Persian Gulf 2018

PERSIAN GULF

PERSIAN GULF 2018 India’s Relations with the Region

P. R. Kumaraswamy Md. Muddassir Quamar Manjari Singh

Persian Gulf India’s Relations with the Region

Series Editor P. R. Kumaraswamy School of International Studies, CWAS Jawaharlal Nehru University New Delhi, India

Persian Gulf, the leading publication of the Middle East Institute, New Delhi, India systematically looks at the growing relationship between India and the countries of the Persian Gulf region. Due to rising economic ­interactions and political engagements, the region has assumed greater importance and hence requires a systematic study. About two-thirds of India’s oil and gas imports are met by the Persian Gulf countries and the Gulf Arab countries are home to over eight million Indian expatriate labour force. The Persian Gulf is also India’s largest ­sub-­regional trading partner and a potential source of trade and investments. There is, however, a knowledge gap regarding the region and its importance to India. Persian Gulf seeks to redress this by offering a systematic understanding of the region, its problems and opportunities for India in the political, economic, social, energy and strategic arenas. Since the publication of the inaugural volume in 2011, the Persian Gulf Series covers India’s bilateral relations with nine countries, namely, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, UAE and Yemen as well as the Gulf Cooperation Council (GCC). It has also examined the relations of the major players such as the US, Russia, China and Pakistan and their impact upon Indo-Gulf relations. Backed by various primary materials, the series seeks to be a platform for informed discussion on this vital region towards its nuanced understanding. It is a closed series. More information about this series at http://www.palgrave.com/gp/series/15919

P. R. Kumaraswamy  •  Md. Muddassir Quamar Manjari Singh

Persian Gulf 2018 India’s Relations with the Region

P. R. Kumaraswamy School of International Studies, CWAS Jawaharlal Nehru University New Delhi, India

Md. Muddassir Quamar Institute for Defence Studies & Analyses New Delhi, India

Manjari Singh Jawaharlal Nehru University New Delhi, India

ISSN 2523-8302    ISSN 2523-8310 (electronic) Persian Gulf ISBN 978-981-13-1977-8    ISBN 978-981-13-1978-5 (eBook) https://doi.org/10.1007/978-981-13-1978-5 Library of Congress Control Number: 2018954499 © The Editor(s) (if applicable) and The Author(s) 2019 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover design: Fatima Jamadar This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-­01/04 Gateway East, Singapore 189721, Singapore

Persian Gulf Series

Persian Gulf 2012, India’s Relations with the Region, Kindle Persian Gulf 2013, India’s Relations with the Region, New Delhi, Sage Persian Gulf 2014, India’s Relations with the Region, New Delhi, Sage Persian Gulf 2015, India’s Relations with the Region, Smashword Persian Gulf 2016–17, India’s Relations with the Region, New Delhi, IDSA and Pentagon Press

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To Commodore C Uday Bhaskar With admiration and gratitude

Contents

1 Introduction   1 2 Bahrain  35 3 Iran  57 4 Iraq  85 5 Kuwait 105 6 Oman 121 7 Qatar 139 8 Saudi Arabia 159 9 UAE 191 10 Yemen 215

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Contents

11 GCC 229 12 Policy Options 243 Index 247

About the Authors

P.  R.  Kumaraswamy is a professor of contemporary Middle Eastern studies in Jawaharlal Nehru University (JNU), New Delhi, India. During 1992–1999, he was a research fellow at the Harry S.  Truman Research Institute for the Advancement of Peace, Jerusalem. Since joining JNU in September 1999, he has been researching, teaching and writing on various aspects of the contemporary Middle East. His works include Squaring the Circle: Mahatma Gandhi and the Jewish National Home (2018); India’s Israel Policy (2010) and Historical Dictionary of the Arab-Israeli Conflict (2015). In February 2010, he setup the virtual Middle East Institute, New Delhi and serves as its honorary director. He is the editor of Contemporary Review of the Middle East and the Series Editor of Persian Gulf: India’s Relations with the Region. Md. Muddassir Quamar  is Associate Fellow in the Institute for Defence Studies and Analysis (IDSA) New Delhi. He holds a Ph.D. in the Middle Eastern studies from Jawaharlal Nehru University, India. His research papers appeared in leading international journals such as Contemporary Arab Affairs, Digest of Middle East Studies, Journal of Arabian Studies and Journal of South Asian and Middle Eastern Studies. He had co-edited an anthology on Contemporary Persian Gulf: Essays in Honour of Gulshan Dietl, Praksh C Jain and Girijesh Pant. He was a visiting fellow in King Faisal Centre for Research and Islamic Studies, Riyadh and serves as Associate Editor of Contemporary Review of the Middle East.

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ABOUT THE AUTHORS

Manjari  Singh is a doctoral candidate and Ryoichi Sasakawa Young Leaders Fellowship Fund (SYLFF) Fellow in the Centre for West Asian Studies, Jawaharlal Nehru University, New Delhi and is specializing on Sustainable Development. Her research papers appeared in Contemporary Review of the Middle East, Mediterranean Quarterly and Migration and Development.

Abbreviations

AAI Aramco Asia India, Saudi Arabia ADHRB Americans for Democracy and Human Rights in Bahrain ADIA Abu Dhabi Investment Authority ADNOC Abu Dhabi National Oil Company AQAP Al-Qaeda in the Arabian Peninsula bbl Barrels BCHR Bahrain Centre for Human Rights BJP Bharatiya Janata Party CENTCOM US Central Command DGFT Director General of Foreign Trade, India DIPP Department of Industrial Policy and Promotion, India DWE Dubai Women’s Establishment plan ECNR Emigration Check Not Required, India FAO Food and Agricultural Organization (FAO) FDI Foreign Direct Investment FICCI Federation of Indian Chambers of Commerce and Industry FNC Federal National Council, UAE FTA Free Trade Agreement GCC Gulf Cooperation Council GDI Gender Development Index GDP Gross Domestic Product GGGR Global Gender Gap Report GoI Government of India GPC General People’s Congress, Yemen HDI Human Development Index HLTFI India-UAE High Level Task Force on Investments HRW Human Rights Watch xiii

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ABBREVIATIONS

IAEA ICBU ICFUAE IDPs IDSA IISS ILO IMA IMF INARA IPI IPO IRFFI IRGC ISIS ITEC JAFZA JCDC JCPOA JWG KDP KIA KRG KVS LNG MBS MEA mmt/MMT MOIA MoU NDA NDA NIA NIIF NRI OIC OIR OMIFCO OPEC PIO PMF SABIC

International Atomic Energy Agency International Campaign to Boycott the UAE International Campaign for Freedom in the UAE Internally-Displaced Persons Institute for Defence Studies and Analyses, New Delhi International Institute for Strategic Studies, London International Labour Organization Islamic Military Alliance International Monetary Fund Iran Nuclear Agreement Review Act of 2015, the US Iran-Pakistan-India Gas Pipeline Initial Public Offering International Reconstruction Fund Facility for Iraq Iranian Revolutionary Guard Corps Islamic State of Iraq and Syria Indian Technical and Economic Cooperation Jebel Ali Free Zone, UAE Joint Committee on Defence Cooperation Joint Comprehensive Plan of Action Joint Working Committee Kurdistan Democratic Party Kuwait Investment Authority Kurdistan Regional Government, Iraq Kendriya Vidyalaya Sangathan, India Liquefied Natural Gas (Crown Prince) Mohammed bin Salman of Saudi Arabia Ministry of External Affairs, India Million Metric Tons Ministry of Overseas Indian Affairs Memorandum of Understanding National Defence Academy Pune, India National Democratic Alliance, India National Investigation Agency National Infrastructure Investment Fund, India Non-Resident Indian Organisation of Islamic Cooperation Operation Inherent Resolve Oman India Fertilizer Company Organisation of Petroleum Exporting Countries Persons of Indian Origin Popular Mobilization Forces, Iraq Saudi Arabian Basic Industries Corporation

 ABBREVIATIONS    

SAGIA SAMA SEP SPC STC STCW SWF UNDP UNHRC UNOCHA UNSC UPR VAT WTI

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Saudi Arabian General Investment Authority Saudi Arabian Monetary Authority Strategic Energy Partnership Supreme Political Council, Yemen Southern Transitional Council, Yemen Standards of Training, Certification and Watch-keeping Convention Sovereign Wealth Fund United Nations Development Programme United Nations Human Rights Council UN Office for the Coordination of Humanitarian Affairs United Nations Security Council Universal Periodic Review (UN) Value Added Tax West Texas Intermediate (oil standard)

List of Figures

Fig. 1.1 Fig. 1.2 Fig. 1.3 Fig. 1.4 Fig. 1.5 Fig. 1.6 Fig. 1.7 Fig. 1.8 Fig. 1.9 Fig. 1.10

India’s largest trading partners. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft. gov.in15 Persian Gulf countries amongst India’s 25 largest trading partners. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in15 Persian Gulf share in India’s total imports. Source: Adapted from Director-General of Foreign Trade, New Delhi, www. dgft.gov.in17 Persian Gulf share in India’s total exports. Source: Adapted from Director-General of Foreign Trade, New Delhi, www. dgft.gov.in18 India’s trade deficit-oil import linkages. Source: Adapted from Director-­General of Foreign Trade, New Delhi, www.dgft.gov.in20 India’s energy imports from the Persian Gulf Region. Source: Adapted from Director-General of Foreign Trade, New Delhi, www.dgft.gov.in22 Share of oil products in India’s exports. Source: Adapted from Director-­General of Foreign Trade, New Delhi, www.dgft.gov.in24 Share of energy in India’s total foreign trade. Source: Adapted from Director-General of Foreign Trade, New Delhi, www. dgft.gov.in26 Persian Gulf share of global oil reserves. Source: BP statistical review of World Energy June 2017 27 Natural gas reserves. Source: BP statistical review of World Energy June 2017 28

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List of Figures

Fig. 1.11 Fig. 2.1 Fig. 2.2 Fig. 2.3 Fig. 2.4 Fig. 2.5 Fig. 3.1

Fig. 3.2 Fig. 3.3 Fig. 3.4 Fig. 4.1 Fig. 4.2 Fig. 4.3 Fig. 5.1 Fig. 5.2 Fig. 5.3

Number of ECRs issued. Source: MOIA, India, Annual Reports and MEA, India Annual Reports31 Social and political stability indices in Bahrain, 2017. Source: Adapted from BMI-MEM, 2017 39 India–Bahrain bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft. gov.in49 Share of oil in India’s total imports from Bahrain. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in51 Bahrain’s share in India’s energy imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www. dgft.gov.in51 FDI inflow from Bahrain to India. Source: Adapted from Department of Industrial Policy and Promotion, Government of India, www.dipp.nic.in53 Share of votes of candidates in presidential election, 2017. Source: Press TV, 20 May, 2017, http://www.presstv.com/ Detail/2017/05/20/522529/Iran-presidential-electionearly-results-first-round61 India–Iran bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in78 Share of oil in imports from Iran. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft. gov.in81 Iranian share in oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in81 India-Iraq bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in98 Share of oil in imports from Iraq. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft. gov.in100 Share of Iraq in India’s oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft. gov.in102 India–Kuwait bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in115 Share of oil in imports from Kuwait. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft. gov.in116 Share of Kuwait in India’s oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft. gov.in117

  List of Figures    

Fig. 6.1 Fig. 6.2 Fig. 6.3 Fig. 7.1 Fig. 7.2 Fig. 7.3 Fig. 8.1 Fig. 8.2 Fig. 8.3 Fig. 8.4 Fig. 9.1 Fig. 9.2 Fig. 9.3 Fig. 10.1 Fig. 10.2

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India–Oman bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in132 Share of oil in India’s imports from Oman. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www. dgft.gov.in134 Share of Oman in India’s oil imports. Source: Adapted from the Directorate General of Foreign Trade, New Delhi, www. dgft.gov.in135 India-Qatar bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in151 Share of energy in India’s imports from Qatar. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in153 Share of Qatar in India’s energy imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www. dgft.gov.in154 International oil price fluctuation in 2017. Source: United State Energy Information Administration, https://www.eia. gov, last accessed on 1 July 2018 165 India–Saudi Arabia bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft. gov.in177 Share of oil in India’s imports from Saudi Arabia. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in178 Share of Saudi Arabia in India’s oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www. dgft.gov.in183 India–UAE bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in207 Share of oil in India’s imports from the UAE. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www. dgft.gov.in209 Share of the UAE in India’s oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft. gov.in211 India–Yemen bilateral relations. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft. gov.in225 Share of oil in India’s imports from Yemen. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www. dgft.gov.in226

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List of Figures

Fig. 10.3 Fig. 11.1 Fig. 11.2 Fig. 11.3 Fig. 11.4

Share of Yemen in India’s oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft. gov.in227 Population of Indians in the GCC. Source: Ministry of External Affairs, Government of India 236 Workers emigrated from India, 2017. Source: Ministry of External Affairs, Government of India 237 India–GCC bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in238 Share of the GCC in India’s energy imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www. dgft.gov.in239

List of Tables

Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 1.6 Table 1.7 Table 1.8 Table 1.9 Table 1.10 Table 1.11 Table 1.12 Table 1.13 Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.8 Table 2.9 Table 3.1

India’s five largest trading partners in 2016–2017 (US$ million)14 Place of PG countries amongst top 25 trading partners of India, 2016–2017 14 Persian Gulf share in India’s total imports (US$ million) 16 Persian Gulf share in India’s total exports (US$ million) 18 Trade deficit-oil import linkages 19 Top five energy suppliers 20 India’s energy imports from the Persian Gulf Region (US$ million)21 Share of oil products in India’s exports (US$ million) 24 Share of energy in India’s total foreign trade (US$ million) 25 Oil reserves of the Persian Gulf countries 26 Natural gas reserves of the Persian Gulf countries 27 List of countries requiring an ECR for Indian migrant labourers29 Number of ECRs issued 30 Major projects in Bahrain, 2017 43 Oil and gas projects in Bahrain, 2017 44 Industrial projects in Bahrain, 2017 44 Power and water projects in Bahrain, 2017 45 Infrastructure projects in Bahrain, 2017 45 India–Bahrain bilateral trade (US$ million) 48 Share of oil in India’s imports from Bahrain (US$ million) 50 India’s energy imports from Bahrain (US$ million) 50 FDI inflow in India from Bahrain (US$ million) 53 Presidential election results, 2017 60 xxi

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List of Tables

Table 3.2 Table 3.3 Table 3.4 Table 4.1 Table 4.2 Table 4.3 Table 5.1 Table 5.2 Table 5.3 Table 6.1 Table 6.2 Table 6.3 Table 6.4 Table 7.1 Table 7.2 Table 7.3 Table 8.1 Table 8.2 Table 8.3 Table 8.4 Table 8.5 Table 8.6 Table 9.1 Table 9.2 Table 9.3 Table 10.1 Table 10.2 Table 10.3 Table 11.1 Table 11.2 Table 11.3 Table 11.4

India–Iran bilateral trade (US$ million) Share of energy in the India–Iran trade (US$ million) India’s energy imports from Iran (US$ million) India–Iraq bilateral trade (US$ million) Share of oil in India’s imports from Iraq (US$ million) India’s energy imports from Iraq (US$ million) India–Kuwait bilateral trade (US$ million) Share of oil in India’s imports from Kuwait (US$ million) India’s energy imports from Kuwait (US$ million) Women in labour force India–Oman bilateral trade (US$ million) Share of oil in India’s imports from Oman (US$ million) India’s energy imports from Oman (US$ million) India–Qatar trade relations (US$ million) Share of oil in India’s imports from Qatar (US$ million) India’s energy imports from Qatar (US$ million) Important members of al-Saud Sidelined since January 2015 Saudi Council of Ministers as of 31 December 2017 Crude oil spot price January to December 2017 India–Saudi Arabia bilateral trade (US$ million) Energy imports from Saudi Arabia (US$ million) India’s energy imports from Saudi Arabia (US$ million) India–UAE bilateral trade (US$ million) Share of oil in India’s imports from the UAE (US$ million) India’s energy imports from the UAE (US$ million) India–Yemen bilateral trade (US$ million) Share of oil in India’s imports from Yemen (US$ million) India’s energy imports from Yemen (US$ million) Population of Overseas Indians in the GCC countries (December 2017) Workers emigrated, January to November 2017 India–GCC bilateral trade (US$ million) India’s energy imports from GCC (US$ million)

77 80 80 98 100 101 114 116 117 129 132 133 134 151 152 153 161 163 165 177 178 182 207 209 210 224 225 226 236 237 238 239

CHAPTER 1

Introduction

The Persian Gulf is not just another geopolitical bloc or a cluster of ­countries but the key to India’s growth story. India’s sustained economic development and the resultant social progress and political ascendance are intrinsically linked to its strategic relations with the region. This recognition is reflected by the increased engagements with these countries since Narendra Modi became prime minister and this journey serves well for the larger foreign policy interests. The region’s strategic importance far outweighs other parts of the world, including the immediate neighbourhood. In sheer economic terms, during 2016–2017 India’s trade with the Persian Gulf countries stood at US$123 billion or 18 per cent of its total foreign trade and the region supplies nearly 55 per cent of India’s total energy imports. In addition, the Gulf Arab countries host over 8.5 million expatriates who send home about US$30 billion in remittance and this was half the amount that India received during the year. Numerous Indian business houses are thriving in the region and a number of mega projects are in the pipeline. Furthermore, abandoning its prolonged hesitation, India is gingerly moving in the direction of a close security partnership with the Gulf Arab countries, thereby seeking to develop defence ties. Above all, the importance of the region for India’s larger interests in the wider Middle East became prominent on 22 March 2018 when the Tel Aviv-bound Air India flight from New Delhi was allowed to fly over the Saudi air space, a maiden privilege since the establishment of the State of Israel in 1948! © The Author(s) 2019 P. R. Kumaraswamy et al., Persian Gulf 2018, Persian Gulf, https://doi.org/10.1007/978-981-13-1978-5_1

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Given this, the Persian Gulf requires constant political attention, ­ iplomatic interactions, economic engagements, and strategic appreciad tion. As the cradle of hydrocarbon resources, the Persian Gulf is also a turbulent region susceptible to family feuds, political rivalries, power struggles, ideological contests, social tensions, and above all, external interferences. Even by its usual standards, 2017 was a turbulent period for the Persian Gulf and some of the issues which cropped up during the year continue to reverberate with growing uncertainty and anxiety around the globe. The intra-regional discord within the six-member Gulf Cooperation Council (GCC), Iran–Saudi regional struggle for power, and the conflicting agendas of the external powers are the most prominent challenges that the region faced during the year. These, in turn, demand a relentless vigil on the part of India both to enhance its interests and to minimize negative fallouts. The question is: how did India face and handle these challenges?

Strategic Scenario The simmering discord and power struggle in the Persian Gulf intensified with the eruption of serious divisions within the GCC in June. Three of its members, namely, Saudi Arabia, the UAE, and Bahrain (also joined by Egypt) announced a political, diplomatic, economic, and cultural boycott of Qatar. They also imposed a blockade of their airspace for flights to and from Qatar and asked their citizens to leave Qatar. This announcement made on 5 June was over Doha’s increasing proximity with the Islamic Republic of Iran and its continued patronage of the Muslim Brotherhood in the region. The boycotting countries also accused Qatar of meddling in the internal affairs of its Arab neighbours through the state-supported Al-Jazeera network. This was the worst crisis facing the GCC since its founding in 1981 to safeguard the political, economic, security, and social interests of the Arab monarchies amidst the Iran–Iraq War and the revolutionary rhetoric and threats from Tehran. The sudden boycott and negative publicity created pressure on the Qatari trade and economy slowing it down, but it gradually started to recover. The crisis nonetheless affected the overall business climate in the GCC. In fact, if the blockade continues it will have economic implications on Saudi Arabia, the UAE and Bahrain in the form of lost business, revenues, and ­investment

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from Qatar.1 After a few days of uncertainty, the gas-rich Qatar recuperated from the initial shock. With political poise, financial management, and diplomatic manoeuvre, the young Qatari Emir overcame the immediate challenge and weathered the storm. However, the political and diplomatic crisis has continued. The Qatari refusal to yield to Saudi-Emirati demands has left no room for a middle ground. All regional and international efforts to resolve the crisis proved unsuccessful and feeble efforts of the new Trump Administration in the US did not help the matter either. The tension within the GCC was brewing for some time. The immediate trigger for the boycott appears to be a reported remark by the Qatari Emir Tamim bin Hamad al-Thani on 25 May during his address to a military graduation ceremony, wherein he expressed sympathy with Iran and termed the Islamic Republic a legitimate regional player. Immediately, Doha denied the statement and declared that the media website, which put out the story, was hacked.2 The prolonged Iranian support for the various Islamic militant groups in the region, especially Hezbollah in Lebanon, Hamas in Palestine, Kata’ib Hezbollah and Asa’ib Ahl-al-Haq in Iraq, and Houthi rebels in Yemen have raised Saudi concerns over the festering Iranian influence in the region. The reported Qatari statement appeared to endorse the Iranian role which has been undermining the Saudi interest. Furthermore, a few weeks earlier, Qatar secured the release of a few royal members from al-Qaida-affiliated Iraqi militants with the help of the Iranian interlocutor and had allegedly paid US$1 billion as ransom to the kidnappers.3 These resulted in Saudi Arabia and the UAE to view and paint Qatar as the financer of Islamic extremism in the region. Above all, both sides were at loggerheads over Egypt since protests against President Hosni Mubarak began in February 2011; while Riyadh supported Mubarak and later on Abdel Fattah el-Sisi, Doha sided with the protesters and later on 1  Kabbani, Nader. 2017. ‘The High Cost of High Stakes: Economic Implications of the 2017 Gulf Crisis’, in Brookings Markaz, 15 June, https://www.brookings.edu/blog/ markaz/2017/06/15/the-high-cost-of-high-stakes-economic-implications-of-the2017-gulf-crisis, last accessed on 1 July 2018. 2  Browning, Noah. 2017. ‘Qatar Investigation Finds State News Agency Hacked: Foreign Ministry’, in Reuters, 8 June, https://www.reuters.com/article/us-gulf-qatar-cybercrimeidUSKBN18Y2X4, last accessed on 1 July 2018. 3  Solomon, Erika. 2017. ‘The $1bn Hostage Deal That Enraged Qatar’s Gulf Rivals’, in the Financial Times, 5 June, https://www.ft.com/content/dd033082-49e9-11e7-a3f4c742b9791d43, last accessed on 1 July 2018.

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the brief Muslim Brotherhood government headed by Mohammed Morsi. The Saudi–Qatari differences are also being played out in Syria where they support different anti-regime militant groups. These differences resulted in Saudi Arabia, UAE, and Bahrain (which have emerged as a bloc within the GCC) temporarily downgrading their diplomatic relations by recalling their ambassadors from Doha during March–December 2014.4 To placate the Saudi anger, Qatar agreed to scale down its media activities and to expel the Muslim Brotherhood leaders from its territory. At that time, the Kuwaiti and Omani mediation had worked but the wisdom of the octogenarian King Abdullah was also instrumental in resolving the crisis. Indeed, Riyadh never came to terms with the Qatari leadership since 1995 when Hamad bin Khalifa al-Thani deposed his father in a bloodless palace coup. For a while, Saudi Arabia refused to recognize the new leader and provided asylum to the deposed Emir and backed one of the counter coup attempts.5 Meanwhile, Qatar underwent a transformation under Hamad al-Thani and emerged as a regional financial powerhouse. Skilfully exploiting the Qatari position as the second-largest reservoir and producer of natural gas after Russia, he initiated economic developmental projects, knowledge hubs, and enhanced the Qatari profile and influence. On a number of regional issues, he broke away from the Gulf Arab consensuses and pursued an independent policy. The growth of the state-­ backed Al-Jazeera network became an instrument in furthering the Qatari regional agenda. On a number of delicate regional issues Doha was competing with Riyadh for diplomatic space in Palestine, Lebanon, and Egypt. Above all, as part of its diplomatic engagement since the late 1990s, Qatar has been patronizing and hosting the Muslim Brotherhood and supporting its agenda in regional issues.6

4  McDowall, Angus and Amena Bakr. 2014. ‘Three Gulf Arab States Recall Envoys in Rift with Qatar’, in Reuters, 5 March, https://www.reuters.com/article/us-gulf-qatar-ambassadors-idUSBREA2413N20140305?feedType=RSS, last accessed on 1 July 2018. 5  Cafiero Giorgio. 2012. ‘Saudi Arabia and Qatar: Duelling Monarchies’, in Foreign Policy in Focus, 26 September, https://fpif.org/saudi_arabia_and_qatar_dueling_monarchies, last accessed on 1 July 2018; and Hammond, Andrew. 2014. ‘Qatar’s Leadership Transition: Like Father, Like Son’, in ECFR Policy Brief, February, http://www.ecfr.eu/page/-/ ECFR95_QATAR_BRIEF_AW.pdf, last accessed on 1 July 2018. 6  Hedges, Mathew and Giorgio Cafiero. 2017. ‘The GCC and the Muslim Brotherhood: What Does the Future Hold?’ in Middle East Policy, 24 (1): 129–53.

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The Arab Spring brought the simmering tension into the open and Al-Jazeera and the Muslim Brotherhood, now backed by Doha, were seen to be fuelling the unrest in the region, especially in Egypt. The strong antimonarchical stand taken by the Brotherhood and the constant flagging of human rights situation and dissent in the Gulf Arab countries by Al-Jazeera were seen as Qatari provocation. Above all, Qatar was viewed as sympathetic towards Iran on a number of regional developments. Against this background, Doha denied the Emir having made any pro-Iranian statement during the military graduation ceremony in May. Its decision in the previous month to start developing the world’s largest gas field—the North Dome that it shares with Iran after a gap of 12  years—did not go down well. Qatar’s neighbours felt that this amounts to Doha leaving the GCC consensus over Iran with significant financial and strategic implications. Some of the post-crisis events only confirmed the Saudi fears over the Qatari–Iranian bonhomie. In early 2016, following anti-Saudi demonstrations over the execution of a Shia dissident Nimr a-Nimr by Saudi Arabia, Iranian protesters attacked the Saudi embassy in Tehran and the consulate in Mashhad. This resulted in Saudi Arabia and its allies breaking off diplomatic relations with Tehran. Qatar which joined the move reversed the decision in the wake of the Saudi-led boycott and relations were restored in August 2017. Three days after announcing the boycott of Qatar, on 9 June the four Arab countries issued a list of 59 individuals and 12 entities who they claimed were involved in terrorist activities, have links with al-Qaida, and have been funded by or were living in Qatar. The accused included dissidents from Bahrain, Egypt, Jordan as well as Qatari nationals.7 While there was no clarity over the issues which forced these countries to take such a drastic step, on 20 June, the Kuwaiti Emir Sabah al-Ahmed al-Jaber al-­ Sabah presented a list of 13 demands on behalf of the four countries. As he was mediating the crisis, the list were leaked to the media and complicated the process. The ultimatum presented to Qatar included curbing diplomatic and military ties with Iran; expelling members of the IRGC; severing relations with the Muslim Brotherhood, al-Qaeda, Hezbollah, and ISIS; closing down Al-Jazeera and its affiliated news channels; shutting down Qatar-funded portals and websites, such as Arabi21, Rassd, 7  Khaleej Times. 2017. ‘Arab Nations List 59 Individuals, 12 Entities on Qatar-linked Terror List’, 9 June, https://www.khaleejtimes.com/arab-nations-list-59-individuals-12-entities-onqatar-linked-terror-list, last accessed on 1 July 2018.

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Al Araby Al Jadeed, and Middle East Eye; terminating military cooperation with Turkey and closing its military base in Doha; ceasing the funding of individuals and groups proscribed by the Arab quartet and the US; handing over individuals named by the Arab quartet for their alleged involvement in terror funding; ending interference in internal matters of other the Arab countries revoking citizenships of wanted nationals of these countries; ending support to opposition groups in these countries; compensation for the loss of life due to the Qatari policies; and aligning Qatari domestic and external policies in line with the GCC consensus of 2014. The quartet insisted that Qatar comply with these demands within 10 days and furnish a monthly audit of its compliance for one year and, subsequently, was asked to submit a quarterly and then an annual audit for the next 10 years.8 The public disclosure of the list worsened the situation and Qatar could not accede to them without being humiliated and disgraced as a sovereign country. For its part, Qatar not only refused to accept any of these demands but described the boycott as an assault on its sovereignty. Refuting all charges and expressing regret at these measures, Doha called them unjustified and an attempt to impose guardianship.9 Qatar’s ability to withstand the initial shock and shortage of food and other essential goods revealed it was not going to bow down. As the fasting month of Ramadan was around the corner, Iran and Turkey rushed in small but crucial supply of essential goods and offered political support. Even the travel disruption following the denial of their airspace to flights going to or from Doha did not last long. If Kuwait opted to be a mediator, Oman provided an alternative airspace to Qatar. The role of the US, the most important and de facto player in the Persian Gulf, has been disappointing. The boycott came just two weeks after President Donald Trump’s maiden foreign visit which took him to Saudi Arabia, Israel, and the Vatican. In the mini Islamic summit in Riyadh, Trump met leaders of 55 countries, including Emir Tamim al-Thani of Qatar. In the immediate aftermath of the boycott announcement, in a series of tweets President Trump remarked: ‘During my recent trip to the Middle 8  The National. 2017. The 13 Demands on Qatar from Saudi Arabia, Bahrain, the UAE and Egypt’, 23 June, https://www.thenational.ae/world/the-13-demands-on-qatar-fromsaudi-arabia-bahrain-the-uae-and-egypt-1.93329, last accessed on 1 July 2018. 9  Al-Jazeera. 2017. ‘Qatar Rejects Saudi-led Group’s Allegations’, 7 July, http://www. aljazeera.com/news/2017/07/qatar-rejects-saudi-led-group-allegations-170707153613982. html, last accessed on 1 July 2018.

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East I stated that there can no longer be funding of Radical Ideology. Leaders pointed to Qatar—look!’ He further tweeted: ‘So good to see the Saudi Arabia visit with the King and 50 countries already paying off. They said they would take a hard line on funding extremism and all reference was pointing to Qatar. Perhaps this will be the beginning of the end to horror of terrorism!’10 Far from mitigating the situation through diplomatic initiatives or behind-the-scene mediation, President Trump explicitly sided with Saudi Arabia and fuelled the crisis. One could subsequently notice moderation with fewer public statements from the US President. Secretary of State Rex Tillerson, who worked for ExxonMobil, before assuming office was familiar with the region and took over the mediatory efforts. Besides calling for a diplomatic solution, he did not rush to the region. In fact, it took him more than a month to visit Riyadh and Doha after the crisis erupted. Meanwhile the four boycotting countries (Saudi Arabia, UAE, Bahrain, and Egypt) met in Cairo on 5 July and trimmed their earlier 13 demands to 6 principles. Amongst others, they urged Qatar to commit itself to combat terrorism and extremism and not to be a haven for extremist groups such as the Muslim Brotherhood. It demanded Doha to stop inciting hatred, violence, and instability through state-owned or state-­sponsored media and adhere to its ‘commitments’ to earlier agreements and desist from interfering in the internal matters of its neighbours.11 Qatar was not prepared to accept the dictates. Refuting the claims of supporting or funding extremism, it underlined its refusal to accept external interference in its sovereignty in pursuing an independent foreign policy.12 At the same time, it is essential to recognize that the US–Qatari relations are multifaceted and the fluidity of the situation has not undermined their bilateral relations. The US Department of Defence has not signalled any 10  Trump, Donald J. 2017. 45th President of the United States of America, Washington DC, @realDonaldTrump, 6 June, https://twitter.com/realDonaldTrump/status/ 872062159789985792, last accessed on 1 July 2018. 11  Khan, Taimur. 2017. ‘Arab Countries’ Six Principles for Qatar ‘A Measure to Restart the Negotiation Process’, in The National, 19 July, https://www.thenational.ae/world/gcc/ arab-countries-six-principles-for-qatar-a-measure-to-restart-the-negotiation-process-1.610314, last accessed on 1 July 2018. 12  Hindustan Times. 2017. ‘Qatar Refuses to Comply with Deadline to Meet 13 Demands of Arab Nations’, 3 July, https://www.hindustantimes.com/world-news/qatar-refuses-tocomply-with-deadline-to-meet-13-demands-of-arab-nations/story-X9XVWGJoxLb3o8NIZsL8wO.html, last accessed on 1 July 2018.

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shift or mediation. Both ­countries signed a 10-year Defence Cooperation Agreement in June 1992 and with slight modifications this was renewed in December 2013. Though the text remains classified, it reportedly covers the US military access to Qatari facilities, prepositioning of US military assets, and the training of about 12,000 Qatari troops.13 As of 2017, about 10,000 US military personnel are deployed in various facilities in the Emirate and continue to participate in various US operations, including Operation Inherent Resolve (OIR) against the Islamic State organization and its positions in Iraq and Syria. The US also has an airbase in Al-Udeid southwest of Doha that also serves as the forward headquarters of the US Central Command (CENTCOM). The US army components of CENTCOM are prepositioned at the Camp As-Sayliyah. Amidst the Qatari crisis, on 26 June Senate Foreign Relations Committee Chairperson Senator Bob Corker wrote to the Secretary of the State Rex Tillerson that the committee would not allow the sale of lethal military equipment to the GCC until it was provided with ‘a better understanding of the path to resolve the current dispute and reunify the GCC.’14 This, however, was preceded by both countries announcing a US$12-­billion deal for the supply of F-15 fighter jets to Qatar.15 The Arab countries which had imposed an air embargo upon Qatar had not prohibited the transit of US-flagged aircrafts and vessels to Qatar through their airspace or waters. Any transit restrictions could affect scores of US citizens, businesses, and universities that are operating in Qatar. On 9 June, Secretary Tillerson alluded to the ‘growing list of some irritants’ that have aggravated the dispute and emphasized on the need for ‘the parties to sit down together’ because for the US, ‘it is important that the GCC remain united.’16 However, the same day President Trump appeared 13  Katzman, Kenneth. 2018. ‘Qatar: Governance, Security, and U.S. Policy’, in CRS Report, 1 March, https://fas.org/sgp/crs/mideast/R44533.pdf, last accessed on 1 July 2018. 14  Al-Jazeera. 2017. ‘US: Bob Corker to Block GCC Arms Sales over Qatar Row’, 27 June, https://www.aljazeera.com/news/2017/06/bob-corker-block-gcc-arms-sales-qatarrow-170626171314489.html, last accessed on 1 July 2018. 15  Beaumont, Peter. 2017. ‘US Signs Deal to Supply F-15 Jets to Qatar After Trump Terror Claim’, in The Guardian, 15 June, https://www.theguardian.com/world/2017/ jun/15/us-signs-deal-to-supply-f-15-jets-to-qatar-after-trump-terror-claims, last accessed on 1 July 2018. 16  Tillerson, Rex. 2017. ‘Remarks on the Middle East’, the US Department of State, 9 June, https://www.state.gov/secretary/20172018tillerson/remarks/2017/06/271672. htm last accessed on 1 July 2018.

 INTRODUCTION  

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to be siding with Saudi Arabia and accused that Qatari donors were ­supplying funds to militant groups.17 Damaging as it was, as two days earlier on 7 June, Trump spoke to the Qatari Emir and ‘offered to help the parties resolve their differences, including through a meeting at The White House if necessary.’18 However, no such meeting took place during the year. As both sides were hardening their stands, on 23 June the White House Press Secretary Sean Spicer depicted the crisis as ‘a family issue’ that the countries concerned ‘should work out’ and said that the US offer to ‘facilitate’ dialogue still stands.19 The rift raises the question over the US foreign policy priorities and the efficacy of its security interests in the Persian Gulf—a region of considerable importance to Washington since the end of the World War-II. The ability of the Trump Administration to combat religious extremism, especially the Islamic State and its aftermath and to adopt a more belligerent position vis-à-vis the Islamic Republic of Iran are considerably undermined by the Qatari crisis and its prolongation. The Qatari crisis came at a time when the geopolitical competition for influence had produced some of the worst conflicts. The situation has particularly worsened since the outset of the Arab Spring in 2011 and the rise of the Islamic State of Syria and Iraq (ISIS) in June 2014. The civil wars in Iraq, Libya, Syria, and Yemen continue to keep the region on the brink of another crisis. The involvement of regional players (primarily Iran, Saudi Arabia, and Turkey) and global powers (the US, Russia, and China in that order) and their partisan support to various groups and proxies meant that the region was highly fractured. The ethnic-sectarian divisions, security concerns, partisan considerations, and short-term interests have coloured the interstate differences and created a complex geopolitical scenario. As a result, the regional players are primarily divided 17  The White House. 2017. ‘Remarks by President Trump and President Iohannis of Romania in a Joint Press Conference’, 9 June, https://www.whitehouse.gov/briefingsstatements/remarks-president-trump-president-iohannis-romania-joint-press-conference, last accessed on 1 July 2018. 18  The White House. 2017. ‘Readout of President Donald J.  Trump’s Call with Amir Sheikh Tameem Bin Hamad Al Thani of Qatar’, 7 June, https://www.whitehouse.gov/ briefings-statements/readout-president-donald-j-trumps-call-amir-sheikh-tameem-binhamad-al-thani-qatar, last accessed on 1 July 2018. 19  The White House. 2017. ‘Press Briefing by Press Secretary Sean Spicer’, 23 June, https://www.whitehouse.gov/briefings-statements/press-briefing-press-secretary-seanspicer-062317, last accessed on 1 July 2018.

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into two broader blocs led by Saudi Arabia and Iran. The Qatari crisis is a manifestation of this competitive geopolitics between the two Persian Gulf giants, which has shades of historical, ethnic, sectarian, and above all religious and ideological divisions. Though it is primarily an internal division within the GCC, it was far more serious than the earlier crisis in 2014. This one affected many countries due to the boycott and the denial of airspace and waters to flights and vessels going to and from the peninsular state whose only land border is with the Kingdom of Saudi Arabia. In the past, disagreement largely revolved around the Qatari support for the Muslim Brotherhood and its use of Al-Jazeera against some of the Arab rulers, however, this time around, Qatari ties with Iran became the trigger. These regional developments have five major implications for India. First, if the US, the only power which has necessary political, diplomatic, and strategic capitals, is neither willing nor able to resolve the crisis and other players have been far less effective. While Russia and China watched the crisis from the sidelines, Kuwait sought to bridge the gap as it had channels of communication with both sides. Furthermore, the Saudi Foreign Minister Adel al-Jubeir and Emirati Minister of State for Foreign Affairs Anwar Gargash attended the annual GCC summit on 5 December hosted by Kuwait, hopes of a possible breakthrough were dashed when the meeting ended quickly without any statement, declaration, or announcement.20 Second, at the core of the Qatari crisis is Doha’s patronization of ‘moderate’ Islamists who have emerged as a major regional force. Though they are largely divided, unorganized, and overshadowed by the extremists, many Arab governments fear the Islamists and view them as an existential threat. The call for republican Islamism runs counter to the monarchical Islam practiced by the Gulf Arab states. Since the Islamic revolution of 1979, Iran has been championing various Islamist movements and trends in many Arab countries. Turkey is a new entrant and, emboldened by the success of the AKP, Recep Tayyip Erdogan is seeking to be regional vanguard for republican Islamism and has come out more openly in support of Qatar during the crisis. 20  Wasmi, Naser Al. 2017. ‘How GCC Summit Can Be Hailed As a Part Success Despite Closing Early’, in The National, 6 December, https://www.thenational.ae/world/gcc/ how-gcc-summit-can-be-hailed-as-a-part-success-despite-closing-early-1.682132, last accessed on 1 July 2018.

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The Qatar crisis has given Iran another opportunity to unsettle the regional geopolitics as its influence has been intensely felt beyond its borders. Either directly or through its proxies, Iran has a significant say in developments in Iraq, Syria, Lebanon, Palestine, and Yemen. The unending ascendance of Tehran’s regional influence is a geopolitical challenge to Riyadh. Doha, that has expanded its diplomatic footprints in recent years, views things differently and is not prepared to share the Saudi views vis-àvis the Muslim Brotherhood as well as Iran. Three, as the Qatari crisis was hogging much of the political and media attention, the political temperature in the Persian Gulf was rising due to other issues and tensions. The stalemate continues in the civil war in Yemen, and the assassination of former President Ali Abdullah Saleh by Iran-backed Houthi militants outside his house in Sana’a on 4 December pushed back any possibilities of reconciliation between the warring sides. The brutal treatment meted out to his body by the rebels speak volumes of the hatred and contempt towards the enemy, a feature which has become more pronounced since the lynching of Libyan leader Muammar Qaddafi in October 2011. Furthermore, the government headed by Abdrabbuh Mansur Hadi, the internationally recognized authority, has been losing grounds to the rebels throughout the year; international cries did not reduce the Saudi-led military offensive in Yemen. An estimated 5,295 people had been killed, 8,873 injured, 3.5 million were internally displaced, 8 million people are on the brink of famine, and nearly 1 million were suspected to be infected with cholera since the conflict began in March 2015.21 Four, the military defeat of the ISIS in Iraq brought some cause for cheer. The fall of the city of Mosul in July was followed by the announcement by Iraqi President Haider al-Abadi on 9 December that the Iraqi armed forces have defeated the Islamic militants. The larger problem for Iraq and the region, however, remains. The ISIS ideology of extremism and intolerance is potent and even in a latent form it still poses a threat to the region and the global order. Lone wolf terror attacks linked to ISIS have continued and cannot be eliminated. Five, the anticipated post-ISIS political stability of Iraq was undermined by the rising political aspirations of the Kurds. Not satisfied with the autonomy in the form of the Kurdish Regional Government (KRG) they 21  BBC News. 2017. ‘Yemen Conflict: how bad is the humanitarian crisis?’ 28 March, https://www.bbc.com/news/world-middle-east-34011187, last accessed on 17 July 2018.

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enjoy since 2005, the leadership decided to call for an independent Kurdistan through a referendum. The KRG held a referendum on 25 September 2017 which overwhelmingly endorsed independence from Iraq. This move was vehemently opposed by the central government in Baghdad as well as well by the neighbouring regions of Turkey, Iran, and Syria. Towards ensuring the Iraqi territorial integrity, Baghdad sent the Iraqi army to Erbil to take control of the oil fields and refineries in Kirkuk and the international airport in Erbil. These, in turn, not only weakened the financial resources of the KRG but also cut off direct connectivity between the Kurdish region and the outside world. After a brief resistance, the Kurdish forces gave up fighting and allowed Baghdad to establish its supremacy. The region and international reactions, especially from Turkey and Iran, were in favour of Baghdad which in turn, stressed the on-going challenges faced by the Kurds who were fighting for independence since the end of World War-I. It is within this broader regional strategic scenario that one has to contextualize the Indo-Gulf relations in 2017.

Bilateral Relations Surprisingly, there were no major political contacts between India and the Persian Gulf countries during 2017. The only high-level visit to the wider Middle East took place in July when Narendra Modi became the first Indian prime minister to visit Israel. Barring these, there have been no visits by president or vice-president, while the External Affairs Minister Sushma Swaraj visited Iran towards the end of the year. This time around one could not fault New Delhi. If internal turmoil prevented Iraq and Yemen from having high-level political contacts, Tehran was preoccupied with the anti-Iranian rhetoric from the Trump Administration and the uncertainties over the nuclear deal concluded in 2015. The Kingdom of Saudi Arabia witnessed some turbulence over the ascendance of Crown Prince Mohammed bin Salman (MBS) and his efforts to consolidate power. The Qatar crisis not only divided the GCC but also prevented the members from having any meaningful engagements with India. Recognizing India’s close economic interests in the entire region, neither Saudi Arabia nor Qatar sought New Delhi’s support. Since 2014, the Indo-Saudi leaders have been meeting during the G-20 summits, but domestic power struggles resulted in Riyadh sending a junior minister to

 INTRODUCTION  

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the summit in July, thereby annulling the possibility of an Indo-­Saudi meeting in Frankfurt. For its part, New Delhi settled for a nuanced and balanced position on the Qatari crisis and urged all the parties to resolve their differences through negotiations and dialogues. The only but detailed statement issued on 10 June stated that India is ‘closely following the emerging situation in the Gulf region’ and that New Delhi is of the ‘view that all parties should resolve their differences through a process of constructive dialogue and peaceful negotiations based on well-established international principles of mutual respect, sovereignty and non-interference in the internal affairs of other countries’.22 It further stated that ‘India believes that peace and security in the Gulf are of paramount importance for the continued progress and prosperity of the countries in the region’ and that India has ‘vital stakes in the regional peace and stability.’23 As would be discussed, this was primarily because of its strategic interests in both sides of the GCC divide. The much-anticipated visit of King Salman towards the end of the year did not materialize and the Qatari crisis was partly to be blamed. At the same time, it is essential to note that the Saudi monarch undertook a month-long foreign visit in March which took him to China, Japan, Indonesia and Malaysia. In October, the King undertook a historic visit to Russia—the first by a Saudi monarch.24 In terms of political engagements, the Persian Gulf countries failed to take any initiative during the year and consolidate the bilateral gains since Modi came to power. The only notable exception was the visit of the Crown Prince of Abu Dhabi and de facto ruler of the Emirates Mohammed bin Zayed al-Nahyan as the chief guest of the Republic Day celebrations in January. He was the fourth Middle Eastern leader and the third from the Persian Gulf to be bestowed this honour. This was also the third meeting between the two leaders since Modi came to power and reflected the emerging Indo-­ Emirati bonhomie. 22  Government of India (GoI), MEA. 2017. ‘India’s Official Statement Following Recent Developments in Qatar’, 10 June, http://mea.gov.in/press-releases.htm?dtl/28523/Indias_ official_statement_following_the_recent_developments_related_to_Qatar, last accessed on 1 July 2018. 23  Ibid. 24  Asharq Al-Awsat. 2017. ‘Putin Hails King Salman’s “Historic” Visit to Russia’, 22 October, https://aawsat.com/english/home/article/1060156/putin-hails-king-salman%E2%80%99s%E2%80%98historic%E2%80%99-visit-russia, last accessed on 1 July 2018.

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Economic Relations The Persian Gulf is India’s largest trading bloc and in 2016–2017, the bilateral trade touched US$123 billion or 18 per cent of India’s total foreign trade. Two of the regional countries, the UAE (third) and Saudi Arabia (fifth) were amongst India’s top five trading partners (Table 1.1) and three others Iran (14), Iraq (15), and Qatar (24) were amongst its top 25 trading partners (Table 1.2, Figs. 1.1 and 1.2). The region continues to be a major partner in India’s search for energy security and supplied about 55 per cent of the total energy imported by the country, amounting to US$56.33 billion. The recovery of the international oil prices reflected a marginal increase in the trade figures, but India’s decision to import shale gas from the US partly contributed to a dip in the overall share of Persian Gulf in India’s oil imports during the year. Its total foreign trade marginally increased from US$642 billion in 2015–2016 to US$660 billion during 2016–2017 and this is reflected in the small increase in the Indo-Gulf trade which moved from US$118 billion to US$123 billion during the same year. These are still lower than the 2012–2013 figures Table 1.1  India’s five largest trading partners in 2016–2017 (US$ million) Country China United States UAE Saudi Arabia Hong Kong

Exports

Imports

Total trade

Trade balance

10,171.18 42,212.27 31,175.50 5110.28 14,047.24

61,281.57 22,307.44 21,509.83 19,972.40 8204.18

71,452.75 64,519.71 52,685.33 25,082.68 22,251.42

−51,110.39 19,904.83 9665.67 −14,862.12 5843.06

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

Table 1.2  Place of PG countries amongst top 25 trading partners of India, 2016–2017 Country

Ranking

UAE Saudi Arabia Iran Iraq Qatar

Three Four Fourteen Fifteen Twenty five

Imports from

Exports to

Total trade

Per cent of total trade

21,470.69 19,972.40 10,506.51 11,707.94 7646.22

31,257.65 5110.28 2379.61 1111.45 784.56

52,728.34 25,082.68 12,886.12 12,819.39 8430.78

7.98 3.79 1.95 1.94 1.27

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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80 70 60 50 40 30 20 10 0

China

United States

United Arab Emirates

Exports

Imports

Saudi Arabia

Hong Kong

Total Trade

Fig. 1.1  India’s largest trading partners. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

Qatar

Iraq

Iran

Saudi Arabia

UAE

24 784.56

7,646.22

15

11,707.94

1,111.45 14 2,379.61

10,506.51

4

19,972.40

5,110.28 3

0.00

21,470.69 5,000.00

10,000.00

15,000.00

Rank

Import

20,000.00

31,257.65 25,000.00

30,000.00

35,000.00

Export

Fig. 1.2  Persian Gulf countries amongst India’s 25 largest trading partners. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www. dgft.gov.in

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when India’s foreign trade stood at US$791 billion and its trade with the Persian Gulf was at US$197 billion. At the same time, India continues to be one of the largest trading partners of the Persian Gulf countries. India’s total imports witnessed a decline since the high of US$139 billion in 2012–2013 and this was mainly due to falling oil prices. As a result, imports sharply declined to US$72 billion in 2015–2016 but marginally increased to US$77 billion in the following year (Table 1.3). There is also a marginal increase in the share of Persian Gulf countries in India’s overall imports from 19.13 per cent to 20.13 per cent during the same period (Fig. 1.3). According to the data provided by the Director-General of Foreign Trade (DGFT), out of the US$77  billion Indian imports from the Persian Gulf, energy accounts for US$56 billion or as much as 72 per cent. This underlines the importance of the Persian Gulf in India’s energy security. During 2016, for example, India consumed about 4.5 million barrels per day (mbd) but could produce only 890,000 mbd Table 1.3  Persian Gulf share in India’s total imports (US$ million) Year 1996–1997 1997–1998 1998–1999 1999–2000 2000–2001 2001–2002 2002–2003 2003–2004 2004–2005 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 2010–2011 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

Total imports

Imports from the Persian Gulf

Share per cent

39,132.41 41,484.49 42,388.71 49,738.06 50,536.45 51,413.28 61,412.14 78,149.11 111,517.43 149,165.73 185,735.24 251,654.01 303,696.31 288,372.88 369,769.13 489,319.49 490,736.65 450,199.78 448,033.40 381,006.62 384,355.56

5225.60 5182.19 6252.67 7708.73 1914.12 2018.62 2189.82 3549.26 7505.67 8519.55 46,131.24 64,328.98 80,292.24 73,640.76 96,595.68 133,825.28 139,892.75 131,409.63 108,176.01 72,913.69 77,391.17

13.35 12.49 14.75 15.50 3.79 3.93 3.57 4.54 6.73 5.71 24.84 25.56 26.44 25.54 26.12 27.35 28.51 29.18 24.14 19.13 20.13

Source: Adapted from Director-General of Foreign Trade, New Delhi, www.dgft.gov.in

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35 30 25 20 15 10 5 0

Share in Per cent

Fig. 1.3  Persian Gulf share in India’s total imports. Source: Adapted from Director-General of Foreign Trade, New Delhi, www.dgft.gov.in

within the country, thereby depended on imports to meet the bulk of its demands. In terms of exports, the region is critical for India. The share of the Persian Gulf in India’s exports increased from 8.13 per cent in 1996–1997 to 16.56 per cent in 2016–2017 (Table 1.4); in other words, it had doubled in two decades. However, the exports reached its highpoint in 2010–2011 when India exported over US$50 billion worth of products to the Persian Gulf, accounting for over 19 per cent of its total exports. The decline since then both in terms of value and share can be attributed to the global economic slowdown and their negative impact upon India’s foreign trade. Efforts to create opportunities for the manufacturing sector to bolster India’s exports are yet to have an impact on the trade figures (Fig. 1.4). The excessive role played by the energy trade resulted in a skewed trade imbalance and contributes to India’s total trade imbalance. Because of the oil factor, India has trade deficit with all the major players in the Gulf, with the UAE being the only exception. In 2016–2017, its overall trade deficit was US$108 billion but its oil imports alone stood at US$103 billion or the oil bill accounted for 95 per cent of its overall trade deficit (Table 1.5). In other words, if the international oil prices increase, not only will India’s imports increase but also the share of trade deficits and the oil bill. For

Table 1.4  Persian Gulf share in India’s total exports (US$ million) Year

Total exports

Exports to Persian Gulf

Share in per cent

1996–1997 1997–1998 1998–1999 1999–2000 2000–2001 2001–2002 2002–2003 2003–2004 2004–2005 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 2010–2011 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

33,469.95 34,784.98 33,218.72 36,822.49 44,560.29 43,826.72 52,719.43 63,842.55 83,535.94 103,090.53 126,414.05 163,132.18 185,295.36 178,751.43 251,136.19 305,963.92 300,400.68 314,405.29 310,338.48 262,290.13 275,851.71

2720.03 2952.81 3280.56 3539.78 4376.42 4405.61 5946.79 8277.87 11,423.92 13,398.41 19,209.10 25,997.08 35,104.98 33,537.55 50,076.90 48,882.30 57,160.12 55,417.58 55,292.31 45,864.41 45,705.53

8.13 8.49 9.88 9.61 9.82 10.05 11.28 12.97 13.68 13.00 15.20 15.94 18.95 18.76 19.94 15.98 19.03 17.62 17.81 17.48 16.56

Source: Adapted from Director-General of Foreign Trade, New Delhi, www.dgft.gov.in

25 20 15 10 5 0

Share in Per cent

Fig. 1.4  Persian Gulf share in India’s total exports. Source: Adapted from Director-General of Foreign Trade, New Delhi, www.dgft.gov.in

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Table 1.5  Trade deficit-oil import linkages Year

Total exports

1996–1997 1997–1998 1998–1999 1999–2000 2000–2001 2001–2002 2002–2003 2003–2004 2004–2005 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 2010–2011 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

33,469.95 34,784.98 33,218.72 36,822.49 44,560.29 43,826.72 52,719.43 63,842.55 83,535.94 103,090.53 126,414.05 163,132.18 185,295.36 178,751.43 251,136.19 305,963.92 300,400.68 314,405.29 310,338.48 262,290.13 275,851.71

Total imports Trade deficit

39,132.41 41,484.49 42,388.71 49,738.06 50,536.45 51,413.28 61,412.14 78,149.11 111,517.43 149,165.73 185,735.24 251,654.01 303,696.31 288,372.88 369,769.13 489,319.49 490,736.65 450,199.78 448,033.40 381,006.62 384,355.56

5662.46 6669.51 9169.99 12,915.57 5976.16 7586.56 8692.71 14,306.56 27,981.49 46,075.20 59,323.19 88,521.83 118,397.95 109,621.45 118,633.24 183,355.57 190,335.97 135,794.49 137,694.92 118,716.49 108,503.85

Energy imports

Per cent of oil imports to trade deficit

11,464.60 10,067.75 8043.19 14,350.19 17,545.14 15,771.75 19,680.60 22,700.20 34,818.66 50,310.06 61,778.90 86,384.07 103,933.81 96,321.16 115,929.02 172,753.97 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20

202.47 150.95 87.71 111.11 293.59 207.89 226.40 158.67 124.43 109.19 104.14 97.59 87.78 87.87 97.72 94.22 95.28 133.57 113.58 81.67 95.07

Source: Adapted from Director-General of Foreign Trade, New Delhi, www.dgft.gov.in

example, in 2013–2014, the international oil prices touched US$120 per barrel; India’s trade deficit and oil imports were 133 per cent, that is, the oil bill was higher than the trade deficit (Fig. 1.5). In terms of energy trade, the Persian Gulf countries are amongst the top five suppliers of oil and gas, with Saudi Arabia continuing to retain the top slot during the year (Table 1.6). India imported US$15.5 billion worth of crude oil from the Kingdom, followed by Iraq (US$11.6 billion), and the UAE (US$9.4 billion) (Table 1.7). Apart from these three, Iran (US$9 billion) and Qatar (US$6.7 billion) have been the major suppliers. During the year, there is a noticeable decline in oil imports from Kuwait (US$3.4 billion), Oman (US$390 million), and Bahrain (US$46 million), and due to the civil war situation oil imports from Yemen had stopped. Compared to the recent past, there is a significant decline in India’s imports from these countries and some are due to declines in reserves and production (Fig. 1.6).

20  

P. R. KUMARASWAMY ET AL.

350 300 250 200 150 100 50 0

Per cent of Oil Imports to Trade Deficit

Fig. 1.5  India’s trade deficit-oil import linkages. Source: Adapted from Director-­ General of Foreign Trade, New Delhi, www.dgft.gov.in

Table 1.6  Top five energy suppliers Year

First

Second

Third

Fourth

Fifth

1996–1997 1997–1998 1998–1999 1999–2000 2006–2007 2007–2008 2008–2009 2009–2010 2010–2011 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

Nigeria Saudi Arabia Saudi Arabia Nigeria Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia

Saudi Arabia Nigeria Kuwait Saudi Arabia Nigeria Iran Iran Iran Nigeria Iraq Iraq Iraq Iraq Iraq Iraq

UAE Australia Nigeria UAE Iran UAE UAE Kuwait Kuwait Kuwait Kuwait Kuwait Nigeria Nigeria UAE

Kuwait Kuwait UAE Kuwait Kuwait Nigeria Kuwait Nigeria UAE UAE UAE Qatar UAE Qatar Iran

Australia UAE Australia Iran Iraq Kuwait Nigeria Iraq Iran Nigeria Qatar Nigeria Qatar UAE Qatar

Source: Director-General of Foreign Trade, New Delhi, www.dgft.gov.in Note: Non-Gulf suppliers are identified in Italics. During 2000–2006 the DGFT did not identity country-­ wise import of energy supplies

10,317.90 6443.36 745.07 1563.15 62,282.89 55,904.14

7806.25 1445.39 54,365.01

59.93

58.04

57.53

60.81

Source: Adapted from Director-General of Foreign Trade, New Delhi, www.dgft.gov.in

62.93

605.89 11,764.01 18,826.19 15,718.33 2083.84 11,697.83 28,302.37

329.85 9716.39 19,166.06 15,737.46 507.88 14,578.34 29,896.53

2011–2012 2012–2013 359.23 8556.95 18,450.33 16,121.78 1514.11 14,590.81 32,781.57

2013–2014

9398.23 15,102.54 14,984.68 13,263.35 1722.95 955.26 942.00 762.62 66,688.4 105,056.26 105,859.19 106,400.75

219.19 9377.88 8954.66 9729.09 3293.14 6060.95 17,932.31

2010–2011

2015–2016

13,509.04 7912.80 516.68 0.01 85,300.30 50,992.26

215.82 94.07 7292.13 4461.57 14,177.22 10,759.19 12,228.71 4059.61 732.51 584.67 13,415.31 7942.43 23,212.88 15,177.91

2014–2015

9457.60 0.00 56,335.34

46.94 9006.29 11,633.29 3455.54 390.56 6762.10 15,583.08

2016–2017

58.37

58.66

54.54

52.59

54.60

103,933.77 96,321.16 115,929.06 172,753.97 181,344.67 181,382.56 156,399.98 96,953.02 103,163.20

1215.37 248.34 11,248.63 10,362.04 7660.78 6981.32 9193.78 7909.80 624.70 2904.41 2890.14 4101.68 18,386.52 15,390.04

599.46 10,048.97 6834.57 7289.51 688.68 1897.18 17,755.00

Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE Yemen Total Persian Gulf Total imports Per cent Persian Gulf imports to total imports

86,384.04

2008–2009 2009–2010

Country 2007–2008

Table 1.7  India’s energy imports from the Persian Gulf Region (US$ million)

Bahrain

Iran 2007-08 2011-12 2015-16

Iraq

Oman

2008-09 2012-13 2016-17

Kuwait

2009-10 2013-14

Qatar

UAE 2010-11 2014-15

Saudi Arabia

Yemen

Fig. 1.6  India’s energy imports from the Persian Gulf Region. Source: Adapted from Director-General of Foreign Trade, New Delhi, www.dgft.gov.in

0

5000

10000

15000

20000

25000

30000

35000

22   P. R. KUMARASWAMY ET AL.

 INTRODUCTION  

23

Driven by energy security concerns, India has been diversifying its energy imports and this is reflected in the marginal decline in the imports from the Persian Gulf. Along with increased investments in renewable energy, such as solar and wind energy, it is also increasing oil imports from Africa as well as South America. As part of this strategy, India is importing oil from the US and the first consignment of 1.6 million barrels of shale oil reached India on 2 October 2017.25 As a result, the share of the Persian Gulf in India’s imports dropped from 62 per cent in 2007–2008 to 55 per cent in 2016–2017 (Table 1.7). India’s energy ties with individual countries reflect an interesting trend. The Kingdom of Saudi Arabia remains its top supplier since 2006–2007 (Tables 1.6 and 1.7). The supplies from Iraq dropped considerably after the US-led invasion of that country, but recovered gradually as Iraq was returning to normalcy and resumed oil production. The demands of reconstruction hastened the Iraqi exports and this was reflected in the Indo-Iraqi oil trade, which for a few months overtook Indo-Saudi trade. On the contrary, the trade with Iran is linked to the international sanctions regime and the signing of the Joint Comprehensive Plan of Action (JCPOA) in 2015 spurred the oil trade. However, threats by the Trump Administration to withdraw from the nuclear deal and to re-impose sanctions on Iran have adversely affected the Indo-Iranian trade. The growing political ties are reflected in the UAE emerging as an important player in the Indo-Gulf energy trade. Both to reduce its import dependency upon oil products and as an economic strategy, India has been developing a series of downstream energy projects. This has resulted in oil projects emerging as a major component of its exports. There has been a substantial increase in this field. In 2006–2007, India exported petroleum products worth US$18.86 billion and this reached US$31.54 billion in 2016–2017 (Table 1.8). The high point of this trade was in 2013–2014 when it exported over US$64 billion worth of petroleum products which accounted for nearly 20 per cent of its exports. Thus, one could suggest that while reducing the import bills, falling oil prices worked negatively upon India’s export of oil products and, correspondingly, rising oil prices would mean an increase in the export of oil products by India (Fig. 1.7). 25  The Times of India. 2017. ‘First Shipment of US Crude Lands in India’, 3 October, https://timesofindia.indiatimes.com/india/first-shipment-of-us-crude-lands-in-india/articleshow/60917601.cms, last accessed on 1 July 2018.

