India-Saudi Arabia Relations

India-Saudi Arabia enjoys cordial and friendly relations reflecting the centuries-old economic and socio-cultural ties. The relationship between India and Saudi Arabia has grown stronger, attaining the level of a strategic partnership and incorporating more political and security content. Prime Minister Narendra Modi’s visit to Riyadh in April 2016 further bolstered the bilateral relationship, laying the basis for deepening existing ties and broadening the parameters of cooperation. India-Saudi Arabia relations rest majorly on five pillars: trade and investment, energy cooperation, diaspora, defence and security, and cultural interaction.

The year 2021-22 commemorates 75 years of India’s independence as ‘Azadi ka Amrit Mahotsav’. This celebration also coincides with 75 years of establishment of diplomatic relations between India and Saudi Arabia.

Areas of Cooperation

Political

• The establishment of diplomatic relations in 1947 was followed by high-level visits from both sides. King Saud visited India in 1955 and the Prime Minister Jawaharlal Nehru visited the Kingdom in 1956. The visit of the Prime Minister Indira Gandhi to Saudi Arabia in 1982 further boosted the bilateral relations.
• In the recent times, the historic visit of King Abdullah to India in 2006 resulted in signing of ‘Delhi Declaration‘ imparting a fresh momentum to the bilateral relationship. The visit provided the framework for cooperation in all fields of mutual interest. The reciprocal visit by Prime Minister Dr. Manmohan Singh to Saudi Arabia in 2010 raised the level of bilateral engagement to “Strategic Partnership” and the “Riyadh Declaration” was signed.
• The recent visit of Prime Minister Narendra Modi to Riyadh from April 2-3, 2016 could be seen as a turning point in our growing engagement with the Kingdom of Saudi Arabia, which has taken an upward strategic direction.
• In a special gesture, King Salman honoured Hon’ble Prime Minister Narendra Modi with the ‘Sash of King Abdulaziz’, the highest civilian decoration awarded by the Kingdom.
• In September 2022, the Union Minister of Commerce and Industry, Consumer Affairs, Food, and Public Distribution and Textiles visited Saudi Arabia to attend the Ministerial meeting of the India-Saudi Arabia Strategic Partnership Council. Outcomes of the meeting:
  • Streamlining efforts to realize Saudi’s investments worth USD 100 Billion in India.
  • Endorsement of the 41 areas of cooperation identified by the technical teams under the 4 broad domains of Agriculture & Food Security; Energy; Technology & IT; and Industry & Infrastructure.
  • Agreement to undertake the implementation of the priority projects in a time-bound manner.
  • Priority areas of cooperation include:
    • Collaboration in the digital fintech sector through operationalization of UPI and Rupay Card in the Kingdom of Saudi Arabia.
    • Re-affirmation of continued cooperation in joint projects including the West coast refinery, LNG infrastructure investment, and development of strategic petroleum storage facilities in India.

Economic

• Saudi Arabia today is our 4th largest trade partner (after China, USA and UAE) and is a major source of energy as we import around 18% of our crude oil requirement and around 22% of its Liquified Petroleum Gas (LPG) requirement from Saudi Arabia.
• In FY 2021-22, bilateral trade was valued at USD 42.8 billion.
  • India’s imports from Saudi Arabia reached USD 34.01 billion and exports to Saudi Arabia were worth USD 8.76 billion. An increase of 49.5% over 2021.
  • Total trade with Saudi Arabia accounted for 4.14% of India’s total trade in FY 2021-22.
• Saudi Arabia is the 8th largest market in the world for Indian exports and is destination to more than 2.44% of India’s global exports. On the other hand, Saudi Arabia is the source of 5.34% of India’s global imports.
• According to Saudi Arabian General Investment Authority (SAGIA), licenses for Indian company’s investments worth $1.6 billion have been issued while Saudi Arabia’s investment in India during the period April 2000 to March 2016 is around $64.19 million.
• Saudi Investments in India, as of March 2021, amounted to US$3.13 billion.
• Major Saudi investment groups include ARAMCO, SABIC, ZAMIL, E-holidays, and Al Batterjee Group.
• Saudi Arabia will assist in setting up the world’s largest greenfield refinery at Raigarh in Maharashtra by Saudi Aramco, Adnoc of the United Arab Emirates and Indian public sector oil companies.
• In the renewable energy sector, Saudi Company Al-Fanar has a controlling stake in 600MW Wind Power projects in India.
• Saudi Aramco is also in discussions with Reliance Industries to acquire a 20% stake in its oil-to-chemicals business.

Defence Cooperation

• In 2012, for the first time Indian Defence Minister visited to the Saudi Arbia to provide a thrust for India’s defence diplomacy in the Gulf region. Indian ships have visited Saudi Arabia on port calls and India has been providing training to some Saudi defence personnel.
• India and Saudi Arabia signed a Defence cooperation pact in 2014 under which the two countries will share Defence-related information, undertake military training and education, and also cooperate in the field of security.
• The degree of understanding on terrorism was reflected when Riyadh came forward to condemn the terrorist attacks in Pathankot (January) and Uri (September) in 2017.
• In 2021, India and Saudi Arabia started their first-ever Naval joint exercise called the Al-Mohed Al-Hindi Exercise.

