India-Saudi Arabia Relations | UPSC Notes

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India-Saudi Arabia Relations | UPSC Notes

India and Saudi Arabia have good relations that go back hundreds of years and are based on business and social ties. India and Saudi Arabia’s relationship has gotten stronger, to the point where it is now a strategic partnership with more political and security content. In April 2016, Prime Minister Narendra Modi went to Riyadh, which helped to strengthen the relationship between the two countries and set the stage for deeper ties and a wider range of ways to work together. The main parts of India-Saudi Arabia relations are trade and investment, energy cooperation, the diaspora, defence and security, and culture exchange.

“Azadi ka Amrit Mahotsav” is a festival that will be held in 2021-22 to celebrate 75 years since India became independent. This party is also happening at the same time that India and Saudi Arabia have had formal ties for 75 years.

Areas of Cooperation

Political

• After formal ties were made in 1947, leaders from both countries came to see each other. In 1955, King Saud went to India, and in 1956, Prime Minister Jawaharlal Nehru went to the Kingdom. In 1982, when Prime Minister Indira Gandhi went to Saudi Arabia, it made things even better between the two countries.

• King Abdullah’s important trip to India in 2006 led to the signing of the “Delhi Declaration,” which gave the relationship between the two countries a new boost. The visit laid the groundwork for partnership in all areas that were of interest to both sides. The “Riyadh Declaration” was made during Prime Minister Dr. Manmohan Singh’s reciprocal trip to Saudi Arabia in 2010. The level of engagement between the two countries was raised to “Strategic Partnership” during this trip.

• On April 2 and 3, 2016, Prime Minister Narendra Modi went to Riyadh. This could be seen as a turning point in our growing relationship with the Kingdom of Saudi Arabia, which is now going in a strategic direction that is up.

• As a special honour, King Salman gave the “Sash of King Abdulaziz” to Hon’ble Prime Minister Narendra Modi. This is the highest citizen award given by the Kingdom.

• In September 2022, the Union Minister of Commerce and Industry, Consumer Affairs, Food, and Public Distribution and Textiles went to Saudi Arabia to attend a meeting of the India-Saudi Arabia Strategic Partnership Council. The meeting’s results:

Streamlining attempts to make sure that Saudi Arabia’s USD 100 Billion investments in India work out.

Approval of the 41 areas of cooperation that the technical teams came up with under the four broad categories of agriculture and food security, energy, technology and information technology, and industry and infrastructure.

Agreement to start working on the top projects within a certain amount of time.

The most important areas of collaboration are:

o Working together in the digital financial technology field by making UPI and Rupay Cards work in the Kingdom of Saudi Arabia.

o A promise to keep working together on projects like the West Coast refinery, investing in LNG infrastructure, and building strategic oil storage sites in India.

Economic

• Saudi Arabia is our 4th biggest trade partner (after China, the United States, and the United Arab Emirates) and a major source of energy. We get about 18% of our crude oil needs and about 22% of our LPG needs from Saudi Arabia.

In FY 2021-22, the amount of trade between the two countries was USD 42.8 billion.

India bought USD 34.01 billion worth of goods from Saudi Arabia, and it sent USD 8.76 billion worth of goods to Saudi Arabia. This is a 49.5% rise from 2021.

In FY 2021-22, India’s total trade with Saudi Arabia made up 4.14 percent of its total trade.

• Saudi Arabia is the 8th biggest market for Indian exports, and more than 2.44 percent of all Indian exports go there. On the other hand, 5.34 percent of all the things India buys from around the world come from Saudi Arabia.

• According to the Saudi Arabian General Investment Authority (SAGIA), Indian companies have been given licences to spend $1.6 billion, while Saudi Arabia has invested about $64.19 million in India from April 2000 to March 2016.

• As of March 2021, Saudi investments in India were worth $3.13 billion (US).

• ARAMCO, SABIC, ZAMIL, E-holidays, and Al Batterjee Group are some of the most important Saudi business groups.

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• Saudi Arabia will help Saudi Aramco, Adnoc of the United Arab Emirates, and Indian public sector oil companies build the world’s biggest greenfield refinery in Raigarh, Maharashtra.

• The Saudi company Al-Fanar has a controlling stake in 600MW Wind Power projects in India. These projects are in the field of green energy.

• Saudi Aramco is also talking with Reliance Industries about buying a 20% share in its oil-to-chemicals business.

Major exports India to Saudi Arabia are:

• Cereals, spices, machinery, iron or steel products, organic chemicals, meat, vehicles, ceramic goods, electronic equipment, and clothing (but not knit or crochet).

Major goods that Saudi Arabia sends to India:

• Oil, organic chemicals, plastics, fertilisers, gems, valuable metals, aircraft, spacecraft, inorganic chemicals, aluminium, copper, and other chemical goods.

Cooperation in defence

• In 2012, India’s defence minister went to Saudi Arabia for the first time. His goal was to give India’s defence diplomacy in the Gulf area a boost. Indian ships have made port calls in Saudi Arabia, and India has been teaching some Saudi military people.