Table 1.8  Share of oil products in India’s exports (US$ million) Year

Total exports

Energy exports

1996–1997 1997–1998 1998–1999 1999–2000 2000–2001 2001–2002 2002–2003 2003–2004 2004–2005 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 2010–2011 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

33,469.95 34,784.98 33,218.72 36,822.49 44,560.29 43,826.72 52,719.43 63,842.55 83,535.94 103,090.53 126,414.05 163,132.18 185,295.36 178,751.43 251,136.19 305,963.92 300,400.68 314,405.30 310,338.48 262,290.13 275,851.71

516.43 394.52 141.08 90.87 1930.99 2182.94 2707.24 3734.32 7140.39 11,866.60 18,859.48 29,085.48 28,437.14 29,036.29 42,610.74 57,391.93 62,105.50 64,685.27 57,619.99 31,231.49 31,545.25

Share in per cent 1.54 1.13 0.42 0.25 4.33 4.98 5.13 5.85 8.55 11.51 14.92 17.83 15.35 16.24 16.97 18.76 20.67 20.57 18.56 11.90 11.43

Source: Adapted from Director-General of Foreign Trade, New Delhi, www.dgft.gov.in

25 20 15 10 5 0

Share in Per cent

Fig. 1.7  Share of oil products in India’s exports. Source: Adapted from Director-­ General of Foreign Trade, New Delhi, www.dgft.gov.in

 INTRODUCTION  

25

Table 1.9  Share of energy in India’s total foreign trade (US$ million) Year

Total trade

1996–1997 1997–1998 1998–1999 1999–2000 2000–2001 2001–2002 2002–2003 2003–2004 2004–2005 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 2010–2011 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

72,602.36 76,269.47 75,607.43 86,560.55 95,096.74 95,240.00 114,131.57 141,991.66 195,053.37 252,256.26 312,149.29 414,786.19 488,991.67 467,124.31 620,905.32 795,283.41 791,137.33 764,594.22 758,301.08 642,094.55 660,207.27

Energy exports Energy imports 516.43 394.52 141.08 90.87 1930.99 2182.94 2707.24 3734.32 7140.39 11,866.60 18,859.48 29,085.48 28,437.14 29,036.29 42,610.74 57,391.93 62,105.50 64,685.27 57,619.99 31,231.49 31,545.25

11,464.60 10,067.75 8043.19 14,350.19 17,545.14 15,771.75 19,680.60 22,700.20 34,818.66 50,310.06 61,778.90 86,384.07 103,933.81 96,321.16 115,929.02 172,753.97 181,344.67 181,382.56 156,399.98 96,953.02 103,163.20

Total oil

Percentage of oil trade

11,981.03 10,462.27 8184.27 14,441.06 19,476.13 17,954.69 22,387.84 26,434.52 41,959.05 62,176.66 80,638.38 115,469.55 132,370.95 125,357.45 158,419.95 230,145.90 243,450.17 246,067.83 214,019.97 128,184.51 134,708.45

6.06 13.74 10.85 16.70 20.50 18.87 19.63 18.63 22.00 26.71 25.83 27.84 27.07 26.84 25.51 28.94 30.77 32.18 28.22 19.96 20.40

Source: Adapted from Director-General of Foreign Trade, New Delhi, www.dgft.gov.in

The growth in the petrochemical industry had a positive impact upon India’s total energy-related foreign trade. It has reached a high of 32 per cent of India’s total exports in 2013–2014 from 6 per cent in 1996–1997, both due to the high volume of trade and increasing oil prices (Table 1.9). This has declined to 20 per cent in 2016–2017 mainly due to the drop in oil prices but with US$134.7 billion, the oil trade is still a major component of India’s foreign trade (Fig. 1.8). Thus, oil plays an imports role in India’s imports as well as exports and millions of Indians directly and indirectly depend upon it. This would mean that despite diversification efforts, the Persian Gulf countries would continue to be important for India. As highlighted in Tables 1.10 and 1.11, the proven oil and gas reserves of the Persian Gulf are considerable and their geographical proximity would be too important to be ignored in India’s energy security calculations (Figs. 1.9 and 1.10).

26  

P. R. KUMARASWAMY ET AL.

35 30 25 20 15 10 5 0

Share in Per Cent

Fig. 1.8  Share of energy in India’s total foreign trade. Source: Adapted from Director-General of Foreign Trade, New Delhi, www.dgft.gov.in Table 1.10  Oil reserves of the Persian Gulf countries Country

Thousand million barrels (at the end of 2016)

Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE Yemen

158.4 153.0 101.5 5.4 25.2 266.5 97.8 3.0

Share of the global total (in per cent)

R/P ratioa (years)

9.3 9.0 5.9 0.3 1.5 15.6 5.7 0.2

94.1 93.6 88.0 14.6 36.3 59.0 65.6 Less than 0.05

Source: BP statistical review of World Energy June 2017 Reserve-to-production ratio

a

It is essential to recognize the flip side of the Indo-­Gulf economic relations, especially the energy trade. In 2016 India overtook Japan and became the third largest oil consumer after the US and China. Its total energy consumption in 2017 stood at about 4.5 mbd, slightly higher than the oil produced by Iraq in 2016 and slightly less than the oil exports of

 INTRODUCTION  

27

Table 1.11  Natural gas reserves of the Persian Gulf countries Country

Trillion cubic metres (at the end of 2016)

Bahrain Iran Iraq

0.2 33.5 3.7

Kuwait Oman Qatar Saudi Arabia UAE Yemen

Trillion cubic feet (at the end of 2016)

Share of the global total (in per cent)

R/P ratioa (years)

5.8 1183.0 130.5

0.1 18.0 2.0

1.8 0.7 24.3 8.4

63.0 24.9 858.1 297.6

1.0 0.4 13.0 4.5

10.5 165.5 More than 500 years 104.2 19.9 134.1 77.0

6.1 0.3

215.1 9.4

3.3 0.1

98.5 365.8

Source: BP statistical review of World Energy June 2017 Reserve-to-production ratio

a

18 15.6

16 14 12 10

9.3

9

8

5.9

6

5.7

4 1.5

2 0

0.3 Iran

Iraq

Kuwait

Oman

0.2 Qatar

Saudi Arabia

UAE

Yemen

Share in Per cent Fig. 1.9  Persian Gulf share of global oil reserves. Source: BP statistical review of World Energy June 2017

28  

P. R. KUMARASWAMY ET AL.

20

18

18 16

13

14 12 10 8 6

4.5

4 2 0

2 0.1 Bahrain

Iran

Iraq

1 Kuwait

3.3

0.4 Oman

0.1 Qatar

Saudi Arabia

UAE

Yemen

Share in Per cent

Fig. 1.10  Natural gas reserves. Source: BP statistical review of World Energy June 2017

Russia. Despite this, India has been a marginal player in the oil trade as a bulk of its imports continues to be met by spot purchases. The gas agreement with Qatar for the annual supply of 7.5 million tonnes remains its only long-term energy contract. This would have to change if India were to be a major player in the global energy market. Despite efforts, the much-talked investments from the Gulf Arab countries had not materialized. The US$75 billion Emirati investments agreed during Prime Minister Modi’s visit to Abu Dhabi in August 2015 was a classic example. When the Emirati Crown Price visited India in January 2017 as the chief guest of the Republic Day celebrations, there were no announcements on the investment flows from Abu Dhabi.

Expatriates According to the Ministry of External Affairs (MEA), at the end of the year there were over 8.7  million Indian expatriates in the Gulf Arab countries who are gainfully employed. Labour immigration to 17 countries are highly restricted and monitored to prevent human trafficking and exploitation and many of the countries requiring an Emigration Clearance Required (ECR) category belong to the Middle East (Table  1.12). In recent years, there is a considerable drop in the ECR-category migration

 INTRODUCTION  

29

Table 1.12  List of countries requiring an ECR for Indian migrant labourers Global

Middle East countries

Persian Gulf countries

Afghanistan Indonesia Malaysia Thailand

Jordan Lebanon Libya Sudan Syria

Bahrain Iraq Kuwait Oman Qatar Saudi Arabia UAE Yemen

Source: The Ministry of Overseas Indian Affairs (MOIA), India, Annual Report, 2014–2015

to the Gulf Arab countries. From 786,000  in 2008, it dropped to 346,000 in 2017 (Table 1.13, Fig. 1.11). The figures indicate a few interesting trends. Because of civil war situations, the ECR was stopped for Iraq and Yemen in 2015 and the numbers for Saudi Arabia diminished considerably. The UAE continues to be the main destination for the ECR-category migration. While the ECR number have come down, the overall estimates of Indians in the Gulf Arab countries have crossed 8.7 million. This indicates a shift in the nature of migration or a substantial increase in the non-ECR category migration. In other words, there is a shift in favour of more educated and skilled Indian migration to the region. This shift needs to be studied closely. Given the strategic and economic importance, what are the challenges facing India in improving its relations with the Persian Gulf and in maximizing its interests and gains?

Challenges One, in terms of political contacts, 2017 was largely a no-show year with the sole exception of the visit of the crown prince of the UAE in January. Partly due to the internal turmoil and challenges in the region, there were no high-level political engagements between the two. The progress of Prime Minister Modi’s 2016 visits to Saudi Arabia, Iran, and Qatar has not been tangible. With political parties gearing up to the 17th Lok Sabha elections due in early 2019, chances of foreign policy being marginalized is real. The desire for re-election might result in Prime Minister Modi reverting to the pre-2014 indifference and limit the political engagements with the Persian Gulf.

31,924 – 35,562 89,659 82,937 228,406 349,827 492 786,883 92.79 847,994

2008

17,541 – 42,091 74,963 46,292 281,110 130,302 421 592,720 97.13 610,270

2009 15,101 390 37,667 105,807 45,752 275,172 130,910 208 611,007 95.27 641,355

2010 14,323 1177 45,149 73,819 41,710 289,297 138,861 29 604,365 96.46 626,565

2011

Source: MOIA, India, Annual Reports and MEA, India, Annual Reports

Bahrain Iraq Kuwait Oman Qatar Saudi Arabia UAE Yemen Total Gulf Gulf share (%) Total ECR

Country

Table 1.13  Number of ECRs issued

20,150 917 55,868 84,384 63,096 357,503 141,138 0 725,068 97.06 747,041

2012 17,269 6577 70,072 63,398 78,367 354,169 202,016 3 791,871 96.97 816,655

2013 14,220 3054 80,419 51,318 75,935 329,937 224,033 4 778,920 96.77 804,878

2014

– – – 85,000 59,000 306,000 225,000 – 675,000 86.42 781,000

2015

– – 70,000 61,000 29,000 162,000 159,000 – 481,000 95.05 506,000

2016

10,000 – 51,000 49,000 22,000 73,000 141,000 – 346,000 95.84 361,000

2017

30   P. R. KUMARASWAMY ET AL.

2009

Bahrain

2010

Iraq

2011

Kuwait

2012

Oman

2013

Qatar

2014

Saudi Arabia

2015

UAE

2016

2017

Yemen

Fig. 1.11  Number of ECRs issued. Source: MOIA, India, Annual Reports and MEA, India Annual Reports

2008

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

 INTRODUCTION  

31

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P. R. KUMARASWAMY ET AL.

Two, the Qatar crisis cast a long shadow over the Indo-Gulf relations and highlighted the challenges and limited options. No major power, especially the US, was prepared to resolve the crisis, thereby widening the rift within the GCC. The simmering discontent amongst the Arab neighbours has not affected India’s import of oil (Saudi Arabia and the UAE) and gas (Qatar). With a sizeable expatriate population in the region, including Qatar, India’s diplomatic options are limited. At the same time, even if it does not identify Qatar with terror financing, fighting extremism is crucial to India. Three, the defeat of ISIS was a welcome development for India. In recent years a number of its nationals and some expatriate population in the Gulf have been accused of being sympathizers of the extremist group. The military defeat must make religious extremism less attractive but India would have to fight this menace politically and by inculcating tolerance and acceptance. Four, India’s decision to import shale oil from the US would have a negative impact upon the bilateral trade with the Persian Gulf, especially its oil trade. Though diversification and reduced dependency are essential, the US option can be exploited by India to secure a better deal with the Persian Gulf countries. The introduction of Asian benchmarking of oil pricing as against the current practice of the three most significant benchmarks, namely, Brent, West Texas Intermediate (WTI), and Dubai/Oman, which do not factor in the distance of transportation, could be a major step in this direction. As the major oil importer after the US and China, India is an attractive market for the Gulf Arab countries who are keen for downstream and upstream projects both within the region and in India. Five, the election of President Donald Trump has resurrected the anti-­ Iranian rhetoric in Washington and the US withdrawal from the nuclear deal (announced in May 2018) will have a negative impact upon the Indo-­ Iranian relations. Having learnt the bitter lessons in the past, India must handle the situation carefully. This time there is a more active Saudi role. At one level, the Kingdom is emerging as a key partner in India’s growth story but at the same time Riyadh is vociferous in its opposition to Iran and its regional hegemony. Overruling the diktats of the Trump Administration might be a lot easier than ignoring the friendly demands of the MBS. Thus, in many ways 2017 was a curtain raiser of sorts for more challenges facing India in the coming years.

 INTRODUCTION  

33

MEI@ND Middle East Institute at New Delhi (MEI@ND) was founded in October 2009 as a private academic initiative with the sole purpose of generating a serious, nuanced, scholarly, and non-partisan understanding of the Middle East and its complexities. Since then we have undertaken a number of academic and outreach activities, including Contemporary Review of the Middle East, a refereed quarterly published by SAGE (India). Another endeavour is the Persian Gulf Series inaugurated in 2012. India’s political, strategic, economic, energy, cultural, and social interests in the Middle East are primarily concentrated in the Gulf region. The MEI@ ND initiated this series to closely follow, analyse, and detail the bilateral relations annually. The inaugural issue was published through Kindle.26 The subsequent issues were then published as Persian Gulf 2013,27 Persian Gulf 2014,28 and Persian Gulf 2015.29 The 2016–2017 volume covering developments during 2015 and 2016 was jointly published by the Institute for Defence Studies and Analyses (IDSA) and the MEI. Our journey has been eventful and thanks to Sagarika Ghosh, we finally found a home in Springer Nature which has taken over the entire Persian Gulf Series and the present volume is the sixth in the series and the first under Palgrave Macmillan imprint. Regarding the nomenclatures, the MEI@ND prefers the ‘Persian Gulf’ to other expressions only because of its historic nature. If there can be bodies of water called the Arabian Sea, Indian Ocean, or Bay of Bengal, none should object to the Persian Gulf. It is essential to recognize that like other geographical expressions, the term Persian Gulf does not denote Iranian ownership of the said waters. A few notes of caution: one, the trade figures put out by India’s Directorate General of Foreign Trade for a current year are often revised in the following year, and hence, there would be a slight discrepancy. For example, the trade figures for 2015–2016 would be different in the Persian 26  Persian Gulf 2012, https://www.amazon.in/Persian-Gulf-2012-Indias-Relationsebook/dp/B0099RZ6NG, last accessed on 1 July 2018. 27  Persian Gulf 2013, https://us.sagepub.com/en-us/nam/persian-gulf-2013/ book242306, last accessed on 1 July 2018. 28  Persian Gulf 2014, https://us.sagepub.com/en-us/nam/persian-gulf-2014/ book245036, last accessed on 1 July 2018. 29  Persian Gulf 2015, https://www.smashwords.com/books/view/549471, last accessed on 1 July 2018.

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Gulf 2016–2017 and Persian Gulf 2018. Two, references to the Internet websites (URLs) were accurate at the time of writing and the authors or publisher are not responsible for URLs that may have expired or changed since the manuscript was finalized on 12 June 2017. Unlike the previous five volumes, Persian Gulf 2018 is co-authored and, therefore, is more cohesive and comprehensive with some structural changes. But the basic premise remains the same—presenting India’s relations with the region in a comprehensive, holistic, and systematic manner. As the series editor, co-author of this volume, and the Honorary Director of the MEI@ND, I record my sincere gratitude to all the previous contributors who made the series possible and flourishing. We wish to register our sincere thanks and gratitude to our innumerable scholar-friends, including Professor Girijesh Pant, Ambassador K.P. Fabian, Professor Rajesh Rajagopalan, Ambassador Sanjay Singh, Professor Srabani Roy Chaudhury, Dr. Sreeradha Datta, Dr. Sameena Hameed, and Shri Vivek Mehra. I would like to put forward a special mention for the Honourable Shri M.  Hamid Ansari for his wholehearted, valuable, and unflinching support for the MEI. We would also like to express our sincere gratitude to the IDSA for publishing the previous volume and its Director General Ambassador Jayant Prasad for his constant encouragement in pursuing our academic endeavours. Thanks are also due to Deputy Director General of the IDSA Major General Alok Deb and Dr. Meena Singh Roy for their support. A word of special thanks goes out to Chetna Kuanr and Minakshi Sardar for their delicate skills in fine-tuning the references and to Suneethi Raja for creating the index and to Naina Mukerji for her making a better copy. And we immensely value the support of Sagarika Ghosh and Sandeep Kaur in getting this volume out in such a short span of time. Above all, we acknowledge and appreciate the unconditional love, affection, inspiration, and support of our family and friends in completing this volume. With great personal gratitude and appreciation we are dedicating this volume to the always-friendly, encouraging, and dependable Commodore C. Uday Bhaskar. All omissions and commissions in this volume are ours alone.

CHAPTER 2

Bahrain

Key Information Ruling family: Al Khalifa; Ruler: King Hamad bin Isa Al Khalifa (since 6 March 1999); Crown Prince: Prince Salman bin Hamad bin Isa Al Khalifa (since 9 March 1999); National day: 16 December; Parliament: 40-member Nominated Consultative Council and 40-member Elected Chamber of Deputies; Last parliamentary election: 22 November 2014; Major group in parliament: Independents (Shia opposition boycotted); National carrier: Gulf Air. Socio-Economic Indicators Area: 760 sq. km; Population: 1.37 million; Native: 46 per cent; Expats: 54 per cent; Religious groups: Citizens (Muslims: 98–99 per cent [Shia 60–65 per cent and Sunni 30–35 per cent]); Resident (Muslim 70 per cent; Christian 14.5 per cent; Hindu 10 per cent; Buddhist 2.5 per cent; Jewish 0.5 per cent; and Others 2 per cent); Youth: 15.76 per cent; Population growth rate: 2.33 2.26 per cent; Life expectancy at birth: 78.9  years; Major population groups: Bahraini 46 per cent; Asian 45.5 per cent; other Arabs 4.7 per cent; African 1.6 per cent; European 1 per cent; Others 1.2 per cent (2010 est.); Literacy rate: 95.7 per cent; National currency: Bahraini Dinar (BHD); GDP: US$33.87  billion (2017 est.); Foreign trade: Export-US$14.33  billion, Import-US$13.96  billion (2017 est.) Defence budget: 4.59 per cent of GDP (2015); Sovereign wealth fund: © The Author(s) 2019 P. R. Kumaraswamy et al., Persian Gulf 2018, Persian Gulf, https://doi.org/10.1007/978-981-13-1978-5_2

35

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US$10.6 billion; External debt: US$42.39 billion (2017 est.); Per capita income: US$50,300; Oil reserves: 124.6  million bbl (2017 est.); Gas reserves: 92.03 billion m3; HDI rank: 45 (2016); Infant mortality rate: 8.9/1000 live births; UN education index: 0.714; Gender inequality index: 0.265 0.233 (2015); Labour force: 83,600; Unemployment rate: 3.8 per cent (2017 est.); Total urban population: 88.9 per cent (2017 est.); Rate of urbanization: 1.77 per cent (2015–2020 est.); Last national census: 2010. India Related Indian cultural centre: None; Indian organizations: 32 registered and 68 non-registered socio-cultural organizations and clubs; Number of Indians: 350,000 (approximately); Number of places of worship for Indians: 1 temple, 5 churches, and 6 Gurudwaras; Indian schools: 7; Indian banks: State Bank of India (2), Bank of Baroda (1), Canara Bank (1), ICICI Bank (1), and HDFC Bank (1); Currency exchange rate: 1 BHD = INR 177.6 (April 2018); Last visit to India by the ruler: Hamad bin Isa Al Khalifa February 2014; Last Indian prime minister to visit: None since 1947. * * * Bahrain, one of the smaller Gulf Arab economics has received meagre and inadequate attention in India’s foreign policy formation. This pattern continued even after the change of government in New Delhi in May 2014, and despite his frequent visits, Prime Minister Narendra Modi had not visited the Kingdom of Bahrain. His personal engagement with Manama has been confined to him hosting the Foreign Minister Khalid bin Mohammed alKhalifa in February 2015. This was despite Bahrain being of one of the tolerant countries towards its expatriate population, especially the Hindu migrants from India; and Bahrainis taking tangible measures towards economic diversification. The international assessment of the Bahraini economic situation has been positive with the country figuring high on a number of indicators of greater public space. India’s only political engagement came in late 2017 when the Minister of State for External Affairs M J Akbar attended the 13th Manama Dialogue in December. Bahrain’s depleting oil resources got a boost with the discovery of new fields off the western coast, thus positioning the island favourably as an attractive option for India’s oil imports and overseas investments.

 BAHRAIN  

37

Domestic Developments Politics The Kingdom of Bahrain has been grappling with internal problems since the outbreak of popular protests in early 2011. The demand for socio-­ economic rights soon took a political-sectarian dimension. The Shias who make up 60–65 per cent of the country’s 1.4 million citizen population1 have often complained of institutionalized discrimination in education, employment, and social mobility. The absence of an adequate number of mosques and religious space is often flagged. In 2011 the Bahrain Independent Commission of Inquiry came down heavily upon the security forces for some of the violence that followed the initial protests.2 More than six years later a number of its recommendations, especially pertaining to political rights and better economic opportunities for the marginalized Shias, were not implemented.3 The brief intervention of the Saudi-led Peninsula Shield Force in March 2011 stabilized the situation and during 2017 the situation has remained volatile but firmly under the control of the al-Khalifa. All the political groups and societies have been outlawed, the last remaining group, the Wa’ad Society (National Democratic Action Society)—a left-leaning secular group—was banned in May.4 Earlier, in July 2016 the largest o ­ pposition group, the Shia-dominated al-Wefaq was dissolved. The shrinking of the 1  Pew Research Center 2011. ‘The Future of Global Muslim Population: Sunni and Shia Population’, 27 January, http://www.pewforum.org/2011/01/27/future-of-the-globalmuslim-population-sunni-and-shia, last accessed on 1 July 2018. 2  Bahrain Independent Commission of Inquiry. 2011. ‘Report of the Bahrain Independent Commission of Inquiry’, 23 November, http://www.bici.org.bh/BICIreportEN.pdf, last accessed on 1 July 2018. 3  Ruffner, Todd. 2016. ‘Bassiouni Says Only 10 of 26 BICI Recommendations Implemented’, in the Project on Middle East Democracy, 10 June, https://pomed.org/bahrain-weeklyupdate-bassiouni-says-only-10-of-26-bici-recommendations-implemented, last accessed on 1 July 2018. 4  BBC News. 2017. ‘Bahrain Court Dissolves Main Secular Opposition Group’, 31 May, http://www.bbc.com/news/world-middle-east-40104731, last accessed on 1 July 2018; see also: The New Arab. 2017. ‘Bahrain Bans Main Secular Opposition Group’, 1 June, https://www.alaraby.co.uk/english/news/2017/6/1/bahrain-bans-main-secular-opposition-group, last accessed on 1 July 2018; Americans for Democracy & Human Rights in Bahrain. 2017. ‘Bahrain Dissolves Wa’ad, Last Major Opposition Society’, 31 May, http:// www.adhrb.org/2017/05/bahrain-dissolves-last-major-opposition-society, last accessed on 1 July 2018.

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political space is compounded by the apolitical nature of the 40-­member Lower House of the National Assembly whose election in November 2014 was largely boycotted by organized political groups and societies and hence is dominated by independent lawmakers. Accusing political groups of inciting violence and plotting to overthrow the government, the Kingdom had clamped down political activities. During the year there were no major political dialogue between the government and the opposition. The continuing tension is reflected in the changes in social media in the country. Bahrain has a higher degree of Internet users and the social media penetration is estimated at 78 per cent. According to a survey conducted by Go-Gulf, a consultancy firm based in Dubai, 52 per cent of the population uses the Internet for a better understanding of politics, while 38 per cent feels that social media platforms give them a better say over the government’s policies.5 At the same time, 30 per cent fear posting political views in the social media as they anticipate official monitoring and hence punitive actions.6 During 2017, there was a decline in the number of social media users in Bahrain.7 One of the reasons could be the official crackdown on Internet activism for posting ‘negative content’.8 In June, amidst the crisis over Qatar, a number of social media users were arrested and jailed for their ‘pro-Qatar posts’.9 These trends undermine the progress towards democratization as the political situation is unstable as protests against the regime have been continuing without any signs of reconciliation. The al-­ Khalifa have taken an uncompromising view of the situation and the g ­ overnment appears to be seeking a military solution to a largely socio-political problem.10 The sectarian violence and narrowing of political space could fuel instability and ‘spur radicalization’ amongst the Shias and they 5  Go-Gulf, Bahrain Online Statistics, https://www.go-gulf.com/blog.php, last accessed on 1 July 2018. 6  Ibid. 7  Stats Counter. ‘Social Media Stats Bahrain March 2017–April 2018’, http://gs.statcounter.com/social-media-stats/all/bahrain, last accessed on 1 July 2018. 8  Gulf Business. 2016. ‘Bahrain Arrests Social Media Users for Posting “Instigative” Content’, 28 June, http://gulfbusiness.com/bahrain-arrests-social-media-users-postinginstigative-content, last accessed on 1 July 2018. 9  Amnesty International. 2017. ‘Bahrain: Human Rights on the Brink of Crisis’, 18 January, https://www.amnesty.org/en/latest/campaigns/2017/09/bahrain-year-crushing-dissent, last accessed on 1 July 2018. 10  The Economist, the Bahrain Country Report, http://country.eiu.com/bahrain.

 BAHRAIN  

100 90 80 70 60 50 40 30 20 10 0

Policy Making Process

Social Stability

Security External Threats

Bahrain

Policy Continuity

39

Short-Term Political Risk Index Score

MENA Average

Fig. 2.1  Social and political stability indices in Bahrain, 2017. Source: Adapted from BMI-MEM, 2017

point to a higher degree of political instability in Bahrain than the wider Middle East region (Fig. 2.1). Human Rights Situation The international community has been accusing the government of continuing its practice of detention-without-trial and incarcerating prominent Shia leaders and activists.11 After widespread coverage, Nabeel Rajab, President of the Bahrain Centre for Human Rights (BCHR) was released by a court on 28 December 2016 but was re-arrested in June 2017 on fresh charges.12 Similarly, activist Ebtisam al-Saegh and female journalist Nazeeha Saeed were arrested, and it was alleged that they were sexually harassed by the security forces.13 The social media also came under attack and the incarceration of activists resulted in the New York-­ backed Human Rights Watch to launch a campaign, 140 Characters, which featured the profiles of prominent online activists who were jailed  Amnesty International. ‘Bahrain: Human Rights on the Brink of Crisis’.  IFEX. 2017. ‘The World is Watching: Bahrain Must Release Nabeel Rajab’, 13 June, https://www.ifex.org/bahrain/2017/06/13/free-nabeel-rajab, last accessed on 1 July 2018. 13  Amnesty International. 2017. ‘Woman Human Rights Defender Tortured, Including Sexually Assaulted, as Bahrain Renews Campaign to Silence Peaceful Critics’, 31 May, https:// www.amnesty.org/en/documents/mde11/6392/2017/en, last accessed on 1 July 2018. 11 12

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or tortured in the GCC countries.14 Many prominent Bahraini activists, including Nabeel Rajab were featured in this campaign.15 Bahrain has been lagging behind in implementing the universal periodic review (UPR) recommendations of the United Nations Human Rights Council (UNHRC). In the third cycle of the UPR, which concluded in May, a number of countries urged Bahrain to allow greater freedom of expression of its citizens; ending the targeted prosecution of civil society actors and political and human rights activists; to end discriminations against the Shia citizens; and to ratify the human rights protocol (2002) and the convention against torture (1987).16 A number of Western countries flagged their concerns over the human rights situation in the country. Reflecting these concerns, the Americans for Democracy and Human Rights in Bahrain (ADHRB), a US-based activist group, observed that ‘by all measureable standards Bahrain’s failure to implement its recommendations illustrates a refusal to reform’.17 Likewise, the Paris-based International Federation for Human Rights issued an appeal in June against judicial harassment, arbitrary arrests, ill-treatment, torture, intimidation, and killings.18 The appeal urged Bahraini authorities to:

14  Bahrain Mirror. 2017. ‘HRW Launches “140 Characters” Featuring Gulf Activists Detained, Targeted for Online Activism’, 15 July, http://bahrainmirror.com/en/ news/40471.html, last accessed on 1 July 2018. 15  The Bahraini activists featured in ‘140 Characters’ are: Nabeel Rajab, Zainab al-Khawaja, Abdulhadi al-Khawaja, Ali Abdulemam, Ghada Jamsheer, Sayed Ahmed al-Wadaei, Naji Fateel, Ebrahim Sharif, Mahdi Abu Deeb, Ali al-Ekri, Abdul Jalil al-Singace, Abdul Ghani al-Khanjar, Mohammed Habib al-Muqdad, Sheikh Ali Salman, Khalil al-Marzooq, Hussain Hubail, Nazeeha Saeed, Mohamed al-Maskati, Sayed Yusuf al-Muhafdah, Mohammed alTajer, Fadhel Abbas, Matar Ibrahim Matar, Zahra al-Sheikh, Ahmed Humaidan, Ahmed alFardan, Jassim Radhi al-Nuaimi, Khalid Abdulaal, Abdullah Salman al-Jirdabi, Maryam al-Khawaja, Jaleela al-Sayed Ameen, Ali Faisal al-Shofa, Ahmed Radhi, Taiba Ismael, Mahmoud al-Jaziri, and Ibtisam al-Sayegh. 16  Ibid. 17  Americans for Democracy and human Rights. 2017. ‘Spotlight on Bahrain’s Human Rights Record: Bahrain Undergoes 3rd Cycle UPR Review’, 1 May, http://www.adhrb. org/2017/05/spotlight-bahrains-human-rights-record-bahrain-undergoes-3rd-cycle-uprreview, last accessed on 1 July 2018. 18  International Federation for Human Rights. 2017. ‘Bahrain: Harassment of Various Human Rights Defenders, Including Excessive Use of Force, Ill-treatment and Torture in Custody’, 13 June, https://www.fidh.org/en/issues/human-rights-defenders/bahrainharassment-of-various-human-rights-defenders-including, last accessed on 1 July 2018.

 BAHRAIN  

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1. Ensure the psychological and physical integrity of all human rights defenders in Bahrain, and in particular of the aforementioned individuals; 2. Fully, promptly, impartially, and transparently investigate the killing of Mohammed Kadhem and other peaceful protesters as well as the allegations of torture, ill-treatment, and physical and psychological pressure of human rights defenders by security agents during interrogation, and in particular of the aforementioned individuals; 3. Put an end to all forms of harassment, including at the judicial level against all human rights defenders in Bahrain, and in particular against the aforementioned individuals, so that they are able to carry out their work without hindrance; 4. Comply with all the provisions of the United Nations Declaration on Human Rights Defenders, in particular with its Articles 1, 5(b), and 12.2; 5. Ensure in all circumstances respect for human rights and fundamental freedoms in accordance with international human rights standards and international instruments ratified by Bahrain.19 In its assessment for 2016, the Religious Freedom Report published by the US State Department identified Bahrain as ‘Not free’ in terms of freedom status with an aggregate score of 12 out of 100, wherein 0 stands for ‘least free’ and 100 for ‘most free.’ According to Freedom House, overall freedom rating is 6.5 out of 7, wherein 1 stands for ‘most free’ and 7 for ‘least free’. Likewise, the country’s performance in providing political and civil rights is also not very conducive and in both the areas it scores 7 and 6, respectively. Freedom of press and net freedom statuses are identified as ‘not free’.20 At the same time, instability in the country could not be divorced from the regional dynamics which continues to impede al-Khalifa from being flexible and accommodative. Foreign Policy The situation in the country got complicated when the neighbouring Islamic Republic of Iran sought to champion the cause of the Bahraini  Ibid.  Freedom House, Bahrain Country Profile 2017, https://freedomhouse.org/report/ freedom-world/2017/bahrain, last accessed on 1 July 2017. 19 20

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Shias and their socio-economic demands.21 The active Iranian ­involvement in some of the other regional crises such as the civil wars in Iraq, Syria, and Yemen heightened Bahrain’s concerns.22 The government accused Iran for a number of statements of incitements and acts of terrorism23 and this in turn resulted in a more active Saudi involvement in the Kingdom.24 These regional factors became prominent in July when Manama was quick to join Saudi Arabia and accused Qatar of meddling in the internal affairs of the GCC countries, of cosying up to Iran and in supporting extremism and radical Islamic groups.25 Economy At one level, continued political instability and low oil price have seriously affected the Bahraini economy. The Bahraini oil reserves are limited and expected to last for another 20 years at the ­existing rate of production. According to the World Bank, its growth rate dropped to 1.8 per cent in 2017, the lowest since 2001.26 Its GDP at current prices stood at US$31.85 billion in 2016 and was expected to drop in 2017. From the highest growth rate of 8.3 per cent registered in 2007, it declined to 5.3 per cent in 2013 to reach 3.2 per cent in 2016. At the same time, the World Bank forecasts that the growth rate would improve in the coming years, primarily due to the initiatives of the 21  The Guardian. 2011. ‘Bahrain Hints at Iranian Role over Country’s Shia Uprising’, 21 March, https://www.theguardian.com/world/2011/mar/21/bahrain-iran-role-uprising-shia, last accessed on 1 July 2018; also see: Rivera, Jason. 2015. ‘Iran’s Involvement in Bahrain: A Battleground as Part of the Islamic Regime’s Larger Existential Conflict’, in the Small War Journal, 3 November, http://smallwarsjournal.com/jrnl/art/iran%E2%80%99s-involvementin-bahrain, last accessed on 1 July 2018; for a contrarian view, see: Louer, Laurence. 2009. ‘The Limits of Iranian influence among Gulf Shi’a’, in CTC Sentinel, 2 (5), https://ctc.usma.edu/ app/uploads/2010/06/Vol2Iss5-Art5.pdf, last accessed on 1 July 2018. 22  Rivera. ‘Iran’s involvement in Bahrain’. op. cit. 23  The Guardian. ‘Bahrain Hints at Iranian Role over Country’s Shia Uprising’. op. cit. 24  In March 2011, Saudi—the GCC’s Peninsula Shield Force intervened in Bahrain to contain the uprising; see: Noueihed, Lin and Frederik Richter. 2011. ‘Saudi Sends Troops, Bahrain Shi’ites Call it “War”’, Reuters, 15 March, https://www.reuters.com/article/usbahrain-protests-forces/saudi-sends-troops-bahrain-shiites-call-it-war-idUSLDE72D0KH20110315, last accessed on 1 July 2018. 25  Bahrain News Agency. 2017. ‘Sovereignty and Legitimate Rights: Historical Facts’, 4 November, http://www.bna.bh/portal/en/news/809537, last accessed on 1 July 2018. 26  World Bank, GDP Growth Rate Annual, Bahrain, https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=BH, last accessed on 1 July 2018.

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­ overnment towards fiscal consolidation.27 The introduction of new taxes g and levies has increased the non-oil revenues and the gradual increase of the oil prices since 2016 would bring additional oil-related revenues. The US-based Heritage Foundation termed the economic freedom status of Bahrain as ‘moderately free’ and ranked the country 44th  in the world with an average score of 60.9. With a score of 61.9, Bahrain ranks third after the UAE and Qatar in the region. Notable successes for the country came from its tax policy, trade freedom, and monetary stability even though there are concerns over its fiscal health, judicial effectiveness, and government integrity.28 Towards reviving the economy and in the process to dilute the social unrest, the government has launched huge spending programmes to ­promote tourism, entertainment, and sports. After a recent glut, a number of construction projects have been revived or launched. As identified in Table 2.1, the government has launched five major projects. In addition, a host of new projects in oil and gas industries and infrastructure development have been launched. The recently launched industrial Table 2.1  Major projects in Bahrain, 2017 On-going projects and tenders

Major projects

Cost in US$ millions

Alba sixth potline expansion Bahrain International Airport expansion IKEA Bahrain

Al Sidra development Mixed-use building at Umm Al Hassam Headquarters for the Ministry of Transportation Water pipelines from Hamad Town to Hamala Luxury hotel in Reef island

US$3 billion US$1.1 billion

Marassi Al Bahrain Bahrain International Airport expansion—New passenger terminal

US$1.2 billion US$3 billion US$3.3 billion

Source: Adapted from Ventures Middle East, available at: Ventures Online, Projects in Bahrain, https:// www.venturesonsite.com/projects/projects-in-bahrain

27  World Bank, 2018, “Country profile: Bahrain,” http://databank.worldbank.org/data/ views/reports/reportwidget.aspx?Report_Name=CountryProfile&Id=b450fd57&tbar=y& dd=y&inf=n&zm=n&country=BHR. 28  The Heritage Foundation, ‘Index of Economic Freedom 2017’, http://www.heritage. org/index/pdf/2017/countries/bahrain.pdf, last accessed on 1 July 2018.

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Table 2.2  Oil and gas projects in Bahrain, 2017 On-going projects and tenders

Major projects

Cost in US$ millions

LNG import terminal

Upgradation of the gas dehydration unit Maintenance and repair services at BAPCO

US$6 billion

BAPCO Modernization Programme (BMP)— Hydrocracker unit BAPCO Modernization Programme—Fluid catalytic cracker unit BAPCO Modernization Programme Bahrain International Airport expansion—Fuel complex

Overhaul services of control valves at BAPCO Upgradation of the gas dehydration unit BAPCO Modernization Programme (BMP)

Between US$4.2– US$6 billion for the entire project For the entire BAPCO project, US$4.2 to US$6.5 billion NA NA

Source: Adapted from Ventures Middle East, available at: Ventures Online, Oil and Gas Projects in Bahrain, https://www.venturesonsite.com/projects/projects-in-bahrain/oil-and-gas-projects-in-bahrain

Table 2.3  Industrial projects in Bahrain, 2017 On-going projects and tenders

Major projects

Cost in US$ millions

Alba sixth potline expansion

Revamp of air conditioning units at Riffa power station Permanent access control for Sitra Yard No. 1—Phase 2 Warehouse and car storage facility Body shop facility at Sitra

US$3 billion

US$16 million US$55 million

Behbehani Storage Centre

US$40 million

Mondelez factory in Bahrain Armacell rubber insulation plant Art cast house for GARMCO in Sitra Copper tube mill

US$90 million

Source: Adapted from Ventures Middle East, Available at: https://www.venturesonsite.com/projects/ projects-in-bahrain/industrial-projects-in-bahrain

projects include development of airport terminals, power generation, water supply, and housing (Tables 2.2, 2.3, 2.4, and 2.5). In other words, the Kingdom has undertaken infrastructure projects worth many times the size of its GDP in 2017. Since economic deprivation was the prime grievance of the Shia citizens, the Al Khalifa family is seeking to address the economic imbalance, and in the process, mitigate the socio-political grievance of its largest population. Because economic

 BAHRAIN  

45

Table 2.4  Power and water projects in Bahrain, 2017 On-going projects and tenders

Major projects

Cost in US$ millions

400 kV transmission development

Water pipelines from Hamad Town to Hamala Independent Power and Water Project (IWPP) at Al Dur—Phase 2 Rehabilitation work at Ras Abu Jarur RO Plant 220 kV and 66 kV Transmission Development Programme (2012–2016)

US$30 million

400 kV transmission substation in Hidd, Riffa, and Umm Al Hassam 400 kV transmission development— Package 1-Substations Alba power station (PS5)

Independent Power and Water Project (IWPP) at Al Dur—Phase 2

US$740 million

NA US$750 million

US$1.5 billion

Source: Adapted from ventures middle east, available at: Ventures on Site, Power and water projects in Bahrain, available at: https://www.venturesonsite.com/projects/projects-in-bahrain/power-and-waterprojects-in-bahrain

Table 2.5  Infrastructure projects in Bahrain, 2017 On-going projects and tenders

Major projects

Cost in US$ millions

Al Madina Al Shamaliya development-sewerage network Bahrain rapid transport network Tubli STP expansion

Brackish water plant repair works

US$1.02 billion

Bahrain marina development Boundary wall at the Electricity and Water Authority (EWA) New fire suppression system at EWA System Control Centre

US$7.05 billion US$530 million

Prince Charles City at Askar—Infrastructure

US$2.5 billion

Bahrain international airport expansion—Enabling works— Package 1B Reclamation work for North Manama Causeway Phase 2

US$1.1 billion

Source: Adapted from Ventures Middle East, available at: https://www.venturesonsite.com/projects/ projects-in-bahrain/infrastructure-projects-in-bahrain

progress tends to be slow, at least in the short term, things would continue to be unstable in Bahrain. Moreover, these mega projects do not directly address the issue of distribution of economic benefits.

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Society Despite the perceived persecution of the Shia population, Bahrain continues to be an open society vis-à-vis its citizens as well as the resident population. The latter, estimated at 0.8 million in 2017, is slightly higher than its citizens.29 Religious and cultural restrictions are limited and have a number of non-Islamic places of worships. Unlike some of its neighbours, the Kingdom has recognized and ensured greater social space for women. The literacy rate and educational progress of the Bahraini women is higher and they have achieved remarkable successes in a number of fields; however, the ratio of women employment continues to be low. In terms of personal laws, women continue to face discrimination, especially with regard to questions, such as marriage, divorce, inheritance, and child custody.30 Bahrain is the only county in the wider Middle East which does not have an Islamic family law,31 and hence the women do not enjoy equal inheritance rights. As a result, a Shia woman could inherit her fathers’ property only in the absence of a direct male heir but cannot inherit her husband’s property. Likewise, in the absence of adequate protection, migrant women continue to suffer from a host of problems, such as physical and psychological abuse, unpaid wages, unsafe accommodation, passport confiscation, and excessive working hours.32

Bilateral Relations Political Ties The only political engagement between the two countries took place in December when the Minister of State for External Affairs M J Akbar visited the Kingdom to participate in the Manama Dialogue.33 Capitalizing 29  The CIA World Fact book, ‘Bahrain’, https://www.cia.gov/library/publications/theworld-factbook/geos/ba.html, last accessed on 1 July 2018. 30  Bahrain Centre for Human Rights. 2017. ‘The Legal Status of Women in Bahrain’, in the BCHR Report, http://bahrainrights.org/sites/default/files/NEW%20BCHR%20Legal%20 Status%20of%20Women%20in%20Bahrain.pdf, last accessed on 1 July 2018. 31  Ibid. 32  Ibid. 33  Government of India (GoI), Ministry of External Affairs (MEA). 2017. ‘Visit of M J Akbar, Minister of State for External Affairs to Manama, Bahrain’, 5 December, http:// www.mea.gov.in/press-releases.htm?dtl/29152/visit+of+mjakbar+minister+of+state+for+e xternal+affairs+to+manama+bahrain+december+810+2017, last accessed on 1 July 2018.

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on the organizers desire to expand the reach of the annual meeting, Akbar flagged the need to redefine ‘extended neighbourhood’ and emphasized the need to build Indo-Gulf partnership towards achieving development and prosperity for both.34 At the same time, Bahrain continues to remain outside of New Delhi’s diplomatic radar. While there have been occasional visits by external affairs ministers, India’s indifference continued since the days of Jawaharlal Nehru and no Indian prime minister has ever visited Bahrain since 1947. This perhaps influenced Nehru’s great-grandson and Congress President Rahul Gandhi to visit Manama in January 2018, which will be discussed in detail in the next volume. Despite its limited oil reserves and smaller economy, Bahrain remains an important country and is home to a large Indian expatriate population. Historically, it has been one of most open societies in the Gulf region and has flourished under a strong, market-driven economic model. Until the ascendance of Dubai, its banking and financial sector, retail industry, and oil sector were well developed and continued to be attractive. Recent political tension and lower economic growth have resulted in Bahrain not attracting Indian attention in the recent years, hence Prime Minister Modi who visited its neighbours chose to skip the Kingdom. Al-Khalifa could use the Manama Dialogue to induce and attract higher Indian representation as happened to the Shangri La Dialogue also organized by the London-based International Institute for Strategic Studies (IISS). Defence and Security The absence of high-profile political contacts has not impeded both the countries from cooperating in a number of security-related issues, especially in the realm of organized crimes and sea-borne illicit activities. In late 2015, they signed a cooperative agreement in combating terrorism, transnational organized crime, and illicit trafficking in drugs, narcotics, and weapons. Security issues figured prominently in the recent deliberations of the External Affairs Minister Sushma Swaraj in September 2014 34  GOI, MEA. 2017. ‘Minister of State Shri M J Akbar’s Speech on India’s International Partnerships at Manama Dialogue 2017’, 9 December, http://www.mea.gov.in/SpeechesStatements.htm?dtl/29285/minister+of+state+shri+m+j+akbars+speech+on+indias+interna tional+partnerships+at+manama+dialogue+2017bahraindecember+09+2017, last accessed on 1 July 2018.

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and June 2016 and the Home Minister Rajnath Singh in October 2016 with the Bahraini leadership. However, interactions with the diplomatic community indicate that India has been unable to appreciate the security dilemma facing Bahrain and its security concerns vis-à-vis Iran. Trade and Commerce As India’s overall foreign trade has been sliding since 2010–2011, Bahrain continued to languish during 2017. Largely due to falling oil prices and partly due to declining oil imports, the bilateral trade dipped and fell below the billion dollar mark. From the high of US$1.3  billion during 2011–2012, it dropped to US$762  million (Table  2.6 and Fig.  2.2). Bahrain is one of the few countries in the region with whom India maintains a favourable trade balance. While both imports and exports in 2016–2017 declined from the previous year, the drop was more significant in India’s imports than exports; exports dropped from US$654.14 million in 2015–2016 to US$471.71 million in 2016–2017, the latter was closer to the 2011–2012 figures when India exported US$439.99 million worth of goods to Bahrain. The Kingdom is one of the three Gulf Arab countries (others being Oman and Yemen) which do not figure in the top 50 trading partners of India and holds a meagre share of 0.12 per cent in India’s overall external trade. Table 2.6  India–Bahrain bilateral trade (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 India’s exports India’s imports Total bilateral trade Share in India’s total trade

2015–2016

2016–2017

439.99

603.47

639.36

472.98

654.14

471.71

905.98

664.66

563.24

446.25

356.90

290.69

1345.97

1268.93

1202.60

919.23

1011.04

762.40

0.17

0.16

0.16

0.12

0.16

0.12

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

2011-12

2012-13 Imports

2013-14

2014-15

Exports

2015-16

2016-17

Total Trade

Fig. 2.2  India–Bahrain bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

At the same time, Bahrain is conscious of the economy-driven external engagements of India and as part of the Gulf Industry Fair in January, Bahrain organized a business partnership summit backed by India’s PHD Chambers of Commerce and Hilal Conferences and Exhibits.35 Energy Ties Despite decline in prices and the quantum of imports, oil remains a major component of the Indo-Bahraini bilateral trade. India’s decision in October to import oil from the US at competitive prices and in large quantities would have a cascading effect upon smaller suppliers such as Bahrain. During 2016–2017, India imported a meagre US$46 million worth of oil from Bahrain (Tables 2.7 and 2.8 and Figs. 2.3 and 2.4) and this was almost 50 per cent below the 2015–2016 figures when it procured US$94 million worth of crude oil from the island. In other words, only 0.05 per cent of 35  The Economic Times. 2017. ‘India Business Partnership Summit to Take Place in Bahrain’, 31 January, https://economictimes.indiatimes.com/news/economy/foreigntrade/india-business-partnership-summit-to-take-place-in-bahrain/articleshow/56891904. cms, last accessed on 1 July 2018.

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Table 2.7  Share of oil in India’s imports from Bahrain (US$ million) Year

2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

Oil imports from Bahrain

Total oil imports

605.89 329.85 359.23 215.82 94.07 46.94

172,753.97 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20

Bahraini share Imports from in total oil Bahrain imports 0.35 0.18 0.20 0.14 0.10 0.05

Per cent of oil in imports from Bahrain

905.98 664.66 563.24 446.25 356.90 290.69

67.53 49.63 63.78 48.36 26.36 16.15

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

Table 2.8  India’s energy imports from Bahrain (US$ million)

Oil imports from Bahrain Total energy imports Energy imports from the Persian Gulf Bahrain’s share in the total energy imports Bahrain’s share in energy imports from the Persian Gulf

2011–2012

2012–2013

605.89

329.85

2013–2014 2014–2015 2015–2016 2016–2017 359.23

215.82

94.07

46.94

172,753.97 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20

105,056.26 105,859.15 106,400.75

85,300.30 50,992.26

56,335.34

0.35

0.18

0.20

0.14

0.10

0.05

0.58

0.31

0.34

0.25

0.18

0.08

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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80 70 60 50 40 30 20 10 0

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Share of Oil

Fig. 2.3  Share of oil in India’s total imports from Bahrain. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

2011-12

2012-13

2013-14

Total Imports

2014-15

2015-16

2016-17

Imports from Persian Gulf

Fig. 2.4  Bahrain’s share in India’s energy imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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oil imported by India came from Bahrain. This is also reflected in the declining share of Bahrain in the Indian oil imports from the Persian Gulf region, which meets about 60 per cent of its overseas supplies. From about 0.6 per cent in 2011–2012 Bahrain’s share in energy imports from the Persian Gulf region dropped to 0.18 per cent in 2016–2017. At the same time, the share of oil in the Indian imports from Bahrain is suggesting a significant shift towards non-oil trade. In 2011–2012, for example, oil made up 67.5 per cent of India’s imports from the Kingdom, however, this dropped to 16 per cent in 2016–2017. This is the lowest in the Indo-Gulf region as oil comprises more than 90 per cent of India’s imports from countries, such as Iraq, Kuwait, and Yemen. However, because of the smallness of the overall trade, the diversification of Bahraini exports to India has not been felt in the bilateral trade. Investments Since coming to power, the NDA government has adopted a sustained policy of enhancing its business environment towards attracting foreign investments through programmes, such as Make in India, Digital India, Smart Cities, and so on. Despite being smaller than the other Gulf Arab countries, Bahrain and its companies have shown interest in investment opportunities in the energy and infrastructure sectors in India.36 There is a significant increase in Bahraini investments in India and in 2017; US$22.93 million came from Bahrain as Foreign Direct Investment (FDI) into India (Table 2.9 and Fig.  2.5). According to the Ministry of Commerce and Industry, between April 2000 and December 2017, US$163.66 million came from Bahrain and this placed the Kingdom at the 42nd position.37 This was higher than Saudi Arabia’s FDI flow. While Bahraini investments in India have been increasing, the converse has remained stagnant. The political climate has cast a shadow over the Bahraini economy and despite a host of new projects unveiled by the government and a stream of visitors to India,38 the picture remains grim. 36  Ravi, Meera. 2014. ‘Bahrain to Invest in India’s $1 Trillion Infrastructure Market’, in Khaleej Times, 7 September, https://www.khaleejtimes.com/business/markets/bahrain-toinvest-in-india-s-1-trillion-infrastructure-market, last accessed on 1 July 2018. 37  Foreign Direct Investment Statistics, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, GoI, http://dipp.nic.in/publications/fdi-statistics, last accessed on 1 July 2018. 38  The Financial Express. 2017. ‘Bahrain Takes Its Investment Story to India Inc’, 9 May, http://www.financialexpress.com/economy/bahrain-takes-its-investment-story-to-india-

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Table 2.9  FDI inflow in India from Bahrain (US$ million) Year

FDI inflow

2012 2013 2014 2015 2016 2017 Total since April 2000

1.64 2.89 17.38 4.37 22.25 22.93 163.66

Source: Adapted from Department of Industrial Policy and Promotion, Government of India, www.dipp.nic.in

25 20 15 10 5 0

2012

2013

2014

2015

2016

2017

US$ million

Fig. 2.5  FDI inflow from Bahrain to India. Source: Adapted from Department of Industrial Policy and Promotion, Government of India, www.dipp.nic.in

Some of the new initiatives identified earlier in the chapter, especially in tourism, IT, financial services, and manufacturing offer opportunities for Indian investments. India has a vibrant tourism and IT industry and Bahrain is a potential market for Indian businesses to expand. inc/660924, last accessed on 1 July 2018; The Financial Express. 2016. ‘Bahrain Eyes Investments from India’, 7 October, http://www.financialexpress.com/economy/bahraineyes-investments-from-india/410478, last accessed on 1 July 2018; Modgil, Shweta. 2017. ‘Can Bahrain Be a New Destination for Indian Start-ups?’, Inc42, 23 October, https:// inc42.com/features/bahrain-startup-hub-indian-startups, last accessed on 1 July 2018.

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Expatriates The economic slowdown has not reflected in the flow of Indian workers to the Kingdom. According to the Ministry of External Affairs, there are about 350,000 expatriates and this comprises a third of the Kingdom’s resident population. The year also witnessed a salary dispute involving G.P. Zachariades (Overseas) Limited which employed about 1500 Indian workers. Upon the expiry of their contract, they did not wish to return because of the non-payment of salaries and it was only after the intervention of the Indian government that about 700 workers were repatriated between April and May after their salary dues were settled.39 About 500 workers were given the option to change their employer and work for other companies in Bahrain.

Challenges Internal instability and the declining economic situation in Bahrain could prevent progress in bilateral relations. As noted earlier, the domestic situation though under control is stressed due to the continued problem over Shia demands for political and economic rights. The Shias have long complained of discrimination and the dissent has intensified since 2011–2012. Massive government crackdown and suppression have not checked the brewing problem which can be detrimental for Bahrain’s foreign relations. India will have to be completely on guard vis-à-vis any significant deterioration in the situation in the near future so as to ensure the security of its citizens and to protect business interests. At the same time, it is important that India understands the Bahraini concerns vis-à-vis Iran, which is a larger and ambitious neighbour and has an alleged history of invoking sectarian identity to raise its influence in regional countries, such as in Lebanon and Iraq. Bahraini and Saudi allegations of Iranian involvement in inciting Shia population in their countries cannot be completely rejected as the many activists and leaders of the protesting groups have maintained direct or indirect links with Iran. In that respect, India will have to be mindful of Bahraini and Gulf Arab concerns while seeking progress in ties with Iran. This would be a major challenge for India in the coming years. 39  India, Rajya Sabha. 2017. ‘Rajya Sabha Question No.511 Indian Workers in Bahrain’, 20 July, http://www.mea.gov.in/rajya-sabha.htm?dtl/28665/question+no511+inidan+wo rkers+in+bahrain, last accessed on 1 July 2018.

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Additionally, India needs to stop ignoring smaller Gulf countries such as Bahrain but continue political engagements with them. The growing security concerns demands that these smaller countries are not ignored when it comes to seeking security cooperation. Economic and investment opportunities should be exploited and there is a scope for enhancing a two-way investments. Given how India has failed in exploiting the multilateral forums, such as the Manama Dialogue and the India–Arab Dialogue to enhance its engagements and presence in the region, and if India has to fully realize the potential for economic and security cooperation, these need to be addressed and rectified.

CHAPTER 3

Iran

Key Information Ruling party: Combatant Clergy Association; Supreme leader (Wilayat-­ e-­Faqih): Ali Khamenei (since 4 June 1989); President: Hassan Rouhani (since 15 June 2013, re-elected in May 2017 presidential election); National Day: 1 April; Parliament: 290-member Majlis; Last parliamentary election: 26 February 2016; Major group in parliament: Reformists; National carrier: Iran Air. Socio-Economic Indicators Area: 1,648,195 sq. km; Population: 82.2 million; Native: 100 per cent; Expats: NA; Religious groups: Muslim 99.4 per cent (Shia 90–95 per cent; Sunni 5–10 per cent); Zoroastrian, Jewish, and Christian 0.3 per cent (2011 est.); Youth: 16.57 per cent; Population growth rate: 1.24 per cent (2017 est.); Life expectancy at birth: 71.4 years; Major population groups: Persians 61 per cent; Azeri 16 per cent; Kurds 10 per cent; Lurs 6 per cent; Baloch 2 per cent; Arabs 2 per cent; Turkmen and Turkic tribes 2 per cent; other 1 per cent; Literacy rate: 86.8 per cent; National currency: Iranian Riyal (IRR); GDP: US$427.7 billion (2017 est.); Foreign trade: Export—US$91.99 billion, Import—US$70.53 billion (2017 est.); Defence budget: 2.69 per cent of GDP (2015 est.); Sovereign wealth fund: US$91 billion; External debt: US$10.56 (2017 est.) billion; Per capita income: US$20,000 (2017 est.); Oil reserves: 158.4  ­billion bbl © The Author(s) 2019 P. R. Kumaraswamy et al., Persian Gulf 2018, Persian Gulf, https://doi.org/10.1007/978-981-13-1978-5_3

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(2017 est.); Gas reserves: 33.5  trillion m3 (2017 est.); HDI rank: 69; Infant mortality rate: 15.9/1000 live births; UN education index: 0.683; Gender inequality index: 0.515 0.509 (2015 est.); Labour force: 30.5 million (2017 est.); Unemployment rate: 12.4 per cent (2017 est.); Urban population: 74.4 per cent (2017 est.); Rate of urbanization: 1.78 per cent (2015–2020 est.); Last national census: 2016. India Related Indian cultural centre: Tehran (inaugurated in 2013); Number of Indians: 4000 (approximately 2017 est.); Number of places of worship for Indians: two temples and three Gurudwaras; Indian schools: one; Indian banks: State Bank of India; Currency exchange rate: IRR 1 = 0.0015 INR (April 2018); Last visit to India by ruler: President Dr. Hassan Rouhani, 15–17 February 2018; Last Indian prime minister to visit Iran: Prime Minister Narendra Modi, May 2016. * * * The non-Arab and Shia-majority Iran is one of the most important countries of the Middle East and a regional power in the Persian Gulf. The Islamic Republic of Iran sees and depicts itself as a peaceful country which has never been aggressive towards its neighbours and wishes to be recognized as a legitimate actor in all the regional affairs. On the contrary, its Gulf Arab neighbours, especially Saudi Arabia and Bahrain, perceive Iran as a regional hegemon that aspires to ‘Persianise’ the Gulf and to undermine the Sunni Arab monarchies and even the Saudi control over the two holy mosques. These place India in a quandary. The roots of the Iran–Saudi mistrust, contest, and confrontation go back to the Islamic Revolution in Iran in 1979 which threatened to spread to the whole region and created an arch-rivalry between Tehran and Riyadh. Though the two undertook rapprochement efforts in the 1990s, the US-led Iraqi invasion of 2003 and its aftermath revived their rivalry and the Arab Spring protests and subsequent regional developments brought them on the brink of direct confrontation. India has friendly relations with both, and, in the past, New Delhi has been seen getting closer with Tehran for a variety of reasons, including convergence of interest. However, since Narendra Modi became the prime

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minister, India has been following a more nuanced and delicate balance between the two. India’s Iran policy is based on energy security and seeking connectivity and land corridor to Afghanistan and Central Asia to bypass Pakistan. Notwithstanding the interests converge, India has been uncertain about its approaches towards Iran as the bilateral relations often come under the American radar, scrutiny, and pressures. Its growing proximity with Riyadh has also been a reason for the distance developing between New Delhi and Tehran. This trend continued in 2017 as a number of problematic issues cropped up in Indo-Iranian bilateral relations. Iran’s wish to renegotiate some of the energy-related deals and opening of the Farzad B gas field for global bidding despite earlier assurances that an Indian consortium led by OVL—which was instrumental in finding the field—would be given a stake irked New Delhi. On the other hand, India’s slow and gradual approach to developmental projects in Iran, especially the Chabahar port, annoyed Iran. Though cooperation on the Chabahar port has kept the trajectory friendly, President Donald Trump’s May 2018 decision to walk away from the June 2015 nuclear deal and the re-­imposition of anti-Iran sanctions would create more problems for Indo-­Iranian relations.

Domestic Developments The situation within Iran in 2017 continues to be troubled and uncertain and despite the removal of international sanctions following the signing of the Joint Comprehensive Plan of Action (JCOPA), the much anticipated economic recovery did not materialize. The coming to power of the moderate reformist faction of the ruling clergy led by President Hassan Rouhani in 2013 and his re-election on 19 May 2017 did not have the desired effect on the political environment or economic growth. Both inside and outside the country, Iran continues to exhibit a sign of defiance and the Rouhani government, which is yet to move away from the hard-line security approach has, in recent years, increased its stronghold over the Iranian polity and economy.1 1  Majidyar, Ahmad. 2018. ‘IRGC’s Role in Iran’s Economy Growing with Its Engineering Arm Set to Execute 40 mega-projects’, in Iran Observed, 7 May, Middle East Institute, http://www.mei.edu/content/io/irgcs-role-irans-economy-growing-its-engineering-armset-execute-40-mega-projects, last accessed on 1 July 2018.

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Politics President Rouhani was re-elected for a four-year term on 19 May 2017 and he secured about 57 per cent of the vote in the first round itself.2 As ­highlighted in Table 3.1 and Fig. 3.1, out of the 41.2 million votes polled, he secured 23.5 million votes as against his nearest rival Ebrahim Raisi who secured 15.8 million votes. The election once again highlighted the limits of the process. As many as 1636 candidates, including 137 women, filed their nomination papers but only six men were allowed to contest and the rest were disqualified. Following the withdrawal of two candidates, Eshaq Jahagiri and Mohammed Bagher Ghalibaf, only four were left in the fray— Mostafa Hashemitaba, Mostafa Mirsalim, Ebrahim Raisi, and the incumbent President Rouhani. The voter turnout was comparatively high with 73 per cent or over 41 million out of 56 million exercising their franchise. While there were other issues, two key issues dominated the election campaign, namely, the election of Donald Trump—who made a number of anti-Muslim remarks during his presidential campaign and his threats of withdrawal from JCOPA and the state of the Iranian economy. The candidates largely criticized the Rouhani government over its failure to bring about economic development since assuming office in 2013. They were also critical of JCOPA, which for them inhibited the advancement of the Iranian nuclear programme without bringing in the economic benefits as promised when Iran signed the agreement in June 2015.3 While President Trump’s Table 3.1  Presidential election results, 2017 Number of registered voters Total votes cast Invalid/blank Hassan Rouhani Ebrahim Raisi Mostafa Mirsalim Mostafa Hashemitaba

56,410,234 41,220,131 1,200,931 23,549,616 15,786,449 478,215 215,450

Share (per cent) 73.30 2.90 57.14 38.5 1.16 0.52

Source: Press TV, 20 May, 2017, http://www.presstv.com/Detail/2017/05/20/522529/Iran-presidentialelection-early-results-first-round 2  In 2013, he had secured the mandate with 50.71 per cent votes in the first round election, defeating his closest rival, Mohammad Bagher Ghalibaf, who had secured 16.56 per cent votes. 3  Farmanfarmaian, Roxane. 2017. ‘Iran’s Presidential Election Puts Populism to the Test’, Al-Jazeera, 10 May, https://www.aljazeera.com/indepth/opinion/2017/05/iran-presidential-election-puts-populism-test-170510072945886.html, last accessed on 1 July 2018.

