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India and the Middle East: A top priority for PM Narendra Modi
Posted:Feb 11, 2017
 
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 by Md. Muddassir Quamar
 
India has vital interests in the Middle East and going by the spurt in political engagements since May 2014, the region is a top priority for Prime Minister Narendra Modi. 
 
Since taking over, the Prime Minister has visited all major countries in the region including Turkey (November 14-16, 2015 for G-20 summit), the UAE (August 16-17, 2015), Saudi Arabia (April 2-3, 2016), Iran (May 22-23, 2016) and Qatar (June 4-5, 2016) and is expected to visit Israel in early 2017. 
 
In addition to the three visits by Modi, 2016 witnessed a flurry of other high level visits to and from the region reflecting a continued push towards improving bilateral relations. If political engagements are a benchmark for measuring foreign policy priorities, then the sheer number of bilateral visits between India and Middle Eastern countries is indicative of the importance New Delhi attaches to the region.
 
India’s dependence on oil and gas imports for energy security, large volume of bilateral trade and a significant migrant population means that the core of its interest lies in the Persian Gulf and this continued in 2016. At the same time, India’s relations with Israel are growing with a strong military and defence component while New Delhi continues to maintain a steady support toward the Palestinian cause. 
 
In the wider region, India has followed a policy of maintaining a safe distance from conflict zones, though it made a deviation in this hands-off policy by reaching out to Iraq and Syria. Likewise, there was an effort to explore possibilities for reinvigorating relations with Egypt and Maghreb countries.
 
India’s push for better relations with the Middle East is focused on improving bilateral trade, attracting investments and enhancing security cooperation. The Modi government has been pursuing an agenda of highlighting the potential of the growing Indian economy and the opportunities it offers for global investors. Hence, the joint statements issued during Modi’s visits to Saudi Arabia, Qatar and the UAE highlighted the projects that the government has initiated to improve business environment and for infrastructure development. 
 
For example, the India-Saudi Arabia joint statement issued during Modi’s visit to Riyadh in April noted the “initiatives taken by the Government of India to improve the ease of doing business in the country” and “efforts to simplify and rationalise existing rules and relax the foreign direct investment norms in key areas, including railways, defence and insurance”. Further the Prime Minister invited Saudi companies “to be a partner in India’s growth story”, encouraging them to “invest in the infrastructure sector in India and to participate in projects creating mega industrial manufacturing corridors, smart cities as well as the Digital India and Start up India”.
 
Trade and investments remains a priority area and were the focus during bilateral meetings. Prime Minister Modi during his visits to Riyadh, Tehran and Doha highlighted the potential for improving trade and commerce between these countries. However, despite India’s pitch for attracting investments and measures taken to improve business climate, the overall foreign direct investments (FDIs) flow from the Gulf and Middle East remains low. 
 
Though overall FDI to India increased from nearly $30 billion in 2014-15 to $40 billion in 2015-16, among the Gulf countries only the UAE witnessed a notable rise becoming the tenth biggest source for FDIs in India. Notably, in 2015-16 and in the first two quarters of 2016-17, FDIs from UAE have further increased with it becoming the sixth biggest source after Singapore, Mauritius, the US, Japan and the Netherlands.
 
Bilateral trade is the cornerstone of India’s relations with the Gulf countries but in 2015-16, a drop was witnessed in the overall trade figure mainly due to low oil prices. Total trade with the six GCC countries stood at $133.72 billion in 2014-15 and came down to $97.46 billion in 2015-16. The GCC, however, remained India’s foremost trading partner accounting for nearly 15 percent of India’s total foreign trade and nearly 70 percent of trade with the Middle East. 
 
The UAE was India’s foremost trading partner in the region followed by Saudi Arabia that are globally India’s third and fourth largest trading partners, respectively, after China and the US. In the case of UAE, the balance of trade has tipped in India’s favour owing to lower oil imports and Dubai emerging as a major re-export hub. In case of Saudi Arabia and other oil and gas exporting countries such as Iraq, Iran and Qatar the balance of trade remained heavily tilted against India.
 
Nearly 60 percent of India’s energy imports come from the Persian Gulf countries. Saudi Arabia is the leading oil supplier while Qatar is the largest source for gas. With the lifting of sanctions on Iran and disorder in the international oil market, Iraq (May) and Iran (October) pipped Saudi Arabia to become India’s leading supplier -- though on cumulative annual supply, the kingdom remained at the top spot. 
 
With Qatar, India has a 25-year contract on buying LNG signed between Petronet and RasGas but due to lower international price India did not buy its quota of 7.5 million tonnes in 2015 prompting RasGas to impose a penalty of $1.5 billion. During Prime Minister Modi’s visit, the issue was resolved with RasGas agreeing to waive the penalty and slash the LNG price to $6-7 per mmBtu from $12-13 mmBtu in keeping with the dip in global price. It was seen as a significant diplomatic success for India and an indication of its growing recognition in the Gulf.
 
