The Hindu Business Line : Beyond oil and remittances

BOTH FROM NEW Delhi's point of view and Riyadh's, the visit of Saudi Arabia's King Abdullah represents a watershed. For the Saudis, the visit could herald the beginning of fruitful cooperation with one of Asia's two "emerging economies" (the other being China, which the Saudi king has already visited). As far as New Delhi is concerned, the first visit by a Saudi monarch in more than 50 years could see the economic relationship with a cash-rich economy moving beyond oil.

In fact, Indian economic interest in Saudi Arabia has been restricted to crude oil imports, on the one hand, and the remittances of Indians working there, on the other (3.5 million Indians in the Gulf region send back nearly $6 billion every year). But there is now a distinct effort by New Delhi to expand and deepen the relationship — and not with Saudi Arabia alone but with the entire Gulf region in the specific shape of the Gulf Cooperation Council (which has as its members Saudi Arabia, Oman, the UAE, Kuwait, Bahrain and Qatar). A lot of spadework has, in fact, been done towards a free-trade arrangement between the GCC and India. Among other things, the Framework Agreement signed between India and the GCC in August 2004 stipulated that the two sides would "explore the feasibility of entering into an FTA", the Prime Minister, Dr Manmohan Singh, having initiated negotiations with the Council as a bloc and also with individual member-countries.

The specifics of the outcome of King Abdullah's visit will have to be seen against this background, especially the fact that the kingdom plays a key role in the GCC's affairs. In fact, on Wednesday, the Saudis signed four accords, one of which related to investment promotion and protection, which seems to be the kingpin of future ties between the two countries. It would appear that the thrust of the cooperation will initially be restricted to the energy sector with specific proposals being aired about Indian companies investing in refineries in Saudi Arabia, and vice-versa. This is perhaps as it should be, given the important place energy currently occupies in Indo-Saudi ties. But India must look at a much broader economic relationship which would have as its principal features Saudi investment in Indian infrastructure and Indian goods and services (including banking and information technology) finding a promising market in Saudi Arabia and the GCC.

There is, however, one area of potential conflict, which will have to be guarded against. A strategic objective of Riyadh and the GCC is to shift their economic focus from the developed West to the emerging economies of Asia, primarily in the interests of long-term market stability. For India, however, over-dependence on a single source of petroleum supply would be unwise from the point of view of strategic national interest (already, India depends on the Saudis for more than a quarter of its oil imports). Future co-operation, therefore, should look beyond petroleum to other spheres, such as infrastructure investment, etc., the details of such a strategy being the real test before the two sides.