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Hassan Rouhani

Ebrahim Raisi

Mostafa Mirsalim

Mostafa Hashemitaba

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Fig. 3.1  Share of votes of candidates in presidential election, 2017. Source: Press TV, 20 May, 2017, http://www.presstv.com/Detail/2017/05/20/522529/ Iran-presidential-election-early-results-first-round

rhetoric against the nuclear deal and Iran cast a shadow over Rouhani, it did little to affect his re-election bid; instead, there was an increase in his vote share. In 2013, Rouhani secured 50.71 per cent of the valid votes as against 57.14 per cent four years later. Indeed, the presidential election was held amidst growing tension with the US, and under President Trump the latter returned to pre-JCOPA threats and rhetoric. In his first presidential order, Trump imposed a travel ban upon citizens of seven Muslim countries, including Iran.4 In line with his campaign pledges, he threatened to withdraw from JCOPA concluded by the Obama administration.5 These became some of the important issues in the campaign and gave Rouhani’s opponents and critics within the reform bloc the ammunition to question and attack the logic of signing the deal with the US.  The others are Iraq, Yemen, Syria, Somalia, Libya, and Sudan.  BBC News. 2017. ‘Trump Orders Iran Nuclear Deal Review Despite Compliance’, 19 April, http://www.bbc.com/news/world-us-canada-39642272, last accessed on 1 July 2018. 4 5

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For its part, the US administration was also speaking in different voices. In accordance with the Iran Nuclear Agreement Review Act of 2015 (INARA), on 19 April President Trump certified to the US Congress that Iran was complying with the provisions of the JCPOA. At the same time, the letter of the Secretary of State Rex Tillerson stated that the Iranian compliance also raised concerns about the continued Iranian involvement in creating instabilities in the region.6 It went on to add that notwithstanding its compliance, ‘Iran remains a leading state sponsor of terror through many platforms and methods. President Donald J. Trump has directed a National Security Council-led interagency review of the Joint Comprehensive Plan of Action (JCPOA) that will evaluate whether suspension of sanctions related to Iran pursuant to the JCPOA is vital to the national security interests of the United States’.7 In other words, though President Trump was certifying the JCPOA as per the provisions of INARA, the administration was reviewing Iran’s regional behaviour and was concerned about its non-nuclear activities. Not addressing the latter during the nuclear agreement was one of the principal Saudi criticisms of the JCPOA.8 The anti-­Iranian posture of the Trump administration added fuel to the conservative faction within Iran to deride President Rouhani.9 The economic performance—another dominant issue of the election campaign—was also linked to the JCPOA. Raisi who was closely trailing Rouhani during the campaign was supposed to be the favoured candidate of the Supreme Leader Ayatollah Khamenei and, on many occasions, the latter criticized the economic performance of the Rouhani government. He highlighted that the JCPOA did not bring the economic benefits to the country10 6  Wroughton Lesley. 2017. ‘U.S. Says Iran Complies with Nuke Deal But Orders Review on Lifting Sanctions’, Reuters, 19 April, https://www.reuters.com/article/us-iran-nuclearusa-tillerson-idUSKBN17L08I, last accessed on 1 July 2018. 7  Tillerson, Rex. 2017. ‘Iran Continues to Sponsor Terrorism’ Press Statement, US Department of State, Washington, 18 April, DC, https://www.state.gov/secretary/20172018tillerson/ remarks/2017/04/270315.htm, last accessed on 1 July 2018. 8  Gause, F. Gregory. 2013. ‘Why the Iran deal Scares Saudi Arabia’, The New Yorker, 26 November, https://www.newyorker.com/news/news-desk/why-the-iran-deal-scares-saudiarabia, last accessed on 1 July 2018. 9  Torfeh, Massoumeh. 2016. ‘Will Trump Play Into the Hands of Iranian Hardliners?’, Al-Jazeera, 26 November, https://www.aljazeera.com/indepth/opinion/2016/11/trumpplay-hands-iranian-hardliners-161124115749230.html, last accessed on 1 July 2018. 10  Middle East Monitor. 2017. ‘Powerful Clerics Back Rouhani Rival in Iran Presidential Elections’, 3 May, https://www.middleeastmonitor.com/20170503-powerful-clerics-backrouhani-rival-in-iran-presidential-elections, last accessed on 1 July 2018.

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and argued that the Iranian economy did not register any significant growth under Rouhani. Raisi was joined by conservative critics who challenged the performance of the government and, on occasions, even the Supreme Leader Khamenei expressed concerns over the escalating unemployment.11 Seen in this context, Rouhani’s re-election dispelled the fears of a conservative victory, which would have intensified both regional and international tensions. Though he pursued a policy of minimizing Iran’s isolation, President Rouhani seemed to have conceded the political space to the conservatives and the security establishment, who have been critical of his economic performance. As a result, the role of the Iranian Revolutionary Guards Corps (IRGC), which reports directly to the Supreme Leader, in the Iranian economy has increased.12 Amidst the election and vehement criticism against Rouhani, the clamour for continued revolutionary zeal and a confrontation vis-à-vis the Trump administration has been increasing. A leading analyst observed that the inauguration of Rouhani for the second term was a ‘bittersweet moment for him’.13 Since the two factions within the regime—conservative and reformist— have divergent views on Iran’s place in the international system, they have been advocating different approaches.14 As a result, despite his re-election, President Rouhani remains vulnerable to political manoeuvring and will not be able to pursue political and economic policies which his reformist supporters desire. The hard-line attitude of the Trump administration, many analysts fear, would weaken the Rouhani government and bolster the conservatives, who, despite the electoral defeat, will be able to set the agenda in the political and economic realm and would not allow normalization with Washington.15 The power struggle within Iran is a recipe for domestic and regional instability.  Ibid.  Majidyar, Ahmad. 2018. ‘Khamenei’s Ruling Unlikely to Loosen IRGC’s Grip on Iran’s Economy’, Iran Observed, 24 June, Middle East Institute, Washington, DC, http://www. mei.edu/content/article/io/khamenei-s-ruling-won-t-radically-change-irgc-s-role-iran-seconomy, last accessed on 1 July 2018. 13  Vaez, Ali. 2017. ‘Rouhani 2.0 vs. the Hawks in Washington and Tehran’, The New York Times, 4 August, https://www.nytimes.com/2017/08/04/opinion/rouhani-2-0-vs-thehawks-in-washington-and-tehran.html, last accessed on 1 July 2018. 14  Kar, Mehrangiz. 2010. ‘Reformist Islam versus Radical Islam in Iran’, Working Paper, Number 4, The Brookings Project on U.S. Relations with the Islamic World, https://www. brookings.edu/wp-content/uploads/2016/06/11_reformist_islam_kar.pdf, last accessed on 1 July 2018. 15  Vaez, Op cit. 13. 11 12

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By the end of year, Iran was also facing challenges due to widespread protests in different parts of the country. The first major demonstration took place on 28 December 2017  in the second-largest city, Mashhad, where demonstrators demanded better employment, an end to corruption, and economic development. This was supposedly spearheaded by the conservatives who were not happy with Rouhani’s policies and the economic and political failures.16 Within days, however, other cities, especially Tehran, Esfahan, and Shiraz witnessed popular protests and the regime had to use security forces to contain the situation. Media reports suggest that nearly 25 people were killed while scores were injured in these protests and over 5000 persons were arrested.17 The authorities pinned these protest on anti-­revolution groups based externally and foreign instigation, especially by the US, Saudi Arabia, and Israel.18 Foreign Policy The return of anti-Iranian rhetoric from Washington discussed earlier has been accompanied by significant Iranian involvement in regional developments. The perceived Qatari sympathy for Iran trigged a major regional crisis in June when Saudi Arabia and its allies within the GCC (Bahrain and the UAE) broke off diplomatic relations with Doha. The economic boycott against Qatar resulted in Tehran increasing its political and economic ties with Doha. Iran has become a major supplier of fresh fruits, vegetables, and other consumer items as well as construction-related materials to Qatar.19 Furthermore, directly or indirectly Iran has expanded its presence in many conflicting situations, including Iraq, Lebanon, Palestine, Syria, and Yemen. Its military involvement in Syria continued to grow during the year. The 16  BBC News. 2017. ‘Iran Protests Continue for a Third Day Despite Warnings’, 30 December, http://www.bbc.com/news/world-middle-east-42521298, last accessed on 1 July 2018. 17  Reuters. 2018. ‘Most Protestors Detained in Recent Iran Unrest Freed, 300 Still in Jail: Minister’, 30 January, https://www.reuters.com/article/us-iran-rallies-arrests/most-protesters-detained-in-december-unrest-freed-300-still-in-jail-minister-idUSKBN1FJ11X?feed Type=RSS&feedName=worldNews, last accessed on 1 July 2018. 18  Press TV. 2017. ‘Washington’s Hand Involved in Iran Protests: Analyst’, 31 December, http://www.presstv.com/Detail/2017/12/31/547371/Iran-US-protests, last accessed on 1 July 2018. 19  Xinhua. 2017. ‘Iran’s Non-oil Exports to Qatar Rise Despite Hurdles: Report’, 27 August, http://www.xinhuanet.com/english/2017-08/27/c_136559193.htm, last accessed on 1 July 2018.

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Syrian regime has been making territorial gains and strengthening its ­position vis-à-vis the rebels and jihadi forces, mainly due to Iranian and Russian support.20 Iran reportedly has as many as 10 military bases in Syria where nearly 20,000-strong militia have been trained by the Iranian Revolutionary Guard Corps (IRGC).21 This, however, is only a part of the Iranian involvement in Syria. Along with Russia and Turkey, the Islamic republic is actively involved in the Astana process which seeks a political settlement to the Syrian crisis.22 This led to the partial implementation of de-escalation zones and has abated fighting in many parts of the country. The Iranian involvement in the Astana talks has ensured that the interests of the Assad regime has been protected and Damascus has not been forced to surrender to the demands of Russia, Turkey, Kurds, or other rebel groups who are also part of the process, but whose interests vis-à-vis Damascus vary at times.23 Through its continued presence in and engagement with Syria, Tehran has significantly enhanced its regional profile and the military presence of Iran close to its borders has also heightened Israeli security concerns.24 Iran continues to support and train the Shia militias in Iraq who had organized as the Popular Mobilization Force (PMF) and played a significant role in defeating the Islamic State of Iraq and Syria (ISIS) which was announced by the Iraqi Prime Minister Haider Abadi in December. The PMF also fought with the Iraqi forces against the Kurds in Kirkuk after the Kurdish referendum on independence. However, with the military defeat of the ISIS and growing expectations for peace and stability, a debate has emerged within Iraq over the future of the PMF. Conscious of the Iran-backed Hezbollah’s example in Lebanon, Iraqi nationalists are demanding the disarming of the militia and their r­ehabilitation 20  Antonyan, Tatev M. 2017. ‘Russia and Iran in the Syrian Crisis: Similar Aspirations, Different Approaches’, Israel Journal of Foreign Affairs, 11 (3): 337–48. 21  Bachner, Michael. 2018. ‘Iran Has 10 Military Bases in Syria, Two Near Israel Border— Analyst’, The Times of Israel, 19 February, https://www.timesofisrael.com/iran-has-10-military-bases-in-syria-two-near-israel-border-analyst, last accessed on 1 July 2018. 22  Priya, Lakshmi. 2017. ‘Astana Talks: A Prelude to Peace in Syria’, IDSA Backgrounder, 27 November, https://idsa.in/backgrounder/astana-talks-a-prelude-to-peace-in-syria_ lpriya_271117, last accessed on 1 July 2018. 23  Antonyan. ‘Russia and Iran in the Syrian crisis’. op. cit. n.20. 24  Eran, Oded. 2018. ‘Why Israel Sees Iranian Presence in Syria As a Threat’, 16 March, Valdai Discussion Club, http://valdaiclub.com/a/highlights/why-israel-sees-iranian-presence-in-syria, last accessed on 1 July 2018.

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into the Iraqi security forces while others are seeking a ­complete merger of the PMF with the Iraqi army.25 The Iran-backed forces are opposed to both of these options and wish to retain the independent identity and autonomous existence of the PMF. An independent militia in Iraq akin to Hezbollah gives Iran a strategic leverage over its regional rivals who are also looking to influence Baghdad. In Yemen, the Iranian involvement has ensured that the Houthi rebels would not lose much ground despite the incessant bombing campaign and ground assault by the Saudi-led and the US-backed military forces.26 Though the Houthis have lost some territory to the Hadi government and the Southern Transitional Council (STC), they continued to maintain their grip over the capital Sana’a and established a robust governing structure under the tutelage of the Supreme Political Council (SPC) backed by Iran. Moreover, Tehran has been allegedly supplying drones and weapons to Houthis and extending intelligence support towards resisting the Saudi-­ led offensive.27 The external interventions has created a stalemate in the Yemen crisis and contributed to a major humanitarian crisis in that country. Iran, however, sees Yemen as a major foreign policy success as it has been able to expand its regional influence with limited financial or material cost.28 Reportedly, only a few Iranian military personnel are active on the ground with the Houthis and even they are involved only in training and capacity-­ building exercises.29 Despite this, the crisis has given Iran a strategic edge 25   O’Driscoll, Dylan and Dave van Zoonen. 2017. The Hashd al-Shaabi and Iraq Subnationalism and the State, Middle East Research Institute, Erbil, Iraq, http://www.merik.org/wp-content/uploads/2017/03/PMF-Report-0.2.pdf, last accessed on 1 July 2018. 26  Sharp, Jeremy M. 2018. ‘Yemen: Civil War and Regional Intervention’, Congressional Research Service Report, No.R43960, United States Congress, https://fas.org/sgp/crs/ mideast/R43960.pdf, last accessed on 1 July 2018. 27  Stewart, Phil. 2017. ‘In First, U.S. Presents Its Evidence of Iran Weaponry from Yemen’, Reuters, 14 December, https://in.reuters.com/article/usa-iran-arms/in-first-u-s-presentsits-evidence-of-iran-weaponry-from-yemen-idINKBN1E82KD, last accessed on 1 July 2018. 28  Bayoumy, Yara and Mohammed Ghobari. 2014. ‘Iranian Support Seen Crucial for Yemen’s Houthis’, Reuters, 15 December, https://www.reuters.com/article/us-yemenhouthis-iran-insight/iranian-support-seen-crucial-for-yemens-houthis-idUSKBN0JT17A20141215, last accessed on 1 July 2018. 29  Baron, Adam, Waleed Alhariri, and Anthony Biswell. 2017. ‘Trump and the Yemen War: Misrepresenting the Houthis as Iranian Proxies’, Sana’a Center for Strategic Studies, 20 December, http://sanaacenter.org/files/Trump_and_the_Yemen_War.pdf, last accessed on 1 July 2018.

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over Saudi Arabia which has been seeking an amicable exit from Yemen. Towards the end of the year, Riyadh got a breakthrough after the General People’s Congress, the main opposition group and its leader and former President Ali Abdullah Saleh indicated their inclination to leave the Houthi rebels and switch over to the Saudi-led coalition. Before this could happen, Saleh was killed in an attack carried out by the Houthi militia, thus prematurely ending the possibility of a change in the Yemeni situation. Elsewhere in the region, Iran continues to expand its support to militant groups, such as Hezbollah in Lebanon and Hamas in Palestine. While individual Arab and non-Arab countries have been apprehensive of the growing Iranian influence well beyond its immediate border, there are no tangible regional or international counter-measures. This in turn has resulted in Iran being able to build a network of armed proxies and involved in the regional and internal affairs of many Arab countries. Though its allies, such as China and Russia do not view this as a threat, countries, such as Saudi Arabia, the US, and Israel view the growing Iranian influence with trepidation. Economy The Islamic Republic is the second-largest economy in the Middle East after Saudi Arabia with a GDP of US$439.5 billion in 201730 and is largely a hydrocarbon-based economy. It has the second-largest known gas reserves in the world after Russia and the fourth-­largest oil reserves after Saudi Arabia, Iraq, and Kuwait. It also has a robust agriculture and service sector and a well-established public sector which focuses on manufacturing and financial services. However, despite the huge hydrocarbon reserves and a fairly diversified economy, Iran has been suffering from severe economic problems largely due to its international isolation since the Islamic revolution of 1979. This was followed by a decade-long crippling of international sanctions over the nuclear controversy. After the signing of the JCPOA in June 2015 and the subsequent lifting of international sanctions, the economy slowly started to recover. The pace, however, was slow, primarily due to the falling oil prices and the resultant decrease in oil revenues.

30  World Bank. 2018. ‘Islamic Republic of Iran: Overview’, 1 April, http://www.worldbank.org/en/country/iran/overview, last accessed on 1 July 2018.

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According to the International Monetary Fund (IMF) and the World Bank during 2017, the Iranian GDP grew at a rate of 3 to 3.5 per cent, while the UN economic reports recorded the rate of growth at 5 per cent.31 The inflation rate was recorded at 10 per cent and higher prices of goods and services have threatened to undermine the slow growth rate. The rate of unemployment has been a major source of concern and the IMF puts it at 12.5 per cent while others suggest a much higher figure.32 For 2018, Iran presented a budget of US$100 billion which is nearly 6 per cent higher than the previous year.33 In the wake of the JCPOA, Iran attracted some international investments and many European and Asian companies showed interest, especially in key sectors of the economy, such as hydrocarbon, aviation, and financial sectors. Towards diversification, Iran has been trying to bring in countries, such as Russia, China, Japan, Korea, India, and Europe and emerge from the prolonged stagnation due to sanctions.34 In August 2017 it signed a deal with the South Korean Exim Bank for a long-term loan of US$9.5 billion for various investment projects. It entered into a US$10 billion agreement with the CITIC Trust, a Chinese investment ­management company for construction and infrastructure-related developmental projects. Some of the European financial institutions, such as Austria’s Ober bank and the Danish Danske Bank have signed agreements with Iran. The Exim Bank of Russia has entered into an agreement for investments and infrastructure support in hydrocarbon and transport sectors. Iran also entered into a US$8 billion deal with Boeing for the purchase of 80 aircrafts for its ageing and dilapidated national carrier, Mahan. Once this deal materializes, Iran will be able to overhaul its aviation industry and promote the local, regional, and international air connectivity, which in turn would enhance its trade and tourism industry. Iran is also seeking investments for the improvement of its rail and road networks and urban transportation facilities in Tehran and Mashhad. 31  Financial Tribune. 2018. ‘2017: Iran’s Economy in Review’, 2 January, https://financialtribune.com/articles/domestic-economy/79122/2017-iran-s-economy-in-review, last accessed on 1 July 2018. 32  International Monetary Fund. 2018. ‘IMF Data Mapper: Unemployment Rate’, http:// www.imf.org/external/datamapper/LUR@WEO/OEMDC/ADVEC/WEOWORLD, last accessed on 1 July 2018. 33  Financial Tribune, ‘2017: Iran’s economy in Review’. 34  D. Cathleen, Cimino-Isaacs, and Kenneth Katzman. 2017. ‘Iran’s Expanding Economic Relations with Asia’, Congressional Research Service Insight, 29 November, https://fas.org/ sgp/crs/mideast/IN10829.pdf, last accessed on 1 July 2018.

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According to one media report, ‘China has also played a major role in developing Iran’s rail sector, as Iran lies in the heart of the so-called New Silk Road—a 3200-kilometer railroad project that ultimately sees Urumqi, the capital of China’s western Xinjiang Province linked to the Iranian capital Tehran, connecting Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan along the way.’35 Furthermore, in December 2017 Iran with support from India opened the first phase of the Chabahar’s Shahid Beheshti Port in the Sistan-­ Baluchistan province. It is considered to be an international gateway and is expected to increase the port’s capacity several times over, thus leading to the improvement of local business activities and the Iranian trade with the Central Asian Republics. India has been partner of the Chabahar developmental project and in addition to US$150 million already spent on it, Delhi has committed an additional fund of US$500 million towards increasing the connectivity between the port in southern Iran with other parts of the country as well as with Afghanistan and Central Asia. Some Iranian authorities also speak of Chinese participation in the Chabahar project.36 Society Iran is a heterogeneous country. It is the biggest country in the Middle East in terms of territory and the second largest after Egypt in terms of population. However, since the Islamic revolution of 1979, it has curbed its cultural plurality and has been promoting a singular Islamic-­Persian socio-cultural milieu upon all its regions and groups. In the process, its religious, sectarian and ethnic minority groups feel suppressed and marginalized. The 300,000-strong Baha’is are not the only ones who feel discriminated, but various other groups, such as Zoroastrians, Christians, Jews, Sunni Muslims as well as the Arabs, Kurdish, and Baloch ethnic minorities have long complained of discrimination and oppression.37 Above all, like much of the Middle East, Iran is a deeply patriarchal society  Financial Tribune, ‘2017: Iran’s economy in Review’.  Business Standard. 2018. ‘Iran Invites Pak and China to Join Chabahar Project with India: Reports’, 13 March, https://www.business-standard.com/article/current-affairs/ iran-invites-pak-and-china-to-join-chabahar-project-with-india-reports-118031300606_1. html, last accessed on 1 July 2018. 37  Nader, Alireza and Robert Stewart. 2013. ‘Iran’s Forgotten Ethnic Minorities’, Foreign Policy, 3 April, http://foreignpolicy.com/2013/04/03/irans-forgotten-ethnic-minorities, last accessed on 1 July 2018. 35 36

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and the status of women has been problematic. The presence of women and minorities in the Iranian political institutions is negligible though they do have some presence in the economy. However, it is in the cultural and religious realms that the minorities, especially religious minorities (Baha’is and Sunnis) and ethnic minorities (Kurds, Baloch and Arabs), face discrimination and have to accept the Persian identity. President Rouhani came with the promise of political and social reforms and flagged the need to give women their due rights and place in the society. His track record has not been impressive as he entered his second term in August 2017. Women are not represented in large number in the parliament or in the Rouhani government. As a Freedom House report aptly summarized, ‘Women remain significantly underrepresented in politics and government. In 2017, Rouhani appointed two women among his several vice-presidents but failed to name any women as cabinet ministers. No women candidates were allowed to run for president.’38 Indeed, they are excluded from all the four pillars of the Iranian polity, namely, the Supreme Leader, President, Council of Experts, and Guardian Council. Women who sought a larger role in public life were hauled up. In an encouraging development, in December 2017, the Tehran police chief issued a statement saying women who do not follow the public dress code and conduct would not be arrested.39 Freedom of the press and media has been a major concern though reports suggest that some improvements were witnessed under Rouhani. For example, according to Freedom House, ‘… although there have been modest improvements on some human rights issues under Rouhani, including a gradual reduction in the number of imprisoned journalists, the regime maintained restrictions on freedom of expression, both offline and online, during 2017.’40

Bilateral Relations The Indo-Iranian relations are passing through a rough phase and there are many issues where their worldviews differ or are not in sync. These include specific bilateral issues as well as problems emanating from 38  Freedom House. ‘“Iran” Freedom in the World, 2018’, https://freedomhouse.org/ report/freedom-world/2018/iran, last accessed on 1 July 2018. 39  The Hindu. 2017. ‘No More Arrests for Flouting Dress Code, Says Tehran Police’, 30 December, http://www.thehindu.com/news/international/no-more-arrests-for-floutingdress-code-says-tehran-police/article22330861.ece, last accessed on 1 July 2018. 40  Freedom House, ‘Iran’.

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­ ultilateral concerns. In the wake of the JCPOA, Iran has been seeking m Indian investment and involvement in its economic developmental projects while Delhi has been sceptical, especially in the light of the Trump presidency and its anti-JCPOA rhetoric. Though Indian companies have shown interest in business opportunities in Iran, the continued uncertainty over the JCPOA did not facilitate a free flow of trade and investment between the two countries. There are some political differences between the two. The kidnapping of the Indian national, Kulbhushan Jadhav by Pakistani agencies allegedly from the Iranian soil has not led to any public acrimony but the incident has left India worried over the security of its assets in Iran.41 The differences over Farzad B gas field allocation to the Indian consortium is another major irritant between the two countries. Political Ties India and Iran have enjoyed strong political relations after the end of the Cold War when both countries rediscovered one another. Since the visit of Prime Minister P.V. Narasimha Rao in 1993, there were robust political, economic, and cultural relations between the two. President Mohammed Khatami’s visit in January 2003 as the chief guest of the Republic Day celebrations also witnessed a bilateral commitment for energy security. Subsequently, the controversy surrounding the nuclear programme overshadowed the bilateral relations and limited political engagements between the two. The exception to this are: the visit of Prime Minister Manmohan Singh to attend the 16th NAM Summit (August 2012); of Vice-President Hamid Ansari for the inauguration of President Hassan Rouhani (August 2013); of the External Affairs Minister Salman Khurshid (May 2013); and of the Iranian Foreign Minister Javad Zarif (February 2014). Since Narendra Modi became prime minister, the political engagements have intensified and climaxed with his visit to Iran in May 2016. Moreover, there are other visits since 2014 and these include visits by Women and Child Development Minister Maneka Gandhi (January 2016); External Affairs Minister Sushma Swaraj (April 2016); Minister of State for External Affairs Ministry M.J.  Akbar (September 2016); and from Iran by the 41  Bhattacherjee, Kallol. 2017. ‘Iran’s Silence on Jadhav Baffling’, The Hindu, 16 April, http://www.thehindu.com/news/national/irans-silence-on-jadhav-baffling/article18072438.ece, last accessed on 1 July 2018.

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Roads and Urban Development Minister Abbas Akhoundi (November 2014) and Foreign Minister Zarif (August 2015 and December 2016). However, 2017 witnessed some rough and turbulent times and was a defining moment in the bilateral relations as both sides developed differences over a number of bilateral and regional issues. India’s desire to remain closer to the US and to strengthen its ties with Israel and Saudi Arabia partly constrained the Indo-Iranian relations. The Chabahar port jointly developed with Indian participation also exhibited signs of unease. In December 2017, the first phase of Shahid Baheshti port was inaugurated by the Iranian president and was attended by representatives from 70 governments.42 Since the project was conceived, India has invested about US$150  million and in 2016 has ­ committed another US$500 million.43 Despite this, neither the prime minister nor his senior cabinet colleague went to Iran, but India was represented by a Minister of State in the Ministry of Shipping Pon Radhakrishnan.44 Upset over this, Iran chose to give a prominent place to the Pakistani Shipping and Ports Minister Hasil Khan Bizenjo on the dais and ostracized the Indian Minister of State. Quoting an Iranian official, Hindustan Times observed that, ‘Iran wanted to send a message that it would not allow India or any other country to use Chabahar against Pakistan’.45 The comparison is rather interesting as Indian security analysts often see Chabahar as an ‘answer’ to Gwadar port in Pakistan developed with Chinese collaboration.46 42  Government of India (GoI), Ministry of External Affairs (MEA). 2017. ‘Inauguration Ceremony of Shahid Beheshti Port at Chabahar, Iran’, 3 December, http://www.mea.gov. in/press-releases.htm?dtl/29146/inauguration+ceremony+of+shahid+beheshti+port+at+c habahar+iran, last accessed on 1 July 2018. 43  India Today. 2016. ‘India to Invest $500 million on Chabahar Port in Iran for Easy Access to Afghanistan, Europe’, 24 May, https://www.indiatoday.in/mail-today/story/ india-to-invest-500-million-on-chabahar-port-in-iran-for-easy-access-to-afghanistaneurope-325141-2016-05-24, last accessed on 1 July 2018. 44  GoI, MEA. 2017. ‘Inauguration Ceremony of Shahid Beheshti Port at Chabahar, Iran’. 45  Hindustan Times. 2017. ‘Pak Minister’s Presence at Chabahar Port Opening Indicates Shift in Ties with Iran: Report’, 11 December, https://www.hindustantimes.com/worldnews/pak-minister-s-presence-at-chabahar-port-opening-indicates-shift-in-ties-with-iranreport/story-ksSBkeR9M3r7UKS27ibrMJ.html, last accessed on 1 July 2018. 46  Mahajan, Anilesh S. 2017. India’s Chabahar vs. China’s Gwadar: New Delhi Plays Tic-TacToe with Beijing’, Business Today, 3 December, https://www.businesstoday.in/magazine/ top-story/india-spread-its-influence-asia-counter-china-deendayal-port-trust-chabahar-portchina-pakistan-economic-corridor-india-china-relation-india-pakistan/story/263807.html, last accessed on 1 July 2018.

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Thus, the Chabahar port which promised to be a major breakthrough in the bilateral relations has been facing several roadblocks.47 Moreover, the inauguration of the first phase took place on 4 December but on 2 December 2017 just 48 hours before the event, the External Affairs Minister Sushma Swaraj visited Tehran and met her Iranian counterpart Zarif but chose not to stay for the inauguration.48 New Delhi sending a junior and a relatively lesser-known minister for the inauguration was seen in India as a snub to express its displeasure over the non-allocation of Farzad B gas field to the Indian consortium. While in Iran, the junior shipping m ­ inister also took part in the second India-Iran-Afghanistan Ministerial-level trilateral meeting on the Chabahar Port development49 and this was a follow up towards implementing an agreement signed during the visit of Prime Minister Modi to Iran in May 2016.50 Earlier in August, India sent the Minister of Road Transport, Highways and Shipping, Nitin Gadkari to the inauguration of President Rouhani’s second term in office. During the occasion, he met the president, discussed various bilateral issues, and conveyed an official invitation to visit India. In his media interactions, Gadkari remarked: ‘Both sides reiterated their commitment to complete and operationalize the (Chabahar) Port at the earliest that would contribute to bilateral and regional trade and economic development and also provide alternative access to landlocked Afghanistan to regional and global markets.’51 He  further added: ‘Once Chabahar is operationalized, which we are hopeful to be in 12 to 18 months’ time, it will prove to be a gateway to golden opportunities to boost trade and business.’52 In a statement 47   India, Rajya Sabha. 2016. ‘India-Iran Agreement on Chabahar Port’, Unstarred Question No. 432, 21 July, http://www.mea.gov.in/rajya-sabha.htm?dtl/27098/question +no432+indiairan+agreement+on+chabahar+port, last accessed on July 1 2018. 48  GoI, MEA. 2017. ‘Visit of External Affairs Minister to Iran’, 2 December, http://www. mea.gov.in/press-releases.htm?dtl/29145/visit+of+external+affairs+minister+to+iran+dece mber+2+2017, last accessed on 1 July 2018. 49  GoI. 2017. ‘Joint Statement of Afghanistan, India and Iran Trilateral Meeting on Implementation of Chabahar agreement’, 3 December, http://www.mea.gov.in/bilateraldocuments.htm?dtl/29147/joint+statement+of+afghanistan+india+and+iran+trilateral+me eting+on+implementation+of+chabahar+agreement, last accessed on 1 July 2018. 50  India, Lok Sabha. 2017. ‘Mediation by Iran’, Unstarred Question No. 512, 19 July, http://www.mea.gov.in/lok-sabha.htm?dtl/28640/question+no512+mediation+by+iran, last accessed on 1 July 2018. 51  Haider, Suhasini. 2017. ‘Gadkari Reaches Out to Iran’, in The Hindu, 7 August, http:// www.thehindu.com/news/national/gadkari-reaches-out-to-iran/article19440598.ece, last accessed on 1 July 2018. 52  Ibid.

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issued on the visit, the Ministry of External Affairs observed: ‘The visit by a senior Minister like Mr. Gadkari, who ­represented India at the swearing-­in ceremony for Mr. Rouhani on Saturday, is seen as a significant reach out by the government after months of a slide in relations between the two countries.’53 However, a few months later, things looked less optimistic. Another issue which cropped up during the year was the kidnapping of Kulbhushan Jadhav. The Ministry of External Affairs and other Indian agencies claimed Jadhav, a retired naval officer, was on a personal visit to Iran when he was kidnapped by Pakistani agencies.54 Following his ­conviction by Pakistan on espionage charges, India referred the matter to the International Court of Justice and the issue has become another irritant in Indo-Pakistan relations. However, Jadhav was on Iranian soil and on a personal business trip raised a few questions. Most importantly, if he was kidnapped on Iranian territory, was the matter taken up with Iran? The Ministry of External Affairs spokesperson refused to comment on this issue when probed by the media.55 It is pertinent to ask what has been the official Iranian stand. Media reports in India flagged the Iranian silence.56 The announcement of the arrest was made during the visit of President Rouhani to Pakistan and led to speculations in Pakistani media of an Iranian involvement which was denied by Rouhani57 and rebutted by the Iranian embassy in Pakistan.58 Indeed, it is worth remembering that in 2012, Iranian elements were accused of involvement in a terror attack on an Israeli embassy  Ibid.  GoI, MEA. 2017. ‘External Affairs Minister’s Statement in Rajya Sabha on Case of Shri Kulbhushan Jadhav, Indian Citizen, Awarded Death Sentence by a Pakistani Military Court’, 11 April, http://www.mea.gov.in/Speeches-Statements.htm?dtl/28373/external+affairs+ ministers+statement+in+rajya+sabha+on+case+of+shri+kulbhushan+jadhav+indian+citizen+ awarded+death+sentence+by+a+pakistani+military+court+april+11+2017, last accessed on 1 June 2018. 55  GoI. 2017. ‘Transcript of Media Briefing by Official Spokesperson’, 12 May, http:// www.mea.gov.in/media-briefings.htm?dtl/28456/transcript+of+weekly+media+briefing+b y+official+spokesperson+may+10+2017, last accessed on 1 July 2018. 56  Bhattacherjee, ‘Iran’s silence on Jadhav baffling’. 57  Roy Chaudhury, Dipanjan. 2016. ‘No RAW Talks with Pakistan: Hassan Rouhani’, The Economic Times, 28 March, https://economictimes.indiatimes.com/news/politics-andnation/no-raw-talks-with-pakistan-hassan-rouhani/articleshow/51576806.cms, last accessed on 1 July 2018. 58  Haider, Mateen. 2016. ‘Iran Slams Pak Media for “Undignified Rumours” on Indian spy Arrest’, Dawn, 31 March, https://www.dawn.com/news/1249073, last accessed on 1 July 2018. 53 54

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personnel in New Delhi but despite repeated requests, Tehran refused to cooperate in the investigation.59 Energy remains another issue straining bilateral concerns. Led by the ONGC Videsh Limited (OVL), a three-member consortium comprising Oil India, Indian Oil Corporation, and OVL, discovered the Farzad B gas field and an informal understanding indicated that India would get the production rights.60 Much to New Delhi’s disappointment, in April 2017 Iran ­indicated that it would opt for alternate options and sign an agreement with Russia’s Gazprom for the development of the gas field.61 On several occasions, India’s Petroleum and Natural Gas Minister Dharmendra Pradhan flagged official sentiment that India should be granted the rights to develop the gas field.62 Media reports in Iran suggest that though talks are still on, the chances of India getting the development rights are slim.63 Meanwhile, during the year, India had lowered its oil imports from Iran64—a development attributed to the Trump administration and this did not go down well with Iran.65 59  Talwar, Aradhana. 2012. ‘India Watch’, No. 27, Middle East Institute, New Delhi, http://www.mei.org.in/archives-india-watch/issue-no-27/india-1333218600-watch, last accessed on 1 July 2018. 60  Kennedy, Charles. 2016. ‘India may lose prize Iranian gas field to Saudi Arabia’, Pipeline and Gas Journal, May, https://pgjonline.com/magazine/2016/may-2016-vol-243-no-5/ web-exclusive/india-may-lose-prize-iranian-gas-field-to-saudi-arabia, last accessed on 17 July 2018. 61  Financial Express. 2017. ‘Iran Ropes in Russia’s Gazprom for Farzad B Gas Field, Puts Pressure on India’, 7 June, https://www.financialexpress.com/industry/iran-ropes-in-russiasgazprom-for-farzad-b-gas-field-puts-pressure-on-india/705954, last accessed on 1 June 2018. 62  The Economic Times. 2017. ‘India Wants Iran to Reciprocate on Gas Field Award: Dharmendra Pradhan’, 15 June, https://economictimes.indiatimes.com/industry/energy/ oil-gas/india-wants-iran-to-reciprocate-on-gas-field-award-dharmendra-pradhan/articleshow/59158047.cms, last accessed on 1 July 2018. 63  Press TV. 2017. ‘Iran, India Seem to Be Parting Ways on Farzad B’, 5 September, http://www.presstv.com/Detail/2017/09/05/534091/Iran-India-Farzad-B-gas-fieldRussia-Israel, last accessed on 1 July 2018. 64  Verma, Nidhi. 2017. ‘India Cuts Oil Imports Plans from Iran by a Quarter over Gas Field Row’, Reuters, 2 May, https://www.reuters.com/article/us-india-iran-oil/india-cuts-oilimport-plans-from-iran-by-a-quarter-over-gas-field-row-idUSKBN17Y1DR, last accessed on 1 July 2018; Bhattacharjee, Subhomoy. 2017. ‘Here’s Why India Decided to Cut Iranian Oil Purchases in Row over Gas Field’, Business Standard, 5 April, http://www.business-standard. com/article/opinion/here-s-why-india-decided-to-cut-iranian-oil-purchases-in-row-overgas-field-117040501125_1.html, last accessed on 1 July 2018. 65  The Hindu Business Line. 2017. ‘Iran Retaliates against India’s Decision to Cut Oil Imports’, 7 April, https://www.thehindubusinessline.com/economy/iran-retaliates-againstindias-decision-to-cut-oil-imports/article9621871.ece, last accessed on 1 July 2018.

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Above all, the question of Kashmir entered the bilateral relations. The Kashmir issue has been a constant problem that has to be resolved by Indian leaders, the sooner the better. Off and on, Iranian leaders have been flagging Kashmir and on 26 June while addressing the congregation in Tehran after the Eid-al-Fitr prayers, Khamenei referred to Kashmir as part of Muslim/Islamic territories that are troubled due to conflict and urged the need to extend support to those who are fighting for its liberation. In his words, ‘Conflicts in Yemen, Bahrain, problems in all Islamic countries, are major wounds on the body of Islam. The World of Islam should explicitly support the people of Yemen, and express their disdain against the oppressors who’ve attacked the people in such horrible ways during the month of Ramadan … The same is true for the people of Bahrain and Kashmir: Our people can back this great movement within the World of Islam.’66 This was not the first time that the Iranian leaders have clubbed Kashmir as a territory under occupation or people under suppression and hence the need for their liberation. Iran has been actively involved in the Organisation of Islamic Cooperation (OIC) deliberation, and, along with Turkey, has been condemning India over its handling of the insurgency in Kashmir. This time around, Khamenei’s statement came just days before Prime Minister Modi’s visit to Israel. Replacing its benign response, India has to develop a comprehensive response to senior Iranian leaders raising politically sensitive issues. It is undeniable that the conflict in Kashmir is a sensitive issue and has to be addressed by the Indian leaders. Since New Delhi insists that it is an internal matter, outside intervention or observations have to be curtailed. At the same time, such statements are also a reflection of the intense competition within Iran between the conservatives and the reformists. Hence, tacitly flagging human rights issues in Iran and the conditions of Baha’is and Baluch communities in multilateral forums might be considered. Moreover, there are no close defence and security ties between the two countries, but they selectively share intelligence and cooperate in maritime security in the Indian Ocean and Persian Gulf. The joint statement issued 66  The Indian Express. 2017. ‘Iran’s Ayatollah Khamenei Talks of Kashmir Conflict in Eid ul-Fitr Remarks’, 27 June, http://indianexpress.com/article/world/irans-ayatollah-khamenei-talks-of-kashmir-conflict-in-eid-ul-fitr-remarks-4723912, last accessed on 1 July 2018.

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during Prime Minister Modi’s 2016 visit flagged a host of issues67 and there were expectations that security cooperation would materialize; however, this did not happen.68 This is in contrast to the growing Indian security-­related cooperation with the Gulf Arab countries, especially Saudi Arabia, and the UAE. Trade and Commerce Commercial trade remains the backbone of the bilateral relations and is dominated by the Indian import of crude oil from Iran. India continued to engage with Iran even during the heights of the US-led sanctions over the nuclear controversy. There was a significant improvement in the bilateral trade which increased from US$9 billion in 2015–2016 to US$12.9 billion in 2016–2017 (Table  3.2 and Fig.  3.2). During the year, Iran was India’s 14th-largest trading partner in the world and third in the Persian Table 3.2  India–Iran bilateral trade (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 India’s exports to Iran India’s imports from Iran Total bilateral trade Share of Iran in India’s total trade

2411.33

4971.35

4175.06

2718.51

2379.61

13,790.16 11,594.46 10,307.16

8955.02

6278.75

10,506.51

16,201.48 14,945.53 15,278.51 13,130.08

9060.26

12,886.12

1.41

1.95

2.04

3351.07

1.89

2.00

1.73

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in 67  GoI, MEA. 2016. ‘India – Iran Joint Statement – “Civilisational Connect, Contemporary Context” during the Visit of Prime Minister to Iran’, 23 May, http://mea.gov.in/bilateraldocuments.htm?dtl/26843/India__Iran_Joint_Statement_quot_Civilisational_Connect_ Contemporary_Contextquot_during_the_visit_of_Prime_Minister_to_Iran, last accessed on 1 June 2018. 68  Ningthoujam, Alvite Singh. 2016. ‘A Renewed Indo-Iranian Security Cooperation in the Offing’, Vivekananda International Foundation, http://www.vifindia.org/article/2016/september/07/a-renewed-indo-iranian-security-cooperation-in-the-offing, last accessed on 1 July 2018.

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18 16 14 12 10 8 6 4 2 0

2011-12

2012-13

2013-14 Exports

2014-15 Imports

2015-16

2016-17

Total Trade

Fig. 3.2  India–Iran bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

Gulf region, and despite the political tensions and disagreements, both oil and non-oil trade between the two improved and the bilateral non-oil trade reached US$4.74 billion, the highest in recent years.69 The Indian imports from Iran during 2016–2017 stood at US$10.5 billion while exports to Iran witnessed a drop and touched US$2.3 billion. The major Indian exports include rice, tea, iron and steel, organic chemicals, metals, electrical machinery, drugs and pharmaceutical, and so on. Besides crude oil, India imports chemicals, fertilizers, dry fruit and nuts, glass and glassware, peals, and precious stones from the Islamic republic. Issues over the pending payment for the Indian imports of Iranian oil continue to plague the bilateral trade as fears renewed over US sanctions on third parties doing business with Iran after President Trump’s i­nauguration in January 2017.70 Partly to mitigate the situation, Tehran has been seeking the permission of the Reserve Bank of India to open branches of 69  Financial Tribune. 2017. ‘Non-oil Trade between Iran, India on Rebound’, 31 October, https://financialtribune.com/articles/domestic-economy/75258/non-oil-trade-betweeniran-india-on-rebound, last accessed on 1 July 2018. 70  Verma, Nidhi and Manoj Kumar. 2017. ‘India Tries to Fix Iran Trade Payments as Trump Hardens Line’, Reuters, 22 March, https://www.reuters.com/article/us-india-irantrade/india-tries-to-fix-iran-trade-payments-as-trump-hardens-line-idUSKBN16T0PE, last accessed on 1 July 2018.

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Iranian banks in India, and according to media reports, both governments have agreed in principle to allow three Iranian banks to operate in India.71 The chambers of commerce of both the countries are regularly ­interacting with one another; however, during 2017, the only commercial exchange took place in August when an OVL delegation attended a briefing by the National Iranian Oil Company on Azadegan oil field tendering process.72 Energy Ties Energy remains the most significant component of the bilateral relations and 2016–2017 witnessed a significant growth in India’s energy imports from Iran. However, since September, the import figures are declining, partly due to bilateral tensions over Farzad B gas field development. During January to August, India bought a monthly average of 450,000 bpd from Iran and in July it peaked at 500,000 mbd. Media reports observe that the August imports went down by 19.2 per cent in comparison to July ‘as the world’s third largest oil importer is reducing intakes of Iranian oil in retaliation to Tehran’s decision to award a giant gas field to Gazprom’.73 As is apparent from Tables 3.3 and 3.4 and Figs. 3.3 and 3.4, nearly 85 per cent of the Indian imports from Iran comprise oil. Iran meets 8.73 per cent of the total energy imports of India and its share in India’s energy imports from the Persian Gulf is 16 per cent. Partly due to the removal of sanctions, India’s oil imports from Iran had increased during the year and reached US$9 billion as against US$4.46 billion a year before, an increase of about 90 per cent. However, the American withdrawal from the JCPOA and the re-introduction of anti-Iranian sanctions would affect and reduce India’s oil intake in 2018. Investments Despite the delays, Chabahar Port is a major Indian investment in Iran and would enhance India’s trade with Afghanistan and Central Asia by circumventing Pakistan. More importantly, the port and the connected transpor71  S. Arun and Kallol Bhattacherjee. 2015. ‘Iranian Banks to Open in India’, The Hindu, 31 December, http://www.thehindu.com/news/national/iranian-banks-to-open-in-india/ article8046024.ece, last accessed on 1 July 2018. 72  GoI, MEA. 2017. ‘India-Iran Relations’, http://www.mea.gov.in/Portal/ForeignRelation/ India-Iran_bilateral_August_2017.pdf, last accessed on 1 July 2018. 73  Financial Tribune, ‘Non-oil trade between Iran, India on rebound’.

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Table 3.3  Share of energy in the India–Iran trade (US$ million) Year

2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

Oil imports from Iran

Total oil imports

Iranian share in total oil imports

Imports from Iran

Per cent of oil in imports from Iran

11,764.01 9716.39 8556.95 7292.13 4461.57 9006.29

172,753.97 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20

6.81 5.36 4.72 4.66 4.60 8.73

13,790.16 11,594.46 10,307.16 8955.02 6278.75 10,506.51

85.31 83.80 83.02 81.43 71.06 85.72

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

Table 3.4  India’s energy imports from Iran (US$ million) 2011–2012

2012–2013

2013–2014 2014–2015 2015–2016 2016–2017

Energy 11,764.01 9716.39 8556.95 7292.13 4461.57 9006.29 imports from Iran Total 172,753.97 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20 energy imports Total 105,056.26 105,859.15 106,400.75 85,300.30 50,992.26 56,335.34 energy imports from the Persian Gulf Share in 6.81 5.36 4.72 4.66 4.60 8.73 total energy imports (in per cent) Share in 11.09 9.18 8.04 8.55 8.75 15.99 energy imports from the Persian Gulf (in per cent) Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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100 90 80 70 60 50 40 30 20 10 0

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

share of oil

Fig. 3.3  Share of oil in imports from Iran. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

18 16 14 12 10 8 6 4 2 0

2011-12

2012-13

2013-14

share in Total Imports

2014-15

2015-16

2016-17

Share in Imports from Persian Gulf

Fig. 3.4  Iranian share in oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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tation networks would enhance the Iranian economy and boost its trade with the Caspian Sea littorals. India’s development of the Chabahar is estimated to cost US$85  million over an 18-month period and upon ­completion, the port’s handling capacity would triple from 2.5  million tonnes to 8  million tonnes. India’s investment is supplemented with a US$150 million line of credit to Iran through the Exim Bank of India. New Delhi also offered to supply US$400 million worth of steel for the construction of the railroad linking Chabahar and Zahedan.74 At the same time, the sudden spurt in Indian investments and trade with Iran in the wake of the removal of sanctions did not materialize and, on the contrary, President Trump’s anti-Iranian policy would affect the flow of Indian investments. Iranian investments in India are small and are unlikely to improve due to Iran’s domestic economic situation and uncertainties over the return of the U.S.-led sanction regime. Expatriate India is a major educational destination for Iranian students and, currently, there are about 7000 Iranians who are pursuing their higher studies in India, especially in Pune, Hyderabad, and New Delhi. Relatively, the Indian presence in Iran is rather small. There was a large Indian community during the reign of the Shah but the number has dwindled since the Islamic revolution. Currently, there are about 80–100 families in Tehran and about 13–15 families in Zahedan and together they constitute about 4000 nationals. Approximately, 2800 Indians are pursuing their theological education in Qom, Mashhad, and Esfahan. Kendriya Vidyalaya Sangathan (KVS) runs a school in Tehran which caters to Indians in the capital, including the wards of the diplomats.

Challenges With the changing geopolitics in the Middle East and growing tensions in the Gulf, Iran has emerged as the most important challenge for India. At the bilateral level, issues such as allocation of Farzad B gas field which was explored by the OVL-led consortium have created some strains. Iran 74  MEHR News Agency. 2018. ‘Indians to Invest $2 Billion in Iran’s Port, Railways’, 17 February, https://en.mehrnews.com/news/132225/Indians-to-invest-2-billion-in-Iran-sport-railways, last accessed on 1 July 2018.

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wishes to open it for international bidding to maximize its gains while India sees it as a going back on the promise made to the OVL-led consortium. Issues related to payments and invitation for China and Pakistan to join the Chabahar port development indicate that the bilateral problems can escalate. While economic issues have been lingering, political problems, such as the issue of Jadhav’s kidnapping in Iran by Pakistani agencies and raising the issue of Kashmir by the Supreme Leader have not gone down well with India and can lead to complications. The multilateral issues are even more complex. The growing geopolitical tensions in the Gulf between Iran and Saudi Arabia have started to create significant ripples and conflicts within the GCC. This means that Indian interests in the region will be significantly affected. The impending American withdrawal from the JCPOA resonated throughout the year and will be a major problem in 2018. The main challenge for Indian diplomacy will be balancing relations with Saudi Arabia, the US, and Israel on the one hand and Iran on the other. Hence, the coming years will be more challenging for the Indo-Iranian relations than in the past.

CHAPTER 4

Iraq

Key Information Ruling party: Dawa Party; President: Fuad Masum (since 24 July 2014); Prime Minister: Haider al-Abadi (since 8 September 2014); National Day: 14 July; Parliament: 325-member Council of Representatives; Last parliamentary election: 12 May 2018; Major group in parliament: Sairoon Alliance; National carrier: Iraqi Airways. Socio-Economic Indicators Area: 438,317  sq. km; Population: 39.1  million (2017 est.); Native: NA; Expats: NA; Religious groups: Muslim 95–98 per cent (Shia 64–69 per cent; Sunni 29–34 per cent); Christian 1 per cent; other 1–4 per cent (2015 est.); Youth: 19.25 per cent; Population growth rate: 2.55 per cent (2017 est.); Life expectancy at birth: 74.9 years; Major population groups: Arabs 75–80 per cent; Kurdish 15–20 per cent; Turkoman, Assyrian, or Other 5 per cent; Literacy rate: 79.7 per cent; National currency: Iraqi Dinar (IQD); GDP: US$192.7 billion (2017 est.); Foreign trade: ExportUS$56.74 billion, ImportUS$36.47 billion (2017 est.); Defence budget: 3.63 per cent of GDP (2016 est.); Sovereign wealth fund: US$0.9 billion; External debt: US$73.43 billion (2017 est.); Per capita income: US$17,000 (2017 est.); Oil reserves: 142.5 billion bbl. (2017 est.); Gas reserves: 3.158 trillion m3;

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HDI rank: 121; Infant mortality rate: 37.5 deaths/1000 live birth; UN education index: 0.467; Gender inequality index: 0.525 (2015 est.); Labour force: 8.9 million (2010 est.); Unemployment rate: 16 per cent (2012 est.); Urban population: 69.7 per cent (2017 est.); Rate of urbanization: 2.87 per cent (2015–2020 est.); Last national census: 1997. India Related Indian cultural centre: NA; Number of Indians: 17,000 (approximately 2017 est.); Number of places of worship for Indians: NA; Indian schools: NA; Indian banks: NA; Currency exchange rate: 1 IQD = INR 0.056 (April 2018); Last visit to India by the ruler: Prime Minister Nouri al-Maliki, August 2013; Last Indian prime minister to visit: Indira Gandhi, January 1975. * * * In the wake of the military defeat of the Islamic State of Iraq and Syria (ISIS) in December 2017, the Republic of Iraq has been slowly recovering and positioning itself towards reconstruction and restoration of normalcy. At the same time, sectarian divide and ethnic tensions continue to plague the state and society. The referendum for independence in Kurdistan held on 25 September 2017 had sharpened the old fault lines between the central government in Baghdad and the Kurdish capital of Erbil spilling into confrontation between the Iraqi and Kurdish security forces. Asserting its authority and power, Baghdad moved to take control of airports and oil installations in the Kurdish autonomous region but the security situation and reconstruction efforts remain the major challenges facing Iraq. Given the situation, India’s role in the rebuilding of that country is limited and its enthusiasm for an active participation in the economic activities of Kurdistan has taken a beating. At the same time, Iraq has re-emerged as one of the largest oil suppliers of India and the political contacts between the two are growing. With the improving security situation, New Delhi can play a larger role in the economic reconstruction, a pre-condition for Iraq’s political stability.

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Domestic Developments Politics The political situation within the country remained turbulent throughout 2017. After more than four years of fighting, supported by many other countries, on 9 December the Iraqi Prime Minister Haider al-Abadi announced the military defeat of ISIS.1 The first significant move in this direction came in July when the Iraqi armed forces took control of Mosul.2 It was in Mosul that Abu Bakr al-Baghdadi had announced the establishment of the Islamic State in June 2014 and declared it to be the capital of the Caliphate.3 This resulted in ISIS being confined to a few pockets of northern Iraq, such as Tal Afar, Hawija, and Anbar. After months of urban warfare and targeted drone attacks by the US forces, the Iraqi military was able to defeat the ISIS. The Kurdish forces, which later took on the central government over the referendum, played a critical role in rolling back the ISIS. The capture of Mosul and the defeat of ISIS were marked by 10 December 2017 being declared as a national holiday to commemorate the victory.4 The military defeat of the ISIS, however, has not diminished its ideological threat to the multi-racial Iraqi state. Jihadism continues to remain alive and has spread to other areas leading to many instances of ‘soldiers of ISIS’ carrying out lone-wolf terror attacks in different parts of the globe. Reports suggest that ISIS forces are increasing their presence in Afghanistan and Yemen—where the central authority is either weak or crumbling— after it became clear that their defeat in Iraq and Syria was a matter of time.5 Moreover, during the year, terrorist attacks in Europe, especially, in 1  Chmaytelli, Maher and Ahmed Aboulenein. 2017. ‘Iraq Declares Final Victory over Islamic State’, Reuters, 9 December, https://www.reuters.com/article/us-mideast-crisisiraq-islamicstate/iraq-declares-final-victory-over-islamic-state-idUSKBN1E30B9, last accessed on 1 July 2018. 2  Rudaw. 2017. ‘PM Abadi Declares Mosul Liberated from ISIS in Victory Speech’, 7 October, http://www.rudaw.net/english/middleeast/iraq/100720174, last accessed on 1 July 2018. 3  Strange, Hannah. 2014. ‘Islamic State Leader Abu Bakr al-Baghdadi Addresses Muslims in Mosul’, The Telegraph, 5 July, https://www.telegraph.co.uk/news/worldnews/middleeast/iraq/10948480/Islamic-State-leader-Abu-Bakr-al-Baghdadi-addresses-Muslims-inMosul.html, last accessed on 1 July 2018. 4  Chmaytelli and Aboulenein, ‘Iraq declares final victory over Islamic State’. 5  Torfeh, Massoumeh. 2017. ‘ISIL in Afghanistan: A Growing Threat’, in Al-Jazeera, 20 August, https://www.aljazeera.com/indepth/opinion/2017/08/isil-afghanistan-growingthreat-170813133122968.html, last accessed on 1 July 2018.

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Germany and France were linked or attributed to ISIS.6 Even within Iraq, ISIS had not given up its ambitions and according to some American intelligence estimates, ISIS is reverting to pre-2014 tactics and focusing on Sunni insurgency against the Shia-led government.7 This would enable the organization to keep its core constituency active and perpetuate the ideological base for the Islamic caliphate. Another domestic issue which challenged Iraqi stability was the efforts of the Kurdistan Regional Government (KRG) to declare independence. Since 2005, the Iraqi Kurds enjoy greater political and economic autonomy than their counterparts in Turkey, Syria, or Iran. The sectarian violence in Iraq since 2003 and the ISIS threat have rekindled the century-old Kurdish aspirations for independence. After weeks of futile negotiations and tension, the KRG decided to hold a referendum on this issue on 25 September. Out of 5.6 million eligible voters, 4.5 million had registered to participate and not less than 3.3  million or 72 per cent exercised their franchise.8 Nearly 2.8 million or 92.73 per cent of voters said ‘Yes’ to the referendum which asked: ‘Do you want the Kurdistan region and Kurdish areas outside the region to become an independent state?’9 The referendum and the overwhelming support for independence evoked considerable anger and opposition from Baghdad as well from the regional players with a considerable Kurdish population, including Turkey, Iran, and Syria. Baghdad reacted by sending troops to the KRG region and after clashes with the Kurdish forces, the government of Abadi took control of the Erbil airport and the oil installations in Kirkuk.10 An international travel ban was imposed leading to the complete halt of international flights to and from the Erbil airport and the cutting off the direct access between the KRG and the outside world. Countries which had opened a consular mission in the KRG, including India, were unable to 6  Easterly, Jen and Joshua A. Geltzer. 2017. ‘The Islamic State and the End of Lone-wolf Terrorism’, Foreign Policy, 23 May, http://foreignpolicy.com/2017/05/23/the-islamicstate-and-the-end-of-lone-wolf-terrorism, last accessed on 1 July 2018. 7  Blanchard, Christopher M. 2018. ‘Iraq: In Brief’, Congressional Research Service Report, 5 March, https://fas.org/sgp/crs/mideast/R45096.pdf, last accessed on 1 July 2018. 8  This was far higher than the participation in the national election held on 12 May which only saw 45 per cent of the registered voters casting their ballots. 9  Rudaw. 2017. ‘92.7% “Yes” for Independence: Primary Official results’, 27 September, http://www.rudaw.net/english/kurdistan/270920174, last accessed on 1 July 2018. 10  Al-Jazeera. 2017. ‘Baghdad: Iraqi Forces in Full Control in Kirkuk’, 17 October, https://www.aljazeera.com/news/2017/10/baghdad-iraqi-forces-full-controlkirkuk-171016133409720.html, last accessed on 1 July 2018.

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function.11 These clashes also resulted in the displacement of nearly 30,000 Kurdish citizens from the area.12 The independence referendum threatened to reignite the ethnic divisions within Iraq and considerably undermined the progress made by the Kurds in achieving regional autonomy over the last decade. It reiterated the determination of Iran and the US— two key supporters of the Abadi government—to maintain the territorial integrity of Iraq. Moreover, with Baghdad taking over the oil installations in Kirkuk, the financial viability of the KRG has come under threat. The referendum also exposed the internal divisions within the KRG and Kurdish political forces in the country. Masoud Barzani-led Kurdistan Democratic Party (KDP) which was the driving force behind the referendum came under criticism from other political factions over the way in which the referendum and its aftermath were handled, and hence they sought his resignation as the head of the KRG.13 Far from advancing the Kurdish case, the referendum had restricted the political space and economic basis of the KRG and Barzani eventually resigned in October 2017 and handed over presidential duties to the prime minister and his nephew Nechirvan Barzani. However, this change did not happen before the indefinite postponement of the Kurdistan National Assembly election due in November. Amidst growing criticisms, Barzani announced that he would not seek re-election and would hand over the mantle to younger leadership.14 Not surprisingly, the September referendum united the otherwise regional rivals, such as Iraq, Iran, Syria, and Turkey. Irrespective of the nature of their regime, all of these countries were vehemently opposed to Kurdish autonomy and hell-bent on preventing any progress towards an independent Kurdistan from any of their territories.15 Indeed, until the 11  Rudaw. 2017. ‘Foreign Consulates to Stay Open in Kurdistan Region’, 13 November, http://www.rudaw.net/english/kurdistan/131120174, last accessed on 1 July 2018. 12  Rudaw. 2017. ‘UN: At Least 300,000 Iraqi’s Disappear from Anbar’, 30 June, http:// www.rudaw.net/english/middleeast/iraq/30062015, last accessed on 1 July 2018. 13  Middle East Eye. 2017. ‘Iraqi Kurdish Opposition Party Gorran Calls on Barzani to Step Down’, 23 October, http://www.middleeasteye.net/news/barzani-called-step-down-iraqikurdish-opposition-party-gorran-173351690, last accessed on 1 July 2018. 14  Solomon, Erika. 2017. ‘Barzani Resignation Stokes Tensions among Kurdish Factions’, Financial Times, 29 October, https://www.ft.com/content/25a77936-bcba-11e7-9836b25f8adaa111, last accessed on 1 July 2018. 15  Alaaldin, Raank. 2017. ‘Regional Implications of the Kurdish Independence Vote’, Al-Jazeera, 19 September, https://www.aljazeera.com/indepth/opinion/regional-implications-kurdish-independence-vote-170918123748896.html, last accessed on 1 July 2018.

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referendum, Ankara and Baghdad were unwilling to discuss and negotiate any of their regional differences, but they made a common cause against the threat posed by an independent Kurdistan.16 Another important political challenge facing Iraq has been the dismantling of the Popular Mobilization Forces (PMF) or their assimilation into the Iraqi armed force. This took a regional dimension as Iran, which supports the Shia-dominated government in Baghdad, is in favour of maintaining a separate Shia militia that it has trained and armed.17 Other players in the Iraqi politics as well as Arab countries, such as Saudi Arabia and the UAE, feel uncomfortable with the growing military strength and popular legitimacy of the Shia militia as the latter strengthened their position after defeating ISIS.18 An independent Shia militia is bound to inflame the sectarian tension in the country. The Sunni groups are also wary of them and accused the latter of carrying out mass murders in Sunni-populated areas after the defeat of ISIS forces in Mosul in June.19 Hence, the future of the PMF would acquire greater sensitivity as Iraq tries to establish peace and stability amidst its diverse population. The emergence of Iran-backed Hezbollah as the parallel power centre in Lebanon is an ominous example that the Iraqi leaders would wish to avoid. Economy Amidst the political instability and uncertainty, the economy continues to struggle and the fiscal crisis facing Iraq since the US-led invasion of 2003 has been intensified by the falling oil prices since mid-2014. The problem persisted during 2017 despite oil prices recovering to US$55 per barrel by December. According to the World Bank, the ‘macroeconomic outlook 16  Rudaw. 2018. ‘Turkish FM to Discuss Mediating KRG-Iraq Talks on Baghdad Visit’, 10 January, http://www.rudaw.net/english/middleeast/10012018. 17  Asharq Al-Awsat. 2017. ‘Iran Warns Against Dissolving Iraq’s Popular Mobilization Forces’, 5 December, https://aawsat.com/english/home/article/1104021/iran-warnsagainst-dissolving-iraq%E2%80%99s-popular-mobilization-forces, last accessed on 1 July 2018. 18  Rashid, Ahmed. 2018. ‘Iraq’s Abadi in High-stakes Plan to Rein in Iranian-backed Militias’, Reuters, 4 January, https://www.reuters.com/article/us-mideast-crisis-iraq-abadiinsight/iraqs-abadi-in-high-stakes-plan-to-rein-in-iranian-backed-militias-idUSKBN1ET1Y0, last accessed on 1 July 2018. 19  Geneva International Center for Justice. 2016. ‘Militias in Iraq’, http://www.gicj.org/ GICJ_REPORTS/GICJ_report_on_militias_September_2016.pdf, last accessed on 1 July 2018.