Dependence on energy imports also means that India needs to prepare for emergency situations. Hence, it is trying to augment its strategic petroleum reserve and is in negotiations with the UAE, Saudi Arabia and Iran to fill the Mangalore strategic storage that has a capacity of 1.5 million tonnes. Notably, during the visit of Abu Dhabi’s Crown Prince, India and UAE agreed to begin negotiations for building a strategic petroleum reserve for Abu Dhabi National Oil Company (ADNOC) in partnership with Indian Strategic Petroleum Reserve Ltd. (ISPRL). Further, India is seeking investments in its energy sector, especially in downstream, and has invited oil-rich Gulf countries to invest, though without much success so far.
 
The Gulf and Middle East are important markets for Indian businesses that have gradually started to mark their presence. Over the past year, some Indian companies landed contracts to work on mega infrastructure and development projects. While lower oil prices meant slowdown in Gulf economies, Iran coming out of sanctions is looking for rapid investments and augmenting its petroleum industry and infrastructure, providing an important market for Indian companies. Further, India’s strategic partnership with Iran witnessed an important development with the signing of the Chabahar port agreement. The agreement that has been described as “historic” was signed during Modi’s visit to Iran in May. Speaking on the occasion, President Hassan Rouhani of Iran highlighted the possibilities the port offers for cooperation in petrochemical, mining, steel and other sectors.
 
Moreover, India signed a trilateral transit agreement with Iran and Afghanistan for Chabahar port underlining its importance not only for bilateral trade but also its significance in Indian interests in Afghanistan and Central Asia. With the lifting of international sanctions after the signing of Joint Comprehensive Plan of Action (JCPOA) in July 2015, which India welcomed, India-Iran bilateral trade is set to grow and there is a desire on both sides to resolve outstanding issues, especially regarding banking and payments to tap the business potential. The Confederation of Indian Industry (CII) has decided to re-open its office in Tehran to facilitate business while UCO Bank is set to open a branch in Tehran for easing banking-related problems.
 
A similar focus on business was witnessed during the visit of Israeli President Reuven Rivlin (November 14-21), who was accompanied by a large business delegation, and expressed keen interest in partnering in some of India’s flagship projects such as Make in India, river cleaning, water treatment and agriculture projects. Further, cooperation in areas of science and technology and defence have emerged as key to the growing India-Israel relations. Israel has been India’s major partner in defence, agriculture, water treatment and irrigation methods where it is considered to be a global leader. During Rivlin’s visit, India signed contracts with Israel Aerospace Industries worth $1.4 billion to purchase two Phalcon/IL-76 AWACS and 10 Heron TP UAVs. An Israeli proposal to jointly develop Heron UAVs with the DRDO was discussed highlighting the possibilities of cooperation in joint defence manufacturing.
 
While economic cooperation remains the focus, there is a serious concern in India over growing scourge of terrorism and, therefore, India has worked toward enhancing security cooperation and intelligence-sharing with the Gulf States and beyond. It came to the fore in 2016 as the joint statements issued during bilateral visits expressed mutual concern on terror and regional turmoil and highlighted the need for further cooperation. India signed MoUs with financial intelligence units of Saudi Arabia and Qatar to counter money-laundering and terror financing.
 
In fact, defence and security has emerged as a major area of cooperation between India and Gulf countries in recent years. While the focus is on preventing spread of extremism and online radicalisation, there is debate about India’s role in providing security in the Gulf. The likelihood of India establishing a military base in the region is remote but it has established close military-to-military relations with some GCC countries, especially Oman, Qatar and UAE. 
 
The Indian Navy has established close relations with navies in the Gulf and naval ships have often paid friendly visits to the Gulf coasts while India has been actively involved in providing maritime security in the Indian Ocean and in safeguarding theSea lines of communication (SLoCs) from the Gulf.
 
In January, India and Oman conducted a joint naval exercise ‘Naseem al-Bahr’ while India and  the UAE Air Forces held a 10-day joint exercise (May 24-June 3) at the Al-Dhafra Air Base in UAE. India and Saudi Arabia that had signed a MoU on defence cooperation in February 2014 during the visit of Crown Prince (now King) Salman decided to intensify cooperation with exchange of military personnel and experts, conduct joint military exercises and organise visits of naval ships. With Qatar, too, India agreed to enhance defence cooperation within the framework of the agreement signed in 2008 through “joint exercises and enhanced training of naval, air and land forces, as also in the area of coastal defence”.
 
As far as cooperation in preventing spread of extremism, India has established close ties with security and intelligence agencies in the Gulf. Home Minister Rajnath Singh visited Bahrain in October while Saudi Arabia, Kuwait and UAE have deported or extradited a number of Indian nationals accused of fomenting extremism and sourcing funds for terrorist activities in India. During Prime Minister Modi’s visit to Riyadh, the two countries pledged to strengthen cooperation in combating terrorism and collaborate in the field of cyber-security to prevent online radicalisation and use of cyber space for terrorism and disturbing social harmony.
 
