A Partnership for the Future

Prime Minister Narendra Modi welcomes Saudi Arabia’s Crown Prince Mohammed bin Salman in New Delhi on February 19
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Saudi Arabia has announced a potential investment of $100 billion in India. If this happens, it will be a huge upswing in business relations between the two countries

JUST DAYS BEFORE Saudi Arabia’s Crown Prince Mohammed bin Salman made his maiden visit to India, New Delhi quietly signed a $1.5-billion deal with the US for the supply of three million tonnes of crude oil. It is a sign of the times that one of the world’s largest producers of crude oil wants to invest in energy, refining, mining, infrastructure, health and education in India. Diversification of economic interests is something that is propelling closer relations between India and Saudi Arabia.

Salman’s visit came at a charged time. On February 14th, at least 40 security men were killed by a suicide bomber in Pulwama in Jammu and Kashmir, leading to greatly elevated tension between India and Pakistan. The Saudi crown prince returned home for a couple of hours after completing his Pakistan visit before he flew to India. Purely in political terms, this appears a somewhat cynical move to give an appearance of a ‘stand-alone’ visit, but the symbolism was important: India wants no truck with Pakistan when it comes to developing ties with other countries, even if they are close partners of Islamabad.

It is unrealistic to hope that no comparison will be made between Salman’s visit to India and to Pakistan just a day before he landed in India. At one level, any such comparison reveals a surge in positive expectations, which was inconceivable even a decade ago. At another level, the comparison is troubling as the nature of relations between Saudi Arabia and the two countries is premised on different outlooks and goals. Pakistan and Saudi Arabia have deep military and political ties spanning a period all the way back to the creation of Pakistan. The two countries have a formal military alliance dating to 1982. But even before that, Pakistan was closely involved in the fight to end the seizure of the grand mosque in Mecca. In 2017, Pakistan dispatched its soldiers, led by its former army chief Raheel Sharif, to help Saudi Arabia pursue its interests in Yemen. The two countries are members of the Organisation of Islamic Cooperation (OIC), the ‘collective voice’ of the Muslim community worldwide. India, despite a vast Muslim population, is not a member of the OIC.

India, in contrast, has a very different basis for ties with Saudi Arabia based on energy security—we buy large quantities of crude oil from the kingdom—and has a substantial diaspora there. Until some years ago, there could be no realistic comparison between Saudi Arabia’s ties with India and Pakistan. On one side were shared religion and military dependence and on the other side little more than an oil buyer-seller relationship. There has been much protestation about shared cultural values and historical ties, but the skew in favour of Pakistan was obvious.

It is against this background that Salman’s visit to India should be seen. The carefully worded joint statement issued late on February 20th did make a mention of the importance of restarting a comprehensive dialogue with Pakistan. The statement noted, ‘His Royal Highness appreciated consistent efforts made by Prime Minister Modi since May 2014 including Prime Minister’s personal initiatives to have friendly relations with Pakistan. In this context, both sides agreed on the need for creation of conditions necessary for resumption of the comprehensive dialogue between India and Pakistan.’ But this was quickly followed by condemnation of the attack on security forces in Pulwama and, in rather general terms, the need to fight terrorism.

In contrast, when he was in Islamabad, the Saudi Arabians echoed the sentiments of their hosts when they said, ‘During the official talks in Islamabad, His Royal Highness the Crown Prince and Deputy Prime Minister, Minister of Defense praised openness and efforts of Prime Minister Imran Khan for dialogue with India and the opening of the Kartarpur crossing point and the efforts exerted by both sides, stressing that dialogue is the only way to ensure peace and stability in the region to resolve outstanding issues.’

There’s nothing surprising here. Joint statements are carefully choreographed diplomatic documents. In both New Delhi and Islamabad alike, Salman stuck to the formulations of his hosts. Nothing more can, or should, be read into these statements.

There is, however, a whiff of positive change when it comes to India. Saudi Arabia has announced a potential investment of $100 billion in India. If this happens, it will be a huge upswing in a commercial relationship that is at best tepid. In the first nine months of 2018, Saudi Arabia’s foreign direct investment (FDI) equity flow to India was a paltry $10 million. For comparison, the United Arab Emirates (UAE), Saudi Arabia’s neighbour, had an inflow into India of $629 million. Even India’s much smaller trading partners have FDI flows in tens of multiples of what the kingdom invests in India.

Much of this change reflects India’s status as a favourable FDI destination and Saudi Arabia’s own priorities at economic diversification, a move being pioneered by Salman. There is mutual interest here: India not only needs crude oil but also as much FDI as it can get, given the current weakness in investment growth. Here, the contrast with Pakistan could not be more glaring. In Islamabad, Salman promised $20 billion to his host country. That, however, is in the nature of an emergency dose of help for a country that is constantly teetering on a balance-of-payments crisis. Were it not for the largesse of China and Saudi Arabia, by now Pakistan would have been forced to go to the International Monetary Fund (IMF) for a bailout on rather onerous terms. It says something about the India-Pakistan- Saudi Arabia relationship that one country wants money from the kingdom to avoid borrowing more from the IMF, while the other, India, is attracting investment on its own economic strength and not by leveraging a special religio-political relationship. On one side are military and economic dependence and on the other side lie progress and mutual interests.

If only for these reasons, it is difficult to foresee political relations between India and Saudi Arabia develop along the lines seen in the case of Pakistan and the Kingdom. In any case, there is no reason why that should be: India’s interests in Saudi Arabia are based on the four pillars of energy security, the well- being of its large diaspora there, closer security and intelligence cooperation, and closer economic ties. On all four there is visible progress over the last five to eight years. Modi’s extra push has helped this process further. As long as bilateral ties progress along these lines, it will be a matter of satisfaction.

It is worthwhile to imagine a counterfactual situation. Suppose Crown Prince Salman had not been accorded the welcome that he received from Modi—hug and all that. What would have happened? By now a different form of criticism would have been at hand: that his reception was lukewarm as Modi does not give any importance to furthering relations with countries of the Middle East. That would have led to an uproar about all manner of issues, secularism included. If the last five years are any guide, the current Prime Minister has gone out of his way to further these relations. His reasons remain embedded in a key goal of India’s foreign policy: furthering India’s economic development.