• In 2014, India and Saudi Arabia signed a Defence cooperation pact that says they will share information about Defence, train and educate their troops, and work together on security issues.

• Riyadh’s condemnation of the terrorist strikes in Pathankot (in January) and Uri (in September) in 2017 showed how much it understood about terrorism.

• The Al-Mohed Al-Hindi Exercise was the first naval exercise that India and Saudi Arabia did together. It began in 2021.

Diaspora and Culture

• There are about 8.5 million Indians living in the Gulf, with more than half of them living in Saudi Arabia (4 million) and the United Arab Emirates (2.8 million). The Haj journey is another important part of the relationship between the two countries.

• About 136,000 Indians came to the Kingdom to perform Haj in 2016. A lot of Indian people come to the Kingdom every year to do Umrah.

• In 2021, the Saudi Ministry of Sports and the Indian Ministry of AYUSH signed a Memorandum of Understanding (MoU) on Yoga Cooperation. This opened the way for formal Yoga standards and courses to be set up in the Kingdom, making it the first country in the Gulf area to do so.

Health

• Both countries met at the G20 to talk about how to deal with the Covid-19 outbreak.

• India sent 4.5 million COVISHIELD vaccines to the Kingdom in two different shipments in February and March 2021. During the second wave, the Kingdom sent India COVID-relief materials, especially liquid oxygen.

Mutual Benefits

• India and Saudi Arabia can both play important roles in multilateral forums because they have large economies and political power. They can also improve their standing and help each other in the region and around the world.

• Saudi Arabia provides one-fourth of India’s oil imports. This makes Saudi Arabia India’s fourth biggest trading partner, and India the fifth largest market for Saudi exports. The amount of money they trade with each other each year is $36 billion.

• Both India and Saudi Arabia are worried about the rise of terrorism, especially the rise of terrorism in West Asia and other parts of the world since the start of the Arab Spring. Militants from Iraq and Syria who work for the Islamic State (IS) have been trying to attack Saudi Arabia. Pakistan is always a threat to India because of the attacks it does.

• Because of this, security cooperation and sharing information have also been important parts of the relationship between the two countries.

Significance of Saudi Arabia to India

• Energy Security: Saudi Arabia has more than a quarter of the world’s oil reserves and has been the world’s largest oil producer for more than 50 years. It is also the only country with extra oil production capability.

• Regional Security: India sees Saudi Arabia as a place it can work with on security issues like terrorism, piracy, and crime. From a diplomatic point of view, it could be a way for India to connect with the rest of the Arab and Islamic world. India cares a lot about the safety of its trade routes, and given how unstable things are in West Asia, it is important for India to strengthen its relationship with Saudi Arabia.

• OIC and GCC: Saudi Arabia has a lot of power in the OIC and can help India support its position on Kashmir. India needs to get an observer position in GCC. Riyadh can make a big difference in this way. India needs Saudi Arabia’s help to get the Free Trade Agreement (FTA) talks with the GCC going again. These talks have been going on since 2006 and are still going on.

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• UNSC: India and Saudi Arabia agree on how the UN should change. Both want to make the UNSC bigger. Riyadh has a lot of power in the West Asia-North Africa (WANA) region and in several groups, so it can do a lot to support India’s bid for a permanent place on the UN Security Council.

• Diaspora: More than 2 million Indians work in Saudi Arabia. Better diplomatic ties between two countries can make sure of their well-being.

• Remittances: Indians who want to work abroad continue to choose Saudi Arabia as one of their top choices. As a result, the Gulf kingdom is one of the biggest sources of money sent back to India. In 2015, nearly $69 billion came into India. Of that amount, over $10.5 billion came from Saudi Arabia alone. This is about a sixth of the total amount.

• Investments: Saudi Arabia, which has a lot of foreign reserves, can be a big source of Foreign Direct Investments in India. Indian Oil Companies like IOCL, HPCL, and others can find there a good place to do business abroad.

In April 2018, Saudi Aramco, the state-owned oil company of the Kingdom of Saudi Arabia, signed an agreement with a group of Indian oil companies to develop and build the Ratnagiri Refinery & Petrochemicals Ltd. (RRPCL) complex in Maharashtra.

During his trip to New Delhi in February 2019, the Crown Prince promised to put more than $100 billion into India’s most important industries.

Significance of India to Saudi Arabia

• The U.S.-Iran deal (Iran nuclear deal) has made Arab states worried about a rising Iran, which has forced them to change how they do diplomacy. Reaching out to new powers like India is one way to keep the power balance in the area stable.

• It was a natural choice for Saudi Arabia to work with India on economic and development issues as part of its efforts to build ties with different Asian countries.

• India is an important market for Saudi Arabia’s main product, oil, and its importance in this area is likely to grow over the next few decades.

• Companies like TCS and L&T have put a lot of money into Saudi Arabia, and their efforts to improving the country’s infrastructure and workforce are well known.