Further, India expressed its concern during bilateral meetings over states harbouring terrorist groups. The India-Saudi joint statement expressed a veiled criticism of Pakistan condemning “misuse of religion by groups and countries for inciting hatred, perpetrating and justifying terrorism for pursuing political aims”. The issue of terrorism and use of religion in fomenting extremism came to the fore during engagements with the regional countries, including Iran, Israel, Qatar, Egypt and Syria. India’s concern on and problem with cross-border terrorism found an audience in the region due to the growing menace of global terror and threats emanating from it. The India-Iran joint statement “urged an immediate end to all support and sanctuaries enjoyed by terrorist groups and individuals” and they were of the view that “States that aid, abet and directly or indirectly support terrorism should be condemned”.
 
At the same time, the trouble in Jammu and Kashmir that deteriorated due to, among other factors, local mishandling which Pakistan used to evoke anti-India sentiments among the Organisation of Islamic Cooperation (OIC) led India to amplify its diplomatic manoeuvres in the region. Media reports suggested that MoS for External Affairs M.J. Akbar’s visit to Syria was aimed at placating it towards the Indian position on Kashmir given that President Bashar al-Assad has been condemned by OIC for human rights violations in dealing with Syrian rebels. Nonetheless, the wider engagements in the region were as much aimed at building cooperation to combating terrorism and extremism. 
 
Given the rise of global jihadist organisations like the Islamic State of Iraq and Syria (ISIS), the Indian position on terror has been appreciated by all sides leading to strengthening of counter-terror cooperation and intelligence-sharing with Israel, the UAE, Saudi Arabia, Iran, Qatar, Egypt, Iraq and Syria.
 
An important issue as far as GCC countries are concerned is the problems faced by a section of Indian expatriate workers. The issue has become a priority for India and was discussed during bilateral meetings. With Saudi Arabia, India signed an agreement on labour recruitment, a follow up of the labour agreement signed in 2014, and also agreed to establish a Joint Working Group on consular issues to resolve outstanding issues. India and the UAE agreed to regularly hold the Joint Labour Committee meetings. 
 
Moreover, GCC countries such as Qatar and Kuwait have initiated labour reforms that should help Indian expatriate workers avoid exploitation and other hardships. India has raised these issues at various bilateral forums and the Indian embassies in respective countries have worked with the expatriate Indian community to create awareness regarding local labour laws and avenues for redressal of rights violations. 
 
Prime Minister Modi, during his visits to Saudi Arabia, Qatar and the UAE, made it a point to interact with the Indian expatriate communities sending a message of the government’s keenness to address their issues.
 
There is a concern in India with respect to slowing down of Gulf economies due to low oil prices, especially as the GCC countries prepare to transform into post-oil economies through programmes such as the Saudi Vision 2030. Arguably, it may lead to lower job opportunities for expatriate workers but is unlikely to have a remarkable impact in short-to-medium term. With Gulf economies preparing to improve participation of locals in the private sector, gradually demand for expatriate workers might drop and impact remittances and the only way forward to deal with such eventuality is to generate employment-incentive economic growth in India.
 
The most significant aspect of India’s engagement with the Middle East in 2016 was an outreach beyond the Gulf and the growing warmth and openness in India’s relations with Israel. Akbar’s visit to Syria, Iraq and Lebanon and Vice President Hamid Ansari’s visits to Algeria, Morocco and Tunisia reflected that India is keen to engage with all important countries in the region. It signifies that India recognises its stakes in regional peace and stability and is willing to cooperate with the wider region, especially in combating terror and countering extremist ideologies. 
 
Concern regarding spread of radical and extremist ideas in India and its neighbourhood, particularly with arrests of radicalised Muslim youths, though few in number, and terrorist attacks in Bangladesh propelled India to forge wider counter-terrorism cooperation in the region.
 
As far as India’s relations with the Middle East are concerned, 2016 witnessed a push for enhancing trade and commerce and attracting investments. Prime Minister Modi made marathon effort to engage with important regional countries highlighting the steps taken by his government to improve the business environment in India and inviting investments. Simultaneously, there was an emphasis on establishing security cooperation and enhancing intelligence-sharing with the wider region to combat the scourge of terrorism and limit the possibilities of global terrorist organisations spreading their tentacles in India. 
 
Though tangible results will take time and depend on many other factors, the highlight of 2016 was India’s ability to re-invent its focus on the Gulf and willingness to reach out to the wider Middle East.
 
(Md. Muddassir Quamar is Associate Fellow at the Institute of Defence Studies & Analyses, New Delhi)
 
 
 
 
 
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