Middle East and India

Strong Relations with the Region can Provide more Opportunities Than Anywhere Else

Middle East and India
Middle East and India

Middle East refers to the region which links the east of Europe to the west of Asia. The modern definition of Middle East emerged during mid-20th century. As per this definition Middle East is a transcontinental region that includes the countries of the Arabian Peninsula (Saudi Arabia, Yemen, Oman, United Arab Emirates, Qatar, Bahrain, and Kuwait), Iran, Iraq, Israel, Egypt, Libya, Syria, Jordan, Lebanon, Cyprus, Palestine, the West Bank and Gaza and certain parts of Turkey. Besides being the major land bridge connecting Asia, Africa and Europe, the Middle East has gained significant position in the world due to its enormous oil deposits.

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Middle East serves as a vital link, connecting India, Africa and Europe. India has significant trade relations with the Gulf countries and also shares important defence relations with different countries of the region. The Covid-19 situation has dealt severe blow on the trade relationship between India and the Middle East and also the conflict between Iran and USA has raised concerns about India’s stand in the region and calls for modification in ties between India and the Middle East. India’s trade, its migrant workers and oil imports from Middle East are some areas of concern in the present times.

It is the major supplier of oil and gas in the world and it is also the region through which world’s busiest transcontinental trade routes pass. In the rapid developing world, energy plays a crucial role in the development of nations. Oil and gas are the important energy sources on which the world depends for variety of purposes. Due to this reason the Middle East which has about 50% of world’s oil reserves and about 40% of natural gas reserves is a crucial region for the world. The Middle East is also home to diverse cultures, religions and ethnic groups. Middle East is the home of three major Abrahamic religions of the world i.e. Judaism, Christianity and Islam.

Conditions prevailing in the Middle East

The Middle East is grappling with different issues at the present time. First, the ongoing global pandemic has incapacitated the trade and normal growth of the economy in the Middle East countries much in the same way as all over the world. The lockdown put in place in order to control the spread of pandemic has severely affected the movement of people and subsequently economy has suffered a backlash. Second, as a result of the pandemic, the world economy has come to a standstill. Middle East is also grappling to deal with the effect of the global pandemic. It has been seen during the economic decline of 2015-16 that the GCC (Gulf Cooperation Council is a regional intergovernmental political and economic union formed by the countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) had adopted measures to increase its private sector jobs and had laid-off many foreign workers. In the present situation also if economic condition of the countries continues to decline due to the pandemic then such measures may be adopted again that will leave several migrant workers unemployed.

Third, a disagreement between the members of OPEC and Russia on decreasing the production in order to deal with the decreasing demand due to the pandemic also has led to issues in the region. Russia refused the proposal of OPEC to cut production and in return, Saudi Arabia, a major oil producer of the Middle East boosted productions and also announced discounts. Further, as retaliation, to Saudi Arabia’s action, Russia also ramped up its production. This led to the unprecedented decline in oil prices globally and the prices have been declining since then. The increase in production of oil at a time when demand is already low has caused historic fall in the global oil prices. The Middle East is a crucial source of oil and natural gas for the world and such price wars and subsequent fall in oil prices pose serious threat to the economic stability of the region which will certainly affect other nations like India, China etc who depend on the imports of oil from Middle East to a great extent.

Conditions prevailing in the Middle East Info 2
Conditions prevailing in the Middle East

Fourth, tensions have been rising high in the Middle East due to altercation between Iran and USA in the recent times. In 2019, USA deployed its military assets in the Persian Gulf region which was condemned by Iran. Further, during May 2019 oil tankers of Saudi Aramco were damaged in the Gulf of Oman and again in June 2019 two oil tankers caught fire in the Gulf of Oman and in response USA increased its troops in the Middle East. Subsequently, in June 2019, Iran’s Islamic Revolutionary Guard Corps shot down a US surveillance drone having accused that the drone had been found within Iran’s territorial space. In December, a military base in Iraq was attacked leading to death of a US contractor and injured several other USA and Iraqi service members. In response, USA launched air strikes on the militia group which it blamed for the strike in Iraq military base. This led to further retaliation from Iran and militia groups stormed the US Embassy in Baghdad leading to destruction of property. The last strike that led to almost a war like scenario in the region was when the US assassinated the Iranian General Qasem Soleimani (Iranian major general of Islamic Revolutionary Guard Corps unit Quds Force) with an airstrike in Iraq. However, the spread of covid-19 and the following lockdown has put the situation on hold.