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in Iraq is expected to improve thanks to a more favourable security ­environment, increase in oil prices and the gradual pick up of investment for reconstruction’.20 Budget deficits, need for extensive investments in reconstruction projects, and extreme dependence upon oil exports, which contribute as much as 90 per cent of the national revenues, remain its major problems. According to the IMF, the GDP growth dropped to −0.8 per cent in 2017 after showing signs of recovery in 2015–2016.21 It, however, forecasts that the economy would recover in 2018, due to rising oil prices. The Iraqi GDP during the year was estimated at US$197 billion and is expected to reach US$225 billion in 2018. The non-oil GDP witnessed a growth rate of 4.4 per cent during the year while the oil-related growth rate was at −3.5 per cent due to low oil prices. The Iraqi re-entry into the oil market partly contributed to the excess supplies in the market and the resultant price drop. Iraq’s average crude oil production was 4.47 million mbd which was slightly lower than the 4.63 mbd in 2016.22 The seizure of oil installations in Kirkuk by the central authority in Baghdad, following the Kurdish referendum, would further affect its production.23 The fiscal break-even point for oil price was estimated at US$54.3 per barrel, which is much below not just to the oil prices during 2017 but also lower than other oil-producing countries of the region.24 This would enable the country to recover faster. Other aspects of the economy are also showing signs of recovery due to the improving security situation and increase in oil prices; for example, the number of deaths in sectarian and ISIS-related violence during the year was 13,187 as against 16,393  in 2016.25 Similarly, oil prices rose from US$53.59 per barrel in January to reach US$64.37 per barrel in December. With the defeat of ISIS, the Iraqi government has been seeking a comprehensive reconstruction programme keeping in view the short-term stabilization of the economy and long-term 20  World Bank. 2018. ‘Iraq Country Report’, http://www.worldbank.org/en/country/ iraq/overview, last accessed on 1 July 2018. 21  International Monetary Fund. 2018. Regional Economic Outlook: Middle East and Central Asia, https://www.imf.org/~/media/Files/Publications/REO/MCDCCA/2017/May/pdf/Statistical-Appendix.ashx, last accessed on 1 July 2018. 22  Ibid. 23  Al-Najar, Kamaran, Rawaz Tahir, Mohammed Hussein, Samya Kullab, and the staff of the Iraq oil report. 2017. ‘Update: Baghdad Retakes Kirkuk Oil Fields’, Iraq Oil Report, https:// www.iraqoilreport.com/news/baghdad-retakes-kirkuk-oil-fields-26054, last accessed on 1 July 2018. 24  International Monetary Fund. Regional Economic Outlook. op. cit. 21. 25  Iraq Body Count. 2018. ‘Database’, https://www.iraqbodycount.org/database/.

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growth prospects. This will create opportunities for bigger economies of the world including India to invest in the reconstruction projects, especially in the oil sector. At the same time, political tension between Baghdad and Erbil has affected business and mercantile activities of the oil-rich KRG region. However, as a result of nearly three-decades of wars, international sanctions, regional isolation, and sectarian violence, Iraq also faces a number of other economic problems in terms of unemployment and infrastructure deficiencies. During 2017, the average national unemployment rate stood at 11.2 per cent but it was acute in areas freed from the ISIS control where it was estimated at 21.6 per cent. While the infrastructure and local businesses have started to recover, in areas that were under the control of the ISIS, the situation is acute. For example, during the anti-ISIS campaign a number of roads, bridges, factories, housing units, medical facilities, educational institutions, and mosques were destroyed by both sides and they had to be rebuilt. The four-year long battle with ISIS also resulted in the deaths of at least 75,000 persons and the maiming of 150,000 and, during the same period, over 3 million have become internally displaced or have fled their home in the areas under ISIS control.26 Poverty is widespread and requires immediate international attention if Iraq were to ward off resurgence of militancy and armed rebellion. In October 2017, the World Bank under its Emergency Operation for Development Project approved an additional fund of US$400 million ‘to support the recovery, reconstruction and rehabilitation of priority infrastructure to restore delivery of public services’ in areas freed from ISIS control.27 This was in addition to US$4.7 billion provided by the World Bank for the Iraqi reconstruction.28 In the short-to-medium terms, the Iraqi economy is expected to recover but political fragility and the security situation would continue to be major threats. The GDP growth is expected to be positive, at 2.5 per cent in 2018. Additionally, Iraq would maintain its current rate of oil production  Ibid.  World Bank. 2017. ‘400 Million Dollars for the Reconstruction of Mosul and Newly Liberated Areas in Iraq’, Press Release, 1 October, http://www.worldbank.org/en/news/ press-release/2017/10/31/400-million-for-the-reconstruction-of-mosul-and-newly-liberated-areas-in-iraq, last accessed on 1 July 2018. 28  World Bank. 2018. ‘World Bank’s Commitment to Iraq Reaches US$4.7 Billion’, Press Release, 14 February, http://www.worldbank.org/en/news/press-release/2018/02/13/ world-banks-commitment-to-iraq-reaches-us47-billion, last accessed on 1 July 2018. 26 27

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of 4.3  mbd as per an agreement with the Organisation of Petroleum Exporting Countries (OPEC) reached in January 2018.29 While the nonoil sector is expected to grow faster, the growth in the oil sector is predicated on the government attracting international investments. Areas, such as poverty and unemployment would continue to be grave concerns and the overall poverty spiked from 18.9 per cent in 2012 to 24.5 per cent in 2017. Instability of the labour market could worsen the situation. The youth labour participation had dropped from 32.5 per cent in 2014 to 27.4 per cent in 2017 and increased unemployment. Society Conflict-ridden societies face severe problems in terms of ensuring safe living conditions of its citizenry, and children, women, and the elderly are the most vulnerable segment of the population. Since the onset of its war with Iran in September 1980, Iraq has been undergoing perpetual crisis for over three decades and has faced innumerable security challenges and hardships. While much of these were self-inflicted, international sanctions and regional isolation were compounded by the onset of the civil war following the US-led invasion of 2003. At least since 2014, over 5  million Iraqis have been forced to become refugees or internally-displaced persons (IDPs).30 The gradual improvement of the security situation in 2017 enabled a significant number of them returning home and, according to UN sources, during the year, 3.2 million IDPs have returned home as against the 2.2 million who were forced to become IDPs. Indeed, for the first time since 2014, the number of returnees exceeded the number of IDPs. Children and women were the most affected section of the population and according to United Nations Children’s Fund (UNICEF) about 5.1 million children across the country are in need of urgent humanitarian assistance.31 29  Zhdannikov, Dmitry and Alex Lawler. 2018. ‘Iraq to Comply with OPEC Deal Despite Oil Export Capacity Rise—Minister’, Reuters, 29 January, https://www.reuters.com/article/us-iraq-oil-opec/iraq-to-comply-with-opec-deal-despite-oil-export-capacity-rise-minister-idUSKBN1FI1H0, last accessed on 1 July 2018. 30  International Organization for Migration. 2018. ‘Number of Returns Exceeds Number of Displaced Iraqis: UN Migration Agency’, 12 January, https://www.iom.int/news/numberreturns-exceeds-number-displaced-iraqis-un-migration-agency, last accessed on 1 July 2018. 31  United Nations Children’s Fund. 2017. ‘Iraq Humanitarian Situation Report’, https:// www.unicef.org/iraq/UNICEF_Iraq_Humanitarian_Situation_Report_-_September_2017_. pdf, last accessed on 1 July 2018.

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Violence against women was on the rise since 2003 and this had worsened after the ascendance of ISIS. Iraq does not even appear in the Global Gender Gap Report (GGGR) due to a lack of basic data.32 According to the UK-based Minority Rights International, women and minorities were the worst affected and more than 14,000 women were killed and 5000–6000 were kidnapped for trafficking since the beginning of the conflict in 2014.33 New York-based Human Rights Watch observed that many of the ‘Yezidi women and girls who escaped ISIS and are displaced in the Kurdish region of Iraq lack adequate access to mental health and psychosocial services.’34 Iraq also lacks the necessary legal frameworks in combating gender violence. According to Zeynep Kaya who has been working on gender violence, especially in the Kurdish region, Gender inequality in Iraq is high and discriminatory laws and practices in the legal system show no sign of changing. The growth of militancy and extremism and the deterioration of economic and social conditions since the 2003 invention led to further increases in violence against women and the restriction of women’s freedom of movement in public places. This is despite the gains women made in political participation and local campaigns for women’s human rights and gender equality.35

Indeed, the Kurdish women shouldered considerable responsibility in the Peshmerga forces which fought ISIS.36 In terms of media freedom, Iraq is considered as one of the deadliest places for journalists due to the continuing violence and threats from 32  World Economic Forum. 2017. The Global Gender Gap Report, Geneva, Switzerland, http://www3.weforum.org/docs/WEF_GGGR_2017.pdf, last accessed on 1 July 2018. 33  Puttick, Miriam. 2015. ‘No Place to Turn: Violence against Women in Iraq’, Ceasefire Centre for Civilian Rights and Minority Rights Group International, https://reliefweb.int/ sites/reliefweb.int/files/resources/ceasefire-report-no-place-to-turn.pdf, last accessed on 1 July 2018. 34  Human Rights Watch. 2017. ‘Iraq: Events of 2016’, in the World Report 2017, https:// www.hrw.org/world-report/2017/country-chapters/iraq, last accessed on 1 July 2018. 35  Kaya, Zeynep. 2017. ‘Gender Equality in Iraq and Iraqi Kurdistan’, The LSE Middle East Centre Blog, 21 December, http://blogs.lse.ac.uk/mec/2017/12/21/gender-equality-in-iraq-and-iraqi-kurdistan, last accessed on 1 July 2018. 36  Nilsson, Marco. 2018. ‘Muslim Mothers in Ground Combat against the Islamic State: Women’s Identities and Social Change in Iraqi Kurdistan’, Armed Forces and Society, 44 (2): 261–79.

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­ ilitia and terrorist organizations.37 For its part, the government is placing m restrictions upon the press, both to control the situation and to curb the opposition. Media freedom has been curbed extensively by the Iraqi Communication and Media Commission. According to Freedom House, though elections have become regular and periodic in terms of political and civil rights, the country could be classified as ‘Not Free’ because of the continued threat to ‘democratic governance … (due to) corruption and security threats’.38 The Iraqi constitution of 2005 guarantees ‘freedom of belief’ and this is the only country in the entire Middle East which elected a minority citizen as its President since 2005.39 The Kurdish autonomy is another example for its willingness to accept ethnic diversity and rights. The international revulsion against the treatment of minorities by ISIS also underscores the new Iraqi approach. At the same time, Freedom House observed that in practice, ‘many Iraqis have been subjected to violence and displacement due to their religious identity and place of worships have often been targets for terrorist attacks’.40 Though the situation is expected to improve following the defeat of ISIS, the Kurdish referendum has rekindled the erstwhile ethnic fault lines.

Bilateral Relations The Indo-Iraqi relations have traditionally been good but witnessed limited political engagements due to Iraq’s preoccupations with wars and internal schism. In 2017, Iraq had emerged as one of the top suppliers of oil to India and the latter has become a major destination for medical tourism from Iraq. Indian companies continue to operate in that country despite the domestic unrest and tension. However, the year was mostly dominated by the fate of 39 Indians who were kidnapped in Mosul by ISIS in 2014.

37  Beck, John. 2017. ‘Is Iraq the Most Dangerous Country for Journalists?’, Al-Jazeera, 1 November, https://www.aljazeera.com/news/2017/10/iraq-dangerous-country-journalists-171031091430746.html, last accessed on 1 July 2018. 38  Freedom House. 2018. ‘Iraq’, Freedom in the World, https://freedomhouse.org/ report/freedom-world/2018/iraq, last accessed on 1 July 2018. 39  Though Maronite Christians have been elected president, the situation in Lebanon is different and complicated. 40  Freedom House, ‘Iraq’.

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Political Ties The only political visit from India took place in July following the liberation of Mosul from the ISIS control when Minister of State for External Affairs V.K. Singh visited Baghdad as well as Mosul and Erbil to find out details about the 39 missing Indians.41 The issue had lingered for long due to the continued suspense over their fate and has become a domestic political issue. Not willing to anger or antagonize the public, the government continued to maintain that their fate was unknown, thereby giving hopes of finding them alive. Media reports, however, indicated that they were killed immediately after their capture by ISIS militants.42 The liberation of Mosul did not provide any new information and as the year ended hopes of finding them alive also faded. It was only in March 2018 that the government announced that they were killed and their remains were brought home in April upon DNA identification.43 From the Iraqi side, the Minister of Foreign Affairs Ibrahim al-Jaafari visited New Delhi in July and amongst others met Minister of External Affairs Sushma Swaraj as well as the Vice President Hamid Ansari and Minister of Petroleum and Natural Gas and Skill Development & Entrepreneurship Dharmendra Pradhan.44 During his meeting with the Indian leaders, Jaafari discussed the Iraqi success against ISIS, especially the liberation of Mosul, Iraqi reconstruction efforts, and bilateral oil trade. Assuring its support for reconstruction needs, India stopped short of announcing any major financial package. Both sides also discussed a mechanism for intelligence sharing.

41  Rediff.com. 2017. ‘VK Singh in Mosul to Locate 39 Indians Missing in Iraq’, 13 July, http://news.rediff.com/commentary/2017/jul/13/vk-singh-in-mosul-to-locate-39-indians-captured-by-isis/78e3a74c259963c101d87873c3d4412b, last accessed on 1 July 2018. 42  India Today. 2014. ‘39 Out of 40 Kidnapped Indians Were Killed by ISIS, Claim Bangladeshi workers’, 28 November, https://www.indiatoday.in/india/story/isis-kidnapped-indian-workers-mosul-iraq-228915-2014-11-28, last accessed on 1 July 2018. 43  Singh, Surjit and Anil Sharma. 2018. ‘4 Years Later, Remains of 38 Indians Kidnapped by IS Return from Mosul’, Hindustan Times, 2 April, https://www.hindustantimes.com/ india-news/mortal-remains-of-38-indians-killed-in-iraq-arrive-in-amritsar/story-4RtTuwa7WZB8IW1jSZbNLP.html, last accessed on 1 July 2018. 44  Government of India (GoI), Ministry of External Affairs (MEA). 2017. ‘Official Visit of Foreign Minister of Iraq to India’, 26 July, http://www.mea.gov.in/press-releases. htm?dtl/28733/official+visit+of+foreign+minister+of+iraq+to+india+2426+july+2017, last accessed on 1 July 2018.

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At the same time, India opened its doors to Iraqi students and those in need of educational and healthcare facilities. According to the Ministry of External Affairs, nearly 10,000 Iraqi students are currently pursuing higher education in the country and the number of Iraqis seeking medical visa has risen considerably. During the year, its embassy in Baghdad and the consulate in Erbil have issued 49,326 visas, mostly for medical and educational purposes, to Iraqis.45 Indian hospitals have treated a number of Iraqi service personnel who were injured in fighting terrorist organizations. The Kurdish referendum was a sensitive issue for India. It opened the consulate in Erbil in August 2016 and has been maintaining political and energy relations with the Erbil-based KRG and Indian envoys have been interacting with the Kurdish region. During their visit to Iraq, both M.J. Akbar (October 2016) and General V.K. Singh (July 2017) went to the Kurdish Regional Government (KRG) headquarters and interacted with its leaders. The referendum, however, raises questions over Iraq’s territorial integrity and reflecting this position, a press release issued on 17 October 2017, New Delhi maintained that: India has always remained steadfast in its support for Iraq in the on-going war against terrorism and in the efforts to uphold its national sovereignty and preserve the territorial integrity. We remain committed to a stable, peaceful, democratic and united Iraq that is able to settle its internal affairs amicably through peaceful process of dialogue and other constitutional means, which serve the interest of the people of Iraq.46

Though it settled for a legal and neutral position and advocated a peaceful resolution, India does not lose sight of the fruits of political and economic engagements with Erbil. Trade and Commercial Ties The economic relations between the two countries witnessed some growth in 2017. The bilateral trade increased from US$11.84 billion in 2015–2016 to US$12.81 billion in 2016–2017 (Table 4.1 and Fig. 4.1). Indeed, Iraq 45  Embassy of India, Baghdad. 2018. ‘India-Iraq Relations’, April, http://www.indianembassybaghdad.in/page/india-iraq-relations/, last accessed 17 July 2018. 46  GoI, MEA. 2017. ‘India’s Position on the Referendum Held in the Kurdistan Region of Iraq’, 17 October, http://www.mea.gov.in/press-releases.htm?dtl/29033/indias+position +on+the+referendum+held+in+the+kurdistan+region+of+iraq, last accessed on 1 July 2018.

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Table 4.1  India–Iraq bilateral trade (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 India’s 763.97 1278.13 918.03 exports to Iraq India’s 18,918.47 19,247.31 18,520.86 imports from Iraq Total 19,682.44 20,525.44 19,438.89 bilateral trade Share of Iraq 2.47 2.59 2.54 in India’s total trade

892.32

1004.39

1111.45

14,247.66 10,837.58

11,707.94

15,139.98 11,841.98

12,819.39

1.99

1.84

1.94

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

25 20 15 10 5 0

2011-12

2012-13 Exports

2013-14 Imports

2014-15

2015-16

2016-17

Total Trade

Fig. 4.1  India-Iraq bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

is India’s fourth-largest trade partner in the Persian Gulf region. However, India’s exports to Iraq remained low at US$1 billion while imports from Iraq, mainly crude oil, witnessed a significant growth reaching US$11.7 billion in 2016–2017 as against US$10.83 billion in 2015–2016. This still remains lower than the US$18.91  billion witnessed during 2011–2012

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and is mainly due to a fall in oil prices and does not reflect the net shift in quantity of oil imported by India from Iraq. Towards the rebuilding efforts, India had contributed a modest sum of US$10 million since 2003 to the International Reconstruction Fund Facility for Iraq (IRFFI) for investments, reconstruction, and developmental projects, in addition to the US$20 million commitments for assistance to Iraq under the UN f­ramework.47 India’s economic engagement with Baghdad is less compared to its relations with Erbil and this received a setback in the wake of the controversial referendum and subsequent punitive actions taken by Baghdad. In recent years, India’s involvement in the Iraqi reconstruction efforts has improved and a number of Indian companies are active in post-war reconstruction works; Mokul Shriram J.V. won a US$235 million contract to rebuild the sewage system in Basrah; Shapoorji Pollonji won a US$85 million contract to rebuild a hotel in Basrah; and Lanco Infratech is involved in the US$81 million EPC contract to build the Akaaz power project in the Al-Anbar province.48 Energy Ties Oil plays a pivotal role in the bilateral trade and, in recent years, Iraq has emerged as one of the top five suppliers of crude oil to India. In 2016, it supplied 37.81 MMT of crude oil to India worth US$11.63 billion.49 During the first half of 2017, Iraq was India’s largest crude oil supplier. However, oil trade constituted as much as 99 per cent of India’s imports from Iraq and the latter supplies nearly 11 per cent of India’s total oil imports (Table 4.2 and Fig. 4.2). During the year Iraq met nearly 20 per cent of India’s oil imports from the Persian Gulf region (Table 4.3 and Fig. 4.3). Expatriates Until the 1980s, Iraq was a major destination for Gulf emigration from India but prolonged conflict and payment issues made Iraq a less attractive destination. Domestic situation in that country has resulted in many Iraqis 47  Pant, Harsh V. 2011. ‘India Finally Makes an Entry in Iraq’, Rediff.com, 14 March, http://www.rediff.com/news/column/india-finally-makes-an-entry-in-iraq/20110314. htm, last accessed on 1 July 2018. 48  GoI, MEA. 2017. ‘India-Iraq Bilateral Relations’, August, http://www.mea.gov.in/ Portal/ForeignRelation/Bilateral_Brief_iraq.pdf, last accessed on 1 July 2018. 49  Ibid.

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Table 4.2  Share of oil in India’s imports from Iraq (US$ million) Year

Oil imports from Iraq

Total oil imports

Iraqi share in oil total imports

Imports from Iraq

Per cent of oil in imports from Iraq

2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

18,826.19 19,166.06 18,450.33 14,177.22 10,759.19 11,633.29

172,753.92 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20

10.90 10.57 10.17 9.06 11.10 11.28

18,918.47 19,247.31 18,520.86 14,247.66 10,837.58 11,707.94

99.51 99.58 99.62 99.51 99.28 99.36

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

99.7 99.6 99.5 99.4 99.3 99.2 99.1

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

share in per cent

Fig. 4.2  Share of oil in imports from Iraq. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

viewing India as an educational destination. Presently, there are about 10,000 Iraqi students studying in various Indian universities and other higher education institutions. Iraq is also a major destination for religious pilgrims from India, as about 30,000–40,000 Indians annually visit Karbala, Najaf, and Samarrah for religious reasons.50 In recent years, the number has come down due to the civil war situation and ISIS threat. Official restric Ibid.

50

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Table 4.3  India’s energy imports from Iraq (US$ million) 2011–2012 2012–2013

2013–2014

2014–2015 2015–2016

2016–2017

India’s 18,826.19 19,166.06 18,450.33 14,177.22 10,759.19 11,633.29 energy imports from Iraq India’s 172,753.92 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20 total energy imports India’s 105,056.26 105,859.15 106,400.75 85,300.30 50,992.26 56,335.34 total energy imports from Persian Gulf Share of 10.90 10.57 10.17 9.06 11.10 11.28 Iraq in total energy imports (in per cent) Share of 17.92 18.11 17.34 16.62 21.10 20.65 Iraq in imports from Persian Gulf (in per cent) Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

tions for work-related travel has not prevented Indians from going to Iraq for lucrative opportunities in the reconstruction projects and hospitality sector. Reports suggest that there are about 15,000 to 17,000 Indian workers in Iraq, largely concentrated in Erbil.

Challenges India’s relations with Iraq are yet to reach their potential and this is mostly due to continued internal conflict, sectarian violence, and the intensification of the Iraqi civil war. Nevertheless, New Delhi has been slow in

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25 20 15 10 5 0

2011-12

2012-13

2013-14

Share in Total Oil Imports

2014-15

2015-16

2016-17

Share in Imports from Persian Gulf

Fig. 4.3  Share of Iraq in India’s oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

r­eaching out to Baghdad as far as its reconstruction is concerned. As of 2017, the Indian involvement is confined to energy imports and limited reconstruction projects in the KRG region. This is much lower than the potential and possibilities. The problems emerging out of the Kurdish referendum further complicated the Indian involvement as it would have to take the dynamics emerging out of the Baghdad-Erbil conflict. At the same time, Indian exports to Iraq remain limited suggesting the need to expand the trade basket. Further, India can also offer to train more Iraqi security personnel and officers and education and skill development can also be developed as prospective sectors. While internal developments in Iraq have been a limiting factor, the involvement of external players in the country also hampers the ability of India to seek further involvement. Countries, such as China, Turkey, and also the European countries are crowding the Iraqi market and India does not have a choice but to compete with them. Most significantly, it is the Chinese and Russian involvements in the energy sector that is a limiting factor and India will have to find ways to manoeuvre its way in this crowded but lucrative market. It can also enhance its participation

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in ensuring political stability and peace in Iraq through greater involvement in the reconstruction project and through initiatives under the UN or other multilateral organizations. Indian diplomatic efforts in this regard are limited and it needs to catch up with the global efforts if it wishes to realize its power ambitions.

CHAPTER 5

Kuwait

Key Information Ruling family: Al-Sabah; Ruler: Emir Sabah al-Ahmad al-Jaber al-Sabah (since 29 January 2006); Crown Prince: Prince Nawaf al-Ahmad al-Jaber al-Sabah (since 7 February 2006); National day: 25 February; Parliament: 65-member (50 elected, 15 ex-officio cabinet) National Assembly; Last parliamentary election: 26 November 2016; Major group in parliament: Conservative (Salafi and Muslim Brotherhood); National carrier: Kuwait Airways. Socio-Economic Indicators Area: 17,818  sq. km; Population: 2.87  million; Native: 31 per cent; Expats: 69 per cent; Religious groups: Citizen (Muslim 100 per cent); Resident population (Muslim 76.7 per cent; Christian 17.3 per cent; Other 5.9 per cent); Youth: 15.16 per cent; Population growth rate: 1.46 per cent; Life expectancy at birth: 78  years; Major population groups: Kuwaiti 31 per cent; Other Arab 28 per cent; Asian 37.8 per cent; African 1.9 per cent; Other 1.1 per cent; Literacy rate: 95.7 per cent; National currency: Kuwaiti Dinar (KD); GDP: US$118.3 billion (2017 est.); Foreign trade: Export US$54.09 billion, Import US$29.36 billion (2017 est.); Defence budget: 4.83 per cent (2015 est.); Sovereign wealth fund: US$524 billion; External debt: US$48.91 billion (2017 est.); Per capita income: US$69,700 (2017 est.); Oil reserves: 101.5 billion bbl. © The Author(s) 2019 P. R. Kumaraswamy et al., Persian Gulf 2018, Persian Gulf, https://doi.org/10.1007/978-981-13-1978-5_5

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(2017 est.); Gas reserves: 1.798 trillion m3 (2017 est.); HDI rank: 51; Infant mortality rate: 7.1 deaths/1000 live birth; UN education index: 0.646; Gender inequality index: 0.335 (2015 est.); Labour force: 2.695 million (2017 est.); Unemployment rate: 2.1 per cent (2017 est.); Urban population: 98.4 per cent; Rate of urbanization: 2.29 per cent (2015–2020); Last national census: 2005. India Related Indian cultural centre: India Study Centre (Faculty of Social Sciences, Kuwait University); Number of Indians: 919,354 (2017 est.); Number of places of worship for Indians: seven recognized churches and a few non-recognised Christian worship facilities; Indian schools: 20; Indian banks: State Bank of India, Indian Overseas Bank, and HDFC Bank; Currency exchange rate: 1 KD = INR 221.01 (April 2018); Last visit to India by the ruler: Emir Sabah al-Ahmad al-Jaber al-Sabah, June 2006; Last Indian prime minister to visit: Indira Gandhi, May 1981. * * * During 2017, the Emirate of Kuwait appeared to have fallen off the Indian radar. The friendly ties were dealt with a severe blow during the Kuwait crisis (1990–1991) when New Delhi was seen to be siding with the Iraqi invasion. This perception resulted in India investing considerable political and diplomatic resources and normalcy was restored leading to the visit of Emir Sabah al-Ahmad al-Jaber al-Sabah to India in June 2006. Since then, the bilateral relations have been flourishing, testified by the presence of 900,000-strong Indian expatriate community in the emirate. At the same time, Kuwait is the only country in the Persian Gulf region—except for the war-torn Yemen—which was not visited by senior Indian leaders or by External Affairs Minister since Narendra Modi became the prime minister in May 2014. The only high-level exchange was the December 2016 meeting of the Joint Working Group (JWG) on labour, employment and manpower in New Delhi. The Joint Ministerial Commission for Trade, Economic, Scientific and Technological Cooperation met in September 2017 in the Kuwait city and this provided the first ministerial visit from India since 2014 and the Indian delegation was headed by the Minister of State for External Affairs M.J. Akbar. When the Modi government has been actively engaging with

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other countries at different levels, the exclusion of Kuwait raises a number of questions. While there are no outstanding issues, disputes, or ideological differences, it is obvious that Kuwait does not command attention in New Delhi or that the Modi government prefers to engage with more important players in the region than Kuwait.

Domestic Developments Politics and Foreign Policy A constitutional monarchy with a parliamentary system, Kuwait, for decades, has been struggling to balance the interests of the ruling alSabah family and the pressures for political reforms. This has often resulted in a successive lockdown between the government, always headed by a member of the ruling family and the opposition. Under similar circumstances, the Emir once again dissolved the National Assembly in October 2016. One of the reasons for the stalemate between the government and the elected members of the parliament was economic and political reforms.1 When fresh elections were held in November that year, the opposition groups consisting of liberals, Sunni Muslims, Islamists, the Muslim Brotherhood, Salafists, and youth groups2 bagged 24 out of 50 seats.3 This resulted in the opposition continuing its demands for reforms and Prime Minister Jaber Mubarak al-Sabah and his cabinet had to resign in October 2017. This paved way for a new cabinet under the same prime minister which was sworn in December. This time, the row was over the no-confidence vote against Minister for Information Mohammad al-­ Sabah, who was questioned by lawmakers for violating budgetary and legislative rules.4

1  BBC News. 2018. ‘Kuwait Country Profile’, 24 April, http://www.bbc.co.uk/news/ world-middle-east-14644252, last accessed on 1 July 2018. 2  International Foundation for Electoral Systems, Election Guide. 2016. ‘State of Kuwait’, 26 November, http://www.electionguide.org/elections/id/2986, last accessed on 1 July 2018. 3  Al-Jazeera. 2016. ‘Kuwait Poll: Opposition Wins Nearly Half of Parliament’, 27 November, http://www.aljazeera.com/news/2016/11/kuwait-poll-opposition-wins-parliament-161127060822207.html, last accessed on 1 July 2018. 4  Al-Arabiya. 2017. ‘Kuwait’s Emir Accepts Cabinet Resignation’, 30 October, http:// english.alarabiya.net/en/News/gulf/2017/10/30/Kuwaiti-Prime-Minister-submitsresignation.html, last accessed on 1 July 2018.

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Kuwait is one of the few countries in the region which has allowed some political process and even though parties are not allowed, activism through societies and groups are permitted. These groups have been taking part in the elections and have been receiving widespread public support. Between 1962, when the first elections were held after independence and until November 2016, Kuwait held 18 parliamentary elections and most of them were unable to complete their four-year terms due to the constant tussle between the palace and the parliament.5 Thus, throughout 2017, the political uncertainty continued to grip Kuwait and the parliament was almost dissolved again as opposition members continued to question the appointment of cabinet over allegations of fraud and impropriety. These came amidst the Qatar crisis resulting in the Emir warning the opposition that they were putting the national unity at risk.6 According to Reporters without Borders, in 2017, Kuwait ranked 104 on the World Freedom Index with a meagre score of 1.06.7 This rather abysmal ranking has been attributed to the vaguely-worded provisions of the cyber-crime law of January 2016, which threatens bloggers and online journalists who post any comments that are critical of the government. The new electronic media law adopted in the same month required online bloggers and social media activists to secure government licenses. Such restrictions and online censorship has curbed the freedom of press immensely and has led to many arrests and convictions.8 The domestic situation became complicated with the regional rift between Saudi Arabia, the UAE, and Bahrain on the one hand and Qatar on the other over the latter’s perceived intervention and support of extremism. With Oman maintaining its traditional maverick position, it fell upon Emir Sheikh Sabah al-Ahmed al-Jaber al-Sabah to spend considerable time and effort to bridge the gap. Professing to be ‘neutral’ in the Gulf Cooperation Council (GCC), Kuwait increased its mediatory efforts. While the public spat between the Saudi-led quartet and Qatari sides reduced, Kuwait was unable to bring the principal protagonists—Saudi Arabia and 5  Das, Hirak J. 2017. ‘National Assembly Elections in Kuwait, 2016’, Contemporary Review of the Middle East, 4 (2): 193–210. 6  Khaleej Times. 2017. ‘Kuwait Amir Sheikh Sabah Orders Dissolution of Cabinet’, 31 October, https://www.khaleejtimes.com/region/kuwait/kuwait-amir-sheikh-sabah-ordersdissolution-of-cabinet-, last accessed on 1 July 2018. 7  Reporters without Borders. 2016. ‘Kuwait’, https://rsf.org/en/kuwait. 8  Freedom House. 2017. ‘Kuwait’ in Freedom of the Press, 2017, https://freedomhouse. org/report/freedom-press/2017/kuwait, last accessed on 1 July 2018.

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Qatar—to an agreement, with some feeling that the emirate was nothing more than a ‘mailman’9 and the GCC summit hosted by Kuwait in December ended much early without any agreement on the crisis.10 Economy Economic issues have added to domestic and regional political tensions facing Kuwait. The lowering of fuel subsidies prior to the 2016 parliamentary elections generated extensive popular discontent. It must be remembered that between 2006 and 2013, the Kuwaiti polity witnessed tension and instability due to the legislature–executive tussle leading to popular protests. However, the ‘pro-government’ parliament, which was elected in 2013, provided stability but lacked legitimacy as the main opposition groups boycotted the polls. Using this opportunity, the government introduced a fuel subsidy cut as a response to the falling oil prices and its cascading effect upon the national budget. As a result, since September 2016, the price of premium oil has gone up by 83 per cent, which is seen as a major reduction of subsidies in the 50 years of price-control mechanism adopted by the state.11 Though the country has a small population of 2.8  million with a relatively large Sovereign Wealth Fund—estimated at US$524 billion in 2017, the population was unhappy over the austerity measures amidst low oil prices. This resulted in thousands of oil workers going on strike in April 2016.12 It was the first major strike action not only in Kuwait but also in the region which unnerved the government and led to the lowering of octane fuel prices by 42 per cent.13 Interestingly, Kuwait was the last GCC country to increase the fuel price following the 9  Bakeer, Ali. 2017. ‘GCC Crisis: Why Is Kuwaiti Mediation Not Working?’, Al-Jazeera, 11 August, http://www.aljazeera.com/indepth/opinion/2017/08/gcc-crisis-kuwaitimediation-working-170807093244546.html, last accessed on 1 July 2018. 10  Dawn. 2017. ‘Gulf Summit Ends in Hours as Saudi, UAE Rulers Stay Away’, 6 December, https://www.dawn.com/news/1374818, last accessed on 1 July 2018. 11  Martin, Geoffrey. 2017. ‘Opinion: A Look at the State of Kuwait’s Political Landscape’, Indrastra, 11 January, http://www.indrastra.com/2017/01/OPINION-A-Look-at-theState-of-Kuwait-s-Political-Landscape-003-01-2017-0036.html, last accessed on 1 July 2018. 12  The National. 2016. ‘Thousands of Oil Workers Go on Strike in Kuwait’, 17 April, https://www.thenational.ae/world/thousands-of-oil-workers-go-on-strike-inkuwait-1.148581, last accessed on 1 July 2018. 13  Arab Times. 2017. ‘Request for Hike in Fuel Prices’, 23 October, https://www.pressreader.com/kuwait/arab-times/20171023/283055529655124, last accessed on 1 July 2018.

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2014 oil price crash and the last one to push for the development of its non-oil sectors even though it was the worst hit by the lowering of oil prices. Kuwait’s excessive dependence on oil for financing its welfare state model has been an area of concern.14 According to the World Bank, energy subsidies have been the most significant expenses of Kuwait and have been equivalent to 1.3 to 5.7 per cent of its GDP. According to Khalifa Hamada, a senior official in the Ministry of Finance, had petrol and the other subsidies remained intact, it would cost the country an additional expenditure of about US$53.1  billion between 2016 and 2019.15 Hence, subsidy cuts became essential to lower the current account deficits and bolster the finances dented by the downturn in the global oil prices. It was also hoped that the increased prices would reduce wasteful over-consumption of oil. Another reason for the cut was that oil and gas revenues account for about 75 per cent of the country’s budget and this meant that the country was badly hit by the mid-2014 oil price crash and the total government revenues fell by 41 per cent in 2015 alone. According to the financial rating firm Moody’s, subsidy cuts were a necessary step for the recovery of Kuwait’s economy.16 Kuwaiti trade surplus narrowed to US$4.9  billion as low oil price resulted in lower oil exports. In other words, while subsidy cuts have strong economic logic, its implementation is accompanied by political tension and instability. Responding to these situations, the government has been following economic reforms aimed at diversification and to reduce the fiscal ­dependence on oil. Towards this endeavour, the government announced plans to invest US$15.68 billion (KD4.8 billion) in 2017–2018 for developmental plans. The IMF estimated that Kuwait’s non-oil GDP growth would rise to 3 per cent in 2017 and 4 per cent thereafter.17 However, according to the Central Bureau of Statistics of the Emirate, non-oil exports increased only ­marginally 14  Al Yaqout, Abdul Aziz. 2017. ‘Kuwait’s New Parliament Must Act Maturely to Safeguard the Country’s Economic Future’, Arabian Business, 10 January, http://www.arabianbusiness.com/kuwait-s-new-parliament-must-act-maturely-safeguard-country-s-economicfuture-658599.html, last accessed on 1 July 2018. 15  Oxford Business Group. 2016. ‘Kuwait’s Drive towards Fuel Subsidy Rationalization’, 20 September, http://www.oxfordbusinessgroup.com/news/kuwait%E2%80%99s-drivetoward-fuel-subsidy-rationalisation, last accessed on 1 July 2018. 16  Moody’s Investor’s Service. 2016. ‘Announcement: Moodyss—GCC’s Fuel Subsidy Reforms Offer Only Modest Fiscal Space’, 16 February, https://www.moodys.com/research/ Moodys-GCCs-fuel-subsidy-reforms-offer-only-modest-fiscal-space%2D%2DPR_343932, last accessed on 1 July 2018. 17  Al-Yaqout, ‘Kuwait’s new parliament must act maturely to safeguard the country’s economic future’.

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from US$825 million to US$911 million since the fourth quarter of 2016 to the second quarter of 2017.18 The economic reform plans include the launching of Kuwait Vision 2035 which aims at diversification, job creation, and reforms in public finance.19 This includes 50 mega projects in a host of key sectors.20 At the same time, frequent political instability emanates from a single source—senior ministers being accused of corruption. In terms of the Corruption Perception Index 2016, the country ranks 75 out of 176 countries with a score of 41 out of 100.21 The economic freedom status of the country is ‘moderately free’ and with a score of 65.1, Kuwait ranks 61st in the world and 6th regionally.22 Above all, Transparency International ranked Kuwait 85 in the corruption perception index and this is the lowest in the GCC.  Hence, the allegations of corruption would be a major impediment for the government in pursuing its reform agenda. Society Kuwait, in comparison to the other smaller Gulf countries, is a somewhat conservative society and has not been as amenable to social opening like Bahrain, the UAE, Qatar or even Saudi Arabia. It is following gradualism with regard to issues such as minority rights, cultural pluralism, and gender rights. Inclined to reforms, it has been dealing with dissent rather firmly. Though accommodative of political activism, it is sensitive to any overt criticism aimed at the ruling family. The constitution guarantees freedom of practice but religious freedom is limited and many curbs are imposed upon minorities as well as non-Sunni Muslims.23 Criticism of religions  Kuwait Times. ‘Kuwait’s Trade Surplus Narrows Slightly to KD 1.5 bn in Q2 2017’, 24 October, https://www.pressreader.com/kuwait/kuwait-times/20171024/ 282170766394959, last accessed on 1 July 2018. 19  Izzak, B. 2017. ‘Govt. Launches Ambitious “New Kuwait” 2035 Strategy’, Kuwait Times, 31 January, http://news.kuwaittimes.net/website/govt-launches-ambitious-newkuwait-2035-strategy/, last accessed on 1 July 2018. 20  Al Asoomi, Mohammad. 2017. ‘Kuwait Needs to Make a Move on Economic Reforms’, in Gulf News, 1 March, http://gulfnews.com/business/analysis/kuwait-needs-to-make-amove-on-economic-reforms-1.1985950, last accessed on 1 July 2018. 21  Transparency International. n.d. ‘Kuwait’, https://www.transparency.org/country/ KWT#chapterInfo. 22  The Heritage Foundation. 2017. ‘2017 Index of Economic Freedom: Kuwait’, http:// www.heritage.org/index/pdf/2017/countries/kuwait.pdf, last accessed on 1 July 2018. 23  US Department of State. 2017. ‘Kuwait’, in International Religious Freedom Report, https://www.state.gov/documents/organization/281236.pdf, last accessed on 1 July 2018. 18

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within the limits of non-defamatory approach is accepted and protected. At  the same time, growing sectarian tension in the region manifested in attacks on some Shia places of worship. According to the CIA World Factbook, most of the citizen population practice Sunni Islam, while there are about 14 per cent Shias and a small number of Christians and Baha’is. Like other GCC countries, Kuwait has a large non-citizen population which belongs to various faiths; about 28 per cent of the non-­Kuwaiti residents are Christians, 5 per cent are Sikhs, 3 per cent are Buddhists, and 2 per cent are Hindus.24 The minority Shia community has been complaining about discrimination and their places of worships are subjected to state scrutiny.25 The condition of women in Kuwait has attracted international attention and criticism. After considerable internal opposition and rejection by the lawmakers, women were given equal political rights, including the right to vote in 2005. This has resulted in women being elected to the parliament since 2009. A record number of four women were elected to the National Assembly in the 2009 elections, namely, Masooma Al Mubarak, Salwa Al Jassar, Aseel Al Awadi, and Rula Dashti.26 However, the number has subsequently fallen with the 2016 elections returning only 2 female members to the parliament. In addition to religious minorities and women, the other group which has been facing a systematic discrimination and has complained of ­organized bias is the ‘stateless’ people or Bidoons.27 These tribal people migrated to Kuwait in the early 20th century but were not granted citizenship at the time of the Kuwaiti independence in 1961 and led occasional protests, often resulting in violence. During 2017, Kuwait tried to send some of them to small African countries and tried to secure them citizenship in return for monetary benefits. Currently, there are about 100,000 stateless Bidoons in the country.28

24  US, CIA, 2018. ‘The World Factbook: Kuwait’, https://www.cia.gov/library/publications/the-world-factbook/geos/ku.html, last accessed on 1 July 2018. 25  US Department of State, ‘Kuwait’. 26  Olimat, Muhamad S. 2011. ‘Women and the Kuwaiti National Assembly’, Journal of International Women’s Studies, 12 (3): 76–95, http://vc.bridgew.edu/cgi/viewcontent. cgi?article=1114&context=jiws, last accessed on 1 July 2018. 27  Human Rights Watch. 1995. ‘The Bedoons of Kuwait: “Citizens without Citizenship”’, https://www.hrw.org/reports/1995/Kuwait.htm, last accessed on 1 July 2018. 28  Weiner, Scott. 2017. ‘The Politics of Kuwait’s Bidoon Issue’, Sada: Middle East Analysis, Carnegie Endowment for International Peace, http://carnegieendowment.org/sada/73492.

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Bilateral Relations Political Ties Kuwait is one of the prominent countries of the Persian Gulf with which India has strong trade and commercial relations. However, since Modi came to power, India has been indifferent towards the tiny but oil-rich country and has focused its attention on Saudi Arabia, UAE, and Iran. There are no known attempts from the Kuwaiti side to seek and secure New Delhi’s attention, especially, given India’s drive of economic investments from the Gulf Arab countries. There were no high-level exchanges between the two since the visit of Kuwaiti Prime Minister Jaber al-Mubarak al-Sabah to New Delhi in November 2013. However, Kuwaiti Emir Sabah al-Ahmed al-Jaber al-Sabha undertook a weeklong private visit for relaxation and medical check-up in Kerala during 25 June and 2 July 2017.29 This was cut short due to the ongoing Qatar crisis. In September, the Minister of State M.J. Akbar visited Kuwait for the third Joint Commission for Trade, Economic, Scientific and Technological Cooperation and this was the only political contact between the two countries since May 2014. The lack of political engagement is surprising as there are no outstanding political problems or economic disagreements; more so, when the ­current Indian government has been proactive with the Middle East and courting the Gulf Arab countries for various infrastructure-related programmes. Modi’s personal style of engagement with foreign leaders and establishing rapport with them to leverage bilateral ties have been the most visible feature during the past four years. His engagements with leaders of Saudi Arabia, the UAE, Qatar, and Oman as well as Iran have to be viewed in this context. However, the omission of Kuwait is glaring and raises questions about possible reasons and explanations. Defence and Security Security-related cooperation with Kuwait is also limited. Though there is no formal security agreement, both have maintained a mechanism for security engagement. The third Security Cooperation Dialogue was held 29  Kuwait News Agency. 2017. ‘His Highness the Amir Heads to India on Private Visit’, 25 June, https://www.kuna.net.kw/ArticleDetails.aspx?id=2620570&language=en, last accessed on 1 July 2018; Gulf Business. 2017. ‘Kuwaiti Emir Travels to India on Private Visit’, 25 June, http://gulfbusiness.com/kuwaiti-emir-travels-india-private-visit, last accessed on 1 July 2018.

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in March in Kuwait and India’s National Security Adviser Ajit Doval led a five-member delegation. This focused on preventing organized crimes and the possible use of Kuwait for terror funding and other subversive activities in India.30 In the following month, a team of National Investigation Agency (NIA) visited the emirate to investigate a case involving transfer of funds from a Kuwaiti national to some Indian nationals who had joined the ISIS, leading to the arrest of the Kuwaiti citizen.31 Trade and Commerce Unlike the political contacts, the commercial relations have been flourishing between the two, and they are amongst the top ten trading partners of one another. With the drop in oil prices and global slowdown, the bilateral trade has witnessed a sharp drop—from a high of US$17.6  billion in 2011–2012 it nosedived to US$5.9 billion in 2016–2017 (Table 5.1 and Fig. 5.1). This is also a marginal drop from US$6.2 billion registered in Table 5.1  India–Kuwait bilateral trade (US$ million) 2011–2012 India’s exports to Kuwait India’s imports from Kuwait Total bilateral trade Share of Kuwait in India’s total trade

1181.41

2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 1198.89

1247.51

1497.99

16,439.64

16,588.13 17,153.55 13,381.97

4969.69

4462.28

17,621.05

17,649.21 18,214.69 14,580.85

6217.20

5960.27

2.22

1061.08

2.23

1061.14

2.38

1.92

0.97

0.9

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in 30  Government of India (GoI), Ministry of External Affairs (MEA). 2017. ‘IndiaKuwait Relations’, August, https://www.mea.gov.in/Portal/ForeignRelation/Kuwait_ India_Aug_2017.pdf, last accessed on 1 July 2018. 31  NewsGram. 2016. ‘Kuwait Man Held for Funding Indian Islamic State Sympathisers’, 7 August, https://www.newsgram.com/kuwait-man-held-for-funding-indian-islamic-statesympathisers, last accessed on 1July 2018.

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20 18 16 14 12 10 8 6 4 2 0

2011-12

2012-13 Exports

2013-14

2014-15 Imports

2015-16

2016-17

Total Trade

Fig. 5.1  India–Kuwait bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

2015–2016. India’s exports registered a modest increase from US$1.2 billion in 2015–2016 to US$1.4  billion in 2016–2017 but owing to the domination of the energy imports, the trade balance remains in favour of Kuwait. In terms of the overall trade, Kuwait only has 0.9 per cent share in India’s foreign trade. Energy Trade Oil continues to be the most important trade commodity and in 2016–2017, India imported about US$3.5 billion worth of oil from Kuwait, which is a slight decline from US$4 billion imported the previous year (Table 5.2 and Fig. 5.2). The importance of oil imports from Kuwait can be understood from the fact that about 77 per cent of the total imports from Kuwait was oil, even though Kuwaiti share in the total oil imports to India is 3.35 per cent (Table 5.2 and Fig. 5.2). Though this might look small, Kuwait has been a trusted partner in India’s energy security and until 2014–2015, it contributed nearly 8–10 per cent of the total oil imports for India and oil made up nearly 90–95 per cent of India’s imports from Kuwait. Notably, because of Iraq’s re-entry into the oil market, the share of Kuwait in India’s oil imports from the Persian Gulf has also declined.

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Table 5.2  Share of oil in India’s imports from Kuwait (US$ million) Year

2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

Oil imports from Kuwait

Total oil imports

Kuwaiti share in total oil imports

15,718.33 15,737.46 16,121.78 12,228.71 4059.61 3455.54

172,753.92 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20

9.10 8.68 8.89 7.82 4.19 3.35

Imports from Per cent of oil Kuwait in imports from Kuwait 16,439.64 16,588.13 17,153.55 13,381.97 4969.69 4462.28

95.61 94.87 93.99 91.38 81.69 77.44

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in 120 100 80 60 40 20 0

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Share in per cent

Fig. 5.2  Share of oil in imports from Kuwait. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

In 2011–2012, the Kuwaiti share in India’s oil imports from the Persian Gulf stood at 15 per cent, but during 2016–2017 it declined to 6.13 per cent (Table 5.3 and Fig. 5.3). Investments Historically, Kuwait has been one of the premier countries in the region in terms of overseas investments and financial assistance and much of its overseas aid was carried out through the Kuwait Investment Authority

Table 5.3  India’s energy imports from Kuwait (US$ million) 2011–2012

2012–2013

2013–2014 2014–2015

2015–2016

Energy 15,718.33 15,737.46 16,121.78 12,228.71 4056.61 imports from Kuwait Total 172,753.92 181,344.67 181,382.59 156,400.01 96.953.06 energy imports Total 105,056.26 105,859.15 106,400.75 85,300.30 50,992.26 imports from the Persian Gulf Share in 9.10 8.68 8.89 7.82 4.19 total energy imports Share in 14.96 14.87 15.15 14.34 7.96 energy imports from the Persian Gulf

2016–2017 3455.54

103,163.20

56,335.34

3.35

6.13

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

16 14 12 10 8 6 4 2 0

2011-12

2012-13

2013-14

Share in Total Oil Imports

2014-15

2015-16

2016-17

Share in Oil Imports from Persian Gulf

Fig. 5.3  Share of Kuwait in India’s oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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(KIA). However, India is yet to be attractive for the oil-dominated ­emirate. Kuwait ranks 54th place in terms of the FDI flows into India and between April 2000 and December 2017, India attracted US$60.71 million from the Emirate. One could notice a significant rise in the past two years; it was US$0.58  million in 2012; US$4.16  million in 2013; US$4.75 million in 2014, and US$2.21 million in 2015. Registering a seven-time increase, this rose to US$14.97  million in 2016 and to US$16.69 million in 2017. In other words, much of the Kuwaiti investments came during 2016 and 2017. At the same time, Kuwait ranks fifth amongst the six-member GCC with only Qatar figuring beneath it. Indeed, Bahrain, which is a smaller economy with lesser Sovereign Wealth Fund and smaller oil reserves, has invested more in India than Kuwait which globally ranks 13 in terms of per capita income. Reflecting this pattern, Indian investments in Kuwait is also limited and only a small number of Indian companies are active in Kuwait. Expatriates The only silver lining in the bilateral relations has been the growing number of Indian workers in Kuwait. According to the Ministry of External Affairs, nearly 900,000 Indians are living in Kuwait and they comprise the largest expatriate community. In recent years, there were a number of cases of delayed salaries, exploitation, and other labour-related issues. The 5th session of the Joint Working Group on Labour and Manpower was held in New Delhi in December 2016.32 Significant number of Indians are domestic workers and India has often raised its concerns over issues of abuses and inhumane treatment of its nationals by the Kuwaiti authorities. Like much of the region, the kafala (sponsorship) system in Kuwait is highly favourable to the national employers than the expatriate workers who find themselves helpless if they land up in a wrong job or are cheated by the travel agents before heading to the Gulf.

32  GoI, MEA. 2016. ‘Fifth Session of India–Kuwait Joint Working Group on Labour, Employment and Manpower Development’, 16 December, http://www.mea.gov.in/pressreleases.htm?dtl/27872/fifth+session+of+indiakuwait+joint+working+group+on+labour+e mployment+and+manpower+development, last accessed on 1 July 2018.

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Challenges Kuwait is a small but oil-rich country and due to diplomatic indifferences, inertia has crept into the bilateral relations. Though India has the option to have friendlier relations with other countries, allowing complacency to set in is not an ideal situation. There can be a number of possible factors for India to ignore Kuwait. It would be a challenge for the Modi government to restore the India–Kuwait relations to a state of political felicity. No doubt that Kuwait is a small Emirate with limited political and security influence and the failure of Kuwait to mediate in the Qatar crisis is a demonstration of that. However, India should see the Kuwaiti situation from a multispectral perspective and view the ­opportunities it offers in terms of investments and energy security. At the same time, it would be difficult for India and Kuwait to match the intensity of relations between India and Saudi Arabia or India and the UAE or even India and Bahrain that offer the same opportunities, albeit with a friendlier approach. Kuwait has been known to have a less liberal approach towards women and minorities and these are issues that might be influencing the Indian decision. The ill treatment of foreign domestic workers is another major issue.33 In terms of the regional situation, with the waning influence of the US and the growing involvement of other global powers, especially Russia and China, it is important that India remains mindful of the situation. Kuwait has a strong Indian expatriate population and, despite the current frost in bilateral ties, India–Kuwait trade and commerce and India’s imports of Kuwaiti oil remain strong. This means that India while prioritizing other countries in the Gulf cannot afford to completely ignore Kuwait and allow the situation to worsen. The most important aspect of the challenge for India vis-à-vis Kuwait in the coming years would be to restore political engagements and improve trade and commerce.

33  Fahim, Kareem. 2010. ‘Immigrant Maids Flee Lives of Abuse in Kuwait’, The New York Times, 1 August, https://www.nytimes.com/2010/08/02/world/middleeast/02domestic. html, last accessed on 1 July 2018; Thai PBS. 2018. ‘196 Filipino Domestic Workers Died in Kuwait since 2016’, 22 February, http://englishnews.thaipbs.or.th/196-filipino-domesticworkers-died-kuwait-since-2016, last accessed on 1 July 2018; Human Rights Watch. 2010. ‘Walls at Every Turn Abuse of Migrant Domestic Workers through Kuwait’s Sponsorship System’, 6 October, https://www.hrw.org/report/2010/10/06/walls-every-turn/abusemigrant-domestic-workers-through-kuwaits-sponsorship-system, last accessed on 1 July 2018.

CHAPTER 6

Oman

Key Information Ruling family: Al-Said; Ruler: Sultan Qaboos bin Said Al-Said (since 23 July 1970); Crown Prince: Not nominated; National day: 18 November; Parliament: 71-member nominated Majlis al-Dawla, 84-member elected Majlis al-Shoura; Last parliamentary election: 25 October 2015; Major group in parliament: NA; National carrier: Oman Air. Socio-Economic Indicators Area: 309,500 sq. km; Population: 4.61 million (2017 est.); Native: 55 per cent; Expats: 45 per cent; Religious groups: Muslim 85.9 per cent (75 per cent Ibadhi Muslim; 25 per cent Shia and Sunni); Christian 6.5 per cent; Hindu 5.5 per cent; Buddhist 0.8 per cent; Other 1.3 per cent; Youth: 18.69 per cent (2017 est.); Population growth rate: 2.03 per cent; Life expectancy at birth: 75.7 years; Major population groups: Arab, Baluch, South Asian, and African (distribution not available); Literacy rate: 93 per cent (2015 est.); National currency: Oman Riyal (OMR); GDP: US$71.93  billion (2017 est.); Foreign trade: Export US$31.9 billion, Import US$22.71 billion (2017 est.); Defence budget: 13.73 per cent of GDP (2016 est.); Sovereign wealth fund: US$24 billion; External debt: US$39.17 billion (2017 est.); Per capita income: US$45,500 (2017 est.); Oil reserves: 5.3  billion bbl; Gas reserves: 651.3 billion m3 (2017 est.); HDI rank: 52; Infant mortality rate: 12.8 © The Author(s) 2019 P. R. Kumaraswamy et al., Persian Gulf 2018, Persian Gulf, https://doi.org/10.1007/978-981-13-1978-5_6

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deaths/1000 live birth; UN education index: 0.603; Gender inequality index: 0.281; Labour force: 968,800; Unemployment rate: 15 per cent (2004 est.); Urban population: 78.5 per cent; Rate of urbanization: 2.17 per cent; Last national census: 2010. India Related Indian cultural centre: NA; Number of Indians: 783,959 (2017 est.); Number of places of worship for Indians: Three temples, five gurudwaras, and seven churches; Indian schools: 19; Indian banks: State Bank of India (1), Indian Overseas Bank (1), Bank of Baroda (4) and HDFC Bank; Currency exchange rate: 1 OMR  =  INR 172.77 (April 2018); Last visit to India by the ruler: Sultan Qaboos al-Said, April 1997; Last Indian prime minister to visit: Narendra Modi, February 2018. * * * Despite being one of the smaller economies of the region, the Sultanate of Oman has multispectral ties with India encompassing trade, commerce, energy, and defence as well as strong expatriate linkages. During 2017, bilateral trade increased marginally and the much-anticipated visit of Prime Minister Narendra Modi to Muscat took place in early 2018. Viewed in the larger context of the regional tension, rivalry, and public acrimony, Oman has been politically stable and peaceful. As the Omani economy is showing signs of recovery, the vexed question of succession is increasingly becoming clearer, thereby requiring a demonstrative Indian engagement with it.

Domestic Developments Politics and Foreign Policy The succession question remains the most important issue facing Oman and the health of Sultan Qaboos bin Said al-Said has become a public concern since 2015. His long convalescence in Germany (during 2014–2015 and again in early 2016) and his absence from public since mid-2014 have been a cause of concern for the Omanis who had known no other ruler since 1970. Without a male heir to succeed, Sultan Qaboos has navigated the country through his foresight and benevolence and

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brought about a transformation since the departure of the British. At the same time, conscious of the political uncertainty, the modalities of choosing a successor is increasingly clearer. According to Simon Henderson, the Sultan has named a possible successor whose identity would be known after his death and whose selection has to be endorsed by the royal family council.1 During 2017, two of the Sultan’s cousins—Asaad bin Tariq alSaid and Fahd bin Mahmoud al-Said—both deputy prime ministers have emerged as the front runners. In March, Asaad bin Tariq was named Deputy Prime Minister for international relations and cooperation and represented Oman in the summit meeting of the Arab League held in Amman.2 Until then, Fahd bin Mahmoud represented the country in various regional and international gatherings.3 During his close to five-decade reign, Sultan Qaboos invested in developing the oil industry and economy, encouraged institution building, established higher education institutions, and pursued an independent and balanced foreign policy. In a region afflicted with strategic competitions and shifting alliances, he did not shy away from taking unpopular decisions while dealing with adversaries and regional and extra-­regional powers. On a host of issues, such as Egyptian peace with Israel, Iran–Iraq War, Arab Spring protests, or the Iranian nuclear controversy, Qaboos navigated Oman with dexterity. He consciously kept away from the brewing power struggle between the Kingdom of Saudi Arabia and the Islamic Republic of Iran and the resultant sectarian tension. Over the years, he has developed a penchant for mediating disputes and emerged as one of the most sought-after leaders in handling regional tension. Maverick in his approach, he ensured a special place for Oman in the Gulf. Therefore, continuing these unique features of the Sultanate would depend upon the convictions and skills of the future leader and his ability to command domestic popularity and regional acceptance. This would be 1  Henderson, Simon. 2017. ‘The Omani Succession Envelope, Please’, Foreign Policy, 3 April, http://foreignpolicy.com/2017/04/03/the-omani-succession-envelope-please, last accessed on 1 July 2018. 2  Times of Oman. 2017. ‘Sayyid Asa’ad Arrives in Amman to Lead Oman’s Delegation in the 28th Arab Summit’, 28 March, http://timesofoman.com/article/105918/Oman/ Government/Sayyid-Asa%27ad-leaves-for-Jordan-to-lead-Oman%27s-delegation-in-the28th-Arab-Summit, last accessed on 1 July 2018. 3  Katzman, Kenneth. 2017. ‘Oman: Reform, Security and US Policy’, in Congressional Research Service, 8 March, https://fas.org/sgp/crs/mideast/RS21534.pdf, last accessed on 1 July 2018.

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especially challenging if other powers try to meddle and swing the Omani policy in their favour. Given these conditions, the question of succession continues to be the preeminent challenge facing the Sultanate. In addition, Oman faces multiple foreign policy challenges and a host of disputes continue to test its pragmatism. The biggest challenge facing the Sultanate was the Qatari crisis when Saudi Arabia and the UAE, along with Egypt and Bahrain, announced the politico-economic boycott of Qatar in July 2017. In line with its traditional policy in regional affairs, Oman resolutely refrained from taking sides and in the process remained sidelined as far as mediatory efforts were concerned. The health of the sultan—who is also the foreign minister—was the primary reason. However, it is also possible that Oman did not want to be a party in an internal schism within the GCC but preferred to watch it from the sidelines until the right time. Towards the end of the year, the country did not show its inclination to step in, as others, especially Kuwait, failed to bridge the inter-­Arab differences and acrimony.4 Above all, Oman needs the support and understanding of its neighbours, especially of the GCC countries, in the post-Qaboos phase, and hence taking sides on the Qatar crisis could be diplomatic suicide. Likewise, over the years, the Sultanate’s ability to maintain a delicate balance between arch-rivals—Saudi Arabia and Iran—and its refusal to be bullied by either of them served its interests well. Muscat understands that stability in the Persian Gulf is vital for the peace and prosperity of the entire region and for the wider world, especially in terms of free flow of oil and gas. It knows that keeping the Strait of Hormuz—one of the busiest international maritime choke points—free from disruption is necessary for the continued economic and social progress of the region. Oman’s belief that this can only be done through deft diplomacy and by keeping frictions from escalating. Thus, Oman’s balancing act vis-à-vis the Iran–Saudi rivalry and the Qatari crisis has not only served its interest but has also been a contributing factor for regional stability.5

4  Bakeer, Ali. 2017. ‘GCC Crisis: Why is Kuwaiti Mediation Not Working?’, Al-Jazeera, 11 August, https://www.aljazeera.com/indepth/opinion/2017/08/gcc-crisis-kuwaiti-mediation-working-170807093244546.html, last accessed on 1 July 2018. 5  Luck, Taylor. 2017. ‘In Oman, a Train-of-Succession Mystery: Who Follows Qaboos?’, The Christian Science Monitor, 17 April, https://www.csmonitor.com/World/MiddleEast/2017/0417/In-Oman-a-train-of-succession-mystery-Who-follows-Qaboos, last accessed on 1 July 2018.