Diaspora and Culture

• The Gulf is home to around 8.5 million Indians, with Saudi Arabia (4 million) and the United Arab Emirates (2.8 million) hosting more than half of all documented Indian citizens living in the region. The Haj pilgrimage is another important component of bilateral relations.
• During Haj 2016, around 136,000 Indians visited the Kingdom to perform Haj. A large number of Indians also visit the Kingdom to perform Umrah every year.
• In 2021, an MoU on Yoga Cooperation was signed between the Saudi Ministry of Sports and India’s Ministry of AYUSH, which paved the way for the establishment of formal Yoga standards and courses in the Kingdom, marking the first time such standards were being implemented by any country in the Gulf region.

Health

• Both countries used the G20 platform to discuss strategies to combat the Covid-19 pandemic.
• In February and March 2021, in two separate consignments, India provided 4.5 million COVISHIELD vaccines to the Kingdom, whereas, during the second wave, the latter provided India with COVID-relief material, particularly liquid oxygen.

Mutual Benefits

• With big economies and political clouts, India and Saudi Arabia can play an important role at multilateral forums, and enhance stature and mutual benefits, both regionally and globally.
• One-fourth of India’s oil imports come from Saudi Arabia, making it the fourth largest trading partner for India, and India is the fifth largest market for the Saudi exports. The trade between the two stands at $36 billion annually.
• The rise of terrorism has been a concern for both India and Saudi Arabia, especially the surge of terrorism in West Asia and beyond since the outbreak of the Arab Spring. Saudi Arabia has been targeted by the Islamic State (IS) militants operating from neighbouring Iraq and Syria. India is continuously suffering from the menace of terrorism perpetrated by Pakistan.
• Thus, security cooperation and intelligence sharing have also been important elements of the partnership that the two countries are forging.

Significance of Saudi Arabia to India

• Energy Security: Saudi Arabia possesses more than a quarter of the global oil reserves and has been the largest oil producer for over half-a-century and, more importantly, it is the only country with a spare production capacity.
• Regional Security: India views Saudi Arabia as a country with which it can forge security ties in order to deal with terrorism, piracy and criminal elements. Diplomatically, it could be a gateway for India into the wider Arab and Islamic world. The security of trade routes are of immense importance to India’s interest and given the volatility of situation in West Asia, it is vital for India to deepen its relationship with Saudi Arabia.
• OIC and GCC: Saudi Arabia has a considerable say in OIC and can play an important role in defending India’s stand on Kashmir. India needs to get an observer status in GCC. Riyadh can play a significant role in this direction. India needs Saudi Arabia’s support to re-energise the negotiation process of the Free Trade Agreement (FTA) with the GCC which is still under negotiations since 2006.
• UNSC: On UN reform, India and Saudi Arabia share common views. Both are desirous to expand UNSC. Being an influential player in the West Asia North Africa (WANA) region and several groupings, Riyadh can play significant role in creating pro-India opinion for India’s candidature for permanent seat in the UNSC.
• Diaspora: More than two million Indians work in Saudi Arabia. Their welfare can be ensured by having better diplomatic relations between two countries.
• Remittances: Saudi Arabia continues to be among the most preferred destinations for Indians seeking jobs abroad, resulting in the Gulf kingdom becoming among the highest sources of remittances to India. In year 2015, of the nearly $69 billion that came into India, Saudi Arabia accounted for over $10.5 billion alone – about a sixth of the total remittances.
• Investments: Foreign reserve rich Saudi Arabia can be an importance source of Foreign Direct Investments in India. Indian Oil Companies like IOCL, HPCL, etc can find attractive overseas business destination there.
  • In April 2018, Saudi Aramco, the state-owned oil company of the Kingdom of Saudi Arabia, has signed a pact with a consortium of Indian oil companies to jointly develop and build a mega integrated refinery and petrochemicals complex, Ratnagiri Refinery & Petrochemicals Ltd. (RRPCL), in Maharashtra.
  • During his visit to New Delhi in February 2019, the Crown Prince had committed to invest over $100 billion in sectors of priority in India.

Significance of India to Saudi Arabia

• The U.S.-lran rapprochement (Iran nuclear deal) has raised anxiety in Arab states about a resurgent Iran, forcing them to reorient their diplomacy accordingly. Reaching out to emerging powers such as India is one way to preserve the balance of power in the region.
• India has been a natural choice for an economic and developmental partnership in Saudi Arabia’s efforts to diversify its relationships by engaging various Asian countries.
• For Saudi Arabia, India is a key market for its chief commodity, oil – and India’s significance in this regard is expected to grow in the decades ahead.
• Companies like TCS and L&T have made significant investments in Saudi Arabia and their contributions to the development of Saudi infrastructure and manpower has been duly acknowledged.
• India has a rich portfolio in sectors like IT and pharmaceuticals, which the Saudi would find attractive as they set out to diversify their economy.
• The rise of terrorism has been a concern for both India and Saudi Arabia, especially the surge of terrorism in West Asia and beyond since the outbreak of the Arab Spring. Given the mutual concern for terrorism and security issues, Agreements on intelligence sharing and terror financing was signed during Indian PM visit to Saudi Arabia in 2016.