India and Middle East

The relationship between India and the Gulf can be traced back to ancient times. India has been involved in trade with the Middle East since the time of Indus Valley Civilisation. Even during the British rule, the imperial policies were administered in the Gulf region from Bombay Presidency. India’s historic and cultural ties with the Middle East have strengthened over time. Middle East serves as a vital link for India to Europe and central Asia. India has strained relationship with its neighbour Pakistan and in such a scenario Middle East becomes a region for India to bypass Pakistan and involve in trade with Europe. Beside this, India also has other interests in the Middle East. India depends on import of oil for meeting about 85% of its oil requirements and above 60% of oil imports of India come from the Middle East (GCC only accounts for more than 35% of India’s oil imports) thereby making the region a significant one for India.

Second, about 9 million Indians live in the Gulf countries and majority of the expats in Kuwait, Oman and the UAE are Indians. These Indians play a key role in development of the Gulf countries and at the same time, these Indians are a vital source of remittances for India. In 2019, the expats remitted about 2% of India’s GDP and two-thirds of total remittances to India. Further, India has good trade relations with the Gulf countries. The UAE and Saudi Arabia are counted among top 5 trade partners of India and the GCC is India’s largest regional-bloc trading partner. Apart from this, India and the GCC also work together on issues like security, defence manufacturing, counter terrorism, cyber-security, drug trafficking etc. Further, investments from Gulf countries (Oman, Saudi Arabia, Kuwait, Qatar etc) also comprise a significant proportion of India’s total FDI. In 2019, Reliance Industries, India decided to sell off 20% stake from its oil-to-chemicals business to Saudi Aramco. As per agreements signed between India and Saudi Arabia, Saudi Aramco will play a major role in setting up of 2nd fuel reserve facility in Karnataka besides building a mega refinery in Ratnagiri along with ADNOC (Abu Dhabi National Oil Company). India and the GCC nations also share strong business links. Institutional mechanisms like the India-GCC SME Business Council and the GCC-India Industrial forum aid and assist in maintaining strong business link. India’s financial institutions, PSUs and construction companies also are present in the GCC. For example, the State Bank of India, Bank of Baroda, HDFC Ltd, Air India, Engineers India Limited, Bharat Electronics Limited L&T, Jindal, Shapoorji Pallonji etc are present in the GCC nations.

India and Middle East Info 3
India and Middle East

India also has defence agreements with some countries of Middle East like the bilateral agreement between India and Qatar, intelligence sharing with the UAE, Saudi Arabia, Israel and Oman. Due to these agreements and India’s strong ties with the nations, the UAE and Saudi Arabia have deported persons of interest wanted by India in relation to terror related activities. India also has been improving its strategic partnership with the Gulf nations. The “Delhi Declaration” and the “Riyadh Declaration” are examples of strengthening defence ties between India and Saudi Arabia. Naval cooperation, joint exercises, Indian ship visit to Gulf countries, training of Gulf armed forces personnel in Indian defence and military academies etc also take place. A pact between India and Oman signed in 2018, allows Indian Navy to use the port of Duqm which occupies a strategic position overlooking the Arabian Sea and the Indian Ocean. Further, the security partnership between India and Israel has proved to be essential for development of India’s security forces and modernisation of military. India has agreed to buy attack drones from Israel and due to Israel’s technological sophistication; it has become a significant supplier of military technology for India. Due to warm relations, Israel also had helped India with crucial information during the Kargil war. The ties between India and the countries of Middle East are strong enough that during the Gulf war, Yemen crisis and other conflicts in Iraq, Kuwait, these countries had allowed India to evacuate Indians from the conflict zones. India and the UAE have been working towards increasing their bilateral trade with the UAE setting targets to increase investment in India’s infrastructure development, airports, highways, petrochemical projects etc.