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Security Issues Internal security was another issue that kept the country busy in 2017. Omani citizens are not known to have joined any major extremist outfits and theirs was the only country in the region ‘Zero’ score thereby suggesting no indulgence in the Global Terrorism Index.6 At the same time, the situation in neighbouring Yemen—with whom Oman shares a 288-kilometre long border—has escalated. Capitalizing on the power vacuum created by the Yemeni civil war, the al-Qaeda in the Arabian Peninsula (AQAP) has grown its presence in the south and south-eastern tribal areas of Yemen. The porous Omani–Yemeni borders and transborder tribal links are a headache for Oman. The Dhofar region of Oman, which in the past witnessed insurgency, is adjacent to turbulent tribal regions of Yemen, and hence during 2017 security concerns drove Oman to take a proactive role in fighting terrorism. Omanis are also wary of the internal situation in Yemen propelling into a refugee influx that could disturb its demographic balance and put pressure on its limited resources. These security concerns resulted in Oman adopting a delicate policy vis-à-vis the Yemeni crisis; at one level, it refused to join the Saudi-led military offensive against Yemen but at the same time, it joined the larger military coalition, the Islamic Military Alliance (IMA) based in Riyadh.7 Economy Oman is a smaller economy than some of the other countries in the region and its known oil reserves would last for about 15  years at the existing rate of production. The falling oil prices have adversely affected the country. Oil contributes to about 44 per cent of the GDP, 84 per cent of the government revenues, and 75 per cent of exports.8 Hence, the government-­ imposed corporate taxes, reduced fuel subsidies, increased expatriate visa fees, suspended utility subsidies and indefinitely deferred bonuses for the state employees, thereby managing the immedi6  Gidda, Mirren. 2017. ‘How Much Longer Can Oman Be an Oasis of Peace in the Middle East?’, Newsweek, 28 January, http://www.newsweek.com/2017/02/10/oman-sultanqaboos-terrorism-isis-al-qaeda-548682.html, last accessed on 1 July 2018. 7  Reuters. 2016. ‘Oman Joins Saudi-led Islamic Alliance: Gulf Sources’, 29 December, https://www.reuters.com/article/us-saudi-oman-coalition/oman-joins-saudi-led-islamicalliance-gulf-sources-idUSKBN14H1L4, last accessed on 1 July 2018. 8  Oxford Business Group. 2017. The Report: Oman 2016. London, Oxford Business Group, https://oxfordbusinessgroup.com/oman-2017.

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ate drop in revenues.9 The country needs to sell oil at US$55 per barrel to pay for its public sector salaries,10 and once the price falls below this benchmark, the economy will be in trouble. During much of 2017, the oil prices hovered around US$53 per barrel. In order to deal with this long-term problem, especially in the light of shale gas and other alternative energy resources, the government has initiated ambitious plans to reduce dependency upon oil and seeks to develop new industries around mining, services, tourism, sports, aviation, port development, and so on.11 Some of the success stories include development of steel and aluminium industries and fishing and agriculture industries but the long-term success in diversification depends heavily on sustained efforts in developing the non-oil sectors. With the marginal recovery of the oil market in 2017, the Omani GDP growth witnessed a small increase of 2.9 per cent from 2.5 per cent in the previous year.12 The annual budget stood at US$30.4 billion, slightly less than in 2016, thus signalling no major reduction in the on-going developmental activities.13 With revenue estimated at US$22.6 billion there was a significant deficit of US$7.8 billion or a quarter of the budget.14 With continued public sector investments, the non-oil GDP grew by 4.2 per cent, much higher than the overall GDP growth of 2.9 per cent during the year. The fiscal stability has been maintained by rationalizing public spending accompanied by efforts to enhance the role of the private sector by incorporating them in diversification plans.15 There were simultaneous efforts to reduce 9  Al-Bawaba Business. 2017. ‘Oman’s 2017 Budget Tackles Cheap Oil with Austerity Measures, Privatization’, 2 January, https://www.albawaba.com/business/omans-2017-budget-tacklescheap-oil-austerity-measures-privatization-920882, last accessed on 1 July 2018. 10  International Monetary Fund. 2018. Regional Economic Outlook: Middle East and Central Asia, https://www.imf.org/~/media/Files/Publications/REO/MCD-CCA/2017/May/ pdf/Statistical-Appendix.ashx, last accessed on 1 July 2018. 11  Reuters. 2016. ‘Oman Sets Plan to Halve Oil’s Role in Economy’, 3 January, https:// in.reuters.com/article/oman-economy-plan-idINKBN0UH0JG20160103, last accessed on 1 July 2018. 12  World Bank. 2018. ‘Country Profile: Oman’, https://data.worldbank.org/country/ Oman, last accessed on 1 July 2018. 13  K. Rejimon. 2017. ‘Oman Budget: Despite Austerity, Oman Committed to Investment’, Times of Oman, 2 January, http://timesofoman.com/article/99741/Oman/Government/ Oman-budget:-Despite-austerity-Oman-committed-to-investment, last accessed on 1 July 2018. 14  Price Waterhouse Cooper. 2017. ‘2017 Oman State Budget: Continued Reduction in Government Spending as Oil Price Stabilizes’, https://www.pwc.com/m1/en/tax/documents/2017/oman-state-budget-2017.pdf, last accessed on 1 July 2018. 15  Times of Oman. 2017. ‘Budget 2017 Aims to Put Oman on Right Track’, 1 January, http://timesofoman.com/article/99650/Oman/Government/Budget-2017-aims-toput-Oman-on-right-track, last accessed on 1 July 2018.

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youth unemployment, a major challenge to the government in recent years. With about 16 per cent unemployment rate, the government is also encouraging nationalization of the labour market in the private sector. In its efforts to boost private-sector investments and skill-development programmes, it was expected that the private sector would generate 12,000–13,000 new jobs for the Omani nationals in 2017.16 In addition to these efforts, the government has earmarked social sectors, such as education, health, and social welfare as well as defence as priority areas. Education accounts for 13 per cent of the budget with about US$4.1 billion as the projected expenditure. During the same year, health and social welfare received US$1.5  billion and US$1.2  billion, respectively. With about US$8.7 billion or 29 per cent, defence got the lion’s share of the budget.17 Indeed, as the percentage of the national budget, Oman ranks first in defence allocations.18 The Qatari crisis induced some sectoral growth in Oman. Following the travel restrictions imposed on Qatar Airways, Oman Air became the third popular regional airliner after Etihad and Emirates owned by Abu Dhabi and Dubai, respectively. With Qatar Airways banned from using the airspace of Bahrain, Egypt, Saudi Arabia, and the UAE, the gap is filled by Oman Air vis-à-vis inter-regional and intra-regional connectivity.19 Since Oman took a neutral stand in the crisis, its trade with Qatar increased by US$702 million in the last two quarters of 2017. It opened its ports to Qatari ships leading to increased maritime trade and transactions between the two.20 16  Arabian Business. ‘Oman Says Private Sector Will Create 13,000 New Jobs in 2017’, 3 January, http://www.arabianbusiness.com/oman-says-private-sector-will-create-13-000new-jobs-in-2017-658179.html, last accessed on 1 July 2018. 17  Katzman, ‘Oman’. 18  SIPRI estimates suggest that Oman allocated 12.1 per cent of its budget for defence in 2017 as against 16 per cent in 2016. Stockholm International Peace Research Institute. 2018. ‘Military Expenditure by Country as Percentage of Gross Domestic Product, 2003–2017’, SIPRI Military Expenditure Database, https://www.sipri.org/sites/default/ files/3_Data%20for%20all%20countries%20from%201988%E2%80%932017%20as%20a%20 share%20of%20GDP.pdf, last accessed on 1 July 2018. 19  Dudley, Dominic. 2017. ‘A Winner Emerges from the Qatar Crisis: Oman’s National Airline’, Forbes, 8 June, https://www.forbes.com/sites/dominicdudley/2017/06/08/ oman-air-takes-advantage-of-qatar-crisis/#51cc2f0325b4, last accessed on 1 July 2018. 20  Al Bawaba Business. 2017. ‘Oman, the Only Winner in Qatar Crisis’, 12 September, https://www.albawaba.com/business/oman-wins-qatar-crisis-1020650, last accessed on 1 July 2018.

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Society Oman is largely a prosperous and peaceful society. The government has focused on social welfare, education, healthcare, and women empowerment and this had led to significant progress in social indicators during the past decade. With 2.5 million citizen population and 2.1 million expatriates, the Sultanate has a balanced demography; in the UAE, Qatar and Kuwait, for example, the expatriates far outnumber the citizen population. Oman ranks significantly higher than the other countries in the Gulf in terms of the human development index; with a score of 0.796 and ranking 52 in the world, Oman is categorized as a developed country. As of 2016, it has 1100 government schools where 283,956 students were enrolled. Interestingly, the number of co-ed government schools is higher in comparison to the male- or female-only schools. There are 521 co-ed schools as against 352 government schools that are only for boys and 227 only for girls.21 Apart from the state-run schools, the Sultanate has many private primary and secondary schools which raises the number of schools to over 1230. These resulted in adult illiteracy rate plummeting to 5.2 per cent. The country has 49 government hospitals, 109 health centres with bed facilities, and 666 private hospitals and nursing homes, and, as a result of the state-run health developmental programmes, life expectancy has risen to 77 years.22 Unlike many other Gulf Arab countries, women constitute a major part of the workforce in Oman and comprise about 47 per cent of the labour force in the public sector and 23.9 per cent in the private sector. However, in terms of political participation the number is low. In the last Majlis alShura elections only 1 out of the 20 female candidates was elected, hence the current Shura (2015–2019) has only 1 female member out of 85.23 Nevertheless, female presence in education, health, and social welfare sectors is higher (Table 6.1). 21  Sultanate of Oman, National Centre for Statistics and Information. 2016. ‘Oman: Education’, 24 October, https://data.gov.om/OMEDCT2016/education?tsId=1065150 &lang=en, last accessed on 1 July 2018. 22   Sultanate of Oman. 2016. ‘Oman: Health’, 23 October, https://data.gov.om/ OMHLTH2016/health?regions=1000000-oman&indicators=1000430-number-of-beds, last accessed on 1 July 2018. 23  Vela, Justin. 2015. ‘One Woman Elected in Oman’s Shura Council Elections’, The National, 26 October, https://www.thenational.ae/world/one-woman-elected-in-oman-sshura-council-elections-1.83764, last accessed on 1 July 2018.

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Table 6.1  Women in labour force Sectors

Percentage

Public Private Dewan (court affairs) Royal court affairs Public (social) institutions Ministry of Education Ministry of Health Ministry of Social Development Ministry of Higher Education Ministry of Law Affairs

47 23.9 13 9 33 69 59 52 43 42

Source: The National Centre of Statistics and Information, Annual Report, Sultanate of Oman, 2016

As far as freedom of expression is concerned, Oman fairs poorly like many of its neighbours. Freedom House describes it as ‘Not Free’ and gives a score of 25 out of 100, where 100 stands for ‘Most Free’ and 0 stands for ‘Least Free’. In terms of total freedom ranking, Oman scores 5.5 out of 7; 6 out of 7 in terms of political rights; and 5 out of 7 on civil rights (where 1 stands for ‘Most Free’ and 7 for ‘Least Free’).24 In terms of press freedom, Oman is designated as ‘Not Free.’ Until 2016, the Sultanate enjoyed an Internet penetration rate of 71.1 per cent and 3.31 million of its total resident population uses the Internet.25

Bilateral Relations Political and Security Ties The Omani Minister Responsible for Foreign Affair Yousuf bin Alawi visited India in April and held discussions with External Affairs Minister Sushma Swaraj, and signifying the importance of the bilateral relations, called on Vice President M Hamid Ansari and Prime Minister Modi.26 24  Freedom House. 2017. ‘Oman’, in Freedom in the World, https://freedomhouse.org/ report/freedom-world/2017/oman, last accessed on 1 July 2018. 25  Internet Live Stats. 2016. ‘Oman Internet Users’, 1 July, http://www.internetlivestats. com/internet-users/oman, last accessed on 1 July 2018. 26  Government of India (GoI), Ministry of External Affairs (MEA). 2017. ‘Official Visit of Minister Responsible for Foreign Affairs of Oman to India (2–3 April 2017)’, http://www. mea.gov.in/incoming-visit-detail.htm?28270/Official+visit+of+Minister+Responsible+for+

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This was his second visit to New Delhi since 2014 when he became the first official from the Middle East to meet the newly-elected prime minister in June 2014.27 At the same time, despite close ties between the two, New Delhi allowed Oman to disappear from its radar. For nearly a decade, there was only one high-level visit between the two when Prime Minister Manmohan Singh visited Muscat in November 2008 during which he also visited neighbouring Qatar. The last visit of Sultan Qaboos, who incidentally studied in India, took place in April 1997, and in 2007 he was bestowed the Jawaharlal Nehru Award for International Understanding. However, his scheduled visit as the Chief Guest of Republic Day celebrations in 2012 did not materialize due to ineffective diplomacy on the part of India. Though under Prime Minister Modi the Persian Gulf has received considerable attention, Oman is conspicuous by its absence. The wait for a prime ministerial visit has been prolonged and the only notable visitor was the External Affairs Minister Swaraj who travelled to Oman in February 2015.28 Though two-way business exchanges have been c­ ontinuing, the prime minister’s visit had to wait until February 2018, this will be discussed in the next volume. At the same time, India has robust defence cooperation with Oman. For long, Oman has been sending its officers and cadets for training in the National Defence Academy and other military training institutions in India. Oman is also the only country in the Gulf with which all the three services of the Indian military conduct periodic exercises. Regular exchanges have been taking place between the two defence establishments and the recent visit was by Defence Minister Manohar Parrikar in May 2016 during which both countries signed the four Memorandums of Understanding pertaining to defence cooperation. Both sides are meeting Foreign+Affairs+of+Oman+to+India+23+April+2017, last accessed on 1 July 2018; GoI, MEA. 2017. ‘Minister Responsible for Foreign Affairs of Oman calls on Prime Minister’, 3 April, http://www.mea.gov.in/press-releases.htm?dtl/28299/minister+responsible+for+fo reign+affairs+of+oman+calls+on+prime+minister, last accessed on 1 July 2018. 27  GoI, MEA 2014. ‘Official Visit of Minister Responsible for Foreign Affairs, Sultanate of Oman to India’, Press Release, 2 June, http://www.mea.gov.in/incoming-visit-detail. htm?23383/Official+visit+of+Minister+Responsible+for+Foreign+Affairs+Sultanate+of+O man+to+India, last accessed on 1 July 2018. 28  GoI, MEA. 2015. ‘Transcript of Media Briefing by Official Spokesperson’, 13 February, http://mea.gov.in/outoging-visit-detail.htm?24777/Transcript+of+Media+Briefing+by+O fficial+Spokesperson+February+13+2015, last accessed on 1 July 2018.

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annually under the ambit of the Joint Military Cooperation Committee to discuss bilateral defence and security issues. In 2017, all the three services of Indian and Omani military conducted joint exercises; in January, their air forces conducted a five-day Eastern Bridge exercise in Jamnagar in Gujarat29; in March their armies took part in the second edition of the exercise Al-Najah in Bakloh, Himachal Pradesh30; and in December the navies took part in the 11th joint naval exercise Naseem al-Bahr in Muscat, where INS Trikand and INS Teg took part.31 Moreover, the Omani Navy has emerged as a partner in the Indian navy’s anti-piracy operations in the Gulf of Oman and the Indian naval vessels are welcomed by Oman for their anti-piracy activities in the Indian Ocean.32 Trade and Commercial Ties India has a moderate trade and commercial relations with Oman. The bilateral trade during 2016–2017 stood at US$4  billion, a marginal increase from US$3.8  billion during the previous year (Table  6.2 and Fig. 6.1). Oman is also amongst the few countries in the Persian Gulf with which India has a favourable balance of trade; India’s exports to Oman stood at US$2.7 billion as against its imports of US$1.3 billion from the Sultanate. Both countries regularly hold meetings of joint ­commissions and joint business council to promote private-sector businesses; however, it should be taken into account that the last meeting was held in October 2014. The joint venture Oman India Fertilizer Company (OMIFCO), which became operational in 2006, remains the model for future Indian partnership in the Gulf Arab countries, especially in oil refinery and petrochemical industry. 29  The Times of India. 2017. ‘Indian Air Force and Royal Air Force of Oman to Hold Joint Exercise’, 17 January, https://timesofindia.indiatimes.com/city/ahmedabad/iaf-and-royalair-force-of-oman-to-hold-joint-exercise/articleshow/56606005.cms, last accessed on 1 July 2018. 30  GoI, Press Information Bureau. 2017. ‘Indo–Oman Joint Army Exercise Al Nagah-II 2017’, 7 March, http://pib.nic.in/newsite/PrintRelease.aspx?relid=158942, last accessed on 1 July 2018. 31  GoI, Press Information Bureau. 2017. ‘Indian Navy Conducts Exercise Naseem-Al-Bahr with Oman Navy’, 20 December, http://pib.nic.in/newsite/PrintRelease.aspx?relid=174638, last accessed on 1 July 2018. 32   GoI, MEA. 2017. ‘India–Oman Relations’, November, http://www.mea.gov.in/ Portal/ForeignRelation/26_Oman_November_2017.pdf, last accessed on 1 July 2018.

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Table 6.2  India–Oman bilateral trade (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 India’s exports to Oman India’s imports from Oman Total bilateral trade Share of Oman in the total trade

1322.13

2599.49

2812.27

2379.44

2190.79

2728.30

3345.94

2009.72

2951.18

1752.24

1674.71

1290.50

4668.08

4609.21

5763.45

4131.69

3865.50

4018.79

0.59

0.58

0.75

0.54

0.60

0.61

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

7 6 5 4 3 2 1 0

2011-12

2012-13

2013-14 Exports

2014-15 Imports

2015-16

2016-17

Total Trade

Fig. 6.1  India–Oman bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

According to the MEA, India earmarks 100 slots for Oman for professional training under the Indian Technical and Economic Cooperation (ITEC) programme and Oman has been ‘optimally availing the allocated seats’.33 The government has also offered to increase the number of slots under the self-financing category of the ITEC for training in the Indian defence institutions. Further, air connectivity between India and Oman  Ibid.

33

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has grown in recent years, and, as of 2017, there are nearly 400 weekly flights between the two countries. The Qatar crisis has partly enhanced the operations between the two. A number of delegations have been travelling to boost business opportunities. Energy Ties Energy continues to be the important component of the bilateral trade and in 2016–2017, India imported nearly US$390 million worth of oil from Oman. This was a significant drop from US$584 million that India imported during 2015–2016 and a substantial drop from 2011–2012 when India imported over US$2 billion worth of oil from Oman (Table 6.3 and Fig. 6.2). This was due to falling oil prices and India’s diversification strategy. Hence the Omani share in India’s oil imports declined significantly from 1.2 per cent in 2011–2012 to 0.38 per cent in 2016–2017. Similarly, Oman’s share in India’s energy imports from the Persian Gulf witnessed a decline from 1.98 per cent to 0.69 per cent during the same period (Table 6.4 and Fig. 6.3). At the same time, the share of oil in the overall imports from Oman had also declined from 62 per cent in 2011–2012 to 30 per cent in 2016–2017, thereby indicating the gradual diversification of non-oil trade between India and Oman. Investments Despite being a smaller economy, Oman is the second-largest investor from the Persian Gulf into India after the UAE, ranking 31st in the investors’ list. The total FDI inflow from Oman into India between April 2000 Table 6.3  Share of oil in India’s imports from Oman (US$ million) Year 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

Oil imports Total oil from Oman imports 2083.84 507.88 1514.11 732.51 584.67 390.56

172,753.92 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20

Omani share in Imports Per cent of oil in total oil imports from Oman imports from Oman 1.21 0.28 0.83 0.47 0.60 0.38

3345.94 2009.72 2951.18 1752.24 1674.71 1290.50

62.28 25.27 51.31 41.80 34.91 30.26

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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70 60 50 40 30 20 10 0

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Share in Per cent

Fig. 6.2  Share of oil in India’s imports from Oman. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in Table 6.4  India’s energy imports from Oman (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 India’s energy 2083.84 507.88 1514.11 732.51 584.67 390.56 imports from Oman India’s total 172,753.92 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20 energy imports Total energy 105,056.26 105,859.15 106,400.75 85,300.30 50,992.26 56,335.34 imports from the Persian Gulf Share in the 1.21 0.28 0.83 0.47 0.60 0.38 total energy imports (per cent) Share in 1.98 0.48 1.42 0.86 1.15 0.69 energy imports from the Persian Gulf (per cent) Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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2.5 2 1.5 1 0.5 0

2011-12

2012-13

2013-14

Share in Total Oil Imports

2014-15

2015-16

2016-17

Share in Imports from Persian Gulf

Fig. 6.3  Share of Oman in India’s oil imports. Source: Adapted from the Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

and December 2017 is US$457.25  million. The FDI into India was US$10.47 million in 2012; US$4.42 million in 2013; US$14.11 million in 2014; US$49.89  million in 2015; US$16.76  million in 2016; and US$22.93 million in 2017. In other words, there is an upward trend since 2014.34 Indeed, these figures are higher than the inflow from larger economies, such as Saudi Arabia, Qatar, or Kuwait which also have higher sovereign wealth funds. According to the Ministry of External Affairs, there are over 2900 Indian companies that are currently operating in the Sultanate with an estimated investment of US$4.5 billion.35 A number of Indian Public Sector Undertakings (PSUs) and private enterprises in banking, construction, telecommunication, and IT sector have a strong presence in Oman. Many Indian companies have also invested in the special economic zones in Sohar and Salalah in mining, textile, fertilizers, and automotive industries. 34   GoI, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion. 2018. ‘FDI Statistics’, http://dipp.nic.in/publications/fdi-statistics, last accessed on 1 July 2018. 35  GoI, MEA, ‘India-Oman Relations’.

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Expatriates The presence of a large expatriate community has helped the Indian businesses and companies to establish a strong presence in the Omani market. They largely offer services to the expatriate community but have gradually expanded their presence to contribute to the local business development. According to the Indian Embassy in Muscat, as of April 2017, there are 800,749 expatriate Indian residing in Oman and the number of Indian workers, including professionals, is estimated at 692,427.36 The liberal social environment, non-discriminatory working conditions, and granting of freedom of religion have resulted in many professionals residing with their families, thus there is a discrepancy between the number of resident Indians and the Indian workforce. The multicultural environment and the open socio-religious milieu have allowed the Indians to thrive and many have spent a significant time in the Sultanate. Though naturalization through residency is not an option, many second and third-generation Indians have been working in Oman. Such measures not only provide two-way familial contacts between the two countries, but also facilitate bilateral trade and investments.

Challenges With the visit of the Prime Minister Modi in February 2018, the Indo– Omani relations are expected to improve; however, there are still impediments. First of all, India needs to avoid ignoring Oman. Despite flourishing relations with other Gulf countries, Oman remains important for a host of reasons, including maritime security and potential for investments. Oman has a strong Indian community and both the government and the society and open towards non-nationals who are allowed to have their places of worship. Notably, the Omani government was the first to reach out to the Modi government after it took over in May 2014 and the Sultanate looks up to India for strong relations to ensure security and stability as well as economic prosperity. India needs to shore up support for the Sultanate and publicly rally behind the Sultan’s chosen successor to ensure Omani stability and foreign policy independence, which will be an asset for India and its policy in the Gulf. 36   Embassy of India, Muscat, Oman. 2017. ‘India and Oman Bilateral Relations’, September, http://www.indemb-oman.org/page/bilateral, last accessed on 1 July 2018.

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Oman is the second-largest source of FDI in India amongst the Gulf countries despite its relatively smaller economy and this speaks volumes about the potential in this area. The Omani business community and rich Indian expatriates are a potential source of investments. Simultaneously, India can help Oman in many fields, including Oman’s quest for food security, diversification of the economy, and skill-development plans. Notably, the only successful joint venture for India in the Gulf is in Oman and this can be a model for planned upstream/downstream activities in the UAE and Saudi Arabia. Apart from the political and economic areas, India should develop military and maritime cooperation. Security concerns in the Gulf are growing and despite its neutral and non-interventionist approach, India will not be able to ignore these concerns. The possible way forward is to develop strategic military-to-military cooperation with Oman to improve the understanding of each other’s concerns and problems and to be able to respond in case of exigencies. With Oman, India already has defence ties and it is important to take them forward. The regional geopolitics and superpower manoeuvring should be a concern for New Delhi. Once, Sultan Qaboos makes way for his successor, Muscat will face strong regional pressures to abandon its traditional, independent foreign policy. It would not be easy for the new ruler to ward off demands from the regional powers, and with the declining appetite for US intervention, India will have to provide the necessary public support for Oman. This will suggest that India should consider military presence and enhanced maritime cooperation which in turn could begin with a more public political support for Oman during its leadership transition.

CHAPTER 7

Qatar

Key Information Ruling family: al-Thani; Ruler: Tamim bin Hamad bin Khalifa al-Thani (since 25 June 2013); Crown Prince: Abdullah bin Hamad bin Khalifa al-Thani (since 11 November 2014); National day: 18 December; Parliament: 35-member nominated Majlis al-Shura; Last parliamentary election: NA; Major group in parliament: NA; National carrier: Qatar Airways. Socio-Economic Indicators Area: 11,586 sq. km; Population: 2.31 million; Natives: 11.6 per cent; Expats: 88.4 per cent (2015 est.); Religious groups: Citizen (Sunni 90–95 per cent; Shia 5–10 per cent); Residents (Muslim 67.7 per cent; Hindu 13.8 per cent; Christian 13.8 per cent; Buddhist 3.1, Other less than one per cent) (2010 est.); Youth: 12.35 per cent (2017 est.); Population growth rate: 2.27 per cent; Life expectancy at birth: 78.9 years; Major population groups: Arab 40 per cent; Indian 18 per cent; Pakistani 18 per cent; Iranian 10 per cent; Other 14 per cent; Literacy rate: 97.3 per cent; National currency: Qatari Riyal (QAR); GDP: US$166.3  billion; Foreign trade: Export US$56.26  billion, Import US$26.69 billion (2017 est.); Defence budget: NA; Sovereign wealth fund: US$320 billion; External debt: US$168 billion; Per capita income: US$1.24,900; Oil reserves: 25.24  billion bbl; Gas reserves: © The Author(s) 2019 P. R. Kumaraswamy et al., Persian Gulf 2018, Persian Gulf, https://doi.org/10.1007/978-981-13-1978-5_7

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24.3 trillion m3; HDI rank: 33; Infant mortality rate: 6.2 deaths/1000 live birth; UN education index: 0.686; Gender inequality index: 0.542; Labour force: 1.953 million; Unemployment rate: 0.6 per cent; Urban population: 99.4 per cent; Rate of urbanization: 1.63 per cent (2015–2020 est.); Last national census: 2010. India Related Indian cultural centre: Doha (Inaugurated in 2000); Number of Indians: 697,500 (approximately); Number of places of worship for Indians: Catholic church (opened in 2008); Indian schools: 14; Indian banks: State bank of India (1); ICICI Bank (1); Currency exchange rate: 1 QAR = INR 18.26 (April 2018); Last visit to India by the ruler: Emir Tamim bin Hamad al-Thani, March 2015; Last Indian prime minister to visit: Narendra Modi, June 2016. * * * The Emirate of Qatar is the only country with which India has a long-term energy import agreement. Under a deal signed in 2004, Qatar is committed to supplying 7.5 million tonnes of natural gas per year to India for 25 years. After the international oil prices tumbled in mid-2014, Qatar agreed to the Indian request for re-negotiating the price for LNG, thus, enabling India to save about US$588 million (Rs 4000 crore) for its import of LNG from the Emirate.1 This was in contrast to the demands of some of the other countries which sought an upward revision of gas prices when oil prices rose. This gesture underscores the importance Doha attaches to India and was crucial in the wake of the Qatari crisis which unnerved many countries in the Persian Gulf and beyond. Though the Saudi-led politico-­economic boycott of Qatar had no direct impact upon the Indo-Qatari relations, it would be difficult for New Delhi to maintain its neutrality should the crisis escalate. In such a situation, India might revise its ­non-­interventionists policy and try to be a facilitator of a Saudi–Qatari dialogue. 1  The Times of India. 2017. ‘India Russia to Renegotiate Rate with US’, 4 October, https://timesofindia.indiatimes.com/business/india-business/india-to-renegotiate-lngrate-with-us-russia/articleshow/60939421.cms, last accessed on 1 July 2018; and Raghavan, T C A Sharad. 2015. ‘Qatar Slashes Gas Price for India, Waives Penalty’, The Hindu, 31 December, http://www.thehindu.com/business/qatar-slashes-gas-price-for-india-waivespenalty/article8049955.ece, last accessed on 1 July 2018.

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Domestic Developments Politics and Foreign Policy The political, diplomatic, and economic boycott of Qatar by the Saudi-led coalition on 5 June 2017 was the most serious crisis faced by the sixmember Gulf Cooperation Council (GCC) since its establishment in 1981. Earlier, the simmering discontent had led Saudi Arabia, the UAE, and Bahrain in temporarily recalling their ambassadors from Doha between March and December 2014. At that time, the Qatari Emir Tamim bin Hamad al-Thani was able to deflect the crisis by promising to address the concerns raised by Saudi Arabia and the UAE, especially over its support to the Muslim Brotherhood and coverage of internal issues of Arab Gulf countries by the Al-Jazeera network.2 According to Riyadh, those promises were only partially implemented by Doha. While imposing the June boycott, Saudi Arabia and the UAE accused Qatar of not only ‘disrespecting’ the promises made in 2014, but of also moving closer to the Islamic Republic of Iran and its continued patronizing of the Islamist groups, especially the Muslim Brotherhood. As discussed in the Introduction, they also accused Doha of using the Al-Jazeera network to incite internal discord in the Gulf Arab countries. Qatar denied these allegations made by Saudi Arabia and its allies (Bahrain, Egypt, and the UAE). Though the initial list of 13 demands made by Saudi Arabia and its allies against Qatar were reduced to six in July, the stalemate, however, continues. The Qatari defiance and its decision to go ahead with its strategic ties with Iran intensified the crisis and the internal schism within the GCC poses a serious challenge to many countries which have vital stakes in the oil-rich Arab countries. For its part, Qatar had unequivocally declared its refusal to succumb to external pressures. On a number of occasions, Emir Tamim, who took over the reins after his father’s abdication in June 2013, termed the Saudi-led boycott as an attack on Qatari sovereignty and argued that Doha is well within its rights to forge relations with any ­country it deems fit and in its national interests.3 In an act of defiance, on 27 August, 2  Kovessy, Peter. 2015. ‘Two Years on Qatar Has Not Changed under Sheikh Tamim’, Doha News, 25 June, https://dohanews.co/two-years-on-how-qatar-has-and-hasntchanged-under-sheikh-tamim, last accessed on 1 July 2018. 3  Al-Jazeera. 2017. ‘Qatar Rejects Saudi-led Group’s Allegations’, 7 July, https://www. aljazeera.com/news/2017/07/qatar-rejects-saudi-led-group-allegations-170707153613982. html, last accessed on 1 July 2018.

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Doha renewed diplomatic relations with Iran which were downgraded in January 2016 in line with the Saudi decision to break off relations with Tehran. These were partly propelled after the attack on the Saudi mission in Tehran and Mashhad after the execution of dissident Saudi Shia cleric Nimr al-Nimr.4 Invoking ‘press freedom’, the Emir also refused to reign in the Al-Jazeera network in its coverage of regional events.5 He refused to expel sympathizers and supporters of the Muslim Brotherhood and its Palestinian sister organization Hamas from Qatar arguing that the Qatari support has been for the people and their rights and not for any individuals or organizations.6 Furthermore, Qatar went ahead and forged strategic ties with Turkey which has emerged as a surprise player by putting its weight in Doha’s favour in the aftermath of the crisis.7 The continuing Qatar crisis and resultant new alliances did not bode well for the Persian Gulf. At the same time, it is essential to recognize that the Qatari policy of impartiality in regional affairs has suffered in recent years. Its insistence on military interventions in Libya and Syria during the Arab Spring, support for anti-Mubarak opposition in Egypt and its lukewarm treatment of the Bahraini protests evoked criticisms. Its alleged role in funding the growth of ISIS was another instance when its partisanship was questioned.8 Though the exact provocation remains uncertain, the diplomatic parting was the culmination of a host of events in 2017. The most important ­incident was the Qatari hostage negotiation with the Shia and Sunni militants in Iraq and Syria to secure the release of 26 of its nationals, including

4  NDTV. 2017. ‘Qatar to Reinstate Ambassador to Iran Amid Gulf Crisis’, 24 August, https://www.ndtv.com/world-news/qatar-to-reinstate-ambassador-to-iran-amid-gulf-crisis-1741557, last accessed on 1 July 2018. 5  Finn, Tom. 2017. ‘Al Jazeera Says Gulf Dispute Won’t Affect Editorial Independence’, Reuters, 8 June, https://www.reuters.com/article/us-gulf-qatar-jazeera-idUSKBN18Z1PM, last accessed on 1 July 2018. 6  Al-Jazeera. 2017. ‘Analysts: Qatar Supports Gaza Not Hamas’, 7 June, https://www. a l j a z e e r a . c o m / i n d e p t h / f e a t u r e s / 2 0 1 7 / 0 6 / a n a l y s t s - q a t a r- s u p p o r t s - g a z a hamas-170607083211016.html, last accessed on 1 July 2018. 7  Al Haj, Saeed. 2017. ‘Implications of Turkey Qatar Alliance’, Al-Jazeera, 19 June, http://www.aljazeera.com/indepth/features/2017/06/implications-qatar-turkey-alliance-170618110726262.html, last accessed on 1 July 2018. 8  Das, Hirak Jyoti. 2015. ‘Qatar’, in P.R. Kumaraswamy (ed.) Persian Gulf 2015: India’s Relations with the Region. New Delhi: MEI/Smashword.

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some royals by paying a huge ransom.9 According to the London-based Financial Times, Doha paid US$700 million to the Iranian-backed militia, US$120–140 million to Tahrir al-Sham, and US$80 million to Ahrar al-­ Sham10 to secure their release. This ransom payment has angered many other countries which were at the receiving end of terrorism and the Saudi call for boycott led to Yemen, Mauritania, and Chad breaking off diplomatic relations with Doha while Jordan downgraded the relations.11 Economy The immediate effect of the Saudi-led boycott was serious, though gradually Doha recovered and returned to economic growth. In the aftermath of the crisis, reports of its market feeling the pinch and empty shelves of supermarket highlighted the disruptive potential of the boycott. Its deft handling of the emerging economic crisis through its massive sovereign wealth funds and its ability to find some regional support, especially from Tehran and Ankara, prevented an economic meltdown. The much-feared flight of international capital out of Doha did not materialize. Gradually, the economy emerged out of the crisis and in the third quarter of the year, the GDP grew at the rate of 1.9 per cent, up from 0.3 per cent in the second quarter of 2017. In the wake of a reduction in tourism which fell by 44 per cent in June as compared to the same month in 2016, disruption in imports which fell by 40 per cent from 2016 and the heavy withdrawal of deposits from the Qatari banks, the government unveiled a series of initiatives. According to a survey conducted by Reuters, the immediate impact of the crisis was felt in the tourism sector as it coincided with Ramadan. Most of the tourists in Qatar are from the Gulf countries and the survey revealed that the five major hotels in the 9  Roberts, David B. 2017. ‘The Meaning of the Intra-monarchy Spat’, Foreign Affairs, https://www.foreignaffairs.com/articles/middle-east/2017-06-13/dustup-gulf, last accessed on 1 July 2018; see also: Arango, Tim. 2017. ‘Big Ransom and Syria Deals Win Release of Royal Qatari Hunters’, The New  York Times, 21 April, https://www.nytimes. com/2017/04/21/world/middleeast/big-ransom-and-syria-deals-win-release-of-royalqatari-hunters.html?mcubz=2, last accessed on 1 July 2018. 10  Solomon, Erika. 2017. ‘The $1-bn Hostage Deal That Enraged Qatar’s Gulf Rivals’, Financial Times, 5 June, https://www.ft.com/content/dd033082-49e9-11e7-a3f4c742b9791d43, last accessed on 1 July 2018. 11  Hunt, Katie. 2017. ‘Qatar: We Are Willing to Talk to Resolve the Diplomatic Crisis’, CNN, 6 June, http://edition.cnn.com/2017/06/06/middleeast/qatar-diplomatic-crisis/ index.html, last accessed on 1 July 2018.

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country had an average occupancy of only 57 per cent.12 Incentives to ramp up food supplies helped to boost the production in primary sectors, such as dairy and agricultural farming. Increased government support in the wake of the boycott resulted in the construction sector registering an astonishing 14.7 per cent growth from the previous year. Depositing of state funds into national banks shored up financial activities, especially when many Gulf banks limited or terminated their banking services in Qatar. On 12 December, the government unveiled the budget for 2018, which included a spending increase of 2.4 per cent from the previous year.13 According to figures released by the World Bank, the GDP growth slowed down to 2 per cent from 2.2 per cent in 2016. More diversified than other Gulf Arab countries, the Qatari economy could withstand the crisis with some deft management. The countries which severed ties— Bahrain, Egypt, Saudi Arabia, and the UAE—constitute a small share in Qatari exports and a relatively small portion of financial and FDI inflows. At the same time, the boycott and disruption led to a small drop in imports because of expensive diversion and alternative transit routes.14 Reporting a grim picture, Forbes stated that the embargo on air, land, and sea traffic to and from Qatar has the potential to inflict serious damage to the economy and its impact would depend upon the duration of the sanctions. Qatar, for example, gets most of its food imported through its land borders with Saudi Arabia and closing this facility has forced Qatar to explore other options, such as maritime imports from Iran, Turkey, or India. Though attractive, these are expensive options. Likewise, equipment and raw materials for the booming construction industry also came through the Saudi border and developing new supply chains will be a time-consuming and costly affair.15 12  Gulf News. 2017. ‘Arab Boycott Hits Qatar Tourism Severely during Eid Holiday’, 27 June, https://gulfnews.com/news/gulf/qatar/arab-boycott-hits-qatar-tourism-severelyduring-eid-holiday-1.2050016, last accessed on 1 July 2018. 13  Focus Economics. 2018. ‘Qatar Economic Outlook’, 8 May, https://www.focus-economics.com/countries/qatar, last accessed on 1 July 2018. 14  World Bank. 2017. ‘Qatar Economic Outlook – October 2017’, http://www.worldbank. org/en/country/gcc/publication/qatar-economic-outlook-october-2017, last accessed on 2018. 15  Dudley, Dominic. 2017. ‘Qatar Starts to Count the Economic Cost of Standoff with Saudi Arabia and UAE’, Forbes, 6 June, https://www.forbes.com/sites/dominicdudley/2017/06/06/qatar-economic-battle-with-saudi-and-uae/#b5104db7bee7, last accessed on 1 July 2018.

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A BBC report highlighted that the crisis has affected the Qatari food situation, international flights, and the preparations for the 2022 Football World Cup.16 Unmoved by such circumstances, the Minister of Economy and Commerce Ahmed bin Jassim al-Thani told Al-Jazeera that ‘challenges create opportunities’ and that the crisis has given Qatar an access to new markets, new goods, and, maybe, to higher-quality products.17 Against this background, the Economic Freedom Index for 2017 prepared by the Heritage Foundation ranked Qatar 29th worldwide and second in the Middle East. Its economic freedom status is identified to be ‘Mostly Free’ with a score of 73.1 which is much higher than the regional (61.9) or the global average (60.9). The report also points out that oil and gas sectors are the major drivers of the Qatari economy and generate about 50 per cent of its revenues. Notable areas of success are tax and fiscal policy and the freedom of trade while areas of concerns are investment freedom, government integrity, labour laws, and workers’ rights.18 In terms of GDP per capita income, Qatar continues to remain the richest country in the world with a figure of US$124,930; the second country in the list is Monaco with a GDP per capita of US$115,700. Society Qatar has come a long way since the days when it followed the Wahhabi tradition in the social and religious realms. Under Hamad bin Khalifa al-­ Thani (1995–2013) the tiny gas-rich emirate made rapid progress towards economic development and social opening. Subsequently, Doha emerged as a major regional competitor to other Gulf metropolises, such as Manama, Dubai, and Abu Dhabi. However, concerns regarding the Qatari treatment of women and minorities continue to persist. If the political rights of the nationals (0.33 million) remain limited, migrant workers face 16  Atkinson, Simon. 2017. ‘Qatar Row: Economic Impact Threatens Food Football and Flights’, BBC News, 5 June, http://www.bbc.com/news/business-40156029, last accessed on 1 July 2018. 17  Al-Jazeera. 2017. ‘Qatar Economic Minister: Challenges Create Opportunities’, 19 June, http://www.aljazeera.com/programmes/countingthecost/2017/06/qatar-economy-minister-challenges-create-opportunities-170618120415402.html, last accessed on 1 July 2018. 18  The Heritage Foundation. 2017. ‘Qatar’, Index of Economic Freedom, http://www.heritage.org/index/pdf/2017/countries/qatar.pdf, last accessed on 1 July 2018.

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extreme working conditions and hardships. Reports have suggested that the number of work-related deaths in Qatar in the last couple of years has been high.19 The FIFA World Cup which Qatar will host in 2022 has been depicted as the ‘World Cup of Shame’ by the Amnesty International owing to the abuse of workers employed in various construction and infrastructure projects related to the event.20 According to the report, the country has 1.7 million migrant workers who constitute 90 per cent of its total workforce. Most of them are employed in works related to the World Cup; for example, 3200 workers are employed daily for the Khalifa Stadium in Doha out of which 234 were abused and exploited. Most of these workers in the stadium are subjected to forced labour and, to make matters worse, these workers paid between US$500–4300 to their employers or recruitment agents back home for finding a job in Qatar.21 Moreover, the workers are subjected to appalling living conditions, do not receive the promised remuneration, and often their salaries are delayed. Given the nature of their work, they have to work out in the open where the temperature crosses the 50 °C mark. Media reports suggest that the real victim of the diplomatic standoff are the 2.2 million migrant workers who fear the prospects of losing their job, are not paid their dues on time, or live in hardship due to the economic crisis engulfing Qatar.22 Amidst international criticism and crisis with its neighbours, on 22 August Emir Tamim ratified a new law named ‘Domestic Workers Law’ which guarantees a maximum of 10-hour working day, a weekly day of rest, three weeks of paid annual leave, and an end-of-service payment of at least three-week per year.23 Though it had not yet set out the enforce19  Human Rights Watch. 2017. ‘Qatar: Take Urgent Action to Protect Construction Workers’, 27 September, https://www.hrw.org/news/2017/09/27/qatar-take-urgentaction-protect-construction-workers, last accessed on 1 July 2018. 20  Amnesty International. 2016. ‘Qatar World Cup of Shame’, March, https://www. amnesty.org/en/latest/campaigns/2016/03/qatar-world-cup-of-shame, last accessed on 1 July 2018. 21  Ibid. 22  Tan, Rebecca. 2017. ‘The Victims of the Gulf Crisis are the 2.2 Million Migrant Workers’, The Vox News, 21 July, https://www.vox.com/world/2017/7/21/15960232/ qatar-gulf-crisis-migrant-workers-saudi-uae-bahrain-egypt-diplomacy-middle-east, last accessed on 1 July 2018. 23  The Guardian. 2017. ‘Qatar Passes Law to Protect Rights of Domestic Workers’, 23 August, https://www.theguardian.com/global-development/2017/aug/23/qatar-passeslaw-protect-employment-rights-domestic-workers, last accessed on 1 July 2018.

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ment mechanism, the law would positively affect the domestic workers. However, this might also be a move to prevent workers from fleeing the country for better options. According to a 2016 labour force survey report prepared by Human Rights Watch, the country has 173,742 domestic workers, out of which 107,621 or 62 per cent are women, mostly from Asia and Africa.24 In October an agreement was signed between Qatar and International Labour Organization (ILO) towards tackling migrant labour abuses.25 For its part, the government has committed to revising its domestic laws in line with international labour standards and with the guidance of ILO experts. It identifies five target areas and one of these allows migrant workers to change their employers and, if necessary, even exit the country. This was often seen as the prime reason for the abuse suffered by migrant labourers and the provision of changing one’s employer will considerably reduce the hardship faced by them.26 In November, Fédération Internationale de Football Association (FIFA) published a report on the human rights situation which highlighted abuses both in Russia which is hosting the World Cup in 2018 and in Qatar four years later.27 Responding to these findings, the New York-based Human Rights Watch demanded that the onus of remedy squarely lies with FIFA and the latter should take the necessary measures to remedy the situation.28 Qatar’s ability to provide a respectable and equal environment for its female population—both citizens and expatriates alike—has remained a serious concern. According to the Global Gender Gap Report (GGGR) 24  Human Rights Watch. 2017. ‘New Law Gives Domestic Workers Rights’, 24 August, https://www.hrw.org/news/2017/08/24/qatar-new-law-gives-domestic-workers-laborrights, last accessed on 1 July 2018. 25  Amnesty International. 2017. ‘Qatar/UN: Agreement to Tackle Migrant Labour Abuse Offers Path to Reform’, 26 October, https://www.amnesty.org/en/latest/news/2017/10/ qatar-un-agreement-to-tackle-migrant-labour-abuse-offers-path-to-reform, last accessed on 1 July 2018. 26  Ibid. 27  FIFA News. 2017. ‘First Report of FIFA Human Rights Advisory Board Published’, 9 November, http://www.fifa.com/governance/news/y=2017/m=11/news=first-reportof-fifa-s-human-rights-advisory-board-published-2919234.html, last accessed on 1 July 2018. 28  Worden, Minky. 2017. ‘Time for FIFA to Act on Human Rights’, Human Rights Watch, https://www.hrw.org/news/2017/11/22/time-fifa-act-human-rights, last accessed on 1 July 2018.

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for 2017, with an abysmal score of 0.626, Qatar ranks 130 out of 144 countries. Some of its smaller Gulf Arab neighbours—the UAE, Bahrain, and Kuwait—fare better. On economic participation and opportunity, the Emirate ranks 122; in educational attainment it ranks 33; in health and survival it ranks 127; and in political participation it ranks 143.29 Some scholars suggest that despite its economic wealth and prosperity, change for the Qatari women is coming rather slowly.30 For its part, the country stresses its obligation to women employment as part of its commitments to the Sustainable Development Goals 2030 and has set its focus on Goals Five and Eight in particular which deal with women and equality.31 The country’s gender development index (GDI) is high at 0.991, but its gender inequality (GII) is rather high at 0.542. Though the human development index for both the sexes is almost same (0.859 for men and 0.851 for women), the labour force participation rate for females at 15 years or above is almost half (53.6 per cent) of their male counterparts (94.2). Female unemployment rate is 13.3 per cent higher than the male of same age.32 Likewise, the number of seats in parliament held by women is 9.76 per cent and the current Majlis al-Shura has 41 nominated members out of whom only four are women.33 According to the Freedom House Report 2017, Qatar is ‘Not Free’ in terms of freedom and has a score of 26 out of 100, and in terms of political rights and civil rights, it has a score of 6 and 5 out of 7, respectively,34 where 1 indicates ‘Most Free’ and 7 ‘Least Free’. In terms of freedom of the press, the country is identified as ‘Not Free’ even though it has a high Internet penetration rate of 92.9 per cent. The freedom of press score is 70 out of 100 where 0 stands for ‘Most Free’ and 100 for ‘Least Free’. 29  World Economic Forum. 2017. The Global Gender Gap Report, http://www3.weforum.org/docs/WEF_GGGR_2017.pdf, last accessed on 1 July 2018. 30  ABC News. 2018. ‘For Qatari Women Change is Slowly Coming’, 11 April, http:// abcnews.go.com/International/story?id=79539&page=1, last accessed on 1 July 2018. 31  Qatar, Ministry of Foreign Affairs. 2017. ‘Qatar Stresses Commitment to Women Empowerment’, 16 March, https://www.mofa.gov.qa/en/all-mofa-news/details/2017/ 03/16/qatar-stresses-commitment-to-women’s-empowerment, last accessed on 1 July 2018. 32   United Nations Development Programme. 2016. ‘Qatar: Human Development Indicators’, in Human Development Reports, http://hdr.undp.org/en/countries/profiles/ QAT, last accessed on 1 July 2018. 33   Inter-parliamentary Union. 2018. ‘Qatar: Majlis-Al-Shura’, 21 February, http:// archive.ipu.org/Parline/reports/2384_A.htm, last accessed on 1 July 2018. 34  Freedom House. 2017. ‘Qatar’, Freedom of Press, https://freedomhouse.org/report/ freedom-world/2017/qatar, last accessed on 1 July 2018.

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The legal and economic environment scores are 21 and 22 out of 30, respectively, while the political environment score stands at 27 out of 40. According to Reporters without Border, with a score of 3.86 Qatar ranks 123 in terms of the World Press Freedom Index—a six-position drop since 2016. At the same time, it has been noted that the country’s outspoken channel Al-Jazeera has transformed the media landscape of the entire Middle East. The state-funded media network largely ignores happenings within Qatar. Media houses in the country and journalists continue to face harsh censorship regulations.35 Because of the ongoing regional standoff, media outlets owned by Qatar, especially Al-Jazeera were blocked by many Arab countries and many international organizations, including Human Right Watch see this as a major blow to free speech in the wider region.36

Bilateral Relations Political Ties Qatar has received considerable attention in India’s Persian Gulf policy since Narendra Modi became prime minister. Modi’s June 2016 visit to Doha was preceded by the visit of Emir Tamim in March 2015. In December 2016, Qatari Prime Minister Abdullah bin Nasser al-Thani visited New Delhi and met Indian officials and both countries signed five MoUs including one on the technical cooperation in combating ­cybercrimes.37 The Qatari Foreign Minister Mohammed bin Abdulrahman al-­Thani visited India in August 2017 and met senior Indian officials, including Prime Minister Modi. The visit came amidst the regional tension and the foreign minister carried a personal message from Emir Tamim al-Thani conveying his country’s appreciation of India’s stand. The Qatari foreign minister also met National Security Advisor Ajit Doval and discussed common concerns. Incidentally, this was the only high-level political contact between the two countries in 2017.

35  Reporters without Borders. 2016. ‘Qatar’, https://rsf.org/en/qatar, last accessed on 1 July 2018. 36  Human Rights Watch. 2017. ‘Media Blocked Threatened in Dispute with Qatar’, 14 June, https://www.hrw.org/news/2017/06/14/media-blocked-threatened-dispute-qatar, last accessed on 1 July 2018. 37  Government of India (GoI), Ministry of External Affairs (MEA). 2016. ‘India–Qatar Relations’, https://www.mea.gov.in/Portal/ForeignRelation/Qatar_Dec_2016.pdf, last accessed on 1 July 2018.

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On 10 June 2017, shortly after the Saudi–Qatari standoff began, India issued a statement whereby it emphasized the need for all parties ‘to resolve their differences through a process of constructive dialogue and peaceful negotiations based on well-established international principles of mutual respect, sovereignty and non-interference in the internal affairs of other countries’.38 New Delhi also emphasized its belief that ‘peace and security in the Gulf are of paramount importance for the continued progress and prosperity of the countries in the region’. At the same time, flagging the prime accusation it felt that ‘terrorism, violent extremism and religious intolerance pose grave threat not only to regional stability but also to the global peace and order and must be confronted by all countries in a coordinated and comprehensive manner’. This focus on the issues concerned without endorsing either side reflected not only India’s traditional position of eschewing interstate disputes but also underscored its stakes in maintaining friendly relations with all the parties to the crisis. Qatar as well as other countries play a vital role in India’s energy security and are home to a sizable expatriate population, and hence a non-partisan approach became prudent. Not taking sides in internal crises or intra-regional affairs might be insufficient if the crisis prolongs or intensifies. The public opinion in the country appears to be divided reflecting a worrying lack of understanding of the situation. While some Indian analysts took positions based on the principles of foreign policy conduct, others appeared to be taking a narrow view due to a blurred understanding of the regional geopolitics.39 Trade and Commercial Ties Trade forms an important component of bilateral relations and Qatar is one of the top trading partners of India in the entire Middle East. The falling oil prices since 2014, reflected in a drop in trade figures but with an annual turnover of US$8.4 billion during 2016–2017, Qatar remains an 38  GoI, MEA. 2017. India’s Official Statements Following the Recent Developments Related to Qatar’, http://www.mea.gov.in/press-releases.htm?dtl/28523/indias+official+s tatement+following+the+recent+developments+related+to+qatar, last accessed on 1 July 2018. 39  Gopal, Neena. 2017. ‘Clash of Civilisations: Can India Play Mediator between Iran and Saudi Arabia’, Deccan Chronicle, 31 August, https://www.deccanchronicle.com/nation/ current-affairs/310817/clash-of-civilisations-can-india-play-mediator-between-iran-andsaudi.html, last accessed on 1 July 2018.

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important player (Table 7.1 and Fig. 7.1). Its share in India’s total foreign trade is small or just 1.28 per cent and the balance of trade is heavily skewed in favour of Qatar mainly due to the latter being the largest supplier of natural gas to India. In addition to LNG, major Indian imports are ethylene, propylene, ammonia, urea, and polyethylene. On the other hand, India exports heavy  machinery, transport equipment, iron and steel goods, plastic, Table 7.1  India–Qatar trade relations (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 India’s exports 807.95 687.18 969.06 1054.98 to Qatar India’s imports 12,916.35 15,693.08 15,707.99 14,604.71 from Qatar Total bilateral 13,724.30 16,380.26 16,677.04 15,659.69 trade Share of Qatar 1.73 2.07 2.18 2.06 in total trade

902.04

784.56

9022.16

7646.22

9924.20

8430.78

1.54

1.28

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

18 16 14 12 10 8 6 4 2 0

2011-12

2012-13 Exports

2013-14 Imports

2014-15

2015-16

2016-17

Total Trade

Fig. 7.1  India-Qatar bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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c­ onstruction material, electrical and electronic equipment, textile, chemicals, precious stones, rubber, spices, and cereals. India is the third-­largest export destination for Qatar after Japan and South Korea while is the tenth-largest source of imports for Qatar. The Qatari need to circumvent the ongoing blockade, especially the non-availability of imports through Saudi Arabia provides an opportunity for India and other countries to explore business opportunities. As discussed elsewhere in this volume, the crisis has increased the Omani–Qatari trade in recent months. Energy Supplies Energy is the most important component of bilateral trade and Qatar is the largest supplier of LNG to India. Indeed, Qatar is the only country with which India has a long-term energy contract when it signed an agreement in 2004 for the supply of 7.5 million tonnes per year of natural gas.40 In 2016–2017, India’s energy imports amounted to US$6.7  billion (Table 7.2 and Fig. 7.2). According to the Ministry of External Affairs, Qatar is the largest supplier of LNG and accounts for 65 per cent of India’s total imports and 15 per cent of Qatari exports of LNG.41 As a result, energy constitutes about 88 per cent of India’s imports from Qatar and 80 per cent of the total bilateral trade. Nearly 6.5 per cent of India’s energy imports and 12 per cent from the Persian Gulf region comes from Qatar (Table 7.3 and Fig. 7.3). Table 7.2  Share of oil in India’s imports from Qatar (US$ million) Year

Oil imports from Qatar

Total oil imports

2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

11,697.83 14,578.34 14,590.81 13,415.31 7942.43 6762.10

172,753.92 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20

Qatar’s share in Imports Per cent of oil in total oil imports from Qatar imports from Qatar 6.77 8.04 8.04 8.58 8.19 6.55

12,916.35 16,380.26 15,707.99 14,604.71 9022.16 7646.22

90.57 89.00 92.89 91.86 88.03 88.44

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

40  The Times of India. 2017. ‘India to Renegotiate LNG Rate with US, Russia,’ 4 October, https://timesofindia.indiatimes.com/business/india-business/india-to-renegotiate-lngrate-with-us-russia/articleshow/60939421.cms, last accessed on 1 July 2018. 41  Ibid.

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94 93 92 91 90 89 88 87 86 85

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Share in Per cent

Fig. 7.2  Share of energy in India’s imports from Qatar. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in Table 7.3  India’s energy imports from Qatar (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 India’s energy 11,697.83 14,578.34 14,590.81 13,415.31 7942.43 6762.10 imports from Qatar India’s total 172,753.97 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20 energy imports Total energy 103,915.24 105,809.19 106,400.75 85,300.30 50,992.26 56,335.34 imports from the Persian Gulf Share in total 6.77 8.04 8.04 8.58 8.19 6.55 energy imports (in per cent) Share in 11.26 13.78 13.71 15.73 15.58 12 energy imports from the Persian Gulf (in per cent) Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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18 16 14 12 10 8 6 4 2 0

2011-12

2012-13

2013-14

Share in Total Imports

2014-15

2015-16

2016-117

Share in Imports from Persian Gulf

Fig. 7.3  Share of Qatar in India’s energy imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

There is a slight decline in the Qatari share in India’s total energy imports. For example, in 2014–2015, the Qatari portion in India’s total energy imports and imports from the Persian Gulf were 8.5 per cent and 15.7 per cent, respectively; however, these have declined to 6.5 per cent and 12 per cent, respectively in 2016–2017 (Table 7.3 and Fig. 7.3). Investments India’s emphasis on improving the two-way flow of investments under the present government has not improved the FDI inflows from Qatar. In terms of FDI flows in India since April 2000, Qatar ranks 68th and it is also the last amongst the six-member GCC countries. In 2017, the Qatari sovereign wealth fund is estimated at US$320  billion but only US$23.88  million came into India between April 2000 and December 2017. The flow was 0.79  million in 2012; US$1.79  million in 2013; US$0.92 million in 2014; US$0.64 million in 2015; US$17.72 million in 2016, and US$0.4 million in 2017.42 In other words, even before the cur42   GoI, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion. 2018. ‘FDI Statistics’, http://dipp.nic.in/publications/fdi-statistics, last accessed on 1 July 2018.

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rent crisis in the Gulf, India attracted minuscule investments from Doha. The same has been the case for Indian investments in Qatar. Though a number of Indian companies, such as L&T, Punj Lloyd, Shapoorji Pallonji, Voltas, TCS, Wipro, Mahindra Tech, and HCL are involved in the construction and infrastructure-related projects for the preparation of the 2022 FIFA World Cup, their role is negligible as compared to mega projects currently underway in the Emirate. Expatriates According to the Ministry of External Affairs, about 695,000 Indians live and work in Qatar and constitute the largest expatriate community.43 A significant portion of them are unskilled and semi-skilled workers, and are employed in the domestic sector and in the construction industry. There are periodic complaints about the harsh working conditions, exploitation, harassment, and other forms of discrimination. Delays in payment of remuneration due to the ongoing Qatari crisis had severely hit the migrant labourers.44 These conditions have been flagged by Indian law makers in both the houses of parliament.45 There were even calls of ‘evacuating’ workers whose salaries had not been paid for months.46 Despite these, the 43  GoI, MEA. 2016. ‘India–Qatar Relations’, December, http://www.mea.gov.in/Portal/ ForeignRelation/Qatar_Dec_2016.pdf, last accessed on 1 July 2018. 44  The Indian Express. 2017. ‘No Evacuation of Indians from Qatar: MEA’, 22 June, http://indianexpress.com/ar ticle/india/no-evacuation-of-indians-from-qatarmea-4717406, last accessed on 1 July 2018. 45  India, Lok Sabha. 2017. ‘Evacuation of Indians from Qatar’, Starred Question No. 55, 19 July, http://www.mea.gov.in/lok-sabha.htm?dtl/28634/question+no55+evacuation+of +indians+from+qatar, last accessed on 1 July 2018; India, Rajya Sabha. 2017. ‘Indians Working in Qatar’, Unstarred Question No. 490, 20 July, http://www.mea.gov.in/rajyasabha.htm?dtl/28691/question+no490+indians+working+in+qatar, last accessed on 1 July 2018; India, Rajya Sabha. 2017. ‘Indians in Qatar’, Unstarred Question No. 1300, 27 July, http://www.mea.gov.in/rajya-sabha.htm?dtl/28752/question+no1300+indians+in+qatar, last accessed on 1 July 2018; India, Lok Sabha. 2017. ‘Qatar Standoff’, Unstarred Question No. 2840, 2 August, http://www.mea.gov.in/lok-sabha.htm?dtl/28777/question+no2840 +qatar+standoff, last accessed on 1 July 2018; India, Lok Sabha. 2017. ‘Isolation of Qatar by Arab Countries’, Unstarred Question No. 3759, 9 August, http://www.mea.gov.in/loksabha.htm?dtl/28832/question+no3759+isolation+of+qatar+by+arab+countries, last accessed on 1 July 2018. 46  India, Rajya Sabha. 2016. ‘Non-payment of Dues of Migrant Workers in Qatar’, Unstarred Question No. 2584, 8 December, http://www.mea.gov.in/rajya-sabha.htm?dtl/27781/ question+no2584+nonpayment+of+dues+of+migrant+workers+in+qatar, last accessed on 1 July 2018.

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situation remained under control during the year and no mass exodus was witnessed. However, the number of the ECR-category workers immigrating to Qatar decreased from 29,000 in 2016 to 22,000 in 2017.47 Any prolongation of the Qatari crisis, however, would be a problem for the expatriates and will require a contingency plan.

Challenges Despite the friendly relations and flourishing of trade and energy relations, India faces a number of challenges both at the bilateral level and those emanating from regional developments. At the bilateral level, it is surprising that Qatar which is a rich country with a sovereign wealth fund of over US$300  billion has invested only US$23  million in India in the last 20 years. It is also the last amongst the GCC countries and ranks 68 overall in terms of the FDI inflow in India. The close political ties is reflected from the favourable re-negotiation of the gas deal but India needs to works on the investment front. Though some initiatives have been taken, it would be important that they are followed up and Qatar, which has a tendency to make big investments in promising markets, is attracted to the Indian market. Notably, the bilateral trade and commerce is dominated by the energy trade and India can invite Qatari investments in the downstream sector which is emerging as a lucrative business. It will be essential for India to work on diversifying the economic ties through improved exports to Qatar and finding opportunities to expand the trade basket. India was also sceptical in making any move amidst the Qatar crisis and failed to capitalize on the economic exigency created by the crisis. While it is understandable that any big move in favour of Qatar would have compromised its relations with Saudi Arabia and the UAE, but given the already-robust economic ties, India could have tried to capitalize on the opportunity and tried to improve exports to Qatar. This move would have both diversified the trade and helped to maintain the trade balance. The regional developments are a bigger challenge for India. The prolongation of the crisis is a major challenge and New Delhi can, perhaps, explore possibilities for facilitating dialogues and negotiations between the parties. At the same time, India will have careful and not been seen as 47  GoI, MEA. Annual Report, 2017–18, March 2018, http://www.mea.gov.in/Uploads/ PublicationDocs/29788_MEA-AR-2017-18-03-02-2018.pdf, last accessed on 1 July 2018.

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working in favour of or against any of the parties; it has to appear truly neutral. Notwithstanding the possibilities of mediation, India needs to balance its relations with Qatar, Saudi Arabia, and the UAE and manage the crisis. There are other problems emanating from third parties, especially China, the US, and Pakistan who have a major presence in the Persian Gulf. The US remains the sole security provider, China has been increasing its economic presence, and Pakistan remains a close political and security partner of the Gulf countries. Additionally, Iran is a major player and given the changing geopolitical dynamics, will play a significant role in the Persian Gulf politics. Even though India has good relations with the US and does not have any major dispute with Iran, it will need to be careful in dealing with Qatar while maintaining a balanced approach. China and Russia which have gradually increased their presence in the Middle East need to be taken into account while India makes its policy choices. Pakistan, which is an arch-rival and has good relations with Qatar, has, in recent times, been working closely with China, Russia, Iran, and Turkey to counter Indian forays in the Persian Gulf and Central Asia and New Delhi will have to be mindful of such mechanizations in the Gulf.