• India has a lot to offer in areas like IT and medicine, which the Saudis might like as they try to broaden their economy.

• Both India and Saudi Arabia are worried about the rise of terrorism, especially the rise of terrorism in West Asia and other parts of the world since the start of the Arab Spring. During the 2016 visit of the Indian Prime Minister to Saudi Arabia, agreements were made to share information and stop terrorists from getting money.

Challenges in Relations

• The explosive conflict between Iran and Saudi Arabia, despite Iran’s historic agreement with the P5+1 countries, doesn’t look good for the future of the region as a whole, since each country has its own areas of power there.

• Historically, Saudi Arabia has been closer to Pakistan. They work together on oil, financial loans, Wahhabism, and other issues. Even though Riyadh doesn’t like how close India is getting to Iran, India wants the Kingdom to stop its ally Pakistan from letting terrorists use its territory to attack India.

• A huge increase in the “expatriate dependent fee (Effective July 1, 2017),” or family tax, in Saudi Arabia is forcing thousands of Indians who work in the country to send their families back home.

• For the past three years, the kingdom has been working hard to implement the “Nitaqat” nationalisation plan, which aims to get Saudi youths to replace foreign workers in industries. Pay has gone down a lot for people who live and work abroad.

• The old Kafala system in Saudi Arabia and other Gulf countries hurts migrant workers the most. Under the Kafala system, all migrant workers must have a sponsor in the country where they will work so that they can get a legal visa and a place to live. This leaves the migrant worker pretty much at the mercy of his or her boss, which can lead to abuse.

Recent Developments

• India’s strategy towards the Middle East is changing in a significant way.

• India has worked hard to form partnerships with important countries in the region, such as Saudi Arabia, the United Arab Emirates, and Israel, in order to draw investments and build stronger security ties.

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• India and Saudi Arabia are moving away from just being buyers and sellers and towards a tighter strategic partnership. Saudi Arabia will invest in downstream oil and gas projects as part of this partnership.

• India seems to be getting over its unwillingness to work on security with the Gulf states, whose security systems have been close to Pakistan for a long time.

• When Prince Salman went to New Delhi earlier this year, Saudi Arabia said it would share more information to help India fight terrorism.

• Saudi Arabia was open to the idea that Article 370 in Jammu and Kashmir should be taken away.

• Saudi Arabia has shown that it knows India’s worries and feelings about Kashmir.

• The leaders of both countries will work together to create the India-Saudi Strategic Partnership Council, which will “help India meet its hopes and dreams.”

What is the Strategic Partnership Council between India and Saudi Arabia?

• The Strategic Partnership Council was set up when the Prime Minister of India went to the Kingdom of Saudi Arabia in October 2019.

• It’s based on two main things:

Political, Social, Cultural, and Security Committee

Economics and Investments Committee

• After the UK, France, and China, India is the fourth country that Saudi Arabia has made a strategic relationship with.

Current Scenario

• Both India and Saudi Arabia have strong political will to take their relationship to a new level.

• Things are different now than they were during the Cold War, when relations between India and Saudi Arabia were mostly affected by Pakistan. This kept New Delhi and Riyadh from realising for decades how important it was for them to work together from a military point of view.

• Recent signs show that Saudi Arabia is less interested in getting involved in India’s internal issues.

• Along with the growing political and business ties, security cooperation is making big strides.

• While cross-border terrorism is still a problem for India, Saudi Arabia is still often attacked by missiles and drones, both on residential homes and on its most important oil fields.

• An agreement to set up a “Comprehensive Security Dialogue” and a Joint Working Group on Counter-Terrorism at the level of the national security assistant (NSA) is a good idea.

The Next Steps

• Handling the Big Powers: India needs to know the facts about how big players like China, Russia, and the US are involved in the chaos in West Asia right now. India should watch out for its own military and economic interests in a world where big players like China are too involved in the economy, and it shouldn’t agree with all the policies of all the players.

• India Must Talk to Both Regional Powers: More and more people think that the Arab Spring has turned into a cold war between Arabs and Persians. India should either stay in the middle between Iran and Saudi Arabia or start talking with both of them. The fact that these two countries are regional giants makes them very important for India. Their strategic and economic importance cannot be downplayed.

• Fight against ISIS: India is worried about the threat that the growth of ISIS poses and must do everything it can to stop it. If India has the chance, it should back the measure at the UN Security Council that could condemn the terrible things it has done. Continued political work should be done to protect the interests of migrant workers.

• At the moment, India has a trade imbalance with Saudi Arabia of USD 25.25 billion. India should put more effort into encouraging trade in many different areas. It would allow us to keep the trade balance with the kingdom and build good trade ties at the same time.

Conclusion

• India’s relationship with the Gulf region and Saudi Arabia in particular has grown thanks to the Look West strategy. India has a lot at stake in the area, so the strategy should include more active Indian participation in the different sectors. India needs to come up with a policy to work with its neighbours because its economy is growing quickly and it is becoming more well-known.