctions were removed in early 2016.[14] It is in India’s vital interests to diversify its energy imports. Geographically, Iran is the closest major supplier. Therefore, the economic complementarity of the two countries would seem to lend itself to the natural development of energy trade, absent any external constraints. Besides energy ties, India and Iran had similar concerns in Afghanistan. From the Cold War era, India maintained close ties with Afghanistan. It provided India’s Pakistan approach some strategic depth. Iran also prefers a stable government in Afghanistan, which has a sizable population of Hazara Shiites, who were persecuted by the Taliban regime in the second half of the 1990s.[15] The Taliban, when they were in power, were equally hostile to Iran and India and had largely been supported by Pakistan.  

India has made huge political and economic investments in Afghanistan after the Taliban were ousted. India doesn’t want another Taliban-type regime coming to power in Afghanistan. Afghanistan not only provides India some leverage on the northern sides of Pakistan, but also access to the larger central Asia region, which is again an important market for India as well as a key source for energy[16]. But one challenge is that India is always dependent on Pakistan for access to Afghanistan. Iran could solve this problem. The Chabahar port India is building on the Iranian coast on the mouth of the Gulf will provide India direct access to Afghanistan bypassing Pakistan.[17] In other words, Iran has the potential to be India’s gateway to the Central Asia region.[18]         

Contending with the Saudi-Iran Rivalry

Geopolitics are a complex terrain where easy choices are a luxury. India is trying to bolster its engagement in the Middle East at a time when the regional politics is as murky as ever. The major fault-line which India will have to navigate is the strategic rivalry between Saudi Arabia and Iran.[19] Riyadh sees Tehran as its main rival in the region and, apparently upset by the nuclear deal which it thinks will strengthen Iran’s position in the region, has boosted its regional profile over the last couple of years. At present, Saudi Arabia and Iran are directly involved in two civil wars in West Asia. In Syria, if the Saudis are backing anti-government rebel/Islamist groups, largely Sunni, the Iranians are staunchly behind the regime of President Bashar al-Assad. In Yemen, Riyadh and its Gulf allies are backing the government of Abdrabbuh Mansur Hadi, while Iran has thrown its weight behind the Shia Houthi rebels.[20] The greatest challenge before India is not to be drawn into this Middle Eastern “cold war.”      

To be sure, India has certain advantages here. First, India is prepared to “act west” at a time when the Gulf countries are “looking east”. (India calls the region West Asia instead of Middle East). Both the Saudi camp and Iran want India as an economic partner and a friend. Take the case of Saudi Arabia. The kingdom is going through a major economic overhaul. A reform plan overseen by Deputy Crown Prince Mohammed bin Salman aims to diversify the country’s economy. The country is planning to launch a $3 trillion sovereign wealth fund to invest in business opportunities abroad.[21] India offers both investment opportunities for the Saudi fund and remains a major buyer of its oil which make the country an important economic destination for the Saudis. For Iran, which doesn’t have many friends among the international community, India remains an important partner despite the fraying of bilateral ties during the sanctions years. The sanctions had weakened Iran’s national economy badly. Tehran is trying to make up for those losses by beefing up oil trade with foreign countries and acquiring new agreements with foreign energy companies. The rapid rise in oil trade volumes between India and Iran in 2016 is a case in point.  

Secondly, India is not seen as a hostile power by either of the blocs. The Saudi camp has its reservations about China given its proximity towards Iran. In the wider global scenario, Beijing is closely linked with Iran and Russia. Even as the trade ties between Saudi Arabia and China keep thriving, there’s a fair amount of strategic mistrust between them. On the other side, India has kept its equidistance. The Saudis know that India does not have any ambitions to control West Asia. Nor is India part of any global alliance that challenges the Saudi influence in the region. This makes it easier for New Delhi to deepen its partnership with the Gulf Arab countries. India has also maintained a distance from developments which Iran sees hostile to its interests. India’s stated position is against any kind of military interventions, be it in West Asia or elsewhere. It had opposed the war in Libya in 2011 and calls for a political solution to the Syrian crisis, in sharp contrast with the call from the Gulf Arab countries for President Bashar Assad’s resignation or even forceful removal. While it has expressed concerns over the humanitarian issues in Syria, it doesn’t want to mix those issues with “political issues.”[22]

This balancing offers a pattern in India’s engagement in the region. It is shaped not by hostility towards anybody, but friendship with everybody moored in political realism. But when India’s regional profile rises and its economic prowess expands, New Delhi will have to widen the scope of its engagement. At that level, India will be tempted to take sides. It will also come under pressure to take decisions which otherwise it would not have taken. To secure its long-term interests, India should resist such temptations and pressure, and be wary of being sucked into the rivalries in the region. It had made certain mistakes in the recent past such as giving in to American pressure on Iran. India had abandoned a proposed tri-nation gas pipeline with Iran and Pakistan, and also reduced crude imports from Iran massively in the wake of sanctions. It had also voted against Iran at the International Atomic Energy Agency, rupturing the mutual trust both countries had built over decades. 

In the coming years, the geopolitical crises in West Asia are likely to be turned worse with U.S. President Donald Trump taking a hawkish view of the region. If the policies taken in the first 100 days of the Trump administration are any indication, the President is following the pre-Obama line towards the Middle East. He wants stronger ties with Israel irrespective of Tel Aviv’s handling of the Palestinians, better partnership with Saudi Arabia and its Sunni allies, and to contain Iran and its growing influence. The continuous attacks on Iran by senior administration officials, as well as the President’s decision to strike Syria with Tomahawk missiles, lay out the new U.S. approach toward the region. This poses new challenges for India and others which are not and do not wish to be involved in the conflicts in the Middle East, but which retain strong strategic and economic ties with the regional countries on bilateral terms. India should be prepared to stay the course — by remaining equidistant to the two poles of West Asia’s Muslim world while at the same time promoting its interests. Non-alignment as a movement may have lost its significance, but as a foreign policy doctrine which allows India to retain its strategic autonomy even in the wake of crises and pressure, should continue to inspire its policymakers.