Challenges in Relations

• The explosive discord between Iran and Saudi Arabia despite Iran’s landmark agreement with the P5+1 countries does not augur well for the future of the region as a whole, given that each country has specific areas of influence in it.
• Traditionally, Saudi Arabia is closer to Pakistan, cooperating in areas of oil and financial credits, Wahhabism, etc. While Riyadh feels uncomfortable with India’s growing relationship with Iran, India expects the Kingdom to restrain its ally, Pakistan, from allowing its territory to be used by terrorists targeting India.
• An astronomical hike in the ‘expatriate dependent fee (Effective from July 1, 2017),’ or family tax, in Saudi Arabia is forcing thousands of Indians working in the kingdom to send their families back home.
• Over three years, the kingdom has been aggressively implementing the ‘Nitaqat‘ nationalisation programme which aims to replace foreign workers in industries with Saudi youths. Wages have come down sharply for expatriates.
• Migrant workers bear the brunt of Saudi’s (and other Gulf countries’) archaic Kafala system also. The Kafala system requires all migrant workers to have a sponsor in the country where he or she is to work in order that a valid visa and residence permit may be issued. This practically places the migrant worker at the mercy of his or her employer, leading to his/her exploitation.

Recent Developments

• There is a substantive shift happening in India’s approach to the Middle East policy.
• India has pushed an aggressive strategy of partnering with key regional powers like Saudi Arabia, the United Arab Emirates and Israel in a bid to attract investments and forge deeper security partnerships.
• India and Saudi Arabia are moving from a purely buyer-seller relationship towards a closer strategic partnership that will include Saudi investments in downstream oil and gas projects.
• India is showing signs of overcoming its reluctance to forge security partnerships with the Gulf states whose security apparatuses had long been closely associated with Pakistan.
• During Prince Salman’s visit to New Delhi earlier this year, Saudi Arabia promised to share more intelligence to boost counterterrorism cooperation with India.
• Saudi Arabia took a positive approach towards abrogation of Article 370 in Jammu and Kashmir.
• Saudi Arabia has signalled that it understands Indian concerns and sensitivities on the Kashmir issue.
• Formation of the India-Saudi Strategic Partnership Council that will be led by the leaderships of both the countries to “help India address its expectations and aspirations.”

Current Scenario

• There is strong political will in both India and Saudi Arabia to take relations to new heights.
• The current scenario is unlike the Cold War period when India-Saudi Arabia ties were mainly determined by the Pakistani factor. For decades, this prevented both New Delhi and Riyadh from discovering the strategic importance of engaging one another.
• Lately, there have been indications that Saudi Arabia is less interested in meddling in India’s internal affairs.
• Alongside the growing politico-economic ties, cooperation in the security realm is significantly progressing.
• While India continues to face cross-border terrorism, Saudi Arabia remains vulnerable to frequent missile and drone attacks on its civilian dwellings as well as on its major oil fields.
• An agreement to constitute a “Comprehensive Security Dialogue” at the national security adviser (NSA) level and a Joint Working Group on Counter-Terrorism is timely

Way Forward

• Managing the Big Powers: India must be cognisant of the facts about the involvement of big players like China, Russia and US in the present turmoil of the West Asia. India must be at the guard of its own strategic and economic interests amidst the over-economic involvement of the big players like China and should not endorse all the policies of all the players.
• India Must Talk to both the Regional Powers: There is growing perception that Arab Spring has transformed into an Arab-Persian cold war. India should either remain equidistant from both the factions or enter into a dialogue with both the sides: Iran and Saudi Arabia. The two countries being the regional powers are crucially important for India, and the strategic and economic relevance of them cannot be undermined.
• Fight Against ISIS: India is concerned about the danger posed by the rise of the ISIS and must extend all support against the ISIS. If there is an opportunity, India should support the resolution at the UN Security Council which might condemn the atrocities committed by it. Securing interests of migrant workers should be pursued through continued diplomatic engagement.
• Currently, India has a trade deficit of USD 25.25 billion with Saudi Arabia. India should focus more upon promoting exports in various sectors. It would enable us to maintain the trade balance with the kingdom while building healthy trade relations.

Conclusion

• The Look West policy has certainly accelerated India’s engagement with the Gulf region in general, and Saudi Arabia in particular. As India has huge stakes in the region, the policy should be supplemented with more proactive Indian involvement in the various sectors. With the rapid economic growth and rising profile of India, devising such policy of engaging with the extended neighbourhood has become imperative for India.