Importance of Saudi Arabia to India

Syllabus: GS2/ India & Foreign Relations

In Context

• The relationship between New Delhi and Riyadh has been improving steadily in recent years.

India Saudi Arabia Relations

• Establishment:
  • The two countries established diplomatic relations in 1947. 
• Delhi Declaration & Riyadh Declaration:
  • The royal visit of 2006 resulted in the signing of the Delhi Declaration, which was followed in 2010 by the Riyadh Declaration that elevated bilateral ties to a strategic partnership.
• Highest civilian honour:
  • Prime Minister Modi’s visit to Riyadh in April 2016 captured the spirit of enhanced cooperation in the political, economic, security, and defence realms. 
  • King Salman conferred on the Prime Minister the kingdom’s highest civilian honour, the King Abdulaziz Sash, indicating the importance Saudi Arabia attached to its relationship with India.
• The Strategic Partnership Council (SPC) Agreement:
  • The Strategic Partnership Council (SPC) Agreement was signed during the 2019 visit of the Indian PM to Riyadh, which established a high-level council to steer the Indo-Saudi relationship. 
  • The SPC now has separate subcommittees on Political, Security, Social and Cultural Cooperation, and on Economy and Investments. Twelve pacts were signed during the PM’s visit.
• Economic Ties:
  • India is Saudi Arabia’s second-largest trade partner; Saudi Arabia is India’s fourth-largest trade partner.
    • Bilateral trade in FY 2022-23 was valued at $52.76 billion. 
    • Trade with Saudi Arabia accounted for 4.53% of India’s total trade in FY23.
  • The bilateral trade has increased to more than US$52 billion in 2022-23, marking a growth of more than 23%.
  • As of January 2022, there were 2,783 Indian companies registered as joint ventures/ 100% owned entities with investments worth approximately $2 billion in the kingdom. 
  • Saudi’s direct investments in India amounted to $3.15 billion (as of March 2022).
• Energy Cooperation:
  • Saudi Arabia is a key partner for ensuring India’s energy security, and was its third largest crude and petroleum products source for FY23. 
  • India imported 39.5 million metric tonnes (MMT) of crude from the country in FY23, amounting to 16.7% of India’s total crude imports.
  • India’s LPG imports from Saudi Arabia stood at 7.85 MMT, and 11.2% of its total petroleum product imports, in FY 23.
• Defence Partnership:
  • The defence partnership has witnessed tremendous growth in recent years.
  • There is extensive naval cooperation between India and Saudi Arabia, and two editions of the bilateral naval exercise, Al Mohed al Hindi, have been concluded so far. 
  • Both sides also cooperate closely in the domain of defence industries and capacity-building.
  • On defence ties, the joint statement said that the two sides commended their deepening cooperation, and agreed to continue work including joint exercises, training and high-level visits, and to “consider possibilities of joint development and production of defence equipment”.
• Indian diaspora in Saudi Arabia:
  • The Indian community in the kingdom is more than 2.4 million strong, widely respected for its contribution to the development of Saudi Arabia, and seen as a living bridge between the two countries. 

Recent Engagements Between India & Saudi Arabia

• India-Middle East-Europe Economic Corridor: Crown Prince Mohammed bin Salman, the country’s de facto ruler, and next in line to be King visited New Delhi for the G20 Leaders’ Summit.
  • During the visit he, along with Prime Minister Narendra Modi and President Joe Biden, announced the India-Middle East-Europe Economic Corridor, a massive infrastructure project that would connect India to Europe via West Asia, and could rival China’s Belt and Road Initiative.
  • Significance:
    • The India-Middle East-Europe Economic Corridor will deepen India’s strategic engagement with the Arabian peninsula. 
    • It breaks Pakistan’s veto over India’s overland connectivity to the West.
• India-Saudi Arabia Strategic Partnership Council: Saudi’s Crown Prince co-chaired with the Indian PM the first meeting of the India-Saudi Arabia Strategic Partnership Council.
  • The two sides signed eight agreements, including on upgrading their hydrocarbon energy partnership to a comprehensive energy partnership for renewable, petroleum and strategic reserves, and to create a joint task force for $100 billion in Saudi investment. 
  • They also discussed the possibility of trading in local currencies, and expediting negotiations for a free trade agreement between India and the Gulf Cooperation Council of which Saudi Arabia is a member.

Challenges

• Aid to Pakistan: India and Saudi Arabia have stressed the importance of strengthening security cooperation in the field of combating terrorism and its financing.
  • Contrary to which, Riyadh still helps Pakistan with economic aid, even while strategically engaging with New Delhi.
• Role of China: The country is also engaged with China, moving towards rapprochement with Iran and Israel, and is also now consolidating the Saudi partnership with the US, India, and Europe.
  • Many have thus already described this engagement as a power shift, with China emerging as a significant player in the Middle East.
  • Increasing Chinese influence in the Middle East may indirectly help Pakistan, both economically and strategically. 

Way Ahead

• India needs to patiently assess if China’s growing involvement in the Gulf is detrimental to its long-term security interests and the regional balance of power. 
• The I2U2 partnership between India, Israel, the UAE, and the U.S. has already put India on the region’s alliance canvas.
• At the same time, recent developments also provide a window of opportunity for India to embed itself as a significant player in the Middle East.