CHAPTER 8

Saudi Arabia

Key Information Ruling family: Al-Saud; Ruler: King Salman bin Abdulaziz al-Saud (since 23 January 2015); Crown Prince: Prince Mohammad bin Salman (since 21 June 2017); National day: 23 September; Parliament: 150-member nominated Majlis al-Shura; Last parliamentary election: Not applicable (NA); Major group in parliament: NA; National carrier: Saudi Arabian Airlines. Socio-Economic Indicators Area: 2,149,690 sq. km; Population: 28.57 million; Native: 63 per cent; Expats: 37 per cent; Religious groups: Citizens (Sunni 85–90 per cent; Shia 10–15 per cent); Youth: 18.57 per cent; Population growth rate: 1.45 per cent; Life expectancy at birth: 75.5 years; Major population groups: Arab 90 per cent (approx.); Afro-Asian 10 per cent (approx.); Literacy rate: 94.7 per cent (2015 est.); National currency: Saudi Riyal (SAR); GDP: US$678.5  billion; Foreign trade: Export US$231.3  billion, Import US$136.8  billion (2017 est.); Defence budget: 9.85 per cent of GDP (2016 est.); Sovereign wealth fund: US$717.9  billion; External debt: US$200.9 billion; Per capita income: US$55,300 (2017 est.); Oil reserves: 266.5 billion bbl. (2017 est.); Gas reserves: 8.602 trillion m3 (2017 est.); HDI rank: 38; Infant mortality rate: 13.2 deaths/1000 live birth; UN education index: 0.723; Gender inequality © The Author(s) 2019 P. R. Kumaraswamy et al., Persian Gulf 2018, Persian Gulf, https://doi.org/10.1007/978-981-13-1978-5_8

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index: 0.257 (2015 est.); Labour force: 12.34 million; Unemployment rate: 28.5 (2015 est.); Urban population: 83.5 per cent; Rate of urbanization: 1.81 per cent (2015–2020 est.); Last national census: 2011. India Related Indian cultural centre: NA; Number of Indians: 3,255,864 (approximately 2017 est.); Number of places of worship for Indians: None; Indian schools: 40; Indian banks: State Bank of India (1); Currency exchange rate: 1 SAR = INR 17.73 (April 2018); Last visit to India by the ruler: King Abdullah, January 2006; Last Indian prime minister to visit: Narendra Modi, April 2016. * * * The Indo-Saudi relations are passing through an exceptional transformative phase. Without much public statements and declarations, both have been conveying the importance they attach to the other and are developing a holistic and strategic partnership. Trade, energy, expatriates, haj, and remittances have been the core of bilateral relations but during the past four years, two-way investments and security cooperation have emerged as priority areas. The change of guard in India (May 2014) and the Kingdom of Saudi Arabia (January 2015) has resulted in a fresh dynamics in understanding each other’s concerns, leading to greater political engagements, and accommodations. Though 2017 was relatively low-key with regard to high-level exchanges, the contours of the bilateral relations stress the strengthening of security and defence cooperation and enhancing of two-way investments.

Domestic Developments Politics The year was tumultuous for the Kingdom and it witnessed a further consolidation of Prince Muhammad bin-Salman, or MBS as he is commonly referred to in the region and elsewhere. By all accounts, he has an unconventional, even disruptive working style and has not hesitated in breaking away from the traditional customs and tribal norms. His ascendance has been meteoric and was made possible by the removal of two

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crown princes and the marginalization of potential contenders and challengers to the throne after King Salman. Ever since Salman ascended to the throne upon the death of his half-­ brother, King Abdullah in January 2015, the political fortunes of MBS has been rising. Initially, MBS was named the defence minister, a portfolio held by his father since November 2011, and was named Second Deputy Prime Minister in April 2015 when his cousin Prince Muhammed bin-­ Nayef was named Crown Prince and the likely successor. This arrangement did not last long and 2017 proved to be a turbulent year for the al-Saud. On 21 June, Prince Bin-Nayef was deposed and MBS was named Crown Prince and the possible successor to King Salman. Indeed, this merely formalized a situation as he overshadowed the formally superior Prince Bin-Nayef. Upon becoming the second most powerful authority in the Kingdom, in May, MBS issued a veiled threat that no prince or minister ‘will survive’ corruption cases1 and this approach took a definite turn on 4 November when 23 persons, including five prominent princes where stripped off their official positions and taken into custody (Table 8.1). Some of those who were removed from office included Prince Miteb bin-Abdullah, Minister of National Guard, Prince Turki bin-Abdullah, former Governor of Riyadh, Adel Fakeih, Minister of Economy and Planning, and Khalid al-Tuwaijri, former Chief of the Royal Court. Saudi billionaire, Prince Waleed bin Talal was amongst those who were arrested. Most of them were gradually Table 8.1  Important members of al-Saud Sidelined since January 2015 Name

Highest position held

Date of removal

Prince Muqrin bin-Abdulaziz Prince Muhammad bin-Nayef Prince Miteb bin-Abdullah Prince Turki bin-Abdullah Prince Mishaal bin-Abdullah Prince Khalid bin-Bandar

Crown Prince Crown Prince Minister of National Guard Governor of Riyadh Governor of Mecca Deputy Defence Minister

29 April 2015 21 June 2017 4 November 2017 29 January 2015 29 January 2015 29 January 2015

Source: Royal Decrees, Saudi Press Agency, http://www.spa.gov.sa/listnews.php?lang=ar&royal=1#page=1, last accessed on 1 July 2018

1  Al-Arabiya. 2017. ‘Mohammed Bin Salman’s Full Interview’, 3 May, http://english. alarabiya.net/en/features/2017/05/03/Read-the-full-transcript-of-Mohammed-BinSalman-s-interview.html#, last accessed on 1 July 2018.

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released by January 2018 often accepting corruption charges and agreeing to pay huge sums as fines.2 Thus, by the end of 2017, MBS appeared to have consolidated his hold on power by sidelining all potential rivals, especially the former Crown Prince Muhammad bin-Nayef and the Minister for National Guard Miteb bin-Abdullah, whose father and late King Abdullah headed the largely tribal security forces that were responsible for the protection of the household since its founding in 1964. MBS has not hesitated from using coercive methods, including detention, curtailing movements, and huge financial fines upon his royal cousins to consolidate his hold and within a short time, the young prince had been able to centralize the governing system and had taken control of all the important pillars of the monarchy. King Salman has allowed his son to take complete control of the situation by bringing in changes at the top to achieve two primary objectives, namely, to infuse new blood at the decision-making process and to eliminate challenge of a linear succession that the Kingdom has followed since the death of the founder–King Ibn Saud in November 1953.3 For example, upon becoming king, Salman dissolved all committees responsible for financial and political affairs and replaced them with the Council for Political and Security Affairs and Council for Economic and Development Affairs—both presently headed by Crown Prince MBS. These were accompanied by far-reaching changes in the cabinet and all the key ministries, namely, defence, interior, national guard, judiciary, petroleum and mineral resources, economy, and religious affairs as well as world’s largest oil company Aramco have been reorganized with fresh faces. Most of the young and qualified royals are professionals who share MBS’s vision (Table 8.2). Above all, MBS consolidated his position by naming his brothers to key positions; in April 2016, his younger full-brother Khalid was appointed as the Saudi ambassador to the U.S. and in April 2017, his elder, half-brother Abdulaziz was named the Minister of State for Energy Affairs in the revamped ministry of petroleum and minerals. Thus, the process of political consolidation was completed with the elevation of MBS as the Crown Prince in June 2017 and the Prince has been able 2  Hubbard, Ben. 2011. ‘Billionaire Saudi Prince, Alwaleed bin Talal, Is Freed from Detention’, The New  York Times, 27 January, https://www.nytimes.com/2018/01/27/ world/middleeast/saudi-arabia-alwaleed-bin-talal.html, last accessed on 1 July 2018. 3  Kings since 1953: Saud bin Abdulaziz (1953–1964); Faisal bin Abdulaziz (1964–1975); Khalid bin Abdulaziz (1975–1982); Fahd bin Abdulaziz (1982–2005); Abdullah bin Abdulaziz (2005–2015); Salman bin Abdulaziz (since January 2015).

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Table 8.2  Saudi Council of Ministers as of 31 December 2017 Name

Position

Since

King Salman bin-Abdulaziz al-Saud Crown Prince Muhammad bin-Salman al-Saud

Prime Minister

January 2015

Deputy Prime Minister and Minister of Defence

Prince Abdulaziz bin-Saud bin-Nayef bin-Abdulaziz al-Saud Khalid al-Muqrin Adel al-Jubeir Saleh al-Shaikh

Minister of Interior

June 2017 (Deputy PM) January 2015 (Defence) June 2017

Khalid al-Falih Mohammed al-Tuwaijri Waleed al-Sammani Ahmed al-Issa Muhammad Saleh Benten Majid al-Qassabi Nabil al-Amoudi Tawfiq al-Rabiah Awwad al-Awwad Sulaiman al-Hamdan Mohammed al-Jaddan Abdulrahman al-Fadli Majid al-Hogail Abdullah al-Sawahah Abdullah al-Shaikh Abdulaziz bin-Salman al-Saud Abdulaziz bin-Abdullah al-Saud Mohammad Abu Saq Nizar al-Madani Thamer al-Shabaan

Minister of National Guard Minister of Foreign Affairs Minister of Islamic Affairs, Endowments, Dawah and Guidance Minister of Energy, Industry and Natural Resources Minister of Economy and Planning Minister of Justice Minister of Education Minister of Haj and Umrah Minister of Commerce and Investment Minister of Transport Minister of Health Minister of Culture and Information Minister of Civil Services Minister of Finance Minister of Environment, Water and Agriculture Minister of Housing Minister of Communication and Information Technology Minister of Municipal and Rural Affairs Minister of State for Energy Affairs Minister of State without Portfolio

November 2017 April 2015 February 2015

Minister of State for Shura Affairs Minister of State for Foreign Affairs Minister of State for Gulf Affairs

2015 – 2017

May 2016 June 2017 February 2015 February 2015 May 2016 May 2016 October 2017 May 2016 April 2017 April 2017 November 2016 April 2016 February 2015 October 2017 February 2015 April 2017 February 2015

Source: Royal Decrees, Saudi Press Agency, http://www.spa.gov.sa/listnews.php?lang=ar&royal=1#page=1, last accessed on 1 July 2018

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to implement what many analysts and observers feared would be catastrophic for the al-Saud.4 It was argued that any rash tinkering of the line of succession could lead to serious infighting amongst the royals and would precipitate the fall of the House of Saud.5 Indeed, the nomination of MBS as the heir apparent was preceded by the removal of two crown princes within a span of two years. Since the commencement of the practice in the early 1960s, no incumbent crown prince was ever removed from office until the King removed Muqrin in April 2015 and Muhammad bin-Nayef in June 2017. Though MBS has used some coercive methods, the transition has been smooth and he is expected to remain in firm control. The royal succession is also important because, if all goes as planned, this would be the first time since 1953 when a son of a king would take over the reins of the Kingdom. In short, within the al-Saud the Salman clan would become the most prominent branch as far as the leadership is concerned. These were reflected in the economic and foreign policies of the Kingdom. Economy With an eye on the post-oil era, the Kingdom remains focused on economic transformation, and in April 2016, MBS launched Vision 2030 aimed at developing the non-oil sectors of the economy, including tourism and entertainment and to reduce its excessive dependency upon p ­ etroleum.6 For example, in 2017, 42 per cent of GDP and 90 per cent of the exports are oil-related. Towards diversification of the economy, private and foreign investments are being aggressively solicited, especially when falling oil prices had dented the Kingdom’s economy. These are aimed at generating employment opportunities for the local population. To augment the additional resources, the Kingdom plans to offer initial public offering (IPO) of 5 per cent of Aramco, whose market value is estimated at US$1.5–2 trillion in 2017–2018. The initial announcement in January 2016, however, was not followed by any concrete moves, partly due to a mild recovery in 4  Quamar, Md. Muddassir. 2017. ‘The Succession Gamble in Saudi Arabia’, The Week, 30 June, https://www.theweek.in/content/archival/news/world/the-succession-gamble-insaudi-arabia.html#, last accessed on 1 July 2018. 5  Aburish, Said K. 1994. The Rise, Corruption and Coming Fall of the House of Saud. London: Bloomsbury; also see: Jahanbegloo, Ramin. 2017. ‘The Fall of the House of Saud’, The Wire, 13 November, https://thewire.in/external-affairs/saudi-arabia-purge-fall-ofhouse-of-saud, last accessed on 1 July 2018. 6  Kingdom of Saudi Arabia, Vision 2030. ‘Vision: Foreword’, http://vision2030.gov.sa/ ar/node, last accessed on 1 July 2018.

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Table 8.3  Crude oil spot price January to December 2017 Month

Oil price per barrel (US$)

January February March April May June July August September October November December

53.59 54.35 50.90 52.16 49.89 46.17 47.66 49.94 52.95 54.92 59.93 61.19

Source: United State Energy Information Administration, https://www.eia.gov, last accessed on 1 July 2018

70 60 50 40 30 20 10 r

r

be m ce

m

be De

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No ve

Oc t

be em

r

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t us

pt

ly

Se

Au g

Ju

ne Ju

ay M

ril Ap

ch ar M

ry ua br

Fe

Ja

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0

Oil Price per Barrel (US$)

Fig. 8.1  International oil price fluctuation in 2017. Source: United State Energy Information Administration, https://www.eia.gov, last accessed on 1 July 2018

the oil prices during 2017; from US$53 per barrel in January, the prices crossed US$61 per barrel in December (Table 8.3 and Fig. 8.1). During 2017, the economy has not shown any strong signs of transformation or improvement. The real GDP growth in the Kingdom was

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small or 0.7 per cent, with a significant decline in oil revenues. The non-oil revenues posted a mild increase with non-oil GDP growing at 0.7 per cent.7 This trend is expected to consolidate in the coming years with the government initiating new measures, such as the introduction of value added tax (VAT), expatriate levies, and additional investments in the oil-­sector. The unemployment rate remained high with 12.5 per cent for both men and women and is expected to ease in middle-tolong-term primarily because of the focus on areas that can generate employment, such as tourism, entertainment, and information technology.8 According to the Saudi Arabian Monetary Authority (SAMA), for the first time since 2011, the Kingdom’s foreign reserves have dropped below US$500  billion, with a fall of US$36  billion in 2017 alone.9 With the recovery of oil prices, this trend is expected to reverse in the coming years. The Kingdom unveiled a budget in 2017 with a planned expenditure reaching US$237 billion (Saudi Riyals 890 billion) as against US$220 billion (Saudi Riyal 840 billion) the previous year. An additional expenditure of US$35 billion would be met through public investment funds. Despite a visible dip in the economy, the military spending has increased significantly and in 2017 it went up by 6.6 per cent or by US$50.8 billion.10 However, there is a slight decline in the military-related expenditure in security and regional administration which dropped to US$25.8 billion in 2017 from US$27.2 billion in the year before.11 In May, during the visit of President Donald Trump, the Kingdom announced US$350 billion worth of deals, including combat ships, missile defence systems, tanks, fighter jets and communications and cyber security systems. Regional tensions, especially in neighbouring Yemen and business-­strategic outlook of the Trump administration contributed to the spike. Not to be left behind, Russia joined the fray, and in October 7  Jadwa Investment. 2018. ‘The Saudi Economy in 2018’, 4 February, http://www.jadwa. com/en/researchsection/research/economic-research/macroeconomic-reports, last accessed on 1 July 2018. 8  Kassem, Mahmoud. 2017. ‘Saudi Arabia’s Economy Likely to Dip This Year, Says Institute of International Finance’, The National, 12 August, https://www.thenational.ae/ business/saudi-arabia-s-economy-likely-to-dip-this-year-says-institute-of-internationalfinance-1.619067, last accessed on 1 July 2018. 9  Saudi Arabian Monetary Agency. 2018. ‘Economic Indicators’, http://www.sama.gov. sa/en-US/Pages/default.aspx, last accessed on 1 July 2018. 10  Reuters. 2016. ‘Saudi Arabia to Raise Military Spending 6 pct Budget’, 22 December, https://www.reuters.com/article/saudi-economy-budget-military/saudi-arabia-to-raisemilitary-spending-6-pct-budget-idUSL5N1EH3CU, last accessed on 1 July 2018. 11  Ibid.

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the Kingdom signed ‘contracts with the Russian government to procure the S-400 air defence system, the Kornet-EM system, the TOS-1A, the AGS-­30, and the Kalashnikov AK-103.’12 Thus, with US$2.97 billion the Kingdom stood at the top position in 2017  in arms procurement followed by Algeria and India.13 In terms of military expenditure in relation to the GDP, it was second in the world (10.4 per cent) after Oman (16.7 per cent).14 In 2015, the armed forces employed 2 per cent of the total labour force in the country.15 In the following year, agriculture employed 4.9 per cent of the workforce, while 70.9 per cent were employed in the service sector. The labour force participation stood at 54.8 per cent; the ­employment to population ratio (15 years and above) is 51.6.16 In practical terms, this means that expatriates make up nearly half of the labour force in the Kingdom. Foreign Policy The Saudi foreign policy has become more aggressive since 2015 when the Kingdom decided to militarily intervene in Yemen, which also coincided with the ascendance of MBS.17 During 2017, Yemen had become a major foreign policy conundrum for the Kingdom, especially in the light

12  Defence World. 2017. ‘Saudi Arabia Signs Agreement with Russia to buy S-400 Air Defence System, Other Weapons’, 5 October, http://www.defenseworld.net/news/20865/ Saudi_Arabia_Signs_Agreement_With_Russia_To_Buy_S_400_Air_Defence_System__ Other_Weapons#.WxkGETSFPcs, last accessed on 1 July 2018. 13  Knoema, World Data Atlas. ‘Arms Imports in Constant Prices of 1990’, https://knoema.com/atlas/ranks/Arms-imports?baseRegion=SA, last accessed on 1 July 2018. 14  Stockholm International Peace Research Institute. 2018. ‘Military Expenditure by Country as Percentage of Gross Domestic Product, 2003–2017’, SIPRI Military Expenditure Database, https://www.sipri.org/sites/default/files/3_Data%20for%20all%20countries%20 from%201988%E2%80%932017%20as%20a%20share%20of%20GDP.pdf, last accessed on 1 July 2018. 15  Knoema, World Data Atlas. ‘Saudi Arabia – Armed Forces Personnel As a Share of Labour Force’, https://knoema.com/atlas/Saudi-Arabia/topics/National-Defense/Armed-forces/ Armed-forces-personnel-as-a-share-of-labor-force, last accessed on 1 July 2018. 16  United Nations Development Programme. 2016. ‘Saudi Arabia: Human Development Indicators’, http://hdr.undp.org/en/countries/profiles/SAU, last accessed on 1 July 2018. 17  Karim, Umer. 2017. ‘The Evolution of Saudi Foreign Policy and the Role of Decisionmaking Processes and Actors’, The International Spectator, 52 (2): 71–88.

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of the growing humanitarian cost,18 inability to find a respectable exit option, and growing internal rumbling in Yemen.19 The Iran-backed Houthi rebels were able to fire medium-range missiles not only against the Saudi-led coalition forces, but against the border towns of the Kingdom itself; and one such missile reportedly targeted the King Khalid international airport in Riyadh in November 2017, but was intercepted. Though the Yemeni crisis did not receive adequate international attention, the cost has been escalating; until December an estimated 10,000 Yemenis, mostly civilians, have been killed and another estimate suggest that 2.5 million had been internally displaced and the operation had cost about US$22 million each day for Riyadh. There are also cracks in the anti-Yemeni Arab coalition with the Southern alliance supported by the UAE breaking ties with Saudi supported President Abdrabbuh Mansur Hadi. There were other regional crises that witnessed an aggressive Saudi posture. The most prominent and in some ways continuing crisis was the Saudi-led boycott of Qatar supported by the UAE, Bahrain, and Egypt. Accusing the al-Thani of patronizing the Muslim Brotherhood, interfering in the internal affairs of the Gulf Arab countries, and of siding with Iran on regional issues, in May 2017, Saudi Arabia and its allies imposed a politico-economic boycott against Qatar. As discussed in the Introduction, this is the most serious crisis facing the GCC since its founding in 1981 and intensified in the wake of Qatar getting politico-­diplomatic support from Iran and Turkey. The Kingdom has continued with its aggressive posture vis-à-vis the Islamic Republic of Iran which became more vocal and pronounced since the July 2015 nuclear deal. Countering the perceived Iranian interference in major regional events, especially in Bahrain, Iraq and Yemen, has become the prominent feature of the Saudi foreign policy pronouncements. For example, writing in The New York Times in January 2016, the Saudi Foreign Minister Adel al-Jubeir wrote, ‘Iran, rather than confronting the isolation it has created for itself, opts to obscure its dangerous 18  UN News. 2017. ‘After 1,000 Days of Conflict, Yemen Sliding into “Deepening Catastrophe”, UN Agencies Warn’, 30 December, https://news.un.org/en/ story/2017/12/640802-after-1000-days-conflict-yemen-sliding-deepening-catastropheun-agencies-warn, last accessed on 1 July 2018. 19  United Nations Security Council. 2018. ‘Amid Deteriorating Conditions in Yemen, Security Council Presidential Statement Calls for Humanitarian Access, Strict Adherence to Embargo’, in Meetings Coverage, https://www.un.org/press/en/2018/sc13250.doc.htm, last accessed on 1 July 2018.

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sectarian and expansionist policies, as well as its support for terrorism.’20 These allegations were reiterated during the OIC ministerial meeting in Jeddah in January 2018.21 Thus, Riyadh supported some of the armed groups in Syria and Iraq and has been involved in Libya through proxy non-state groups. Its relations with Egypt has been a rollercoaster affair; on the one hand it wants to strengthen the regime of President Abdel Fattah el-Sisi partly to counter Iran’s regional influence but at the same time its desire to ‘recover’ the two islands—Tiran and Sanafir—in the Red Sea got embroiled in Egyptian domestic politics. Shared concerns vis-à-vis the Islamic Republic of Iran brought Saudi Arabia closer to Israel and media reports often speak of low-level meetings and tactical understanding between the two.22 The Saudi efforts against ISIS resulted in the formation of the 41-member Islamic Military Alliance (IMA), but the group which does not include Iran and Syria is seen as a regional Saudi endeavour to counter Tehran.23 The swearing in of Donald Trump as the 45th President of the US in January 2017 brought some cheers in Riyadh, especially when the latter felt let down by the previous Obama administration. The nuclear deal with Iran raised the Saudi concerns over a possible US shift in the Gulf towards Tehran. Hence, despite the anti-Muslim rhetoric during the campaign, Trump’s victory was seen in Riyadh and some other Middle Eastern capitals as a welcome change. Trump making Riyadh as his first foreign visit and Saudi hosting an Islamic summit during the occasion were followed by the US tilting in favour of al-Saud over the Qatar controversy. While the spate of military deals signalled a return of the traditional cordiality, President Trump’s controversial decision in December to recognize Jerusalem as Israel’s capital exposed the limitations of the Saudi–US bonhomie. 20  al-Jubeir, Adel Bin Ahmed. 2016. ‘Can Iran Change?’, The New York Times, 19 January, https://www.nytimes.com/2016/01/19/opinion/saudi-arabia-can-iran-change.html, last accessed on 1 July 2018. 21  Asharq Al-Awsat. 2018. ‘Jeddah Ministerial Meeting Calls on Iran to Stop Fuelling Sectarianism’, 22 January, https://aawsat.com/english/home/article/1151246/jeddahministerial-meeting-calls-iran-stop-fueling-sectarianism, last accessed on 1 July 2018. 22  Marcus, Jonathan. 2017. ‘Israel and Saudi Arabia: What’s Shaping the Covert “Alliance”’, BBC News, 24 November, https://www.bbc.com/news/world-middle-east-42094105, last accessed on 1 July 2018. 23  Winter, Chase. 2017. ‘Saudi-led Islamic Military Alliance: Counterterrorism or CounterIran?’, Deutsche Welle, 26 November, http://www.dw.com/en/saudi-led-islamic-militaryalliance-counterterrorism-or-counter-iran/a-41538781, last accessed on 1 July 2018.

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Society Though Vision 2030 is primarily an economic agenda, it visualizes a social opening. A number of developments during 2017 indicated that the Kingdom is moving towards lesser social control. In a significant move, in September the long-standing demand for allowing Saudi women to drive was granted and the modalities are being worked out. The regime indicated that it would remove the restrictions on female spectators from watching sports in stadiums like their male counterparts. Placing restrictions upon the religious authorities, the government has announced its intention to restart public screening of movies which was discontinued in the early 1980s. There are signs that the government is amenable to removing the guardianship system detested by modern Saudi women. According to Global Gender Gap Report (2017), Saudi Arabia ranked 138 out of 144 countries with a score of 0.584, which is reflective of the grim situation, despite the progress made by Saudi women in education and other professional fields, such as healthcare, arts and literature, and business.24 The Kingdom ranks 38th on the Human Development Index (HDI) with a score of 8.847 and has a Gender Development Index of 0.882. At the same time, the gender inequality is deep and measured by the Gender Inequality Index, Saudi Arabia has a 0.257 score. Thus, it is not accidental that King Salman continued to head an all-male cabinet during 2017.25 At the same time, if one examines indicators relating to education, health, life expectancy and so on, Saudi Arabia shows women being placed better than men. The composition of the workforce presents a different picture. According to the United Nations Development Programme (UNDP) report for 2016, the years of schooling for girls and boys is 15.3 and 17 years, respectively and their HDI score is 0.779 and 0.884, respectively. At the same time, the labour participation (15 years and above) for females is much lower than their male counterparts; 20.1 per cent for females as against 79.1 per cent for males. In terms of parliamentary representation for women, Saudi Arabia fairs far below than its counterparts in the Middle East with only 19.9 per cent share. Likewise, the unemployment rate amongst the females is higher than the males by 6.9 per cent,

24  Quamar, Md. Muddassir. 2013. ‘Education as a Ladder for Saudi Women: An Overview’, Journal of Arabian Studies, 3 (2): 262–77. 25  A Female deputy minister for labour affairs was appointed in October 2017.

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while youth unemployment amongst females is 1.4 per cent higher than their male counterpart.26 The Kingdom lags behind on the issue of gender equality, as women cannot marry, divorce, travel, get a job, or have elective surgery without the prior permission of a male guardian. They are not allowed to mix freely with the opposite sex, cannot appear in public without an abayah (a loose predominantly black long outer clothing worn by women in Gulf countries) and cannot retain custody of their children in case of divorce.27 A few small measures were taken during 2017 towards addressing some of the issues; for example, in February, Sarah Al Suhaimi became the first female chairperson of the Saudi stock exchange; in September, a royal decree allowed women to drive; and in October, the General Sports Authority announced that women would be allowed to enter sports stadium with effect from early 2018.28 In terms of its minority treatment, the Kingdom has a dismal record and has been harsh towards its Shia population. According to Human Rights Watch (HRW) report for 2017, some Saudi clerics and institutions backed by the state incite hate against the Shias. In a 62-page report titled They are not Our Brothers: Hate Speech by Saudi Officials, the HRW documented that the state has allowed its religious appointees to refer to the country’s minorities in derogatory terms and to demonize them. The HRW claimed that even if it was not directed by it, the state has pursued a permissive approach and allowed these officials to demonize the religious minorities, especially Shias, more blatantly. The state-appointed clerics often refer to Shias as rafidah, which means rejectionists, and stigmatize Shia beliefs and practices.29 The Religious Freedom Report published by the U.S. State Department marked the country’s status as ‘Not Free’ and so are its indicators on political and civil rights.  UNDP, ‘Saudi Arabia’.  Tarabay, Jamie. 2017. ‘Women in Saudi Arabia Still Can’t Do These Things’, CNN, 6 December, http://edition.cnn.com/2017/09/27/middleeast/saudi-women-still-cant-dothis/index.html, last accessed on 1 July 2018. 28  Bleiker, Carla. 2017. ‘Women’s Rights in Saudi Arabia: A Timeline’, Deutsche Welle, 29 October, http://www.dw.com/en/womens-rights-in-saudi-arabia-a-timeline/g-40709135, last accessed on 1 July 2018. 29  Human Rights Watch. 2017. ‘“They Are Not Our Brothers” Hate Speech by Saudi Officials’, https://www.hrw.org/sites/default/files/report_pdf/saudi0917_web.pdf, last accessed on 1 July 2018; and Al-Jazeera. 2017. ‘HRW: Saudi Arabia Hate Speech Still Targets Minorities’, 26 September, http://www.aljazeera.com/news/2017/09/hrw-saudiarabia-hate-speech-target-minorities-170926082722213.html, last accessed on 1 July 2018. 26 27

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Bilateral Relations Political Ties The Indo-Saudi relations have witnessed a significant improvement in recent years, primarily because of New Delhi’s willingness and ability to delink Pakistan from its Middle East policy.30 This was strengthened by the Indian government’s ability to reach out to the monarch and Prime Minister Modi striking a personal chord with the foreign leaders added a new dimension to the conduct of foreign policy. This has manifested in Modi reaching out to Riyadh since assuming office in May 2014. His personal friendship proved useful when India rescued and evacuated its citizens from the war-torn Yemen in 2015. Modi’s visit to the Kingdom in April 2016 laid the foundation for greater security cooperation and bilateral investments between the two. Even before the April 2016 visit, there were a number of high-level exchanges between the two. Prime Minister Modi met the then Crown Prince Salman on the sidelines of the Brisbane G-20 summit in November 2014 and when both the leaders met again in Turkey, Salman had already become king. During the Hangzhou summit, Modi met the then deputy Crown Prince MBS in September 2016. However, during the Hamburg summit in July 2017, there were no meetings between the two sides as the Kingdom was represented by a low-level delegation led by the Minister for State for Finance Ibrahim al-Assaf because of the internal turbulence. Healthy equations between the two are based on a host of issues of mutual interests. Growing trade, energy imports, and cultural contacts rooted in history became useful when India began reaching out to the countries along the Persian Gulf since the early 1990s. In 2006, King Abdullah became the first Saudi monarch to arrive in India since the visit of his half-brother King Saud in December 1955. Abdullah was given the honour of being the chief guest in the Republic Day celebrations and the visit stimulated the bilateral relations and both the leaders pledged to transform the buyer-seller relations. This was followed by Prime Minister Manmohan Singh’s visit to the Kingdom in early 2010 and Delhi and Riyadh Declarations signed during these visits laid the foundations for taking the relations forward.

30  Kumaraswamy, P.R. and Md. Muddassir Quamar. 2019. India’s Saudi Policy: Bridge to the Future. New Delhi: Palgrave Macmillan.

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At the same time, institutional inertia has been a dominant feature of the foreign policy establishment in India and there were limited political engagements with the Gulf countries, including Saudi Arabia. As discussed in the Introduction, a more active and engaging approach towards the extended neighbourhood, especially the Kingdom, had to wait until Modi came to power. While he inherited a strong economic foundation for an active engagement, Modi reinvigorated it through his periodic meetings, communications, and engagements. At the same time, it is essential to recognize that 2017 did not see any high-level visits from either side but the Kingdom remained important for the policymakers. The Minister of State for Petroleum and Natural Gas Dharmendra Pradhan visited the Kingdom in April 2016 and held talks with Aramco chairman Khalid al-Falih and Deputy Minister for Petroleum Prince Abdulaziz bin Salman. Later, the Minister of State for External Affairs V.K. Singh visited to handle the problems arising out of the nonpayment of salary dues to some Indian workers in Riyadh and Jeddah. This response evoked the intervention of King Salman and issue was resolved amicably.31 Indeed, the only official visit in 2017 took place in January when the Minister of Minority Affairs Mukhtar Abbas Naqvi went to Jeddah to sign an agreement for haj and umrah pilgrimage from India. The much-anticipated visit of King Salman was deferred due to internal churning in the Kingdom and scheduling difficulties in India. In February 2017, he undertook a four-nation tour of Asia to promote investments and strengthen bilateral ties and the 30-day visit took him to Malaysia, Indonesia, Japan, and China.32 There were, however, Indo-Saudi bilateral consultations in third countries. Saudi Foreign Minister Adel al-Jubeir met the Minister of State for External Affairs M.J. Akbar on the sidelines of the G-20 Foreign Ministers meet in Bonn on 17 February and his counterpart Sushma Swaraj during the annual UN General Assembly session on 20 September. Indeed, the External Affairs Minister Sushma Swaraj who had been visiting many countries since assuming office in May 2014 did not visit the Kingdom until early 2018. 31  Hazaimeh, Hani. 2016. ‘No Government Payment to Firms Until They Clear Expat Dues’, Arab News, 9 August, http://www.arabnews.com/node/966276/saudi-arabia, last accessed on 1 July 2018. 32  Paul, Katie. 2017. ‘Saudi King Salman Launches Investment Drive with Asia Tour’, Reuters, 24 February, https://www.reuters.com/article/us-saudi-asia/saudi-king-salmanlaunches-investment-drive-with-asia-tour-idUSKBN1631P0, last accessed on 1 July 2018.

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Security and Defence As political engagements are increasing since 2014, there is an interest convergence on security issues. The joint statement issued during Prime Minister Modi’s visit established the template for a host of security agenda and both leaders ‘agreed upon the need to intensify bilateral defence cooperation, through exchange of visits by military personnel and experts, conducting joint military exercises, exchange of visits of ships and aircrafts and supply of arms and ammunition and their joint development’.33 Some of these, especially ‘supply of arms and ammunition and their joint development’ are unprecedented and would require considerable planning. Towards fighting financial crimes, both sides signed an MoU for exchanging intelligence related to money laundering, terror financing, and related crimes. These began paying dividends when Riyadh moved away from its traditional coyness and openly condemned the terrorist attacks in Pathankot (January 2016) and Uri (September 2016) where militants infiltrated from Pakistan-controlled Kashmir into India and perpetrated attacks on the Indian military installations. India reciprocated similar sentiments when the Kingdom came under attack. For example, India was one of the few major powers which condemned the terror attack in Mecca on 23 June 201734 and the missile attack in Riyadh in November.35 The latter one was carried out by the Houthi rebels in Yemen. India and Saudi Arabia identified terrorism and organized crimes as a serious threat and pledged to cooperate in ‘cyber security, including the prevention of the use of cyber space for terrorism, radicalization, and for disturbing social harmony.’36 The third meeting of the Joint Committee on Defence Cooperation (JCDC) was held in New Delhi in November 2017 and was attended by a 33  Government of India (GoI), Ministry of External Affairs (MEA). 2016. ‘India–Saudi Arabia Joint Statement during the Visit of Prime Minister to Saudi Arabia’, 3 April, http:// www.mea.gov.in/bilateral-documents.htm?dtl/26595/IndiaSaudi+Arabia+Joint+Statemen t+during+the+visit+of+Prime+Minister+to+Saudi+Arabia+April+03+2016, last accessed on 1 July 2018. 34  GoI, MEA. 2017. ‘Official Statement on Terrorist Attack Near the Grand Mosque in Mecca, Saudi Arabia on 23 June 2017’, 25 June, http://www.mea.gov.in/press-releases. htm?dtl/28594/official+statement+on+terrorist+attack+near+the+grand+mosque+in+mecc a+saudi+arabia+on+23+june+2017, last accessed on 1 July 2018. 35  GoI, MEA. 2017. ‘Statement on Missile Attack at Riyadh Airport’, 8 November, http:// www.mea.gov.in/press-releases.htm?dtl/29096/statement+on+missile+attack+at+riyadh+ai rport, last accessed on 1 July 2018. 36  GoI, MEA, ‘India-Saudi Arabia Joint Statement during the visit of Prime Minister to Saudi Arabia’.

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12-member Saudi delegation led by the Chief of Operations of the Saudi armed forces. The meeting identified ‘credible activities towards defence cooperation’ to bolster bilateral ties.37 During the visit of a delegation from Saudi National Defence College it was agreed that officers of the Royal Saudi Armed Forced would undergo training at various defence training intuitions in India, including the National Defence Academy (NDA, Pune), Defence Services Staff College (Willington), and National Defence College (New Delhi). According to the Ministry of Defence, Saudi officers have been given five slots in the NDA and it was decided to continue this arrangement.38 The first batch of Saudi cadets came to the NDA in December for a three-year training programme.39 Towards combating sea piracy and other maritime security challenges, both countries have increased cooperation between their navies. Indian naval ships have regularly been making port calls in Saudi Arabia and in May INS Mumbai, INS Trishul, and INS Aditya made port calls at Jeddah on the Red Sea. In November, the Indian coast guard ship ICGS Samarth visited Al-Jubail Port in the Eastern Province along the Persian Gulf.40 These exercises seek to enhance coordination between the two coast guards and other maritime agencies towards ensuring coastal security and to prevent their respective coasts and territorial waters from terrorist or other criminal activities. During the year, there was no progress on the joint military exercise which figured prominently during Prime Minister Modi’s visit to the Kingdom in 2016. Trade and Commerce As founding members of G-20, both have a huge appetite for growth and their leadership is feverishly working for economic reforms and growth by exploring new opportunities for investments and infrastructure developments. In some ways both the countries are in a similar position despite 37  Spandan. 2017. ‘News Flash’, November, 1 (2), http://www.indianembassy.org.sa/ images/documents/SPANDAN-NOVEMBER-ISSUE-2.pdf, last accessed on 1 July 2018. 38  GoI, Ministry of Defence. 2017. Annual Report 2016–17, https://mod.gov.in/sites/ default/files/AnnualReport1617.pdf, last accessed on 1 July 2018. 39  Saudi Gazette. 2017. ‘Saudi Cadets Set Out for Training in India’, 17 December, http://saudigazette.com.sa/article/524026/SAUDI-ARABIA/Saudi-cadets-set-out-fortraining-in-India, last accessed on 1 July 2018. 40  Embassy of India, Riyadh, Kingdom of Saudi Arabia. 2017. ‘Visit of Indian Coast Guard Ship SAMARTH’, 8 November, http://www.indianembassy.org.sa/news-and-events/307samarth, last accessed on 1 July 2018.

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the vastly different nature of their economies. Saudi Arabia is an oil-based economy and since the discovery of oil in the 1930s, it revolved around the oil industry. Indeed, oil comprises about 42 per cent of its GDP, 90 per cent of its exports, and 85 per cent of the state revenues. The rentierstate economic model rests on its oil wealth. At the same time, changes in the global energy scene and the resultant decline in the significance of oil as a strategic energy resource have compelled the Kingdom to diversify its economy and explore the hitherto taboo areas, such as tourism, sports, entertainment, and fashion. These are nascent areas for the Kingdom and would require external help, assistance, or guidance. On the contrary, India is a more traditional and relatively diversified economy but is largely rural and agricultural-based. The mixed economy model served it well during the Cold War, but in the early 1990s it came out of the state-controlled economic policy to accelerate growth by attracting overseas investments. The economic reforms towards integration with global economy have been positive but the global economic slowdown also affected India and since 2010–2011, its foreign trade, for example, has been stagnant. To overcome the situation, the government has been pegging international investments, especially in the infrastructure development, as its priority. In other words, the Saudi drive for diversification of its economy and Indian appetite for overseas investments are complementary. Traditionally, trade ties have formed the backbone of the Indo-Saudi relations and this has been the case even when there were limited exchanges between their political leaderships. The economic reforms accelerated India’s foreign trade and 2013–2014 was notable because the bilateral trade reached a high of US$48 billion and since then this has been dropping largely due to global economic slowdown and was below US$26 billion in 2016–2017. This is largely due to falling oil prices even though the quantity of two-way trade had improved. During 2016–2017, the Kingdom of Saudi Arabia was India’s fourth-­ largest trading partner after China, the U.S. and the UAE. It is the eighth-­ largest market for India’s exports with a share of 1.86 per cent. The situation for Saudi Arabia is rather interesting; India is the fourth-largest export market for the Kingdom and accounts for 9.3 of the Kingdom’s exports and the seventh-biggest source of imports with India constituting 3.7 per cent of the total imports of Saudi Arabia. The total value of the bilateral trade in 2016–2017 was US$25.08 billion, with India importing goods worth US$19.97 billion or 5 per cent of its total imports (Table 8.4 and Fig. 8.2). During the same period, India exported US$5.11 billion

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Table 8.4  India–Saudi Arabia bilateral trade (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 Exports Imports Total trade Share

5683.29 31,817.70 37,500.99 4.72

9785.78 33,998.11 43,783.89 5.53

12,218.95 36,403.65 48,622.60 6.63

11,161.43 28,107.56 39,268.98 5.18

6394.23 20,321.33 26,715.56 4.15

5110.28 19,972.40 25,082.68 3.8

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

60 50 40 30 20 10 0

2011-12

2012-13 Exports

2013-14

2014-15 Imports

2015-16

2016-17

Total trade

Fig. 8.2  India–Saudi Arabia bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

worth of commodities to Saudi Arabia. Due to large-scale energy imports, the balance of trade has always been in favour of Saudi Arabia but with the plans to increase bilateral investments and significant amount of remittances close to US$12 billion, the overall picture is more balanced. The bilateral trade is largely dominated by petroleum imports by India. In 2016, it overtook Japan and has emerged as the third-largest consumer of oil, after the US and China. The growing appetite for hydrocarbon resources has largely been met by the Gulf countries with Saudi Arabia being the largest supplier to India, accounting for nearly one-sixth of the total oil imported annually (Table 8.5 and Fig. 8.3). Other commodities

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Table 8.5  Energy imports from Saudi Arabia (US$ million) Year

Oil imports from Saudi Arabia

Total oil imports

Saudi share in total oil imports

Imports from Saudi Arabia

Per cent of oil in imports from Saudi Arabia

2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

28,302.37 29,896.53 32,781.57 23,212.88 15,177.91 15,583.08

172,753.97 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20

16.38 16.49 18.07 14.84 15.65 15.11

31,060.10 33,998.11 36,403.65 28,107.56 20,321.33 19,972.40

91.12 87.94 90.05 82.59 74.69 78.02

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

100 90 80 70 60 50 40 30 20 10 0

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Share in Per cent

Fig. 8.3  Share of oil in India’s imports from Saudi Arabia. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

which constitute the bilateral trade include petroleum products, food and agricultural products, cereals, leather and leather products, aluminium, iron and steel, heavy machinery, textile, cotton, and so on. Trade continues to be the mainstay of the bilateral relations and a decline in the overall trade figures has mainly been due to the falling oil prices but, as it would be discussed, this trend has brought economic benefits to India.

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Investments The changing contours of the commercial relations are manifested in the shifting of focus from bilateral trade to two-way investments. Both ­countries took a number of steps to improve the business environment towards enhancing the global investor confidence and business climate. According to World Bank’s Ease of Doing Business ranking, in 2016 Saudi Arabia stood at 82 in terms of business-friendly environment while India was way behind at 130. However, in 2018, their standing was 92 and 100, respectively, indicating significant improvement in the business climate in India. Investments figured prominently during the visit of Prime Minister Modi to the Kingdom and he and King Salman noted that in the light of, … the on-going positive transformation of the economies of India and Saudi Arabia, the two leaders emphasized the importance of expanding trade and investment ties to drive the strategic engagement forward. They directed their Finance and Trade Ministries to work together to find ways and means to substantially increase the flow of bilateral investments and growth of trade ties.41

As part of its post-oil model, Saudi Arabia has taken a number of steps in this direction, including a planned development of a new investment city in the north-western region of Tabuk and vigorous and tangible anticorruption drive, including temporary incarceration of powerful members of the ruling family and social opening towards attracting new investments. For its part, the Indian government is working towards streamlining investment procedure, anti-corruption measures, and unveiling of mega projects for international investments. Oil ministers of both the countries have been meeting frequently to further investment opportunities in the hydrocarbon sector. Petrochemical giant Saudi Arabian Basic Industries Corporation (SABIC) has set up a research and development centre in Bengaluru with an estimated investment of US$100 million.42 41  GoI, MEA. 2016. ‘India-Saudi Arabia Joint Statement during the visit of Prime Minister to Saudi Arabia’. 42  The Hindu Business Line. 2013. ‘Saudi Firm Sabic Opens Rs 624-cr Technology Centre in Bangalore’, 29 November, https://www.thehindubusinessline.com/companies/Saudifirm-Sabic-opens-Rs-624-cr-technology-centre-in-Bangalore/article20694297.ece, last accessed on 1 July 2018.

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The year 2017 witnessed some tangible movements in this regard. The biggest oil company Saudi Aramco is driving the process. In October, it opened Aramco Asia India (AAI) office in Gurugram near the national capital with the objective of coordinating its operations in India in the hydrocarbon sector, including engineering service, IT operations, security, and research and development.43 This became necessary as Aramco which began its operations in India in 2016 in Bangalore has been expanding its functions in the country. Media reports speak of an Indian willingness to invest in the Aramco when its disinvestment process begins with the IPO.44 The proposal for an Indian participation in Aramco projects in the Kingdom are often talked about though concrete measures are yet to be outlined. According to the Department of Industrial Policy and Promotion (DIPP) of the Indian Ministry of Commerce and Industry, the Saudi investments in the country are very small but are picking up. Between April 2000 and December 2017 it received US$200.37 million worth of investments from Riyadh thus ranking it 41st, a significant jump from 50th until December 2016. There is a significant increase in the recent years; the FDI flow from Saudi Arabia was US$16.11  million in 2016; US$8.66 million in 2015; US$9.52 in 2014; US$0.36 million in 2013; and US$7.13 million in 2012.45 In short, nearly 75 per cent of the Saudi FDI came to India since 2014. The Kingdom was a major participant in the India Energy Forum held in New Delhi in October which attracted a number of global energy players. Following his meeting with Saudi officials, CEO of NITI Aayog Amitabh Kant observed that the Kingdom ‘wants to invest in energy security and supply and become India’s investment partner. It will invest US$300 billion in next 4–5 years’.46

43  Saudi Aramco. 2017. ‘Saudi Aramco Expands Presence in India with Opening of New Aramco Asia India Office’, 8 October, http://www.saudiaramco.com/en/home/newsmedia/news/india-office.html, last accessed on 1 July 2018. 44  Zhdannikov, Dmitry and Ernest Scheyder. 2017. ‘India Could Invest in Aramco IPO to Strengthen Ties’, Reuters, 23 May, https://in.reuters.com/article/india-oil-aramco-idINKBN18I2DJ, last accessed on 1 July 2018. 45  GoI, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry. ‘FDI Statistics’, http://dipp.nic.in/publications/fdi-statistics, last accessed on 1 July 2018. 46  Financial Express. 2017. ‘Saudi Arabia to Invest $ 3,000 Billion in next 4–5 years: NITI Aayog CEO Amitabh Kant’, 9 October, http://www.financialexpress.com/economy/saudiarabia-to-invest-300-billion-in-next-4-5-years-niti-aayog-ceo-amitabh-kant/887827, last accessed on 1 July 2018.

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Interestingly, the Indian investments in the Kingdom have been on the rise. A number of leading Indian companies, such as Tata Consultancy Service, Larsen and Toubro, Shapoorji Pallonji, and others have formed joint ventures with Saudi companies to invest in the Saudi economy. Both the size of investments and number of companies operating in the Kingdom have increased. Though the latest figures are not available, according to Saudi Arabian General Investment Authority (SAGIA), 426 licenses were issued to Indian companies for joint ventures or fully-owned ventures until 2015 and they would generate a total investment of US$1.6  billion in the Saudi market. These licenses have been issued to diverse projects covering ‘management and consultancy services, construction projects, telecommunications, information technology, pharmaceuticals, etc.’.47 According to one Indian embassy official, ‘several Indian companies have established collaborations with Saudi companies and are working in the Kingdom in the areas of designing, consultancy, financial services and software development’.48 Energy Ties Energy supplies are the most important component of the bilateral trade, especially since the oil crisis of 1973. Saudi Arabia continues to be largest and most reliable source of oil and supplying about 19 per cent of India’s total oil imports.49 In late 2016, post-sanctions Iran briefly overtook the Kingdom as the leading supplier50 and this was soon reversed in favour of the latter. In the first three quarters of 2016–2017, the Kingdom supplied US$10.7 billion worth of oil to India.51 India’s accelerating demand for hydrocarbon energy and its growing dependence upon oil imports means that the Gulf region, especially Saudi Arabia would be the major supplier. 47  Embassy of India, Riyadh, Kingdom of Saudi Arabia. 2017. ‘India–Saudi Arabia Bilateral Relations’, August, http://www.indianembassy.org.sa/india-saudi-arabia/india-saudi-bilateral-relations, last accessed on 1 July 2018. 48  Ibid. 49  GoI, Ministry of Commerce and Industry, Directorate General of Foreign Trade. Export-Import Data Bank, http://dgftkolkata.wb.nic.in, last accessed on 1 July 2018. 50  The Economic Times. 2016. ‘Iran Overtakes Saudi to Become India’s Top Crude Supplier’, 17 November, http://economictimes.indiatimes.com/industry/energy/oil-gas/ iran-overtakes-saudi-to-becomes-indias-top-crude-oil-supplier/articleshow/55481064. cms, last accessed on 1 July 2018. 51  GoI, Ministry of Commerce and Industry, Directorate General of Foreign Trade. Export-Import Data Bank, http://dgftkolkata.wb.nic.in, last accessed on 1 July 2018.

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There are on-going official negotiations regarding Saudi investment in some of the mega energy projects in India and the expansion of strategic oil reserves with Saudi participation. During 2016–2017, India imported nearly 39.5 million metric tonnes (MMTs) of crude oil from Saudi Arabia worth US$15.58  billion (Table 8.5 and Fig. 8.3). The Kingdom continues to be India’s largest oil supplier and this would expand if India entices Saudi investments in strategic oil reserves. However, compared to 2015–2016, Saudi share in India’s energy imports have dipped slightly in 2016–2017 as demonstrated in Table  8.6 and Fig.  8.4. Some reports suggest that Aramco wishes to follow the example of the Emirati government in taking part in the expansion of India’s strategic oil reserves.52 During the visit of King Abdullah in January 2006, both countries signed the Strategic Energy Partnership (SEP) towards increasing energy imports from the Kingdom and this strengthened during the visit of Manmohan Singh to Riyadh in 2010 when both leaders agreed to develop a ‘comprehensive strategic Table 8.6  India’s energy imports from Saudi Arabia (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 Energy 28,302.37 29,896.53 32,781.57 23,212.88 import from Saudi Arabia Total energy 172,753.97 181,344.67 181,382.59 156,400.01 import Total import 95,915.24 105,859.19 106,400.75 85,300.30 from the Persian Gulf Share in 16.38 16.49 18.07 14.84 total imports Share in 29.13 28.26 30.81 27.21 imports from the Persian Gulf

15,177.91

15,583.08

96,953.06 103,163.20 50,992.26

56,335.34

15.65

15.11

29.77

27.66

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

52  The Economic Times. 2018. ‘Saudi Keen to Have Stake in West Coast, Kakinada Project: Dharmendra Pradhan’, 23 February, https://economictimes.indiatimes.com/industry/ energy/oil-gas/saudi-keen-to-have-stake-in-west-coast-kakinada-project-dharmendra-pradhan/articleshow/63046262.cms, last accessed on 1 July 2018.

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35 30 25 20 15 10 5 0

2011-12

2012-13

2013-14

Share in Total Imports

2014-15

2015-16

2016-17

Share in Imports from Persian Gulf

Fig. 8.4  Share of Saudi Arabia in India’s oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

partnership’. Energy security figured prominently during the visit of Prime Minister Modi in 2016 when both leaders flagged it as a pillar of the strategic partnership. At the same time, it is essential to recognize that until early 2018, when both sides concluded a strategic MoU for the hydrocarbon project in Maharashtra at the cost of US$44  billion,53 there were no long-term energy agreements between the two. Much of the oil and gas imported into the country are spot purchases which are price sensitive and cost-­ effective but lack long-term strategic planning. Expatriates The Indian expatriate community forms the backbone of the people-to-­ people contacts between the two countries and the cultural connect is strengthened by the discipline, hard work, and skills of Indians. There are 53  Press Information Bureau, Ministry of Petroleum & Natural Gas. 2018. ‘Indian Consortium and Saudi Aramco Sign MoU for Ratnagiri Mega Refinery in Maharashtra’, 11 April, http://pib.nic.in/newsite/PrintRelease.aspx?relid=178581, last accessed on 1 July 2018.

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nearly 3.3 million Indians—the largest concentration outside the country— engaged in various sectors and professions across the Kingdom. A large portion of them are still engaged in low-paid unskilled and semi-­skilled workers, but increasingly, they are occupying blue-collar jobs due to their professional qualifications, training, and skills. Though actual figures are elusive, the number of Indian engineers, doctors, managers, IT experts, entrepreneurs, and consultants has increased over the years. The expatriate community directly contributes to the Indian economy through remittances which not only help their immediate families in improving their socio-economic conditions but also inject liquidity into the market. Since 2012, India has been identified as the largest recipient of remittances from abroad and received US$69 billion in that year54 and this has fallen since then primarily due to global economic slowdown and dropped US$62  billion in 2016. This, however, is expected to reach US$65 billion in 2017.55 The Kingdom has been the third-largest source of remittances after the UAE and the US. During 2017, remittances from Saudi Arabia were estimated at US$10 billion.56 Though Indian expatriate workers are recognized for their discipline, hard work, and apolitical nature, and experience a compatible and satisfactory condition and earn a decent living, there have been instances of exploitation, torture, and even sexual abuse. One of the means of exploitation has been the kafala (sponsorship) system whereby expatriate workers were tied to their employers, thereby resulting in a pitiable situation. Partly to mitigate the situation, both the countries signed a labour agreement in January 2014 towards streamlining the working conditions, especially for domestic workers, such as drivers and helps. However, the bigger challenge is the problem which comes from India in the form of 54  Pew Research Center. 2018. ‘Remittance Flows Worldwide in 2016’, 23 January, http://www.pewsocialtrends.org/2014/02/20/remittance-map, last accessed on 1 July 2018. 55  Thakur, Atul. 2018. ‘India Retains Long-held Position of Top Remittance Destination of Migrants’, The Times of India, 25 April, https://timesofindia.indiatimes.com/india/ india-retains-long-held-position-of-top-remittance-destination-of-migrants/articleshow/63903300.cms, last accessed on 1 July 2018. 56  Menon, Shailesh. 2017. ‘How Economic Downturn in Gulf States has Resulted in a Drop in Remittances into India’, The Economic Times, 5 November, https://economictimes. indiatimes.com/nri/forex-and-remittance/how-economic-downturn-in-gulf-states-hasresulted-in-a-drop-in-remittances-into-india/articleshow/61511605.cms, last accessed on 1 July 2018.

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manpower agencies which exploit the potential applicants over their salary, working conditions, or even the nature of jobs. The Kingdom continues to be the favourite destination for the Gulf migration and the size of the community has marginally increased in 2017 to reach 3.3 million.57 This came against the backdrop of two forces working against labour migration to Gulf Arab countries, namely, low oil price and domestic pressure for the nationalization of the labour force. Partly to mitigate pressure of youth unemployment—the drive behind popular protests in various Arab countries—the Kingdom introduced the Nitaqat policy in 2011 which aimed at limiting the size of the expatriate workers in all companies and establishments in the country.58 This led to a sizeable increase in Gulf returnees since 2012 and during 2017 nearly 10,000 Indian workers faced salary delays of up to 3–4  months and most were working in the two large conglomerates, the Saudi Oger and Saad Group. Due to slowing public and private investments, these companies were unable to pay the salaries on time,59 thus resulting in the repatriation of nearly 4830 Indian workers by the early 2017.60 To resolve the matter, the Minister of State V.K. Singh travelled to the Kingdom and met the senior Saudi officials and ministers and this resulted in the King agreeing to waive the fines of Iqama (resident permit)-related violations and to provide them exit visas and a one-way return ticket to India. While many were repatriated in February 2017, a significant number availed the opportunity to transfer their sponsorship from these two companies to others and stayed behind. A far more immediate problem was the Saudi decision in 2016 to levy dependent tax upon the expatriate workers. Calculated at 100 Saudi Riyal per person per month or 1200 Saudi Riyal annually for a person, it is likely to be raised to 400 Saudi Riyal per month per person by 2020. This taxation system came into force in July 2017 and was part MBS’s policy of diversification 57  India, Lok Sabha. 2017. ‘Expatriate Levy by Saudi Arabia’, Unstarred Question No. 610, 19 July, http://www.mea.gov.in/lok-sabha.htm?dtl/28649/quesion+no610+expatriate+le vy+by+saudi+arabia, last accessed on 1 July 2018. 58  Hussain, Zakir. 2014. ‘Nitaqat  – The Second Wave of Saudi-isation: Implications for India’, ICWA Issue Brief, https://icwa.in/icwa_hindi/pdfs/IBsecondwaveof.pdf, last accessed on 1 July 2018. 59  India, Rajya Sabha, “Indian employees forced to leave Saudi Arabia”, Starred Question No. 242, 8 December 2016, http://www.mea.gov.in/rajya-sabha.htm?dtl/27786/question +no242+indian+employees+forced+to+leave+saudi+arabia (last accessed on 1 July, 2018). 60  India, Rajya Sabha 2017. ‘Retrenched Indian Workers in Saudi Arabia’, Unstarred Question No. 819, 9 February, http://www.mea.gov.in/rajya-sabha.htm?dtl/28052/questi on+no819+retrenched+indian+workers+in+saudi+arabia, last accessed on 1 July 2018.

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of the economy. Generating additional revenue is a pre-condition for reducing the high Saudi dependence upon its oil wealth. With about 10 million expatriate workers in the Kingdom, the tax is estimated to yield US$27 million revenues in 2017, which is expected to increase to US$17  billion by 2020. However, for the expatriate community this is an additional burden which would limit the chances of them bringing in their family members to the Kingdom. An average family of four members, for example, would have to pay Saudi Riyal 7200 as tax in 2018 and this means a considerable drop in the income that the family remits home.61 Haj The annual pilgrimage to Ka’aba in the Islamic month of Dhul Hijja is one of the five pillars of Islam, the duties a faithful has to fulfil. Even though the haj is mandatory only for those who can afford it, both financially and physically, all Muslims aspire to fulfil this duty once in their lifetime. Muslims from India have been travelling to Mecca and Medina in large numbers every year for haj or umrah (pilgrimage made to Mecca during non-haj season). In fact, haj has been one of the major dimensions of the people-to-people contacts between India and Saudi Arabia, especially during the Cold War when political engagements were minimal and even non-existent. Historically, Indians have been one the largest contingents of hajis and 135,904 Indians travelled to Mecca in 2016 for haj.62 In 2017, the number of hajis increased as the Kingdom increased India’s quota to 170,025 and out of them, 124,852 pilgrims went through the state-sponsored Haj Committee of India, while another 45,000 travelled through private operators. A goodwill delegation led by the Minister of State for External Affairs M.J. Akbar went to Saudi Arabia during haj. In addition, another 300,000 Indians perform umrah annually.63 The haj quota for 2018 has been marginally increased to 175,000. Responding to the Supreme Court order of 2012, the government unveiled a New Haj Policy for 2018–2022 and announced the discontinuation of haj subsidy 61  The Indian Express. 2017. ‘How Saudi Arabia’s Expat Dependent Tax Will Affect Indian families’, 21 June, http://indianexpress.com/article/world/how-saudi-arabias-expat-dependent-tax-will-affect-families-4715608, last accessed on 1 July 2018. 62  GoI, MEA. Annual Report, 2016–2017. New Delhi, p. 73. 63  GoI, MEA. 2017. ‘India–Saudi Arabia Bilateral Relations’, http://www.mea.gov.in/ Portal/ForeignRelation/India-Saudi_Bilateral_Relations_Aug__2017.pdf, last accessed on 1 July 2018.

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from 2018.64 Though this is in line with the declared policy of secularism and the state’s desire to treat religious practices as a private matter of its citizens, the socio-economic impact of the subsidy removal upon the poor and weaker sections of the Muslim population would be known in the coming years. Partly to mitigate the situation, the government appeared to be reviving the erstwhile practice of hajis travelling to Jeddah by ship, a practice that was discontinued in 1995.

Challenges The Indo-Saudi relations will face significant challenges in the coming times. These can be divided into two types; bilateral ones and challenges emanating from regional developments in South Asia and Middle East. At the bilateral level, the most important challenge will be to walk the talk of bringing in Saudi investments. If one goes by the FDI data in 2017, the Saudi investment in India spiked to US$124 million. Further, the discussion about Saudi Aramco partnering an Indian consortium to develop an oil refinery in the western coast of India with an investment of US$44 billion shows that this challenge can be met. Nevertheless, the bureaucratic bottlenecks and legal wrangling will have to be avoided if these and other projects are to become a reality. Another challenge will be to expedite the visit of King Salman to India. His visit has been impended since late 2016 and despite his age and health concerns the King undertook a month-long trip in 2017 and visited the major powers of the world, including China, Japan, and Russia. Salman’s visit will give impetus to bilateral relations and strengthen the ties. India will have to pursue the bilateral relations to new levels without a zero-sum approach or without thinking about the Pakistan factor. Saudi Arabia and Pakistan enjoy close relations and have strong defence component. However, this should not deter India from enhancing bilateral security relations with Saudi Arabia without appearing to undermine Pakistan and without compromising its own national interests. The Indian diplomacy will have to adapt to changed dynamics and deal with its neighbours and partner countries accordingly. Just like India has good relations with Iran, despite bitter Saudi-Iranian rivalries, India will have to ignore the Saudi-Pakistan ties without compromising its vital interests. 64  Ghosh, Abantika. 2018. ‘Haj Subsidy Discontinued: Credit for Phasing it out Goes to Supreme Court’, The Indian Express, 17 January, http://indianexpress.com/article/opinion/haj-subsidy-haj-india-modi-mukhtar-abbas-naqvi-5027434, last accessed on 1 July 2018.