India also has invested in the Chabahar port and the Farzad B gas field of Iran. The Chabahar port is vital for India from strategic point of view in order to connect with the International North-South Transit Corridor after bypassing Pakistan en route to Afghanistan and also the port can be used as a counter measure to deal with the increasing presence of China in the Indian Ocean Region. The Middle East will also prove to be vital for the success of the Asia-Africa Growth Corridor which had been planned for countering China’s Belt and Road Initiative. This will be significant link for India to access the Central Asian region. Some of the countries of Middle East have also taken a stand in favour of India in matters related to Pakistan. After the recent abrogation of article 370 by India, Saudi Arabia supported India and also cautioned Pakistan against escalating the matter. Saudi Arabia has also given a positive response in India’s for having understood the concerns on Kashmir issue.

Challenges in Relationship with Middle East Countries

Iran is an important trade partner of India.  Oil is the major import of India from Iran. However, the sanctions put by USA on Iran have destabilised India’s trade with Iran. Even India’s investments in Iran in the Chabahar port and Farzad B gas field have remained stagnant without any significant progress in the last few years. India has increased its focus on Israel, Saudi Arabia and the UAE in order to tilt away from Iran and the combined stand of USA, Israel, Saudi Arabia and the UAE has put India on an unstable ground. Besides the reluctance of Indian companies to proceed with the Chabahar project, foreign companies have also refused to participate in the project which has slowed down the progress considerably. India is faced by a challenge to deal with Iran in a diplomatic manner as strengthening trade ties with Iran would not be advisable in the current scenario but at the same time India cannot completely sideline Iran as the Chabahar port is a matter of significance for India to connect with the INSTC and also India has always strived to maintain good relations with Iran in the backdrop of India’s substantial Shia Muslim minority. The Iranian issue has also emerged as an irritant in the otherwise robust relationship between India and USA. India’s approach of balancing powers by engaging diplomatically with the three poles in the region i.e. the Gulf nations, Israel and Iran would prove to be difficult to follow considering the hawkish position of USA on Iran.

Further, the conflicts in the Middle East region and tension in the Strait of Hormuz has adversely affected the stability of the region. The instability in the Middle East region in the form of military confrontation or conflict would have adverse impact on India. The sea lines in the Gulf region serve as significant lines of communication and India would want it to remain open and free from monopoly. A stable Middle East would serve as an important market for India and also would serve as a vital link between India, Africa and Europe. Another challenge faced by India is the approach it should have towards the Middle East region. India refrains from assuming an active role in the region (taking sides in intra-regional disputes) like the USA as it would increase the risk of damaging India’s core interests.

The pandemic situation has added to India’s worries regarding the Middle East. The slowdown in the economy that has occurred due to the pandemic is expected to affect migrant workers in the region. As Indians account for majority of the migrant workers in the region, the safety of the workers, their employment prospective and the fear of these workers getting affected by the virus are the major areas of concern for India. Also due to the economic slowdown and the collapse of oil prices, the remittances from Middle East have witnessed a significant decline. Remittances from the Middle East areas are significant particularly in the states of Kerala, UP, Bihar etc and making up for the loss of remittances would prove to be challenging for the government. In case if a situation so arises that India will have to repatriate the worker from Middle East, then, India would have to face different issues like dealing with the cost of airlifting millions in the times of economic slowdown, providing for quarantine facilities for the workers, providing for medical facilities for the evacuated workers and providing for employment in case if the Gulf countries reduce the hiring of foreign nationals. India’s investments and the investments of the Gulf countries in Indian projects have failed to deliver result in the current situation and this sector also needs to be closely monitored.

Conclusion

India has strong ties with the Middle East nations and has been striving to further strengthen its ties in the recent times. Middle East is vital for India due to its strategic geopolitical positioning. India also has strong trade ties with the Gulf countries and millions of Indians work as migrant workers in the region. Besides investments of the Gulf countries in India, the remittances from Indians also are also important for India. Considering the current tense situation due to conflict between USA and Iran, and more importantly the ongoing pandemic that has dealt severe blow to the economy and all other sectors, it is vital for India to approach the Middle East diplomatically by keeping in view the various stakes that India has in the region. Developing the trade as well as defence ties in the region and further strengthening the partnerships with the countries of Middle East will prove to be beneficial for India.

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