India expanding footprint in West Asia

Manoj Joshi

Distinguished Fellow, Observer Research Foundation, New Delhi

THERE is a curious irony about India’s foreign policy in recent years: New Delhi has spoken of looking and acting East, but has in reality acted West. The Modi government and the PM himself have made an enormous investment of time and effort in courting nations of West Asia. In the process, the relationship based on energy and expatriates is now acquiring political, economic and defence dimensions.

India lacks the kind of ability to invest in the region that China has, but its diaspora and partnership with the US, Israel and France provide it with other options.

These are manifested in India’s participation in the I2U2 grouping and the India-Middle East-Europe Economic Corridor. The former, linking Israel, India, the UAE and the US, is seen as a kind of Western Quad. The latter is an ambitious US-mooted connectivity venture to link India with Europe through a multimodal project going through the UAE, Saudi Arabia and Israel.

Earlier this month, Prime Minister Modi paid his seventh visit to the UAE after assuming office in 2014. He inaugurated the first Hindu temple in Abu Dhabi and also signed a bilateral investment treaty (BIT). He then headed for Qatar and managed to extend a $78-billion natural gas import deal till 2048, close on the heels of securing royal pardon for eight Indians imprisoned there for alleged espionage.

China, a significant player in the region, is playing its cards carefully. Just when India is trying to triangulate its position between the Gulf states, Palestine and Israel, China has made a shift away from Israel and is seeking to project itself as a neutral and potential peacemaker. India has been bidding to emerge as a competitor of China, whose investment and focus cover the entire region from Egypt and Iran to Saudi Arabia and Oman.

In recent years, the UAE has emerged as India’s second largest export market. In 2022, the two sides signed a Free Trade Agreement (FTA). In a year, India’s trade with the UAE grew by 16 per cent to reach $85 billion. The UAE is the only country with which India has signed both a BIT and an FTA.

As part of this policy is a major effort, for example in the UAE, to promote Indian exports by helping create retail, warehousing and logistics facilities in the Jebel Ali Free Trade Zone. This is a joint venture called Bharat Mart, involving the government of India and the DP World company, which specialises in logistics, port operations and maritime services.

In view of the shared interest in geopolitical stability, India is playing a larger role in the security of the region. Last year, it held its first trilateral exercise with the UAE and France. Currently, the Indian Navy has been uncommonly active in the waters off the northwestern Arabian Sea, offering protection to commercial ships threatened by the Houthis. And, in recent years, India has become a full-fledged member of the US-led Combined Task Force headquartered in Bahrain.

There is no dearth of opportunities for India in the region. Rulers like Prince Mohammed bin Salman (MBS) of Saudi Arabia have opened the taps and are furiously investing or offering to invest in everything, from international golf and premier soccer to building a futuristic new city and a global airline. The UAE’s largest sovereign wealth fund has committed to over $75 billion for Indian infrastructure, while the Saudis have offered $100 billion. Both wealthy Arabian kingdoms see in Indian economic growth the means to push forward their own post-oil economic plans.

MBS’s Vision 2030 calls for the Saudi wealth fund — the Public Investment Fund (PIF) — to manage $2 trillion in assets, up from $718 billion now. The Saudis have an ambitious goal of upgrading their economy. Chinese economic troubles are persuading their companies to offer unprecedented deals to the Saudis, who have laid down tough conditions on technology transfer and development.

One major nation left out of these developments is Iran. This is largely on account of US sanctions on the country. Like it or not, Iran plays an important role in India’s calculations in relation to Pakistan and Central Asia. It also happens to be the hydrocarbon source closest to India. As for the Chinese, they have been successful in brokering the Saudi-Iran détente, which is still holding, even as the Saudis are rethinking their recent moves in relation to Israel.

Though China has spread its investments across the region, it has not followed through with its promises in Iran. Its big beneficiary is, of course, Pakistan, with $16 billion worth of Chinese investment in the 2013-16 period, far more than in the UAE and Saudi Arabia ($8 billion each), Turkiye ($5.8 billion) and Iraq ($4.3 billion). Iran has received just $0.35 billion.

India lacks this kind of ability to invest in the region as well as other levers that China has, like the export of technology and arms. But its enormous diaspora and partnership with the US, Israel and France provide it with other options.

As of now, the geopolitical future of the region is clouded by the Israel-Hamas war. Plans such as those involving the normalisation of ties between the region and Israel are on hold. While the UAE has not swerved from its policy of normalising ties with Israel, the Saudis are waiting and watching. Meanwhile, both the UAE and Saudi Arabia have joined the expanded BRICS, along with Ethiopia, Iran and Egypt.

India’s efforts in West Asia have led to the opening up of significant strategic opportunities with security and economic benefits for the country. But New Delhi will need to carefully manoeuvre itself between the turbulence unleashed by the Israel-Palestine conflict and Chinese regional ambitions.

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