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Further, India needs to work towards two aspects in terms of economic relations; one, diversify the overall business away from oil. This will be beneficial for both; Saudi Arabia is diversifying its economy through the ambitious Vision 2030 programme and for India it will help ease the balance of trade which is hugely in favour of Saudi Arabia. Similarly, India and Saudi Arabia should forge a strategic energy partnership and India will have to move away from the spot purchases and take advantage of the volatility in the oil market to enter into a long-­term strategic energy partnership with Saudi Arabia. Inviting Saudi investment in the downstream petroleum sector in India can be a major step as it will enhance India’s refining capacity, generate employment, and reduce dependence on spot buying. India should also think in terms of cultivating long-term and friendly relations with the new generation of Saudi leadership. The Crown Prince of Saudi Arabia is young and if he succeeds in his reform agenda, which is more likely, he can rule the Kingdom for the next generation. This would mean that India should not hesitate in trying to develop a personal rapport with the Crown Prince and should try and partake in his ambitious plan to reform the Saudi society and economy. Amongst others, Vision 2030 plans to develop the sports, cultural, entertainment, and tourism sectors and these are fairly flourishing in India and the latter should leverage its advantages and cooperate with the Kingdom. To achieve these aims, India’s diplomatic and strategic community will have to come out of the past inhibitions vis-à-vis the overtly religious and conservative nature of the Saudi society. The Saudi monarchy is strong and in control and has shown signs of socio-economic opening. Political centralization which suits the local cultural ethos and should not become a matter of concern for India and the Indian leadership in forging strategic relations. Islam is an asset for the bilateral relations and this should be utilized for addressing their common concerns vis-à-vis radicalization and terror. At the multilateral level, the biggest challenge for India would be to balance the Saudi-Iranian rivalry. The two Persian Gulf powers are at loggerhead over a number of regional issues and the continuing ascendance of Iran and its growing regional profile have added to the historical sectarian Shia–Sunni and ethnic Arab–Persian rivalries. The struggle for regional supremacy since 2011 has manifested in proxy wars in Iraq, Syria, Yemen, Bahrain, and Lebanon as well as in Palestine. This is significantly adding to

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the geopolitical tensions in the region and has caused regional realignment. While India has no interest in intervening in regional tensions and rivalries and has, therefore, kept away from them, it needs to balance its interest vis-à-vis Saudi Arabia and Iran which are at the opposite end of the regional spectrum. One of the key aspects of regional tensions that acquired threatening proportions in 2017 was the Qatar crisis. The Saudi-led boycott of Qatar and the subsequent mudslinging shows a deep internal schism and this has been a major problem for India as it seeks a close and cordial relation with all the countries. Beside strong trade ties, both the Arab countries host a considerable Indian expatriate community. Therefore, India will have to tread a very fine line lest it harms its interests. Further, India will have to be mindful of the evolving dynamics in Saudi Arabia’s relations with great powers, especially, the US, Russia, and China. Saudi Arabia has in recent years developed a more dynamic foreign policy and is no longer completely dependent on the US for maintaining its internal security and regional interests. In the recent years, the tensions and differences between the two have increased, especially over the Syria and Jerusalem question. Therefore, despite friendly ties with the Trump administration, the Kingdom took a lead in chastising it over the plan to unilaterally move the US embassy to Jerusalem. Saudi Arabia has invested considerably in forging better ties with Moscow and King Salman became the first Saudi monarch to visit Russia in October 2017. The two countries have been cooperating to manage the global energy market at the expense of the US. Russia under Putin has been successful in emerging from the post-Cold War dynamics and has enhanced its presence in the Middle East. It is firmly in control of the situation in Syria and has shown interest in other regional affairs. This would mean that India cannot afford to ignore the emerging dynamics vis-à-vis Russia–Saudi Arabia and Russia–Middle East in pursuing its interests in the Gulf. The third part of this chain is China. The Sino-Indian relations are complicated and both are rivals and competitors in many parts of the world. The Chinese interests and presence in the Persian Gulf have increased significantly and the Sino-Saudi strategic partnership encompasses various energy and infrastructure projects. This would mean that India will have to both compete and cooperate with China to safeguard its interests in the Persian Gulf while still being cautious over China’s forays in the Gulf.

CHAPTER 9

UAE

Key Information Political system: Federation of seven Emirates ruled by different families; Ruling family: Dubai (al-Maktoum); Abu Dhabi (al-Nahyan); Sharjah (al-Qasimi); Ras al-Khaima (al-Qasimi); Ajman (al-Nuaimi); Fujaira (al-­ Sharqi); and Umm al-Qaiwan (Al-Mu’alla); President: Khalifa bin Zayed al-Nahyan (since 3 November 2004); Prime Minister and Vice President: Mohammed bin Rashid al-Maktoum (since 11 February 2006); National day: 2 December; Parliament: 40-member partially elected Federal National Council; Last parliamentary election: 3 October 2015; Major group in parliament: Not Applicable (NA); National carrier: Emirates (Dubai); Etihad Airways (Abu Dhabi). Socio-Economic Indicators Area: 83,600 sq. km; Population: 6,072,475; Native: 12 per cent (approximately 2017 est.); Expats: 88 per cent (approx. 2017 est.); Religious groups: Citizens (Sunni 85 per cent; Shia 15 per cent); Resident (Muslim 76 per cent; Christian 9 per cent; Hindu and Buddhist 10 per cent; and Other 5 per cent); Youth: 13.51 per cent; Population growth rate: 2.37 per cent; Life expectancy at birth: 77.7 years; Major population groups: Emirati 19 per cent; other Arabs and Iranians 23 per cent; South Asian 50 per cent; European and East Asian 8 per cent; Literacy rate: 93.8 per cent; National currency: Emirati Dirham (AED); GDP: US$378.7  billion; © The Author(s) 2019 P. R. Kumaraswamy et al., Persian Gulf 2018, Persian Gulf, https://doi.org/10.1007/978-981-13-1978-5_9

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Foreign trade: Export US$314.7 billion, Import US$241.3 billion (2017 est.); Defence budget: 4.86 per cent of GDP (2017 est.); Sovereign wealth fund: US$1319.5 billion; External debt: US$239.7 billion; Per capita income: US$68,200; Oil reserves: 97.8 billion bbl.; Gas reserves: 6.091 trillion m3; HDI rank: 42; Infant mortality rate: 10 deaths/1000 live birth; UN education index: 0.673; Gender inequality index: 0.232; Labour force: 5.344  million; Unemployment rate: 3.6 per cent (2014 est.); Urban population: 86.1 per cent; Rate of urbanization: 2.32 per cent (2015–2020 est.); Last national census: 2005. India Related Indian cultural centre: Abu Dhabi (inaugurated in 2009); Number of Indians: 2,803,751 (2017 est.); Number of places of worship for Indians: Two temples; one gurudwara; 35 churches; Indian Schools: 60; Indian banks: State Bank of India (1); Bank of India (1); Bank of Baroda (7); Union Bank of India (1); Punjab National Bank (1); IDBI Bank (1); ICICI Bank (1); Axis Bank (1); HDFC (1); Canara Bank (1), Currency exchange rate: 1 AED = INR 18.10 (April 2018); Last visit to India by the ruler: Crown Prince Muhammad bin Zayed, January 2017; Last Indian prime minister to visit: Narendra Modi, February 2018. * * * The Indo-Emirati relations have been on the ascendance since Narendra Modi became prime minister and between 2014 and early 2018, the two leaderships have met as many as four times. If the Indian leader visited the UAE in August 2015 and February 2018, Vice-President and Crown Prince Mohammed bin Zayed al-Nahyan (also the de facto ruler of the UAE) visited India twice, in February 2016 and in January 2017. This developing bond between the two leaders is reflected in some of their economic agreements. In 2017, the UAE agreed to award 10 per cent participation for an Indian consortium in the Lower Zakum offshore oil field which has a production capacity of 3.5  million barrels a day and offered to help in the strategic oil reserves in Mangalore. However, the  crowning moment came in January when Crown Prince al-Nahyan attended India’s Republic Day celebrations as the chief guest.

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Domestic Developments Politics Though popular participation has been limited, political stability, accountable governance, and economic prosperity are the hallmarks of the UAE. A federation of seven emirates—Abu Dhabi, Dubai, Ajman, Fujairah, Ras al-Khaimah, Sharjah, and Umm al-Quwain—the UAE is ruled by autonomous rulers who are bound by the federal constitution. Abu Dhabi and Dubai are the richest emirates who have emerged as the engine of modernization and economic development and their rulers have a greater say in the functioning of the federal government while local issues are handled by the respective ruling families of the federation.1 A prudent use of the oil wealth had transformed the tiny Emirates into one of the most powerful centres of international trade and finance. With the introduction of a 40-member elected Federal National Council (FNC) in 2006, some progress was made regarding a participatory political system but a larger political inclusion and vibrant system of governance remains a distant dream. Dissent is rarely tolerated under the traditional patrimonial arrangement, whereby the head of state is presented and seen as a guardian figure. He enjoys the absolute right to take decisions on behalf of the state as a whole akin to a traditional patriarchal family. As a result, the legislation is considered as the prerogative of the executive, but a system of consultation rooted in the local culture is practiced through informal majlis and the formal FNC. Khalifa bin Zayed al-­ Nahyan, who became head of the UAE in 2004, was indisposed in 2014 and since then his younger brother and crown prince of Abu Dhabi Mohammad al-Nahyan functions as the de facto ruler of the UAE. On the political front, some progress can be noticed in recent years, the most remarkable development being the partial election for the FNC. Until then, that is between 1972 and 2006, all the members of the FNC were nominated and the first election was held in December 2006. In 2008, the Supreme Court increased the scope of influence and coordination with the cabinet.2 Since then the FNC elections were held in 2011 and 2015. 1  BBC News. 2018. ‘United Arab Emirates Country Profile’, 14 May, https://www.bbc. com/news/world-middle-east-14703998, last accessed on 1 July 2018. 2  United State Department of State, ‘United Arab Emirates’, https://www.state.gov/ documents/organization/160079.pdf, last accessed on 1 July 2018.

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According to the government, political reforms continue to remain the prime goal of the UAE and are pursued through three main steps, namely, the strategy adopted in 2007, amendments to the constitution carried out in 2008, and the Vision 2021 unveiled in 2010. The government strategy of 2007 aimed to ‘create cooperative interaction between federal and local governments’ and to revitalize ‘the regulatory and policy-making role of the ministries’ and to improve their decision-making mechanism. The 2008 amendment to Article 62 of the 1971 constitution was aimed at ensuring greater transparency in the executive. The new provision states that the prime minister of the Emirates or his deputies may not practice any professional or commercial jobs or enter into any business transactions with the federal or local governments. This became necessary as the post of prime minister is always headed by a member of the royal family. Amendment to Article 72 extended the tenure of the FNC from two years to four years,3 and modified Article 78 which empowers the government to call for a special session of the FNC, if necessary, besides the regular annual sessions. Likewise, the amended Article 91 demands the government to notify the FNC of all international treaties and conventions concluded by the government.4 These amendments were aimed at strengthening the FNC and to provide more powers to it within the federal set-up and were also approved by the Supreme Court in 2008. Vision 2021 was launched in 2010 and is seen as a big step towards political reforms in the country and aims to ‘transform’ the UAE by integrating efforts at both the federal and local levels. It focuses on the unification of four objectives, namely, ‘in responsibility, in destiny, in knowledge and in prosperity.’5 In other words, it seeks to ensure a sense of responsibility and participation of its nationals within a sustainable, progressive, and nationalist atmosphere with moderate Islamic values at the core. It aspires for a knowledge-based economy that is diverse and flexible and is led by skilled Emiratis. Lastly, it aspires to ensure prosperity for its nationals. The frequent use of the expressions ‘Emiratis’ and ‘UAE nationals’ in the Vision 2021 indicates a desire for the indigenization of the workforce. 3  World Intellectual Property Organization. 2010. ‘Constitution of the UAE’, http:// www.wipo.int/wipolex/en/text.jsp?file_id=440263, last accessed on 1 July 2018. 4  Ibid. 5  United Arab Emirates. 2018. Vision 2021, https://www.vision2021.ae/en, last accessed on 1 July 2018; and Government of the United Arab Emirates. 2018. ‘The Political System’, https://government.ae/en/about-the-uae/the-uae-government/political-system-andgovernment, last accessed on 1 July 2018.

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Foreign Policy In recent years, the UAE and Saudi Arabia have emerged as strong allies, and reportedly along with Bahrain, are forming a bloc within the GCC.6 During 2017, the two important issues, namely, the on-going civil war in Yemen and the Qatar crisis, formed the core of the Emirati neighbourhood policy. On both these issues, it overwhelmingly sided with Riyadh. Regarding the former, the UAE chose to ‘ignore’ the human rights violations of its allies, especially by Saudi Arabia and at times even endorsed the torture and disappearances. Likewise, ever since the Qatar crisis broke out on 4 June, the UAE sided with Riyadh and severed ties with Doha. Despite the economic implications, it was quick to recall its ambassador from Doha and sought to isolate the latter socially and economically.7 There is an economic cost for the Emirati action as Qatar depends heavily on the GCC in terms of volume of trade and trade routes and their abrupt disruption not only affected Qatar but also the flow of Qatari– Emirati trade.8 The situation opened new avenues for Qatar in the form of Iran, incidentally the principal reason for the Saudi ire.9 If the economic measures, such as trade and banking sanctions and denial of airspace to and from Doha were not enough, in July the UAE cautioned that Qatar would be expelled from the GCC if it does not show ‘change of behaviour’.10 For its part, Qatar accused the UAE for sparking the crisis.11 6  The Hindu. 2017. ‘UAE and Saudi Form New Group Separate from GCC’, 5 December, http://www.thehindu.com/news/international/uae-and-saudi-form-new-group-separatefrom-gcc/article21268680.ece, last accessed on 1 July 2018. 7  Kabbani, Nader. 2017. ‘The High Cost of the High Stakes: Economic Implications of the 2017 Gulf Crisis’, Brookings Markaz, 15 June, https://www.brookings.edu/blog/ markaz/2017/06/15/the-high-cost-of-high-stakes-economic-implications-of-the2017-gulf-crisis, last accessed on 1 July 2018. 8  The Economist. 2017. ‘The Boycott of Qatar is Hurting Its Enforcers’, 19 October, https://www.economist.com/middle-east-and-africa/2017/10/19/the-boycott-of-qataris-hurting-its-enforcers, last accessed on 1 July 2018. 9  Nader Kabbani, ‘The high cost of the high stakes’. 10  FirstPost. 2017. ‘Gulf Diplomatic Crisis UAE Warns to Expel Qatar from GCC Calls for “Change in Misbehaviour”’, 17 July, http://www.firstpost.com/world/gulf-diplomaticcrisis-uae-warns-to-expel-qatar-from-gcc-calls-for-a-change-of-behaviour-3823519.html, last accessed on 1 July 2018. 11  Finn, Tom. 2017. ‘Qatar Says Media Reports Reveal UAE Role in Hack that Sparked Crisis’, Reuters, 17 July, https://www.reuters.com/article/us-gulf-qatar-emirates/qatar-saysmedia-report-reveals-uae-role-in-hack-that-sparked-crisis-idUSKBN1A20P1, last accessed on 1 July 2018.

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Even though in March 2015 Operation Decisive Storm against Yemen was launched by a coalition of Gulf and Arab Monarchies, it was Saudi Arabia that took the lead, whereas the contribution from others, including Egypt, Bahrain, Kuwait, and Jordan was largely symbolic. Initially the UAE sent its military brigade along with tanks and other armoured vehicle to Aden when Houthi rebels killed 45 Emirati soldiers on 5 September 2015 and pledged heavy ‘retaliation’.12 Besides the killing of its soldiers, the UAE has other higher-stakes in Yemen in the form of geostrategic and economic calculations. The security of Bab el-Mandeb upon which the UAE and other Persian Gulf states depend is one of the world’s busiest maritime trade route for oil and gas exports to Europe and North America13 and is 160 kilometres from the Aden port. Though it has been siding with Saudi Arabia on the Yemen crisis, there are indications that the interests of these two allies in Yemen have shifted. Partly due to international criticisms and partly to unrealized objectives, while Saudi Arabia is showing signs that it ‘wants out’ of Yemen, the UAE has increased its involvement. As of November 2017, the UAE has been financing and training armed groups in the southern Yemen.14 In May, the Hadi government, an ally of the Saudi-led coalition, accused the UAE of acting as an ‘occupying force’ rather than a ‘liberation force’.15 Economy On the economic front, owing to its political stability and astute policies, the country has shown resilience despite oil prices falling since 2014. The economic growth has been falling and had reached a low of 2.3 per cent in 2016, though the condition of each of the emirates has been different. It is no secret that about 60 per cent of its GDP rests on Abu Dhabi and its 12  The National. 2015. ‘UAE Servicemen Die in Yemen’, 4 September, https://www.thenational.ae/uae/government/uae-servicemen-die-in-yemen-1.123498, last accessed on 1 July 2018. 13  Wagner, Daniel and Giorgio Cafiero. 2016. ‘The UAE’s High Stakes in Yemen’, Huffington Post, 21 September, https://www.huffingtonpost.com/daniel-wagner/theuaes-high-stakes-in-y_b_8170042.html, last accessed on 1 July 2018. 14  Al-Jazeera. 2017. ‘Have Saudi and the UAE’s Aims in Yemen War Shifted’, 8 November, http://www.aljazeera.com/indepth/features/2017/11/saudi-uae-aims-yemen-warshifted-171108080509650.html, last accessed on 1 July 2018. 15  Middle East Eye. 2017. ‘Yemen President Says UAE Acting Like Occupiers’, 3 May, http://www.middleeasteye.net/news/exclusive-yemeni-president-says-emiratis-actingoccupiers-1965874493, last accessed on 1 July 2018.

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hydrocarbon production. With its flourishing service industry, port connectivity, and infrastructure development, Dubai contributes about a quarter of the GDP.16 The economic growth during 2017 was estimated at 2.3 per cent17 and this has been contradicted by the World Bank which pegged the real growth rate at 1.4 per cent as against 3 per cent a year earlier.18 At the same time, the World Bank’s economic outlook suggested that the GDP growth would further come down to 2.9 per cent in 2018, primarily due to its adherence to the Organisation of Petroleum Exporting Countries (OPEC) agreement for production cuts.19 The World Bank added that the non-oil sector would grow by 3.3 per cent during the year, thereby highlighting the impact of the greater public investments.20 The non-oil trade has contributed to the marginal increase in the GDP. Delay in payments is a worrying issue in the Emirati banking system21 and has increased by 4 per cent.22 In November, the CIA estimated that due to successful diversification efforts, the share of oil and gas sector in the GDP has reduced by 30 per cent.23 According to the Economic Freedom Report 2017, prepared by the Heritage Foundation, the country’s economic freedom status has been identified as ‘Mostly Free’ and the UAE ranks eighth in the world and, naturally, stands first in the Middle East in terms of economic freedom. The global average in terms of economic freedom stand at 60.9 and the Middle Eastern averages are slightly better at 61.9 per cent. The UAE surpasses 16  Santander Trade. 2018. ‘UAE: Economic and Political Outline’, May, https://en.portal.santandertrade.com/analyse-markets/united-arab-emirates/economic-political-outline, last accessed on 1 July 2018. 17  Ibid. 18  Arabian Business. 2017. ‘UAE’s Real GDP Growth Forecast to Slow to 1.4% in 2017’, 13 October, http://www.arabianbusiness.com/politics-economics/381074-uaes-real-gdpgrowth-forecast-to-slow-to-14-in-2017, last accessed on 1 July 2018. 19  The World Bank. 2017. ‘United Arab Emirates’ Economic Outlook – October 2017’, 11 October, http://www.worldbank.org/en/country/gcc/publication/united-arab-emirates-economic-outlook-october-2017, last accessed on 1 July 2018. 20  Arabian Business, ‘UAE’s real GDP growth forecast to slow to 1.4% in 2017’. 21  The World Bank, ‘United Arab Emirates’ Economic Outlook – October 2017’. 22  Arabian Business. 2017. ‘UAE Economy on the up in 2017, But Late Payments Still an issue’, 6 February, http://www.arabianbusiness.com/uae-economy-on-up-in-2017-butlate-payments-still-issue-662176.html, last accessed on 1 July 2018. 23  US, Central Intelligence Agency. 2018. ‘CIA Factbook: UAE’, https://www.cia.gov/ library/publications/the-world-factbook/geos/ae.html, last accessed on 1 July 2018.

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both these averages and stands at 76.9 per cent and this is 4.3 percentage points higher than last year. The report also highlighted that there has been a significant increase of 5.8 percentage points in the country’s score since 2013.24 Notable success for the UAE came in the fields of trade freedom and regulatory efficiency while the areas of concerns are investment and financial freedom and government spending. The IMF estimates that the economy would grow further at the rate of 3.4 per cent in 2018.25 This suggests that the Emirati growth rate is set to double in the following year.26 Society The UAE is a liberal, open, and tolerant society than many of its neighbours and both citizens and expatriates enjoy the freedom to practice their faiths. There are a number of non-Muslim places of worship in Abu Dhabi and Dubai where much of the expatriates reside. At the same time, political space in the Emirates is highly restricted and Freedom House, for example, identifies it as ‘Not Free’. On the freedom of press, the UAE has a score of 78 out of 100, meaning it is closer to the ‘Least Free’ status. On the legal environment it scores 25 out 30, on the political environment it scores 30 out 40, and on the economic environment it scored 23 out of 30, thereby indicating a great scope for improvement.27 With a total resident population of 9.3 million (including 1.4 million citizens), the Emirates has an Internet penetration rate of 91.2 per cent, one of the highest in the Persian Gulf. At the same time, Internet freedom has come down considerably and has been the lowest in 2017 due to the passage of a new cybercrime law which, amongst other things, calls for a 10-year imprisonment for the political use of social media. Human rights activist Nasser bin Ghaith was arrested and convicted under the new provision. 24  The Heritage Foundation. 2017. ‘Economic Freedom Index: UAE’, http://www.heritage.org/index/pdf/2017/countries/unitedarabemirates.pdf, last accessed on 1 July 2018. 25  John, Issac. 2017. ‘IMF Economic Outlook: UAE Growth on Track’, Khaleej Times, 31 October, https://www.khaleejtimes.com/business/economy/imf-economic-outlook-uaegrowth-on-track, last accessed on 1 July 2018. 26   John. Issac. 2017. ‘UAE Economic Growth Set to Double’, Khaleej Times, 23 November, https://www.khaleejtimes.com/business/economy/uae-economic-growth-setto-double, last accessed on 1 July 2018. 27  Freedom House. 2017. Freedom of the Press, https://freedomhouse.org/report/freedom-press/2017/united-arab-emirates, last accessed on 1 July 2018.

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The UAE has emerged as the regional centre for international media and broadcasters but the local press is heavily controlled by the state. According to Freedom House, nearly all the media outlets which serve the Emirates are either owned or heavily influenced by the authorities. Individuals using social media for dissent or for sharing ‘sensitive’ information are subjected to arbitrary arrests, prolonged detention, and criminal prosecution.28 These measures have intensified in the wake of the Qatari crisis and social media posts regarding the official policy of b ­ lockade evoked stronger state response; for example, on 7 July Ghanem Abdullah was arrested for airing support for Qatar. Hence, according to, Reporters Without Borders, out of 180 countries and territories puts the UAE in 119th position.29 Apart from these, the Emirates has been accused of resorting to intimidation and violence to shun protests. Though it did not face Arab Spring protests which engulfed many countries, there were voices and some of them even subtly called for the overthrow of the present order.30 Some scholars even argued that wealth prevented violent protests from reaching the Emirates.31 For its part, the government resorted to strong action to counter opposition, mostly towards the Islamists and this in turn evoked international condemnation and accusations of human right violations. For example, in September 2017, on health grounds, the UK-based Arab Organization for Human Rights (AOHR) demanded the release of Aliaa Abdelnour, who was sentenced for 10-year imprisonment on charges of funding terrorism and links with regional terrorist networks.32 Another organization, the International Campaign for Freedom in the United Arab Emirates (ICFUAE) accused the government of routinely targeting human rights campaigners and activists on charges of dissent or criticisms. In its view, the Emirates resorts to arbitrary detention, enforced disappearances, torture, and other ill-treatment, unfair trails, citizenship revocation,  Ibid.  Reporters without Borders. 2018. World Press Freedom Index, https://rsf.org/en/ranking_table, last accessed on 1 July 2018. 30  Forstenlechner, Ingo, Emilie Rutledge, and Rashed Salem Alnuaimi. 2012. ‘The UAE the “Arab Spring” and different types of dissent’, Middle East Policy, 19 (4): 54–67. 31  Shah, Angela. 2011. ‘Why the Arab Spring Never Came to UAE’, TIME, 18 July, http://content.time.com/time/world/article/0,8599,2083768,00.html, last accessed on 1 July 2018. 32  Qatar Tribune. 2017. ‘Flagrant Human Rights Violations by UAE Draw Global Condemnation’, 5 September, http://www.qatar-tribune.com/news-details/id/84167, last accessed on 1 July 2018. 28 29

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and denial of freedom of association and assembly.33 On the occasion of the National Day in November President Sheikh Khalifa pardoned 1500 prisoners and promised financial support for them to start a new life. It is, however, not clear if those released included political prisoners.34 The UAE is accused of supporting torture and disappearances and dissent in other cases, especially in the war-torn Yemen. In June, Human Rights Watch highlighted the Emirati callousness in extending support to Yemeni organizations accused of serious human rights violations.35 It has documented 49 people, including four children who were detained or have disappeared. The country was also accused of ‘ignoring’ allies’ torture methods in Yemen.36 These accusations resulted in the formation of the International Campaign to Boycott the UAE (ICBU) over its ‘grim’ human rights record within and outside its territories.37 Women empowerment is one of the key agendas of Vision 2021. The GGGR published by World Economic Forum ranks the UAE at 120 out of 144 countries with a score of 0.64 per cent.38 The assessment measures gender equality in four main areas, namely, economic participation and opportunity, educational attainment, health and survival, and political empowerment. Unlike many of its Arab neighbours, the UAE fares well in political empowerment with a 67th rank, but in terms of health and economic participation, its accomplishments are low with 129 and 130 ranks, respectively. With regard to education, some Gulf Arab countries fare well and the UAE is not an exception and ranks 62. 33  International Campaign for Freedom, UAE. 2017. ‘Human Rights Violations in the United Arab Emirates’, http://icfuae.org.uk/sites/default/files/Human%20Rights%20 Violations%20in%20the%20UAE-2017.pdf, last accessed on 1 July 2018. 34  The National. 2017. ‘UAE Rulers Pardon Hundreds of Inmates Ahead of National day’, 27 November, https://www.thenational.ae/uae/government/uae-rulers-pardon-hundreds-of-inmates-ahead-of-national-day-1.679208, last accessed on 1 July 2018. 35  Human Rights Watch. 2017. ‘Yemen: UAE Backs Abusive Local Forces’, 22 June, https://www.hrw.org/news/2017/06/22/yemen-uae-backs-abusive-local-forces, last accessed on 1 July 2018. 36  Human Rights Watch. 2017. ‘US Ignores Allies Torture in Yemen’, 22 July, https:// www.hrw.org/news/2017/06/22/us-ignores-allies-torture-yemen, last accessed on 1 July 2018. 37  The New Arab. 2017. ‘Group Launches Campaign to Boycott UAE over Rights Vacations’, 8 October, https://www.alaraby.co.uk/english/News/2017/10/7/Grouplaunches-campaign-to-boycott-UAE-over-rights-violations, last accessed on 1 July 2018. 38  World Economic Forum. 2017. The Global Gender Gap Report, http://www3.weforum.org/docs/WEF_GGGR_2017.pdf, last accessed on 1 July 2018.

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Aware of these discrepancies, in February 2017 Dubai hosted the UN Secretary General’s High Level Panel on Women’s Empowerment in Middle East and North Africa. Aspiring to be amongst the top 25 nations in terms of women empowerment,39 the Minister of State for Tolerance Shaikha Lubna al-Qasimi highlighted that there is a need to form partnership with different entities, NGOs, and international organizations to remove obstacles towards this endeavour. Besides, a contribution of US$12 million, the government supported the establishment of the organization’s office in Abu Dhabi.40 For its part, the United Nations Entity for Gender Equality and the Empowerment of Women elected the UAE as a member. At the same time, some of the progress made by the UAE is noteworthy. Women comprise 60 per cent of public sector workers in the country, the highest in the Persian Gulf region and about 30 per cent of them are in leadership positions. Women above 15  years of age constitute about 46.6 per cent of the active labour market and they occupy about 75 per cent of the positions in education and health sectors. The country has eight women ministers in the 32-member cabinet, thereby making it the highest rate of ministerial representation for women in the entire Middle East. They have 10 per cent representation in the 40-member FNC and as high as 95 per cent female high school graduates pursue higher education. It ranks first amongst 132 countries where Women are treated with ‘Respect’ as per the Social Progress Index Report, 2015.41 This has fallen in 2017 due to ‘insufficient data’.42 In April 2017, Dubai Women’s Establishment plan (DWE) was announced to improve their participation in the workforce by providing new ideas, conducting research on Emirati women in various fields, creating public–private partnership to increase women’s representation and by developing training programmes.43 39  Khamis, Jumana and Natassia Chrysanthos. 2017. ‘UAE to Be in the Forefront of Women Empowerment’, Gulf News, http://gulfnews.com/news/uae/society/uae-to-bein-the-forefront-of-women-s-empowerment-1.1974098, last accessed on 1 July 2018. 40  Ibid. 41  Ibid. 42  Porter, Michael E., Scott Stern, and Michael Green. 2017. Social Progress Index 2017, Social Progress Imperative, Washington, DC, United States, https://www.socialprogressindex.com/assets/downloads/resources/en/English-2017-Social-Progress-Index-FindingsReport_embargo-d-until-June-21-2017.pdf, last accessed on 1 July 2018. 43  The National. 2017. ‘New Plan for Improving UAE Women’s Participation’, 18 April, https://www.thenational.ae/uae/government/new-plan-for-improving-uae-women-s-participation-1.86040, last accessed on 1 July 2018.

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In September President Sheikh Khalifa approved a federal law regarding domestic workers. In most Gulf Arab countries domestic workers are not covered by labour laws and hence the Emirati move is a step forward.44 Under the new law, the domestic workers are entitled to wage protection, payment of wages as per the contracts, one-day paid rest per week, twelve hours of rest per day, medical insurance provided by the employer, 30-day medical leaves per year, round trip ticket for home in two years, decent accommodation, decent meal, clothing and possession of their personal identification papers, such as passports and Identity Cards. The law also prohibits employment of anyone below age of 18, exposure to physical harm and assignment of task not covered in the contract. It sets categories of domestic workers who are included in the new law.45 The year was remarkable for its resident population mainly because of the new federal labour laws, even though the violation of human rights remains a major concern. Economic growth remained steady and is likely to soar in coming years and because of a fairly diversified economy, the UAE is expected to fare better than the rest of the GCC countries.

Bilateral Relations Political Ties The year began with the second visit of Prince Mohammed bin Zayed al-­Nahyan, the Crown Prince of Abu Dhabi and heir apparent to the UAE, to India in two years. He became the fourth leader from the Middle East to be the chief guest of the Republic Day celebrations in January.46 The Crown Prince had earlier come to India for the Vibrant Gujarat Summit held in Vadodara in February 2016. Breaking the protocol, Prime Minister Modi received the Emirati leader at the airport. The personal bonding between the two leaders was on display during 44  Agarib Amira. 2017. ‘UAE President Issues Law on Domestic Workers’, Khaleej Times, 26 September, https://www.khaleejtimes.com/nation/uae-president-issues-law-on-domestic-workers, last accessed on 1 July 2018. 45  Salama, Samir. 2018. ‘Shaikh Khalifa Approves Law on Domestic Workers’, The Gulf News, 3 June, http://gulfnews.com/news/uae/government/shaikh-khalifa-approves-lawon-domestic-workers-1.2096191, last accessed on 1 July 2018. 46  The others are President Abdelaziz Bouteflika of Algeria (2001), President Mohammed Khatami of Iran (2003), and King Abdullah of Saudi Arabia (2006).

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Prince al-Nahyan’s three-day visit.47 The joint statement issued after the delegation-level talks reflected the emerging strong political ties and deeper understanding between the two since Modi’s visit in August 2015. It indicated their desire to advance the bilateral relations in the two main areas, namely, defence and security cooperation and business and investments. Before the summit-level talks, India and the UAE held the first Bilateral Strategic Dialogue on 20 January and signed an agreement for a Comprehensive Strategic Partnership. The meeting was co-chaired by Minister of State M.J. Akbar and his Emirati counterpart Anwar Gargash, wherein both discussed ways to expand bilateral cooperation to newer areas, including ‘energy security and renewable energy, defence and security, electronics and information technology and space’.48 On 26 January 2017, in a joint statement, Prime Minister Modi and Crown Prince al-Nahyan reaffirmed their commitment for a ­‘comprehensive strategic partnership,’ and they agreed ‘to elevate their multifaceted ties to an even higher and qualitatively new level based on mutual understanding and confidence in each other with the primary aim to ensure peace and prosperity of their two people’.49 During the visit, both countries signed 14 bilateral agreements or MoUs covering a wide range of spheres. These included the  ‘Comprehensive Strategic Partnership’; oil storage and management between Abu Dhabi National Oil Company (ADNOC) and Indian Strategic Petroleum Reserves Limited (ISPRL); MoUs on cooperation in cyber space, defence industry, and maritime transport cooperation; and the mutual recognition of naval training, road transport cooperation, and prevention of human trafficking; cooperation in the farm and agriculture sector and small-scale

47  The Times of India. 2018. ‘PM Modi Meets Crown Prince of Abu Dhabi; India, UAE Sign 5 Pacts’, 11 February, https://timesofindia.indiatimes.com/world/middle-east/ pm- modi-meets - cr o w n - p r in ce- o f- ab u - d h ab i- in d ia - ua e - s i g n- 5- p a c ts / a r ti c l e show/62870028.cms, last accessed on 1 July 2018. 48  Government of India (GoI), Ministry of External Affairs (MEA). 2017. ‘India–UAE Strategic Dialogue’, New Delhi’, 20 January, http://www.mea.gov.in/press-releases. htm?dtl/27959/indiauae+strategic+dialogue+new+delhi+january+20+2017, last accessed on 1 July 2018. 49  GoI, MEA. 2017. ‘India–UAE Joint Statement during State Visit of Crown Prince of Abu Dhabi to India (January 24–26, 2017)’, http://www.mea.gov.in/bilateral-documents. htm?dtl/27969/india++uae+joint+statement+during+state+visit+of+crown+prince+of+abu +dhabi+to+india+january+2426+2017, last accessed on 1 July 2018.

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industries; diplomatic visas; and exchange of news programmes.50 This was the third Modi-al-Nahyan meeting since August 2015 and it did not go unnoticed. Weeks after the Qatari crisis, Emirati Minister of State Anwar Gargash, who accompanied the Crown Prince in January, came to India in August to convey his country’s position regarding the standoff. During his visit, he met the External Affairs Minister Sushma Swaraj, National Security Advisor Ajit Doval, and Foreign Secretary S.  Jaishankar. In these meetings, New Delhi conveyed its views regarding ‘peace and security in the Gulf’ and its concerns over the growing scourge of ‘terrorism, violence, extremism and religious intolerance’ and their impact on the ‘regional stability’ and ‘global peace and order’. India used the occasion to reiterate its position that ‘parties should resolve their differences through a process of constructive dialogue and peaceful negotiations’.51 In October, Minister of State M.J.  Akbar headed the delegation for the second round of Strategic Dialogue.52 Other important exchanges included a visit by Emirati Minister for Climate Change, Environment and Agriculture Thani bin Ahmed al-­ Zeyoudi in August and the Emir of Sharjah Sultan bin Mohammed al-­ Qasimi in the following month. The latter was conferred an honorary doctorate by the Calicut University for his contribution to scholarship and international culture and education.53  India, Rajya Sabha. 2017. ‘Agreements with the UAE’, Unstarred Question No. 3212, 30 March, http://www.mea.gov.in/rajya-sabha.htm?dtl/28273/question+no3212+agreemen ts+with+uae, last accessed on 1 July 2018. 51  GoI, MEA. 2017. ‘Official Visit of Dr. Anwar Gargash, Minister of State for Foreign Affairs of the UAE to India’, 10 August, http://www.mea.gov.in/press-releases. htm?dtl/28848/official+visit+of+dr+anwar+gargash+minister+of+state+for+foreign+affairs +of+the+uae+to+india+august+0910+2017, last accessed on 1 July 2018. 52  GoI, MEA. 2017. ‘Official Visit of M.J. Akbar, Minister of State for External Affairs to the United Arab Emirates for Attending Second Round of India–UAE Strategic Dialogue’, 27 October, http://www.mea.gov.in/press-releases.htm?dtl/29053/official+visit+of+mj+a kbar+minister+of+state+for+external+affairs+to+the+united+arab+emirates+for+attending+ second+round+of+indiauae+strategic+dialogue, last accessed on 1 July 2018. 53  The New Indian Express. 2017. ‘Calicut University Confers Honorary Doctorate on Sharjah ruler’, 27 September, http://www.newindianexpress.com/states/kerala/2017/sep/27/calicut-varsity-confers-honorary-doctorate-on-sharjah-ruler-1663256.html, last accessed on 1 July 2018. 50

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Defence and Security Ties A significant aspect of the flourishing Indo-UAE relations is based on the strengthening defence and security cooperation. Indeed, 16 of 31 agreed items in the joint statement issued during Prime Minister Modi’s visit in August 2015 were pertaining to security issues. In May 2016, Manohar Parikkar became the first Indian Defence Minister to visit the UAE and, amongst others, explored the possibilities of joint defence manufacturing and Indian military exports to the UAE.54 This was followed by the signing of an MoU in defence manufacturing during the Crown Prince’s visit in January 2017. The following month, Naval Chief Admiral Sunil Lanba visited the Emirates and discussed enhancing maritime security cooperation in the Indian Ocean. In the same month, the Minister of State for Defence Subhas Bhamre visited the UAE to discuss the modalities of expanding defence cooperation. During the visit of the Crown Prince in January 2017, defence and security cooperation figured prominently. The joint statement noted the need ‘to provide further impetus to these (defence and security) relations, including through joint exercises, training of naval, air and land forces, as also in the area of coastal defence and through participation in defence exhibitions etc’.55 During the Republic Day parade, an Emirati armed forces contingent comprising of personnel from army, navy, air force, air defence, and presidential guard accompanied by a military band marched alongside the India military contingents. This was the first occasion that a foreign military contingent took part in the Republic Day parade on Rajpath since India’s independence. Both sides are focused on improving security cooperation in counter-­ terrorism, combating radicalism, and preventing cybercrime. Such cooperation has enabled India and the UAE to nab many transnational subversive activities as well as crimes. During the Crown Prince’s visit, both ‘agreed to coordinate efforts to counter radicalization’.56 In the second  Singh, Sushant. 2016. ‘Parikkar’s UAE Visit to Focus on Widening Defence Relationship, Supply of Military Equipment’, The Indian Express, 16 May, http://indianexpress.com/ article/india/india-news-india/parrikars-uae-visit-to-focus-on-widening-defence-relationship-supply-of-military-equipment, last accessed on 1 July 2018. 55  GoI MEA, ‘India-UAE Joint Statement during State Visit of Crown Prince of Abu Dhabi to India’. 56  Ibid. 54

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strategic dialogue in October 2017, issues such as deepening cooperation in defence, security, and terrorism were discussed.57 In January 2017, a number of Emirati nationals and diplomats were killed or injured in the attack in Afghanistan. India which faced similar attacks against its mission and offices in Afghanistan condemned the attack and expressed its empathy over ‘the death of several UAE nationals, among others, and the serious injuries suffered by the UAE Ambassador to Afghanistan resulting from a bomb blast that took place at a guesthouse in Kandahar on 10 January during a meeting between senior Afghan officials and UAE diplomats’.58 In recent years, the UAE has taken a similar position of support and understanding when terror attacks were carried out in the State of Jammu and Kashmir.59 Trade and Commerce Bilateral relations are dominated by robust trade ties and the UAE is India’s third-largest trading partner, the second-largest export destination, and the fourth-biggest source of imports. For the UAE, India is the largest trading partner after China, the second-largest export destination after Japan and third-biggest source of imports after China and the US.  The volume of Indo-Emirati trade has witnessed a slight boost after three successive years of decline due to falling oil prices. In 2016–2017, the total bilateral trade was US$52.68  billion and the share of the UAE in total external trade increased to almost 8 per cent. Despite the heavy domination of crude oil imports, India has a favourable trade balance vis-à-vis the UAE.  During 2016–2017 it exported US$31.17  billion worth of goods to the UAE while its imports stood at US$21.5 billion (Table 9.1 and Fig. 9.1). 57  The Hindu Businessline. 2017. ‘India, UAE Discuss Security Defence Ties at 2nd Strategic Talks’, 30 October, https://www.thehindubusinessline.com/news/world/indiauae-discuss-security-defence-ties-at-2nd-strategic-talks/article9929891.ece, last accessed on 1 July 2018. 58  GoI, MEA. 2017. ‘Statement by India on the Death of Several UAE Nationals and Injury to UAE Ambassador in Terrorist Attack in Kandahar, Afghanistan on 10 January 2017’, http://www.mea.gov.in/press-releases.htm?dtl/27932/statement+by+india+on+th e+death+of+several+uae+nationals+and+injury+to+uae+ambassador+in+terrorist+attack+in +kandahar+afghanistan+on+10+january+2017, last accessed on 1 July 2018. 59  Emirates News Agency. 2016. ‘UAE Condemns Terrorist Attack on Indian Air Force Base in Pathankot’, 6 January, http://wam.ae/en/details/1395290009076, last accessed on 1 July2018; and Emirates News Agency, 2016. ‘UAE Condemns Terrorist Attack against Indian Military Base in Kashmir’, 19 September, http://wam.ae/en/details/1395300099805, last accessed on 1 July 2018.

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Table 9.1  India–UAE bilateral trade (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 India’s exports to 35,925.52 36,316.65 30,520.42 33,028.08 30,290.01 31,175.50 the UAE India’s imports 36,756.32 39,138.36 29,019.82 26,139.91 19,445.68 21,509.83 from the UAE Total bilateral 72,681.84 75,455.01 59,540.24 59,167.99 49,735.69 52,685.33 trade Share of the UAE 9.14 9.54 7.79 7.80 7.73 7.98 in total trade Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

80 70 60 50 40 30 20 10 0

2011-12

2012-13 Exports

2013-14 Imports

2014-15

2015-16

2016-17

Total Trade

Fig. 9.1  India–UAE bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

The bilateral trade is fairly diversified; India’s exports include jewellery, heavy machines, petroleum products, textile, food, and dairy products while importing crude oil, precious stone, pearls, plastic, iron, cooper, aluminium and animal products from the UAE.60 60  GoI, Ministry of Commerce and Industry, Director General for Foreign Trade. ‘Export– Import Data Bank’, www.dgft.gov.in, last accessed on 1 July 2018.

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Both sides are aware that the current value and volume of the bilateral relations is well below the true potential. During the visit of Prime Minister Modi in August 2015, both discussed ways of expanding the trade by 60 per cent over the next five years.61 During the visit of Minister of State Anwar Gargash in August 2017, both sides appreciated the signing of the ‘MoUs on the framework for facilitating the participation of UAE Institutional Investors in National Infrastructure Investment Fund (NIIF)’ of India.62 In October it was announced that Abu Dhabi Investment Authority (ADIA) has agreed to invest US$1 billion in the master fund of NIIF, thus becoming the first international entity to have a significant share in the NIIF.63 Moreover, during the Crown Prince’s visit, both the countries agreed to conduct studies for the ‘identification of potential sectors and the impeding tariff and non-tariff barriers’ and to explore ‘opportunities in service sector and formulating a sector-specific strategy to boost two-way trade and investments’.64 Energy Ties Energy trade occupies a pivotal role in the bilateral trade and cooperation. Traditionally, the UAE has been one of the principle suppliers of crude oil to India and both countries are working to expand the partnership through two-way investments in their petroleum sector. Indian investments in the upstream sector in the UAE would provide the latter the much needed stability and confidence in the market during turbulent times but would ensure long-term supplies to India. For its part, the UAE 61  GoI, MEA. 2015. ‘Joint Statement between the United Arab Emirates and Republic of India’, 17 August, http://www.mea.gov.in/bilateral-documents.htm?dtl/25733/Joint_ Statement_between_the_United_Arab_Emirates_and_the_Republic_of_India, last accessed on 1 July 2018. 62  GoI, MEA. ‘Official Visit of Dr. Anwar Gargash, Minister of State for Foreign Affairs of the UAE to India’. 63  Financial Express. 2017. ‘Modi’s Ambitious Infrastructure Fund Gets $1-billion Steroid from Abu Dhabi after 2 Year Lull’, 17 October, https://www.financialexpress.com/economy/modis-ambitious-infrastructure-fund-gets-1-billion-steroid-from-abu-dhabi-after2-year-lull/897421, last accessed on 1 July 2018. 64  GoI, MEA. 2017. ‘India–UAE Joint Statement During State Visit of Crown Prince of Abu Dhabi to India’, 26 January, http://mea.gov.in/bilateral-documents.htm?dtl/27969/ India++UAE+Joint+Statement+during+State+visit+of+Crown+Prince+of+Abu+Dhabi+to+I ndia+January+2426+2017, last accessed on 1 July 2018.

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has shown interest in investing in the downstream oil sector in India and in enhancing its strategic oil reserves. The value of energy imports from the UAE during 2016–2017 stood at US$9.45 billion and this was 44 per cent of total Indian imports from the Emirates and about 9 per cent of total oil imports by India (Table 9.2 and Fig. 9.2). This was a significant increase from US$7.9 billion imported by India in the previous year and the change was primarily due to price rise  than increase in quantity. The UAE promised that it would allow Table 9.2  Share of oil in India’s imports from the UAE (US$ million) Year

2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

Oil imports from the UAE

Total oil imports

UAE share in total oil imports

15,102.54 14,984.64 13,263.35 13,509.04 7912.80 9457.60

172,753.92 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20

8.74 8.26 7.31 8.64 8.16 9.17

Imports from Per cent of oil UAE in imports from the UAE 36,756.32 39,138.36 29,019.82 26,139.91 19,445.68 21,509.83

40.79 38.29 45.70 51.68 40.69 43.97

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

60 50 40 30 20 10 0

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Share in Per cent

Fig. 9.2  Share of oil in India’s imports from the UAE. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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India a share in its upstream sector and an agreement to this effect was signed in early 2018 during the visit of Prime Minister Modi. Ministry of Petroleum and Energy disclosed that the UAE has been helping India in increasing its strategic oil reserves through the Abu Dhabi National Oil Company (ADNOC) and an initial ‘Oil Storage and Management Agreement’ was signed in January during the visit of the Crown Prince.65 The Emirati share in India’s energy imports from Persian Gulf has increased from 15.5 per cent in 2015–2016 to 16.8 per cent in 2016–2017 (Table  9.3 and Fig.  9.3). Notably, its overall share in India’s total oil imports, especially from the Persian Gulf has consistently increased since 2011–2012 despite the fluctuations in international oil market; its share in India’s total oil imports and oil imports from the Persian Gulf has increased from 8.74 per cent and 14.38 per cent to 9.17 per cent and 16.79 per cent respectively from 2011–2012 and 2016–2017. Table 9.3  India’s energy imports from the UAE (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 Energy 15,102.54 14,984.64 13,263.35 13,509.04 imports from the UAE Total energy 172,753.92 181,344.67 181,382.59 156,400.01 imports Energy 105,056.26 105,859.15 106,400.75 85,300.30 imports from the Persian Gulf Share in 8.74 8.26 7.31 8.64 total energy imports (per cent) Share in 14.38 14.16 12.47 15.84 energy imports from the Persian Gulf (per cent)

7912.80

9457.60

96,953.06 103,163.20 50,992.26

56,335.34

8.16

9.17

15.52

16.79

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in 65  Press Information Bureau, Ministry of Petroleum & Natural Gas. 2018. ‘India–UAE Bilateral Investments’, 13 February, http://pib.nic.in/PressReleaseIframePage.aspx?PRID=1520423, last accessed on 1 July 2018.

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18 16 14 12 10 8 6 4 2 0

2011-12

2012-13

2013-14

Share in Total Imports

2014-15

2015-16

2016-17

Share in Imports from Persian Gulf

Fig. 9.3  Share of the UAE in India’s oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

Investments The UAE is the largest investor in India amongst the Persian Gulf and the tenth-largest in terms of global sources of investments. Between April 2000 and December 2017, India received US$5.33 billion from the UAE in the form of FDI; it received US$270.59 million in 2012; US$283.93 million in 2013; US$279.28 million in 2014; US$541.88 million in 2015; US$1.2 billion in 2016; and US$689.01 million in 2017.66 Indeed, the flow has increased considerably since Prime Minister Modi’s mid-2015 visit to the Emirates. In addition, many Emirati companies have invested in India through their sister concerns or joint ventures and according to the MEA, the total investments from the UAE including the FDI is US$8 billion and this is mainly concentrated in five sectors, namely, services (10.33 per cent), real estate (9.97 per cent), power (9.54 per cent), airline (8.44 per cent), and the hospitality industry (7.82 per cent).67 Indian businesses too have   GoI, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion. 2018. ‘FDI Statistics’, http://dipp.nic.in/publications/fdi-statistics, last accessed on 1 July 2018. 67   GoI, MEA. 2017. ‘India–UAE Relations’, November, https://www.mea.gov.in/ Portal/ForeignRelation/12_UAE_Nov_2017.pdf, last accessed on 1 July 2018. 66

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invested in various sectors in the UAE and have established a strong footprint in the Emirati market. More than 800 Indian companies are operating in the Jebel Ali Free Zone (JAFZA)68 and Indian business houses have a strong presence in Dubai and Abu Dhabi, the two principal economic centres. As the UAE seeks to diversify its economy, especially in financial and service sector, tourism and sports, opportunities for India are bound to expand. Recognizing the importance of investments, the joint statement issued in January 2017 noted the work being carried out by the bilateral High Level Task Force in Investments (HLTFI) in promoting economic and investment cooperation.69 It emphasized the need for realizing the agreement for US$75  billion Emirati investment in India announced during Prime Minister Modi’s August 2015 visit to the UAE and the joint statement noted: The two leaders reviewed the progress in realizing the USD 75 billion target for UAE investments in India’s plans for rapid expansion of next generation infrastructure development. PM Modi invited UAE participation in India’s National Infrastructure Investment Master Fund as an anchor investor. The two leaders agreed that the Joint Working Group formed under the MOU on the framework for facilitating the participation of UAE Institutional Investors in National Infrastructure Investment Fund should meet regularly to boost investment ties to realize the full potential.70

Indeed, nearly three years later, this had not taken off except for the agreement of a US$1  billion ADIA investment in NIIF announced in October 2017. It was decided that the HLTFI would help the Emirati investment agencies to explore and identify areas for investments and facilitate the fast-tracking of the process. Expatriates A flourishing Indian expatriate community in the Emirates is vital for the growth of the bilateral relations. With about 2.8  million Indians constituting the largest non-national community, they have been making their mark for decades. There have been labour-related issues such as  Ibid.  GoI, MEA, ‘India-UAE joint statement during state visit of crown prince of Abu Dhabi to India’. 70  Ibid. 68 69

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exploitation, which at times becomes a domestic political issue within India. The plight of the workers, especially from Kerala which comprises the bulk of the Indian workers in the Gulf, is often raised in the parliament. Media often highlights the plight of the expatriates exploited by the unscrupulous labour agents in India. Answering a question in the Rajya Sabha in November, the Minister of State for the Ministry of External Affairs V.K. Singh observed: Despite awareness campaigns and repeated warnings by the Government, a large number of workers go illegally for employment in the Gulf countries. On arrival in the foreign country and being faced with problems, the workers approach the Indian Embassy for help. The Indian Missions receive complaints from Indian workers against their sponsors regarding non-payment/ less payment of salaries, non-issuance/renewal of residence permits, refusal to grant exit/re-entry permits for visit to India, refusal to allow the worker on final exit visa etc.71

At the same time, one must view the situation with a sense of proportion and balance. The UAE has one of the largest concentrations of Indians outside the country and they enjoy considerable economic, social and religious freedom. According to the MEA, … the UAE is home to 2.8 million Indian expatriates, the largest expatriate community in the UAE. Professionally qualified personnel constitute about 15 and 20 per cent of the community, followed by 20 per cent white-collar non-professionals (clerical staff, shop assistants, sales men, accountants, etc.) and the remainder 65 per cent comprises blue-collar workers. There is a significant business community from India.72

Despite the falling oil prices, the Qatar crisis, and the demand for the ‘Arabization’ of the labour force, the flow of Indian workers to the UAE continues unabated and will remain so in the short and medium term, and hence, they are a major source of strength for furthering the bilateral relations. 71  India, Rajya Sabha. 2017. ‘Indian Workers Going to UAE’, Unstarred Question No. 1621, 16 March, http://www.mea.gov.in/rajya-sabha.htm?dtl/28177/question+no+1621 +indian+workers+going+to+uae, last accessed on 1 July 2018. 72  GoI, MEA, 2017. ‘India-UAE Relations’.

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Challenges The UAE has emerged as the preferred partner for India in the Persian Gulf and the bilateral relations have witnessed significant improvement since August 2015 and are moving ahead. At the same time, there are serious challenges both at bilateral and multilateral levels. The slow progress in the implementation of the US$75 billion investment agreement has been a major concern. The Indian side is the guilty party and this does not augur well for its economy which needs substantial external investments. It speaks volumes about the slow nature of Indian bureaucracy and the lack of a better planning and management at the administrative level. While the UAE wishes smooth and large-scale investments, the Indian system is creating numerous hurdles for mega investments. This would mean India would miss the Emirati bus. Moreover, despite the agreements, discussions, and dialogue, the Indo-­ Emirati cooperation in the field of defence and security is rudimentary and preliminary. Both need to move faster to consolidate the bilateral security cooperation, especially when there is a significant political will from both the sides. India can offer more training opportunities for the Emirati defence personnel and officials and can strengthen cooperation in the field of maritime security. While political engagement has witnessed an increase, there is scope to improve cooperation in the field of energy and investments and it would be a challenge for both the countries. A number of multilateral challenges stare at India in furthering the relations with the UAE, including the Qatar crisis. Earlier, India had to mind the Arab sensitivities while engaging with Iran, however, with the new rupture within the GCC, New Delhi will have to be careful about the sensitivities of all the GCC members. The UAE, Bahrain, and Saudi Arabia will be watchful, if India tries to build close partnerships with Qatar and, at the same time, Qatar might get alienated if India ignores Doha. Given this, a delicate balance is necessary.

CHAPTER 10

Yemen

Key Information Ruling group/Party: General People’s Congress/Houthis; President: Abdrabbuh Mansur Hadi (since 25 February 2012); Mohammed Ali al-­ Houthi, President of the Revolutionary Committee (since 22 January 2015); Prime Minister: Ahmad Obaid Bin Daghir (since 3 April 2016); National day: 22 May; Parliament: 111-member nominated Shura Council and 301-member elected House of Representatives; Last parliamentary election: 27 April 2003; Major group in parliament: General People’s Congress; National carrier: Yemen Airlines. Socio-Economic Indicators Area: 527,968 sq. km; Population: 28.03 million; Native: NA; Expats: NA; Religious Groups: Muslim 99.1 per cent (Sunni 65 per cent; Shia 35 per cent); Others (Jewish, Baha’i, Hindu, and Christian) 0.9 per cent; Youth: 21.21 per cent; Population growth rate: 2.28 per cent; Life expectancy at birth: 65.9 years; Major population groups: Predominantly Yemeni Arabs; some Afro-Arabs, South Asian, and European; Literacy rate: 70.1 per cent; National currency: Yemeni Rial (YER); GDP: US$25.67  billion; Foreign trade: Export US$501.2  million, Import US$4.573  billion (2017 est.); Defence budget: 3.97 per cent of GDP (2014); Foreign Reserve: US$245.1 million (2017 est.); External debt: US$7.252 billion; Per capita income: US$2300; Oil reserves: 3 billion © The Author(s) 2019 P. R. Kumaraswamy et al., Persian Gulf 2018, Persian Gulf, https://doi.org/10.1007/978-981-13-1978-5_10

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bbl.; Gas reserves: 478.5 billion m3; HDI rank: 168; Infant mortality rate: 46 deaths/1000 live birth; UN education index: 0.339; Gender inequality index: 0.767 (2015 est.); Labour force: 7.425  million; Unemployment rate: 27 per cent (2014 est.); Urban population: 35.8 per cent; Rate of urbanization: 3.76 per cent (2015–2020 est.); Last national census: 2004. India Related Indian cultural centre: NA; Number of Indians: 10,400; Number of places of worship for Indians: A number of old Hindu temples in Aden; Indian schools: One; Indian banks: None (Bank of India has a branch incorporated into the National Bank of Yemen); Currency exchange rate: 1 YER  =  INR 0.26 (April 2018); Last visit to India by the ruler: President Ali Abdullah Saleh, March 1999; Last Indian prime minister to visit: None since 1947. * * * The on-going Civil War in Yemen has escalated into a humanitarian crisis of indefinite proportions. Since 2011, more than 10,000 people have been killed, nearly 50,000 have been injured or maimed, and more than three million were displaced. In November 2017, the United Nations humanitarian agencies have warned that the country is on the verge of facing the largest famine the world has seen in decades and that 17 million Yemenis are food insecure.1 Differences amongst various warring factions have increased and international efforts towards a negotiated settlement did not progress. The assassination of the former President Ali Abdullah Saleh in December 2017 exasperated the situation. Regional Interventions on behalf of various conflicting groups has led to a stalemate which could not be overcome. There is a serious possibility that the civil war could escalate into a regional confrontation between Saudi Arabia and Iran which supports the government of Abdrabbuh Mansur Hadi and Houthi rebels, respectively. Under these circumstances there are no p ­ olitical, economic, 1  UN News. 2017. ‘Yemen facing Largest Famine the World has Seen for Decades, Warns UN Aid Chief’, 9 November, https://news.un.org/en/story/2017/11/570262-yemenfacing-largest-famine-world-has-seen-decades-warns-un-aid-chief, last accessed on 1 July 2018.

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or trade relations between India and Yemen and the Indian mission in Sana’a had to be shifted to Djibouti in April 2015. Despite the successful evacuation carried out in 2015 through Operation Rahaat, media reports speak of a small Indian community that continues to reside in Yemen due to economic or social compulsions.2 The continuation of the Yemeni crisis poses a serious diplomatic and security challenge to New Delhi and its interests in the Persian Gulf region.

Domestic Developments Politics and Security Yemen is on the verge of collapse as there is no successful de-escalation process in sight. The political and military stalemate between the Iran-­ backed Houthi militias and the Saudi-backed Hadi government also supported by Southern Transitional Council (STC) sponsored by the UAE has left no space for manoeuvre. The UN initiatives spearheaded by Ould Cheikh Ahmed are almost dead. Due to the growing violence, the local administration and security situation have collapsed and have left a large vacuum for the Al-Qaeda in the Arabian Peninsula (AQAP) and Islamic State of Iraq and Syria (ISIS) to flourish. The AQAP has expanded its influence since 2015 and has taken effective control of parts of Hadramut, Shabwa and Abyan provinces3 and is active in the southern and eastern parts of the country. ISIS is also active in many areas and has mounted attacks on the Houthi-controlled areas in the north from its stronghold in in southern towns such as Mukalla but has not been able to expand its territorial control.4 The front lines did not change much during 2017. The Houthi militia continue to control the north-western areas of the county, including the capital Sana’a through the Supreme Political Council (SPC) headed by

2  Makkar, Sahil. 2015. ‘The Dramatic Evacuation of Indians from Yemen’, Business Standard, 18 April, https://www.business-standard.com/article/beyond-business/out-ofyemen-115041701186_1.html, last accessed on 1 July 2018. 3  Baron, Adam. 2015. ‘Mapping the Yemen Conflict’, European Council on Foreign Relations, http://www.ecfr.eu/mena/yemen#, last accessed on 1 July 2018. 4  Zimmerman, Katherine and Jon Diamond. 2016. ‘Challenging the Yemeni State: ISIS in Aden and al Mukalla’, Critical Threats, 9 June, https://www.criticalthreats.org/analysis/ challenging-the-yemeni-state-isis-in-aden-and-al-mukalla, last accessed on 1 July 2018.

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Saleh Ali al-Sammad.5 The SPC represented the Southern Movement, Ansar Allah and the General People’s Congress (GPC) led by former president Saleh. Towards the end of the year, there was a split within the GPC and Saleh indicated that he and his loyal forces were already negotiating with the Saudi-led alliance.6 On 4 December 2017, two days after the possible defection surfaced, Saleh was assassinated in a ground attack carried out by the Houthi militia in Sana’a. In a statement, the GPC accused its former leader of ordering a blockade and killing ‘civilians in clear collaboration with the enemy countries of the coalition’.7 On the other hand, operating from Aden, the Hadi-led government-in-­ exile controls most of the eastern and southern provinces and has been supported by a powerful faction of the STC which has a strong presence in the south. During the year, the forces loyal to Hadi have put the Houthiled alliance under pressure in the coastal areas along the Red Sea towards taking over the region. However, despite the continuous aerial campaign by the Saudi air force and technical assistance from the US, they were unsuccessful.8 Even though the Houthi rebels control the areas in the north and west, the Saudi-led coalition pressured them from all sides. During continuous aerial campaign, Saudi Arabia and its allies attacked and destroyed various civilian infrastructures and population centres in and around Taiz and Sana’a and were actively supported by the US and European governments.9 During 2017, Saudi Arabia pledged to reduce civilian casualties in coalition attacks but Human Rights Watch documented six coalition attacks that killed 55 civilians, including 33 children. About 85 apparently unlawful coalition airstrikes killed nearly 1000 civilians and destroyed homes, markets, hospitals, schools, and mosques and some of these attacks may amount to war crimes. The Office of the UN High Commissioner for Human 5  He was killed in a Saudi airstrike on 23 April 2018 and was replaced by Mahdi al-Mashat as the acting president of the SPC. 6  BBC News. 2017. ‘Yemen Ex-president Saleh Offers Talks to Saudi-led Coalition’, 2 December, https://www.bbc.com/news/world-middle-east-42208360, last accessed on 1 July 2018. 7  Al-Jazeera. 2017. ‘Ex-president Abdullah Saleh killed’, 10 December, http://www. aljazeera.com/news/2017/12/houthi-media-ali-abdullah-saleh-killedsanaa-171204123328290.html, last accessed on 1 July 2018. 8  Baron, ‘Mapping the Yemen conflict’. 9  Human Rights Watch. 2016. ‘Bombing Businesses: Saudi Coalition Airstrikes on Yemen’s Civilian Economic Structures’, 11 July, https://www.hrw.org/report/2016/07/11/ bombing-businesses/saudi-coalition-airstrikes-yemens-civilian-economic-structures, last accessed on 1 July 2018.

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Rights (OHCHR) reported in September that coalition airstrikes remain ‘the leading cause of civilian casualties’.10 Besides, these attacks led to the destruction of medical facilities, increasing shortage of food and water, and other basic amenities. The continuing campaign has worsened the spread of cholera and other diseases in the country.11 The UN-sponsored peace talks broke down in late 2016 and failed to make any headway since then. In March 2017, the UN Security Council held a close-door meeting, wherein the UN Special Envoy for Yemen Ismail Ould Cheikh Ahmed outlined his framework for the resumption of talks. He told the Council that the Government of Yemen headed by Hadi ‘should agree to engage in talks based on the framework, and Ansar Allah and the General People’s Congress must end their long-standing refusal to undertake serious discussions on security arrangements’.12 According to him, ‘[t]he only real way to prevent a worsening of the situation is to reach a peaceful resolution to this tragic conflict which has been going on for too long’ and that it is his ‘firm belief that further military escalation and humanitarian suffering will not bring the parties closer together.’ He also urged the UNSC to ‘use all of its diplomatic weight to push for the relevant parties to make the concessions required to reach a final agreement before more lives are lost. We must give peace another chance’.13 No progress was noticeable until the end of the year. Society and Economy The violent conflict has deteriorated the country’s social and economic conditions. The Food and Agricultural Organization (FAO) estimated that seven million out of Yemen’s 28 million people or 25 per cent of the population are at a risk of facing famine during 2017. The cholera outbreak has worsened and nearly 450,000 suspected cases were reported 10  Human Rights Watch. 2018. ‘Yemen: Events of 2017’, World Report 2018, https:// www.hrw.org/world-report/2018/country-chapters/yemen, last accessed on 1 July 2018. 11  Freedom House. 2017. ‘Yemen’, Freedom in the World, https://freedomhouse.org/ report/freedom-world/2017/yemen, last accessed on 1 July 2018. 12  UN News. 2017. ‘UN Envoy Urges Security Council to Pressure Warring Parties to Discuss Proposal’, 30 March, https://news.un.org/en/story/2017/03/554352-yemenun-envoy-urges-security-council-pressure-warring-parties-discuss-peace, last accessed on 1 July 2018. 13  Ibid.

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while World Health Organization (WHO) recorded 815,000 confirmed cases during the year with 4000 new cases being diagnosed daily.14 The waterborne cholera disease in Yemen is seen as the biggest outbreak in modern history. Save the Children pointed out that a million cases would be recorded by the end of 2017.15 The UN warned that the situation in Yemen would be the ‘world’s worst famine in decades’ and alerted that millions of people, mostly malnourished children, would die due to inadequate food supplies. In April, it had declared Yemen as the world’s worst humanitarian crisis.16 As of November, around three million people were internally displaced while 17.8 million were identified as food ‘insecure’.17 According to the UN Office for the Coordination of Humanitarian Affairs (UNOCHA), as of December, Yemen required US$2.3 billion as aid but only US$1.4 billion was available, thereby leaving a fund shortage amounting to US$913.4 million. In its Humanitarian Needs: Overview for Yemen, the UNOCHA estimated that around 22.2 million or 75 per cent of the Yemenis are in need of humanitarian assistance and out of them 11.3 million are in ‘acute’ need of the same.18 It flagged key humanitarian issues, such as protection of civilians, collapse of basic services and institutions, issues of individual existence, loss of livelihood, and the non-availability of non-official sectors. As of October, 8757 deaths were identified as conflict-related while 50,610 people were injured. All the parties to the conflict, both domestic and external, have repeatedly violated their obligations under the International Humanitarian Law and women and children have been the easiest and most vulnerable targets. Many reports have highlighted grave violations of child rights and increase in gender-based violence. The conflict has resulted in the collapse of the essential services and added to the 17.8  million food ‘insecure’ population, with 16  million 14  Torkington Simon. 2017. ‘The UN Warns a Looming Famine Will Kill Millions’, World Economic Forum, 2 June, https://www.weforum.org/agenda/2017/06/yemen-war-famine-cholera-explainer, last accessed on 1 July 2018. 15  Save the Children. 2017. ‘Yemen: Cholera Outbreak Now Largest and Fastest on Record, 600,000 Children Infected by Christmas’, 12 October, https://www.savethechildren.org/us/about-us/media-and-news/2017-press-releases/yemen%2D%2Dcholera-outbreak-now-largest-and-fastest-on-record%2D%2D600-0, last accessed on 1 July 2018. 16  Torkington, ‘The UN warns a looming famine will kill millions’. 17  United Nations Office for Coordination of Humanitarian Affairs. 2017. ‘Yemen: Humanitarian Needs Overview’, December, https://reliefweb.int/report/yemen/yemen2018-humanitarian-needs-overview, last accessed on 1 July 2018. 18  Ibid.

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­ aving no access to safe drinking water and sanitation and 16.4 million h with no access to adequate healthcare.19 Reduced working hours in many enterprises has directly affected 55 per cent of the workforce. The most severe impact was felt in the agricultural sector and fisheries which employed 54 per cent of the rural labour force and was the main source of income for about 73 per cent of the Yemeni population. An estimated 8.4 million people require subsistence assistance and around 1.7 million people engaged in crop and livestock production have been severely affected by the conflict and their livelihood has been compromised.20 Official statistics are no longer available for the country but since March 2015, its GDP contracted by 37.5 per cent and employment opportunities in the private sector has diminished considerably.21 Economic activities such as agriculture—the largest in terms of employment—and oil production which contributes heavily to the GDP, remain limited. According to international estimates, the economy is in 83.5 per cent debt and has a negative fiscal balance of 9.9 per cent and the real GDP growth in most sectors is negative; agriculture is −3 per cent; services −3.5 per cent, and industry 1.7 per cent. The inflation during the year was estimated at 20 per cent.22 Another estimate by the Heritage Foundation puts inflation at 30 per cent but does not grade Yemen in terms of economic freedom.23 In terms of press freedom, with a score of 85 out of 100, Freedom House identifies Yemen as one of the ‘Least Free’ countries of the world. In terms of political freedom and legal and economic environment, the country does not fare better either.24 The leading newspapers of the country, The Yemen Times, Yemen Post, and Yemen Observer remain suspended since 2015, while the website Yemen Post was last updated in May 2016.  Ibid.  Ibid. 21  United Nations Office for Coordination of Humanitarian Affairs. 2018. ‘Yemen: Humanitarian Response plan’, https://reliefweb.int/report/yemen/yemen-humanitarianresponse-plan-january-december-2018-enar, last accessed on 1 July 2018. 22  World Bank. 2017. ‘Yemen’s Economic Outlook’, October, http://pubdocs.worldbank.org/en/592801507055198056/MEM-Oct2017-Yemen-ENG.pdf, last accessed on 1 July 2018. 23  The Heritage Foundation. 2017. ‘Yemen 2017 Index of Economic Freedom’, http:// www.heritage.org/index/pdf/2017/countries/yemen.pdf, last accessed on 1 July 2018. 24  Freedom House. 2017. ‘Yemen’, Freedom of the Press, https://freedomhouse.org/ report/freedom-press/2017/yemen, last accessed on 1 July 2018. 19 20

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Furthermore, the marginalization of women is quite visible. According to the GGGR published by World Economic Forum, Yemen is ranked last in its survey of 144 countries in 2017.25 The country suffers the same dubious distinction in the UNDP Report for 2016 and is ranked last in terms of the HDI for 168 countries. It does not even figure in the UNDP report for 2017.26 In 2016, the gender development index of Yemen was 0.737 and women had an average of 7.6  years of schools as against 10.4 years for men. The HDI for Yemeni women was recorded at 0.4 as against 0.543 for men. The GII was 0.767; labour force participation rate for women above the age of 15 years was only 25.8 per cent as against 73.1 per cent for men of the same age group. Mean years of schooling for girls is 1.9 years as against 4.2 years for boys. Indeed, only 15.6 per cent of the females obtained secondary education. As a result of this overall situation, women have very little representation in parliament making up just 0.5 per cent of the lawmakers and the rate of unemployment is higher than men to a ratio of 2.1 per cent.27 In other words, civil war has placed Yemen amongst the worst areas for human living.

Bilateral Relations Before the outbreak of the civil war in 2011, India had minimal bilateral engagements with Yemen, and political relations were also limited. Indeed, no prime minister has ever visited Yemen since India’s independence in 1947. At the same time, India has been importing limited quantities of crude oil from Yemen and was exporting food products, textile, and machinery. The outbreak of the civil war changed this radically and India deployed its air force and navy in March–April 2015 and evacuated 2900 of its citizens.28 Soon after the beginning of the Saudi-­led strikes in March 2015, the Indian mission was shifted to Djibouti and continues to function from there. During the whole time, India kept away from the conflict and has not taken any sides. It supports the UN-sponsored peace 25  World Economic Forum. 2017. ‘The Global Gender Gap Report’, http://www3.weforum.org/docs/WEF_GGGR_2017.pdf, last accessed on 1 July 2018. 26  United Nations Development Programme. 2016. ‘Yemen’, Human Development Report, http://hdr.undp.org/en/countries/profiles/YEM, last accessed on 1 July 2018. 27  Ibid. 28  Chakravorrty, Dipanwita. 2018. ‘Yemen’, in P.R. Kumaraswamy and Meena Singh Roy (eds.), Persian Gulf 2016–17: India’s Relations with the Region. New Delhi: IDSA & MEI, pp. 170–90.

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talks and does not recognize the SPC backed by Iran. It has extended humanitarian aid to the internationally-recognized government headed by Hadi and has maintained diplomatic relations with it. Following a request from the Yemeni government in December, India provided US$1 million worth of medical assistance to that country.29 India faced major domestic crisis over the abduction of Father Tom Uzhunnalil from Kerala who was carrying out humanitarian activities in Aden. In an attack carried out in Aden on 4 March 2016 on a humanitarian assistance group, an Indian nun was killed and Father Uzhunnalil was kidnapped.30 This resulted in India issuing a fresh travel advisory in April31 ‘to avoid travelling to Yemen under any circumstances by any means for any purpose till further notice’.32 Since then India made several back-­channel efforts and sought the help of Saudi Arabia, the UAE, and Oman towards securing the freedom of the priest. Father Uzhunnalil was eventually released in September 2017 following the intervention of the Vatican and the Omani government which interceded with various groups operating in Yemen.33 The only political engagement during 2017 took place in July when the Yemeni Deputy Prime Minister and Minister of Foreign Affairs Abdulmalik Abduljalil al-Mekhlafi visited India and met the External Affairs Minister Sushma Swaraj. Appraising the situation in his country, he ‘appreciated India’s steadfast support for Yemen during difficult times, including India’s humanitarian assistance’. For its part, India thanked the government of Yemen for its assistance and support in carrying out Operation Raahat for the evacuation of its nationals stranded in Yemen. Both sides also discussed providing access to education and medical  Government of India (GoI), Ministry of External Affairs (MEA). 2017. ‘India’s Humanitarian Assistance to Republic of Yemen’, 27 December, http://www.mea.gov.in/ press-releases.htm?dtl/29255/indias+humanitarian+assistance+to+republic+of+yemen, last accessed on 1 July 2018. 30  Reuters. 2016. ‘Indian Priest Kidnapped in Deadly Yemen Attack: Pope Condemns World Apathy’, 6 March, https://www.reuters.com/article/yemen-security-attack/indianpriest-kidnapped-in-deadly-yemen-attack-pope-condemns-world-apathy-idUSKCN0W80CD, last accessed on 1 July 2018. 31  Earlier India had issued similar travel advisories in January and July 2015. 32  GoI, MEA. 2016. ‘Travel Advisory for Indian Nationals travelling to Yemen’, 1 April, http://www.mea.gov.in/press-releases.htm?dtl/26588/travel+advisory+for+indian+nation als+travelling+to+yemen, last accessed on 10 July 2018. 33  GoI, MEA. 2017. ‘Arrival of Rev. Tom Uzhunnalil in India after Release from Captivity in Yemen’, 28 September, http://www.mea.gov.in/press-releases.htm?dtl/28985/arrival+o f+rev+father+tom+uzhunnalil+in+india+after+release+from+captivity+in+yemen+septem ber+28+2017, last accessed on 1 July 2018. 29

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f­acilities in India and the latter ‘assured all possible assistance, including through supply of much-needed medicine’. As a special gesture, India announced that the ICCR scholarship slots ‘for Yemen would be increased from the existing 35 to 55 annually’ and to offer ‘50 ITEC slots for Yemen for 2017–2018’. Trade and Commerce The commercial relations have diminished due to the on-going crisis. The Indian imports from Yemen has declined to just US$4.81  million in 2016–2017. Though Yemen has never been a major trading partner of India, the figures shown in Table 10.1 and Fig. 10.1 highlight how badly the Yemeni economy has been devastated by the crisis, thus leading to a complete destruction of its infrastructure for the production and transportation of its goods. Because of this, Yemeni exports have diminished considerably and all the ports, including the main ones in Aden and Mukalla are operating only partially. Since there is shortage in imports from Yemen, during 2016–2017, India exported goods worth US$446.13 million and the total bilateral trade stood at US$450 million. Energy Crude oil imports used to be the main component of the bilateral trade between the two countries. In 2011–2012, for example, India had imported US$955.26  million worth of crude oil from Yemen and this constituted about 98 per cent of the Indian imports from that country and 0.5 per cent of the total oil imports of India (Table 10.2 and Fig. 10.2). Table 10.1  India–Yemen bilateral trade (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 India’s exports to Yemen India’s imports from Yemen Total bilateral trade Share of Yemen in India’s total trade

730.62

1477.27

1306.99

992.13

399.79

446.13

970.72

958.92

782.18

540.68

6.88

4.81

1701.34

2436.19

2089.17

1532.82

406.67

450.94

0.21

0.31

0.27

0.20

0.06

0.07

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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3

2.5

2

1.5

1

0.5

0

2011-12

2012-13 Exports

2013-14 Imports

2014-15

Total Trade

Fig. 10.1  India–Yemen bilateral relations. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in Table 10.2  Share of oil in India’s imports from Yemen (US$ million) Year 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

Oil imports from Yemen

Total oil imports

955.26 942.00 762.62 516.68 0.01 0.00

172,753.92 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20

Yemen’s share in Imports Per cent of oil in total oil imports from Yemen imports from Yemen 0.55 0.52 0.42 0.33 0.00 0.00

970.72 958.92 782.18 540.68 6.88 4.81

98.11 98.24 97.50 95.56 0.15 0.00

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

While there was a significant drop in the oil imports largely due to the falling oil prices, the seizure of oil production facilitated by the rebels, destruction of pipelines due to the on-going war, lack of transportation and export facilities, and a limited working of ports have resulted in crude oil exports being nearly stopped. This had affected the Indo-Yemeni oil

120

100

80

60

40

20

0

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Share in Per cent

Fig. 10.2  Share of oil in India’s imports from Yemen. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in Table 10.3  India’s energy imports from Yemen (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 India’s energy 955.26 942.00 762.62 516.68 0.01 0.00 imports from Yemen India’s total 172,753.92 181,344.67 181,382.59 156,400.01 96,953.06 103,163.20 energy imports Total energy 105,056.26 105,859.15 106,400.75 85,300.30 50,992.26 56,335.34 imports from the Persian Gulf Share in total 0.55 0.52 0.42 0.33 0.00 0.00 energy imports (in per cent) Share in 0.91 0.89 0.72 0.61 0.00 0.00 Persian Gulf (in per cent) Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

2011-12

2012-13

2013-14

Share in Total Imports

2014-15

2015-16

2016-17

Share in Imports from Persian Gulf

Fig. 10.3  Share of Yemen in India’s oil imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

trade and during 2016–2017, India did not import any oil from Yemen (Tables 10.2 and 10.3 and Figs. 10.2 and 10.3). Expatriates In 2015, it evacuated 2900 of its citizens from Yemen with the active cooperation from Saudi and Yemeni governments. Despite the ongoing crisis, there are about 100,000 people of Indian ­origin in that country and they are largely concentrated in the port town of Aden and the surrounding areas.34 They have settled in Yemen over decades and some of them even before the Indian Independence due to trade purposes and have become part of the Yemeni social milieu. Similarly, there are about 300,000 people of Yemeni origin, mostly from the Hadramut province in south Yemen, who live in the southern states of Andhra Pradesh, Telangana, and Kerala. These two-way linkages partly contribute to the continuous flow of Indians to Yemen, despite the travel advisory or 34  Embassy of India, Republic of Yemen. 2017. ‘Indian Diaspora in Yemen’, http://eoisanaa.org/indian-diaspora-in-yemen, last accessed on 1 July 2018.

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violence in that country. Some estimates suggest that there are about 500–800 Indians in Yemen who are engaged in medical and other service sectors.

Challenges The civil war in Yemen has emerged as a major challenge for the international community and India was partly affected due to low political engagements with the country and the small number of Indian community. Its inability to play any role in the resolution of the conflict reflects India’s limitations as far as its options are concerned. The conflict has undoubtedly affected the limited bilateral ties New Delhi had with Sana’a and, until the situation improves, the possibilities of revival of engagements are limited. At the same time, India has kept its engagement with the Hadi-­ government and extended humanitarian support in the form of food and medical supplies. Moving forward, the challenge for India would be to play a positive role in Yemen’s reconstruction. There are a number of possibilities but what is clear is that India’s inability to find a way f­orward in resolving the conflict in Yemen is not commensurate to its global power aspirations. It reflects significantly on the debate within India about the need for it to mediate or play a larger role in preventing regional conflicts in the Persian Gulf.

CHAPTER 11

GCC

The year 2017 was the toughest year for the six-member Gulf Cooperation Council (GCC) comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE since its founding in 1981. While the internal differences were not uncommon, in June they resulted in three member countries led by Saudi Arabia imposing a political, diplomatic, and economic boycott upon the fourth member, Qatar. The gas-rich tiny Emirate was accused of funding terrorism, harbouring extremism, and interfering in the internal affairs of its neighbours, thus destabilizing them. These charges were severe and if Qatar adopted a defiant position, meagre efforts by Kuwait proved unsuccessful in minimizing the tension. The seemingly irrevocable split within the GCC led to a widespread fear of the most successful and envious regional economic bloc in the world coming to an end. India has huge stakes in the GCC and about 8.5  million its citizens are gainfully employed in the GCC countries, including Qatar. Initial fears of a major evacuation of its nationals soon subsided and with the awareness of delicacy of the situation, India settled for a balanced policy and hoped for a ‘swift’ resolution of the crisis through mutual consultations.

Internal Developments On 5 June, three members of the GCC, namely, Saudi Arabia, Bahrain, and the UAE (also joined by Egypt) announced a political boycott of Qatar, severed all diplomatic relations, moved to expel the Qatari diplomats from their countries, recalled their ambassadors from Doha, imposed © The Author(s) 2019 P. R. Kumaraswamy et al., Persian Gulf 2018, Persian Gulf, https://doi.org/10.1007/978-981-13-1978-5_11

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restrictions upon the entry and transit of Qatari nationals, and denied access to Qatari vessels and carriers plying within their territories, waters, and airspace.1 The Qatari citizens residing in these countries were given a 14-day time to leave while their nationals were asked to return from Qatar. Soon other regional countries joined the boycott. These proceedings took place at a time when there were proposals to transform the GCC into a border and a visa-free bloc with a common currency akin to the European Union.2 Though internal tensions and disagreements are not new, the crisis over Qatar was both unprecedented and shook the foundation of the six-member bloc of the oil- and gas-rich Gulf Arab countries. As discussed in the Introduction, the tiny gas-rich country of Qatar was accused of funding and abetting terrorism and extremism in the region and hobnobbing with Iran with the purpose of undermining the other members of the GCC. For its part, Qatar reacted with surprise and defiance and refuted all the charges and expressed ‘deep regret’ at these measures and called them ‘unjustified’ attempts to impose ‘guardianship’ and a direct assault on its sovereignty and independent foreign policy.3 Iran and Turkey rushed to provide economic support and supplies to Qatar in response to its initial fears of economic chaos and meltdown. The two other members of the bloc—Oman and Kuwait—took a neutral stand; while Oman gradually stepped up its trade and commercial ties, the Emir of Kuwait Sabah bin Ahmed bin Jaber al-Sabah tried to carry out mitigation measures that proved to be unsuccessful.4 The unprecedented internal crisis and the announcement of economic sanctions and travel restrictions rippled through the energy and financial markets and caused food insecurity, import shortages, mass exodus of migrants, and even flight from the capital, especially in the context of the 1  Saudi Press Agency. 2016. ‘Kingdom of Saudi Arabia Severs Diplomatic Ties with Qatar’, 5 June, http://www.spa.gov.sa/viewstory.php?la`ng=en&newsid=1637321, last accessed on 1 July 2018. 2  Cameron, Fraser. 2010. ‘The European Union as a Model for Regional Integration’, CFR Report, https://www.cfr.org/report/european-union-model-regional-integration, last accessed on 1 July 2018. 3  Al-Jazeera. 2017. ‘Qatar Rejects Saudi-led Group Allegations’, 7 July, http://www. aljazeera.com/news/2017/07/qatar-rejects-saudi-led-group-allegations-170707153613982. html, last accessed on 1 July 2018. 4  Bakeers Ali. 2017. ‘GCC Crisis: Why is Kuwaiti Mediation Not Working?’, Al-Jazeera, 11 August, https://www.aljazeera.com/indepth/opinion/2017/08/gcc-crisis-kuwaitimediation-working-170807093244546.html, last accessed on 1 July 2018.

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holy month of Ramadan that began on 26 May 2017. The countries which imposed these sanctions have a host of grievances over the Qatari support of non-state actors such as the Muslim Brotherhood and what they alleged as the Qatari attempts to meddle in the internal affairs of Arab countries through the Al-Jazeera media network.5 Official Saudi and Emirati statements also expressed concerns over the Qatari stand towards Iran with which Doha maintains political relations and shares lucrative natural gas reserves. Interestingly in April, just weeks before the crisis, Doha lifted its self-imposed 12-year long ban on developing the world’s largest natural gas field (North Dome) that it shares with the Islamic Republic.6 The immediate trigger appears to be the alleged remarks of the Qatari Emir Tamim bin Hamad al-Thani on 25 May during his address at a military graduation ceremony, wherein he expressed sympathy for Iran, terming it as a legitimate regional player.7 Subsequently, Qatar claimed that the reported comment was not made by the Emir and that the websites which attributed them to the Emir were hacked.8 This position did not cut much ice with Saudi Arabia or the UAE. Media reports claim that Qatar paid a huge ransom, estimated at US$1  billion to secure the release of some members of the royal family from the Al-Qaeda-affiliated Iraqi kidnappers and this painted Doha as a supporter and financer of extremism in the region.9 Even though other countries were far more active in promoting religious extremism, times have changed, especially after the September 11 attacks and the birth of ISIS. With these developments, Qatar was seen to be moving in the opposite direction.

5  The New Arab. 2017. ‘Qataris Cancel TV Network Subscription after al Jazeera Block’, 27 May, https://www.alaraby.co.uk/english/Blog/2017/5/27/Qataris-cancel-TV-networksubscription-after-al-Jazeera-block, last accessed on 1 July 2018. 6  Finn, Tom. 2017. ‘Qatar Restarts World’s Largest Gas Field after 12 Year Freeze’, Reuters, 3 April, http://www.reuters.com/article/us-qatar-gas-idUSKBN175181, last accessed on 1 July 2018. 7  Maclean, William. 2017. ‘Gulf Crisis Reopens after Qatar Decries Hacked Comments by Emir’, Reuters, 24 May, https://www.reuters.com/article/us-qatar-cyberidUSKBN18K02Z?il=0, last accessed on 1 July 2018. 8  Browning, Noah. 2017. ‘Qatar Investigation Finds State News Agency Hacked: Foreign Ministry’, Reuters, 8 June, https://www.reuters.com/article/us-gulf-qatar-cybercrimeidUSKBN18Y2X4, last accessed by 1 July 2018. 9  Solomon, Erika. 2017. ‘The $1-bn Hostage Deal That Enraged Qatar’s Gulf Rivals’, Financial Times, 5 June, https://www.ft.com/content/dd033082-49e9-11e7-a3f4-c742b9791d43, last accessed on 1 July 2018.

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Not prepared to bow down, on 24 August 2017, Qatar announced the restoration of diplomatic relations with Tehran added that Doha wished ‘to strengthen bilateral relations with the Islamic Republic of Iran in all fields’.10 The Emirate had cut off diplomatic relations with Tehran in January 2016 following the breakdown of Saudi–Iranian relations over the execution of Saudi Shia dissident cleric Nimr al-Nimr by Riyadh and the subsequent mob attacks on the Saudi embassy in Tehran and its consulate in Mashhad. Turkey, which has been seeking to expand its footprints in the Persian Gulf region had already initiated the process of opening a military base in Doha and the Qatari crisis hastened the process and President Recep Tayyip Erdogan was quick to get parliamentary approval for deploying troops in the Turkish military base in Doha; moreover, Turkey exported food items to Qatar in large quantities.11 Within the GCC, Oman had closer ties with Iran and was instrumental in the back channel diplomacy between Washington and Tehran that culminated in the JCPOA.12 Furthermore, for long, Muscat had followed an independent, often maverick policy, on the major regional issues and was not prepared to join the Saudi-led boycott. At the same time, future uncertainties over succession impeded a more active stand on the crisis and, therefore, it stayed aloof. Given the possible regional ramifications and the energy security, many countries urged the GCC countries to resolve the matter amicably. As discussed in the Introduction, the crisis erupted within days after President Donald Trump’s maiden foreign visit which took him to Riyadh and his mini-Islamic summit meeting with leaders of 55 countries.13 The summit which was held on 21 May 2017, just two weeks before the crisis, was also attended by the Qatari Emir Hamad al-Thani who also had a private meeting with President Trump. Some saw it as a reversal of the traditional 10  The Hindu. 2017. ‘Qatar Restores Diplomatic Ties to Iran amid Regional Crisis’, 24 August, http://www.thehindu.com/news/international/qatar-restores-diplomatic-ties-toiran-amid-regional-crisis/article19551315.ece, last accessed on 1 July 2018. 11  Al-Jazeera. 2017. ‘How Turkey Stood by Qatar amid Gulf Crisis’, 15 November, https:// www.aljazeera.com/news/2017/11/turkey-stood-qatar-gulf-crisis-171114135404142.html, last accessed on 1 July 2018. 12  Schmierer, Richard J. 2015. ‘The Sultanate of Oman and the Iran Nuclear Deal’, Middle East Policy, 22 (4): 113–20. 13  The White House. 2017. ‘President Trump Delivers Remarks at the Arab Islamic American Summit’, https://www.whitehouse.gov/articles/president-trump-delivers-remarks-arab-islamicamerican-summit, last accessed on 2018.

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American neutrality over inter-Arab differences, especially in the Persian Gulf and a complete embrace of Riyadh.14 Trump’s threats to abandon the JCPOA were viewed as signs of shift from the earlier American approach to the Saudi-Iranian regional tension.15 The American call for a quicker resolution of the crisis16 resulted in the boycotting countries presenting a list of specific demands vis-à-vis Qatar. A set of 13 demands, which were subsequently leaked to the media, were presented on 22 June to Kuwait for transmission to Qatar and were subsequently reduced to six principles (both have been discussed in detail in the Introduction of the book). On 5 July, four Arab countries boycotting Qatar met and proposed that Qatar accept a set of six principles, including a firm commitment to combat terrorism and extremism and work towards regional peace and stability. Feeling cornered and bullied, Qatar refused to budge. Meanwhile, claims and counter-claims and inflammatory rhetoric by both sides have only made the situation worse. Amidst the crisis, Kuwait, which was holding the rotating chair of the GCC, sought to mediate and on 5 December hosted the annual GCC summit which was also attended by Qatari Emir Tamim bin Hamad al-Thani and the Saudi Foreign Minister Adel al-Jubeir but the meeting ended quickly, thereby dashing any hopes of an early resolution.17 The roots of the intra-GCC crisis can be traced to the emergence of Qatar as a major diplomatic player in the wider Middle East. Though an enthusiastic supporter of the regional bloc when it was formed in 1981, change of leadership in Qatar in 1995 shifted its foreign policy trajectory. Ever since Hamad bin Khalifa al-Thani deposed his father and became the Emir in a bloodless palace coup in June 1995, Qatar has been using its ample financial resources (its sovereign wealth fund in 2017 was estimated at US$335  billion) to tread an assertive foreign policy on the regional 14  Wintour, Patrick. 2017. ‘Donald Trump Tweets Support for Blockade Imposed on Qatar’, The Guardian, 6 June, https://www.theguardian.com/world/2017/jun/06/qatar-panicbuying-as-shoppers-stockpile-food-due-to-saudi-blockade, last accessed on 1 July 2918. 15  Singh, Michael. 2018. ‘Is Washington Too Focused on Iran’s Nuclear Program?’, Foreign Affairs, 9 May, https://www.foreignaffairs.com/articles/middle-east/2018-05-09/ washington-too-focused-irans-nuclear-program, last accessed on 1 July 2018. 16  Wadhams, Nick. 2017. ‘Trump Offers up Tillerson to Mediate Solution to Qatar crisis’, Bloomberg, 9 June, https://www.bloomberg.com/news/articles/2017-06-08/trump-offersup-tillerson-to-mediate-solution-to-qatar-crisis, last accessed on 2018. 17  Dawn, 2017. ‘Gulf Summit Ends in Hours as Saudi, UAE Rulers Stay Away’, 6 December, https://www.dawn.com/news/1374818, last accessed on 1 July 2018.

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t­ ensions and conflicts. A few of the Qatari stances came into conflict with the Saudi positions and it was most noticeable in the internal crises in Lebanon and Palestine and the Qatari engagements with Israel. Qatar maintained political ties with Iran even while hosting the US military on its soil. Like others, it also sought to shape the outcomes of the regional uprising since 2011, through politico-diplomatic support or financial backing. Although it joined other GCC countries to secure the removal of President Bashar al-Assad in Syria, Doha had no qualms about supporting the rebels with links to Al-Qaida. On the Egyptian situation both sided with the rival camps; while Saudi Arabia supported Hosni Mubarak and later on Fattah al-Sisi, Doha sided with Tahrir Square protesters and later on with the Muslim Brotherhood. It also criticized the deposing of President Mohammed Morsi in June 2013 by the military. These differences and acrimony resulted in Saudi Arabia, the UAE, and Bahrain withdrawing their ambassadors from Doha between March–November 2014. In other words, the Qatari crisis is a symptom of a deep-rooted interest divergence between Riyadh and Doha and being a relatively bigger and more influencing player, the former has carved out a bloc within the GCC, comprising of Bahrain and the UAE.

India and the GCC India shares robust relations with all the GCC countries and the bloc is its largest and strategically important trading partner. It is the biggest source of remittances and about 50 per cent of total inflows in the country come from these six countries. New Delhi has been maintaining cordial relations with all the countries and during the past decade, has been enhancing its security cooperation with them. It seeks to improve its maritime and counter-terrorism cooperation with the GCC.  Since Narendra Modi became prime minister there were a number of high-level political contacts, engagements, and agreements between India and the members of the GCC. The expatriate Indian community in the GCC countries is over 8.5 million strong and these countries meet about 60 per cent of India’s energy imports. Therefore, the explosive situation within the GCC member-states caused anxiety and worry in New Delhi. It was concerned over the crisis transforming into a full-blown conflict which would affect not only its trade and energy ties but would also force it to consider the exigency of evacuating over thousands, if not millions, of its citizens from the

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war-zone. In 2017, days after the crisis, it came out with a balanced and nuanced position. We are closely following the emerging situation in the Gulf region in the wake of the recent decision by the Kingdom of Saudi Arabia and some other countries to break diplomatic relations with the State of Qatar. We are of the view that all parties should resolve their differences through a process of constructive dialogue and peaceful negotiations based on well-­ established international principles of mutual respect, sovereignty and non-­ interference in the internal affairs of other countries. India believes that peace and security in the Gulf are of paramount importance for the continued progress and prosperity of the countries in the region. International terrorism, violent extremism and religious intolerance pose grave threat not only to regional stability but also to the global peace and order and must be confronted by all countries in a coordinated and comprehensive manner. India has time-tested friendly relations with GCC countries. With over eight million Indian expatriates living and working in these countries, we have vital stakes in the regional peace and stability. In this context, Government is closely monitoring the situation and is also in regular contact with the regional countries. Their authorities have assured us continued support for welfare and well-being of the resident Indian communities. Indian expatriates in the region are advised to contact the Indian Embassy or Consulate concerned should they require assistance or advise consequent to the developing situation.18

This statement underlined its neutrality and non-interference while simultaneously urging the need for non-escalation. According to the MEA figures, as of December 2017, there are 8.7 million Indians who are currently residing in the six GCC countries (Table 11.1 and Fig. 11.1). At the same time, there appears to be a slight dip in the number of Indians going to the GCC under the ECR category. Until November, 346,000 ECR-category migrant labourers emigrated to these countries (Table 11.2 and Fig. 11.2). In other words, out of 361,000 of ECR-category migrants, 346,000 or 95 per cent went to the GCC countries. 18  GoI, MEA. 2017. ‘India’s Official Statement Following Recent Developments in Qatar’, 10 June, http://mea.gov.in/press-releases.htm?dtl/28523/Indias_official_statement_following_the_recent_developments_related_to_Qatar, last accessed on 1 July 2018.

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Table 11.1  Population of Overseas Indians in the GCC countries (December 2017) Country

Non-Resident Indians (NRIs)

Bahrain Kuwait Oman Qatar Saudi Arabia UAE Total

312,918 917,970 783,040 697,000 3,253,901 2,800,000 8,764,829

Persons of Indian Origin (PIOs) 3257 1384 919 500 1963 3751 11,774

Overseas Indians

Share (in per cent)

316,175 919,354 783,959 697,500 3,255,864 2,803,751 8,776,603

3.60 10.48 8.93 7.95 36.76 31.95 100

Source: GOI, MEA, http://mea.gov.in/images/attach/NRIs-and-PIOs_1.pdf, last accessed on 1 July 2018

3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0

Bahrain

Kuwait NRIs

Oman PIOs

Qatar

Saudi Arabia

UAE

Overseas Indians

Fig. 11.1  Population of Indians in the GCC. Source: Ministry of External Affairs, Government of India

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237

Table 11.2  Workers emigrated, January to November 2017 Country Saudi Arabia UAE Qatar Oman Bahrain Kuwait Total GCC Others Total India

Numbers emigrated

Share (in per cent)

73,000 141,000 22,000 49,000 10,000 51,000 346,000 15,000 361,000

20.22 39.05 6.09 13.57 2.77 14.12 95.84 4.16 100

Source: Ministry of External Affairs, Annual Report 2017–18, p. 231

saudi Arabia UAE Qatar Oman Bahrain Kuwait Others

Fig. 11.2  Workers emigrated from India, 2017. Source: Ministry of External Affairs, Government of India

Trade and Commerce The Indo-GCC bilateral trade continues to be strong and in 2016–2017 it stood at US$96.94  billion (Table  11.3 and Fig.  11.3), a slight drop from US$97.46 billion from the previous year. It was, however, a substantial drop from US$147.54 billion, a peak attained in 2011–2012. Despite this, the GCC continues to be India’s largest trading bloc, with oil and gas imports persisting as the backbone of the bilateral trade (Table 11.4 and Fig. 11.4). Due to the falling oil price, there is a slight drop in the energy

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Table 11.3  India–GCC bilateral trade (US$ million) Country

2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017

Bahrain 1345.97 1268.13 1202.60 919.23 1011.04 762.40 Kuwait 17,621.05 17,649.21 18,214.69 14,580.85 6217.20 5960.27 Oman 4668.08 4609.21 5763.45 4131.69 3865.50 4018.79 Qatar 13,724.30 16,380.26 16,677.04 15,659.69 9924.20 8430.78 Saudi Arabia 37,501.00 43,783.89 48,622.60 39,268.98 26,715.56 25,082.68 UAE 72,681.84 75,455.01 59,540.24 59,167.99 49,735.69 52,685.33 Total trade 147,542.24 159,145.71 150,020.62 133,728.43 97,469.19 96,940.25 with GCC India’s total 795,283.41 791,137.33 764,605.09 758,371.89 643,296.75 660,207.28 trade Share in 18.32 20.12 19.62 17.63 15.15 14.68 total trade Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

25

20

15

10

5

0

2011-2

2012-13

2013-14

2014-15

2015-16

2016-17

GCC's Share in India's External Trade

Fig. 11.3  India–GCC bilateral trade. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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Table 11.4  India’s energy imports from GCC (US$ million) 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 India’s total 172,753.92 181,344.67 181,382.59 156,400.01 energy imports Energy 73,510.80 76,034.70 78,630.85 63,314.27 imports from the GCC Total 105,056.26 105,859.15 106,400.75 85,300.30 imports from the Persian Gulf The GCC 42.55 41.93 43.35 40.48 share in the total imports (per cent) The GCC 69.97 71.83 73.90 74.23 share in imports from the Persian Gulf (per cent)

96,953.06 103,163.20

35,771.49

35,695.82

50,992.26

56,335.34

36.90

34.60

70.15

63.36

Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

80 70 60 50

Share in Total Imports

40

Share in Imports from Persian Gulf

30 20 10 0

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Fig. 11.4  Share of the GCC in India’s energy imports. Source: Adapted from Directorate General of Foreign Trade, New Delhi, www.dgft.gov.in

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trade which marginally decreased to US$35.69 billion during 2016–2017. India’s bilateral trade with the GCC dropped slightly to 34.60 per cent while the region’s share in India’s energy imports decreased from 70.17 per cent in 2015–2016 to 63.36 per cent in 2016–2017. The emergence of the US as its oil energy supplier contributed to the lowering of the GCC countries’ share in India’s energy basket.

Challenges India has vital stakes in the GCC due to energy security considerations and presence of a large expatriate population. The US continues to be the sole security provider and arbitrator in the regional affairs. Hence the Indian interests are influenced and affected by the US policy towards the Arab monarchies, especially if Washington scales down its involvement or revamps its engagements. This was a major contention during the second term of President Barack Obama when he signalled a scaling down of American involvement in the Middle East, especially in the Persian Gulf region. The conclusion of the nuclear deal with Iran, for example, was viewed as the signal for changing American priorities. Things, however, look different under President Donald Trump but would depend upon the future developments, especially the administration’s ability to resolve the formidable Qatar crisis. In the absence of other mediator, the US would continue to be the sole security guarantor for the Persian Gulf and India will have to closely monitor the US foreign policy shifts. The most critical aspect of the US factor in India’s engagement with the Persian Gulf is relations with Iran. For over a decade, the India–Iran– US triangle has been a centre of speculation and, at times, caused tensions in Indo-Iranian relations. The US pressures have resulted in India adopting an antagonistic position over the Iranian nuclear programme. Its votes in the UN Security Council and International Atomic Energy Agency (IAEA), abandoning of Iran-Pakistan-India (IPI) gas pipeline, ceasing of exporting oil products to Iran, and the scaling down of purchase of crude oil from Iran are often linked to the American factor. At times, Indian oil companies were warned for the interest they had in the energy sector in the Islamic Republic. Though these measures created problems for India, the anti-Iranian rhetoric of President Trump and his intension to scrap the JCPOA are in sync with the position of some of the prominent members of the GCC, especially Saudi Arabia.

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241

The region, thus is witnessing a strange and paradoxical situation. At one level, the GCC countries appeared to have won the attention and sympathy of the Trump administration concerning their apprehensions over Iran. At the same time, the Qatari crisis has created a divide within the GCC over Iran, and, in some ways, pushed Doha closer to Tehran. Far from presenting a unified Arab position vis-à-vis Iran, the GCC is speaking in two contradictory voices and even while concluding lucrative military deals with both sides of the divided GCC, the Trump Administration has been unable in bringing about a meaningful dialogue between Qatar and its Arab neighbours. In the process, as an organization, the GCC appears considerably weakened. Not long ago, the GCC sought to include two other monarchies—the geographically nearer Jordan and distant Morocco—as members but as the year ended, there was a three-way split within the rich regional bloc; Saudi Arabia, the UAE, and Bahrain on the one side, with Qatar on the other and Oman and Kuwait trying to stay in the middle. This situation inhibits India from seeking an early conclusion of a Free Trade Agreement whose negotiations began in 2006. Likewise, until the crisis within the GCC is resolved, India’s regional political engagement will have to wait.

CHAPTER 12

Policy Options

1. Diplomatic outreach: In terms of high-level political engagements, 2017 was a complete washout and the only exception was the visit of the Crown Prince of Abu Dhabi Mohammed bin Zayed al-Nahyan as the chief guest of the Republic Day celebrations in January. Otherwise, it saw no high-level bilateral visits or multilateral engagements. Israel was the only country in the entire Middle East that Prime Minister Narendra Modi visited during the year. Though this was largely due to the internal crisis in the Gulf, India should not allow the erstwhile drift to set in. 2. Enhance regional engagement: The Qatar crisis has no signs of abating and the Trump Administration does not appear to have the interest or the diplomatic capital to resolve it. The festering of the discord amongst Gulf Arab monarchies is a bad news for India and even if it does not seek a mediatory role, New Delhi should increase its political engagement with the principal players, especially Saudi Arabia, the UAE, and Qatar. 3. Return of the Iranian puzzle: The election of Donald Trump has revived the American anathema vis-à-vis Iran and the withdrawal of the US from the nuclear deal, eventually announced on 8 May 2018, and the subsequent American threats to impose sanctions against Iran and its friends will complicate the Indo-Iranian relations. This would be felt more acutely in the ongoing Chabahar Port construction and the planned Indian investments in the Iranian energy sector. © The Author(s) 2019 P. R. Kumaraswamy et al., Persian Gulf 2018, Persian Gulf, https://doi.org/10.1007/978-981-13-1978-5_12

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Given the unyielding nature of the Trump ­Administration, India does not have the space to remain ambiguous as it was when the nuclear controversy intensified in 2005. Unlike the previous administration, the margin of error under the Trump Administration is smaller and more punitive. 4. Managing the US: The Trump administration has given indications of reviewing the scaled down engagements with the Persian Gulf but how this would be played out remains uncertain. India would have to be quick in adapting to the changing circumstances and demands and should avoid a moral compass in judging the US actions and their fallouts. 5. Recognize regional rivalry: In recent years, the tensions between Iran and Saudi Arabia for regional influence, most visibly played out in Bahrain, Yemen, and, of late, in Qatar and within the GCC, seems to have increased. While taking sides is not a proposition, India will have to recognize that its ability to pursue its interest in the Persian Gulf rests on not compartmentalizing its relations but rather recognizing and accommodating intra-regional tensions and rivalry. 6. Security engagements: Without appearing to be intrusive, India should expand its military and security contacts with the Gulf region. The problems of sea piracy and the protection of sea lanes of communication and counter-terrorism have been flagged in its engagements with the Arab countries and Iran. However, India will have to explore the ways of enhancing the military capacities of the Gulf Arab countries through joint exercises, training, and opening of small military facilities, if not bases in countries, such as Oman and the UAE whose rulers are friendlier in their disposition towards India. 7. Recognize sectarianism: A significant portion of violence and turmoil in the Persian Gulf (and in the wider Middle East) are the result of sectarianism and the unwillingness of various political groups to pursue their narrow sectarian agenda. With a substantial Sunni and sizeable Shia population, New Delhi does not have the luxury of taking sides but adopting a policy of denial of sectarianism will be unsustainable. 8. Avoid entanglements: India has friendly relations with all countries along the Persian Gulf and has strategic interests due to energy security and the presence of 8.5  million expatriates. Given the

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regional complexities, it will have to avoid taking sides and eschew any suggestions of mediation, but intensify its engagements with all sides without antagonizing any of them. 9. Diversify trade: Except for Bahrain, the UAE, and Yemen, India has high trade imbalance with all the Persian Gulf countries. This imbalance is primarily due to oil and gas imports. In countries, such as Iraq, Kuwait, Qatar, Saudi Arabia, and Yemen, hydrocarbons account for more than 90 per cent of India’s imports. Both for economic and larger political interests, India should work towards the diversification of the bilateral trade. 10. Enhance two-way investments: Despite the high-level engagements since he became the prime minister, Narendra Modi has not succeeded in attracting investments from the Gulf Arab countries. Structural constraints, namely, bureaucratic bottlenecks, lack of follow ups, inability to think in terms of size, inefficiency, and time and cost overruns, impeded Arab investments in India. 11. Abandon the obsession with China and Pakistan: India needs to recognize the growing economic and political engagements of its rivals, China and Pakistan, with the Persian Gulf countries. Of late, Iran is seeking Chinese and Pakistani participation in the Chabahar Port that is being developed with Indian financial participation. Therefore, New Delhi should avoid looking at the region primarily through the prism of China and Pakistan lest its policy becomes reactive and counterproductive. 12. Recognize growing Russian involvement: As the US continues to remain ineffective in resolving regional tensions, under Vladimir Putin, Russia has been quietly enhancing its regional footprint. Though Moscow will not replace the US, its role would be important in minimizing, if not resolving some of the regional tensions over Qatar, Syria, Yemen, and, of course, the volatile US–Iran tensions. India will have to add the Gulf region in its diplomatic agenda with Russia. 13. Continue engagement in Kurdistan Regional Government (KRG): The Kurdish referendum has complicated India’s energy-­ driven engagement with the KRG and compelled by larger strategic concerns India was forced to side with Baghdad and reiterate its unqualified support for the territorial integrity and sovereignty of the Iraqi state. At the same time, India should not lose the sight of the Kurds who can be a major ally in the region.

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14. Avoid entanglement in Yemen: On the Yemeni crisis, India has done what was possible, namely, the evacuation of its nationals, moving its diplomatic mission to the neighbouring Djibouti and offering a limited amount of humanitarian assistance to the war-­ ravaged country. Until the principal players—Iran, Saudi Arabia, and the US—workout a successful exit strategy, New Delhi will have to wait it out. Pending appropriate opportunity for reconstruction, India should increase technical assistance to the Yemeni youths and open its educational institutions for them. 15. Promote Persian Gulf studies: The importance of the Persian Gulf and the wider Middle East is not reflected by the promotion of these areas in the educational institutions of the country. While only a handful of institutions have some interest in the Persian Gulf, most think tanks are obsessed with South Asia. This neglect of a region of considerable importance is counterproductive to India’s interest and great power aspirations. 16. ‘Arabization’ of the labour force: Partly to ward off domestic protests over youth unemployment, oil-rich Arab countries are working towards the indigenization of the workforce. The process has been slow, uneven, and even counterproductive. However, the ‘Arabization’ and the entry of women into the labour market pose a long-term threat to India. If it were to continue the flow of expatriate workers to the Gulf Arab countries, then India will have to impart a skill-development programme and make its labour force competitive, in terms of skills and wages. 17. Using the right nomenclature: In recent years, the Indian government has not been averse to describing the region as the Middle East than the archaic expressions West Asia. The Middle East is a term of self-identity for the region and employing other nomenclature is both a sign of unfamiliarity with the regional discourses and a sign of hegemony. One hopes that the same applies to the other historical expressions such as the Persian Gulf. Like other geographical terms, such as the Arabian Sea, the Indian Ocean, and the South China Sea, the expression ‘Persian Gulf’ does not denote the Iranian ownership of the said waters and there is no reason for India to settle for a prefix-less ‘Gulf’ to describe the Persian Gulf.

Index1

A Abadi, Haider, 11, 65, 87–89 Abdullah, King of Saudi Arabia, 4, 161, 162, 172, 182 Akbar, M. J., 36, 46, 47, 71, 97, 106, 113, 173, 186, 203, 204 Alawi, Yousuf bin, 129 Al-Qaeda in the Arabian Peninsula (AQAP), 125, 217 Americans for Democracy and Human Rights in Bahrain (ADHRB), 40 Ansari, Vice President M. Hamid, 34, 71, 96, 129 Arab Spring, 5, 9, 58, 123, 142, 199 al-Assad, Bashar, 234 B Bahrain–India bilateral relations challenges, 54 defence and security, 47–48 energy imports, 50–52 FDI inflow, 53

Indian expatriate community, 47 oil imports, 48, 50, 52 political ties, 46–47 trade and commerce, 48–49 Bahrain, Kingdom of bilateral relations, 46–54 domestic development, 37–39 economy, 42–45, 47, 52 energy ties, 49–51 foreign policy, 36, 41–42 human rights, 39–41 industrial projects, 43, 44 infrastructure projects, 44, 45 internet users and the social media penetration, 38 investments, 52–53 key information, 35 major projects, 43–45 ‘not free’ freedom status, 41 oil and gas projects, 44 oil reserves and oil-based revenue, 42, 47 popular protests, 2011, 37

 Note: Page numbers followed by ‘n’ refer to notes.

1

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INDEX

Bahrain, Kingdom of (cont.) power and water projects, 45 religious and cultural restrictions, 46 social unrest, 43 society, 40, 46, 47 socio-economic indicators, 35–36 women, 46 Barzani, Masoud, 89 Barzani, Nechirvan, 89 bin-Abdullah, Prince Miteb, 161, 162 bin-Abdullah, Prince Turki, 161 bin-Nayef, Crown Prince Muhammed, 161, 162, 164 bin-Salman, Crown Prince Muhammad (MBS), 12, 32, 160–162, 164, 167, 172, 185 C Chabahar development project, 69 China, 9, 10, 13, 14, 26, 32, 67–69, 83, 102, 119, 157, 173, 176, 177, 187, 189, 206, 245, 246 D Defence Cooperation Agreement, 8 Doval, Ajit, 114, 149, 204 E Egypt, 2–5, 7, 69, 124, 127, 141, 142, 144, 168, 169, 196, 229 el-Sisi, President Abdel Fattah, 3, 169, 234 Energy consumers, 26, 177 suppliers, 19, 20, 152, 240 Erdogan, President Recep Tayyip, 10, 232 ExxonMobil, 7

F Fakeih, Adel, 161 G Gadkari, Nitin, 73, 74 Gargash, Anwar, 10, 203, 204, 208 GCC–India bilateral relations challenges, 240–241 Indian expatriate community, 235 India’s energy imports, 239, 240 trade and commerce, 237–239 Ghalibaf, Mohammed Bagher, 60, 60n2 Gulf Cooperation Council (GCC) intra-GCC crisis, 233 members, 229, 230, 234, 240, 241 political boycott of Qatar, 229 H Hadi, President Abdrabbuh Mansur, 11, 66, 168, 196, 216, 218, 219, 223 Hashemitaba, Mostafa, 60 I India bilateral relations with Persian Gulf, 12 challenges in Gulf relations, 32 economic relations with Persian Gulf, 14, 26 exports to Gulf, 17, 18, 25, 48, 98, 131 Iran policy, 59 policy options for Gulf relations, 244 share of oil products in exports, 24 India-Arab Dialogue, 55

 INDEX 

Indian expatriate community Bahrain, 47, 54 Emigration Clearance Required (ECR) category, 28 GCC, 234 Kuwait, 106, 118, 119 Oman, 136, 137 Qatar, 155 Saudi Arabia, 183 UAE, 212, 213 Yemen, 217 India’s energy Bahrain, 50, 51 GCC, 239, 240 Iraq, 101 Kuwait, 115, 117 Oman, 133, 134 Qatar, 150, 152–154 Saudi Arabia, 182 share of oil trade, 24, 51, 52, 81, 100, 116, 133, 134, 152, 178, 209, 225, 226 total foreign trade, 1, 14, 25, 26, 115, 151 UAE, 210 Yemen, 226 International Campaign for Freedom in the United Arab Emirates (ICFUAE), 199 International Reconstruction Fund Facility for Iraq (IRFFI), 99 Iranian Revolutionary Guard Cops (IRGC), 5, 63, 65 Iran-India bilateral relations Chabahar Port, 59, 73, 243, 245 challenges, 82–83 defence and security ties, 76 energy related, 59 Indian imports from Iran, 77–79 Iranian investments in India, 79–82 Iranian students in India, 82 Kashmir issue, 76

249

kidnapping of Kulbhushan Jadhav, 74 political ties, 71–77 trade and commerce, 77–79 Iran, Islamic Republic of bilateral relations, 70–82 contribution to Yemen crisis, 66 domestic developments, 59–64 economy, 67–69 foreign policy, 64–67 GDP growth, 67, 68 India related, 58–59 international investments, 68 Iran–Saudi regional struggle, 2 key information, 57 military involvement in Syria, 64 Presidential elections, 2017, 60, 61 press and media freedom, 70 protests, 2017–2018, 64 society, 69–70 socio-economic indicators, 57–58 US anti-Iran sanctions, 59 women and minorities, status of, 70 Iran Nuclear Agreement Review Act of 2015 (INARA), 62 Iraq-India bilateral relations challenges, 101–103 energy ties, 99–101 India’s energy imports, 79, 80, 101 Iraqi students in India, 97, 100 political ties, 96–97 trade and commercial ties, 97–99 Iraq, Republic of bilateral relations, 95–101 domestic developments, 87–90 economy, 90–93 ethnic diversity and rights, 95 GDP growth, 91, 92 gender inequality, 94 India related, 86 key information, 85 Kurdish political aspiration, 89

250 

INDEX

Iraq, Republic of (cont.) press and media freedom, 94, 95 sectarian divide and ethnic tensions, 86 societies, 93–95 socio-economic indicators, 85–86 Sunni-Shia crisis, 90, 142, 188 US-led invasion, effect of, 90, 93 women and minorities, status of, 94 Islamic Military Alliance (IMA), 125, 169 Islamic revolution of 1979, 10, 58, 67, 69 Islamic State of Syria and Iraq (ISIS), 5, 9, 11, 32, 65, 86–88, 90–92, 94–96, 100, 114, 142, 169, 217, 231 Islamism, 10 Israel, 1, 6, 12, 64, 67, 72, 76, 83, 123, 169, 234, 243 J Jadhav, Kulbhushan, 71, 74, 83 Jahagiri, Eshaq, 60 Jaishankar, S., 204 Al-Jazeera, 2, 4, 5, 10, 141, 142, 145, 149, 231 Joint Comprehensive Plan of Action (JCOPA), 23, 59–62 al-Jubeir, Adel, 10, 163, 168, 173, 233 K Kant, Amitabh, 180 Kata’ib Hezbollah, 3 al-Khalifa, Khalid bin Mohammed, 36, 38, 39, 41, 47 Kurdish Regional Government (KRG), 11–12, 88, 89, 92, 97, 102, 245 Kuwait, Emirate of bilateral relations, 52, 106, 113–119 corruption, 111

economy, 67, 110, 118 energy subsidies, 110 foreign policy, 107–109 fuel subsidy cuts, 109 India related, 106–107 kafala system, 118 key information, 105 non-oil GDP growth, 110 politics, 106, 119, 148, 245 press and media freedom, 70 regional rifts, 108 religious freedom, 111 society, 111 socio-economic indicators, 105–106 women and minorities, status of, 119 Kuwait–India relations challenges, 119 commercial relations, 113 defence and security agreement, 113–114 energy trade, 115 India’s oil imports, 115–117 overseas investments and financial assistance, 116 political ties, 113 Security Cooperation Dialogue, 113 M Manama Dialogue, 36, 46, 47, 55 Middle East Institute at New Delhi (MEI@ND), 33 Mirsalim, Mostafa, 60 Modi, Narendra, 1, 12, 13, 28, 29, 36, 47, 58, 71, 73, 76, 77, 106, 113, 122, 129, 130, 136, 140, 149, 160, 172–175, 179, 183, 192, 202, 203, 205, 208, 210–212, 234, 243, 245 personal style of engagement with foreign leaders, 113

 INDEX 

Modi visits Iran, 29 Oman, 122, 130 Qatar, 29 Saudi Arabia, 29 UAE, 192, 203, 205, 208, 212 Morsi, President Mohammed, 4, 234 Mubarak, President Hosni, 3, 234 Muslim Brotherhood, 2, 4, 5, 7, 10, 11, 107, 141, 142, 168, 231, 234 N al-Nahyan, Crown Prince Mohammed bin Zayed, 13, 192, 193, 202, 203, 243 al-Nahyan, President Khalifa bin Zayed, 193 New Silk Road, 69 Nimr al-Nimr, 142, 232 O Obama, Barack, 169, 240 Oil crude, spot price, 2017, 78, 98, 99, 165, 225 international price fluctuation, 2017, 165 reserves, Persian Gulf, 25–27 trade deficit–oil import linkage, 19, 20 Oman bilateral relations, 129–136 economy, 125–127 foreign policy, 122–124 freedom of expression, 129 GDP growth, 126 healthcare and education, 128 India related, 122 key information, 121 mediation in regional disputes, 4, 123 oil reserves, 125

251

Oman Air, 127 politics, 122–124 press and media freedom, 129 private sector investments and skill development programs, 127 security issues, 125 socio-economic indicators, 121–122 steel and aluminum industries, development of, 126 women, status of, 128, 129 Oman India Fertilizer Company (OMIFCO), 131 Oman-India relations air connectivity, 132 challenges, 124, 136–137 defence cooperation, 130 energy ties, 133–135 FDI, 133, 135, 137 Indian expatriate community, 136 India’s energy and oil imports, 133, 134 military-to-military cooperation, 137 partnership in anti-piracy operations, 131 political engagement, 122 security ties, 129–131 trade and commercial ties, 131–133 Operation Decisive Storm, 196 Operation Inherent Resolve (OIR), 8 Operation Rahaat, 217 P Pakistan, 59, 72, 74, 79, 83, 157, 172, 187, 245 Parrikar, Manohar, 130 Persian Gulf competitive geopolitics between giants, 10 India’s energy and oil imports, 14, 16, 21, 22, 99, 115–116, 133, 152, 210

252 

INDEX

Persian Gulf (cont.) India’s total imports, 16, 17 India’s trade and top trading partners with, 1 natural gas reserves, 27 oil reserves, 26 power struggle in, 2 role of US, 6 turbulent period, 2 Persian Gulf Series, 33 Popular Mobilization Force (PMF), 65, 90 Pradhan, Dharmendra, 75, 96, 173 Putin, Vladimir, 189, 245 Q Qaddafi, President Muammar, 11 al-Qasimi, Sultan bin Mohammed, 204 Qatar air embargo on, 8 bilateral relations, 149–156 economic freedom status, 145 economic growth, 143 as financer of Islamic extremism, 3 foreign policy, 141–143 GDP growth, 144 migrant labour abuse, 147 press and media freedom, 142, 148 Qatari trade and economy, 2, 144, 145, 152 regional agenda, 4 Saudi–Qatari differences, 4 society, 139–140 socio-economic indicators, 139 tourism, 143 transformation under Hamad al-Thani, 4 women and minorities, status of, 145 Qatar crisis, 11, 12, 32, 108, 113, 119, 124, 133, 142, 156, 189, 195, 213, 214, 240, 243

Qatar–India relations challenges, 156–157 FDI, 144, 154, 156 Indian expatriate community, 155–156 India’s energy and oil imports, 150, 152–154 LNG supply to India, 140, 151, 152 long-term energy import agreement, 140 political ties, 149–150, 156 trade and commercial ties, 150–152 R Raisi, Ebrahim, 60, 62, 63 Rouhani, President Hassan, 58–64, 70, 71, 73, 74 S al-Sabah, Emir Sabah al-Ahmad al-Jaber, 5, 106–108 al-Sabah, Jaber al-Mubarak, 107, 113 al-Said, Asaad bin Tariq, 123 al-Said, Fahd bin Mahmoud, 123 al-Said, Sultan Qaboos bin Said, 121–123, 130, 137 Saleh, President Ali Abdullah, 11, 67, 216, 218 Salman, King of Saudi Arabia, 13, 161, 162, 170, 173, 179, 187, 189 Salman, Prince Abdulaziz bin, 40n15, 162n3, 163, 173 Saudi Arabia, Kingdom of bilateral relations, 172–187 contracts with Russia, 167 council of ministers, 2017, 163 economy, 164–167 employment, 164, 166, 167, 188 foreign policy, 167–169 GDP growth, 165

 INDEX 

Iran–Saudi regional struggle, 2 kafala (sponsorship) system, 184 military intervention in Yemen, 216 military-related expenditure, 166 political consolidation process, 162 regional agenda, 4 Saudi–Qatari differences, 4 Saudi–US relations, 169, 189 society, 170–171 socio-economic indicators, 159–160 Vision 2030, 164, 170, 188 women and minorities, status of, 170 Saudi–India bilateral relations Aramco Asia India (AII), establishment of, 180 challenges, 187–189 defence and security cooperation, 174–175 energy ties, 181–183 haj or umrah pilgrimages from India, 186–187 Indian expatriate community, 183–186 Indian exports to Saudi, 176 Indian investments in the Kingdom, 179–181 India’s energy and oil imports, 23, 177, 178, 181, 183 petroleum imports by India, 177 political ties, 172–173 Saudi air space, use of, 1 Saudi Arabian Basic Industries Corporation (SABIC), establishment of, 179 Saudi investment in India, 182, 187, 188 Strategic Energy Partnership (SEP), 182, 188 trade and commercial ties, 175–179 Singh, Rajnath, 48 Singh, V. K., 96, 97, 173, 185, 213

253

Southern Transitional Council (STC), 66, 217, 218 Supreme Political Council (SPC), 66, 217, 218, 223 Swaraj, Sushma, 12, 47, 71, 73, 96, 129, 130, 173, 204, 223 T Tamim, Emir, 6, 141, 146, 149 al-Thani, Ahmed bin Jassim, 145 al-Thani, Emir Tamim bin Hamad, 3, 140, 141, 149, 231, 233 Tillerson, Rex, 7, 8, 62 Trump, Donald, 3, 6–9, 12, 23, 32, 59–63, 71, 75, 78, 82, 166, 169, 189, 232, 233, 240, 241, 243, 244 Turkey, 6, 9, 10, 12, 65, 76, 88, 89, 102, 142, 144, 157, 168, 172, 230, 232 al-Tuwaijri, Khalid, 161 U UAE Dubai Women’s Establishment plan (DWE), 201 economic growth, 196, 197, 202 FNC elections, 193 foreign policy, 195–196 GDP growth, 197 India related, 192 internet freedom, 198 political stability, 193, 196 press and media freedom, 198 Qatari–Emirati trade, 195 society, 198–202 socio-economic indicators, 191–192 Vision 2021, 194, 200 women, status of, 200, 201

254 

INDEX

UAE–India relations challenges, 214 defence and security ties, 205–206 energy ties, 208–210 FDI flow, 211 Indian expatriate community, 212–213 India’s energy and oil imports, 206, 209–211 MoUs, 203, 208 political ties, 202–204 trade and commerce, 206–208 United Nations Human Rights Council (UNHRC), 40 Universal periodic review (UPR), 40 US Central Command (CENTCOM), 8

US foreign policy priorities, 9 US sanctions, against Iran, 78 Y Yemen crisis, 66, 196 Houthi militia, 67, 217 politics, 12, 217–219 socio-economic indicators, 215–216 Yemen–India bilateral relation abduction and release of Father Tom Uzhunnalil, 223 challenges, 228 Indian expatriate community, 227 oil and energy trade, 224–226 trade and commerce relations, 224 Yemeni expatriates in India, 227 Yemeni students in India, 223