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INDIA’s RELATIONSHIPS WITH THE GULF REGION: PROSPECTS AND POSSIBILITIES IN THE 21ST CENTURY

Kingshuk Chatterjee

In the five decades after India’s independence, several aspects of its foreign policy have come under criticism—its allegedly idealistic character in the Nehru era, its failure to be truly non-aligned for the better part of the duration of the Cold War, and its discomforting proximity to the USA since the late 1990s. There is hardly any major questioning of the two principal features of the Indian foreign policy—bilateralism and excessive focus on Pakistan. While India’s preference for bilateralism over multilateralism and even the Pakistan-fixation in its foreign policy have their own rationale (which is not always necessarily substantive), their implications in the wider field of India’s international relationships has seldom been fully appreciated. One of the casualties of these twin preoccupations of the foreign policy establishment has been India’s relationship with the countries in the Persian Gulf region.

At the turn of the 20th century, it is very difficult to speak with any earnestness of India’s policy/policies towards the countries around the Persian Gulf,¹ except to say that the foreign policy in this region has been almost invariably reactive. In the Indian foreign policy circles, it is virtually an article of faith that the countries around the Persian Gulf, being Muslim-majority countries, would be naturally inclined to favour Pakistan over India in the international arena, especially with respect to the Kashmir question. In view of this, India hesitantly tried to make use of the Non-Aligned Movement (NAM) platform to engage the Gulf states multilaterally, but such efforts were never more than half-hearted in their intent. Accordingly, over the 50-odd years since 1947 India’s policy towards the Gulf countries—ranging from India’s responses to the Islamic revolution in Iran and the subsequent Iraq–Iran war, to the two Gulf wars—has tended to be one calculated to displease as few countries as possible.

The urge to displease the least number of parties in this region, coupled with India’s failure to get admitted to the Organization of Islamic Countries (OIC), has made India resort to bilateralism in her engagement with individual Gulf states. While such bilateralism allows India to address the concerns of each of these states as well get her own concerns addressed individually, it has failed to develop a uni-form pattern in the intensity of such bilateral ties. Hence, frequently Indian policy towards one Gulf state has appeared to be at cross-purposes with that towards another—the best example of this being New Delhi’s silence over Iraq’s invasion of Kuwait in 1991 causing estrangement with Kuwait. In order to prevent her potentially contradictory bilateral ties with Gulf countries from undermining her strategic interest (i.e. oil), India has preferred to react to the region’s developments rather than engage proactively, and to keep her reactions fairly distant and bordering on indifference.

Such meek and reactive policies can be argued to have cost India important diplomatic leverage with India’s new-found ally, the USA, especially over denial of refuelling facilities to US aircraft during the Gulf War of 1991, or of sending peace-keepers to Iraq. More directly, such distancing from the affairs of the region has occasionally lost India diplomatic leverage in the region itself—as with Kuwait, over India’s failure to condemn the Iraqi invasion. In the light of this situation, it is possible to think of an alternative approach to the region.

This chapter begins by looking at the assumptions and implications of the various policies that inform and constitute India’s Gulf policy. It then proceeds to explore the possibilities of its pursuit of a pro-active policy in the region. An important factor in this proactive stance could be the country’s low profile petroleum diplomacy, which has helped India acquire energy stakes in many regions left beyond the pale of USA and allies (because of political reasons). Another important factor could be India’s hitherto-absent readiness to involve itself in this region from within a multilateralist commercial paradigm, where India engages with all the states around the Persian Gulf collectively through a forum such as the Gulf Cooperation Council (GCC). The paper also proposes to raise the issue whether such proactive policy might go on to ease the security situation in both the Gulf region and India’s immediate environs, by creating greater ties of interdependence—economic or otherwise.

Non-Gulf Character of India’s Gulf Policy

It is very difficult to argue that until very recently India had anything even remotely like a Gulf policy. For all practical purposes, as was true for its relations with nearly all other regions of the world, India used to engage with individual Gulf countries rather than the region as a whole. One might argue that this was partly because relations could be established with these states only at different points of time,² and partly because the region itself was slow in emerging as a geo-strategically synchronous region that needs be dealt with as a region.

Nonetheless, in view of the significance that the region has for India, the tardiness of its foreign policy establishment in engaging with the region as a whole is not worthy of praise. Between themselves, the Gulf countries account for 15 per cent of India’s total foreign trade. An estimated 2.5 million Indians live in the area and their annual remittances to India are of the order of a few billions of rupees.³ Still more importantly, the Persian Gulf countries contribute nearly a fourth of the world’s total crude oil production, and hold nearly two-thirds of the world’s proven reserves of oil. The World Energy Outlook, published by the International Energy Agency (IEA), projects that India’s dependence on oil imports will grow to 91.6 per cent by the year 2020.⁴ In view of the fact that nearly two-thirds of the country’s energy requirements are met with imports from this region, it makes good economic and strategic sense to remain engaged with the region constantly.

In the realm of assumptions that inform the Indian foreign policy, the Gulf countries form a part of a greater regional package—the Gulf countries (except Iran) constitute a part of the Arab world. This assumption has, if anything, served to hinder rather than promote any meaningful engagement on India’s part with the region. In the wake of the creation of Israel in 1948, the Arab countries had adopted a firmly antagonistic posture by denying even recognition of the new state after they failed to destroy it militarily. Since 1948, India had chosen to toe a firmly pro-Arab line in the Arab-Israeli conflict, partly because of genuine sympathy for the Palestinians, and partly in order to counteract Pakistani influence in the region and to secure access to the Middle East petroleum resources. In the 1950s and early 1960s, this pro-Arab stance did not help India in establishing good relations with all Arab countries, but it was believed necessary ‘to keep peace with India’s Muslim minority’.⁵ This assumes, of course, that Indian Muslims invariably think as Muslims and primarily about Muslims—a premise that remains to be substantiated.

The idea that having a pro-Arab stance would automatically ingratiate India with the Gulf countries was doubtful at best. Although India’s leadership role in the Non-Aligned Movement, and her distance with the USA and Israel should theoretically have given India the means of close ties with the Arab states,⁶ yet India virtually relinquished the diplomatic offensive in countries where Pakistan seemed to be interested. Hence, Saudi Arabia was one country which India neglected with remarkable consistency, while Pakistan kept on pressing home her advantage.⁷ The so-called Islamabad–Riyadh nexus that the foreign-policy establishment in India keeps on raving about was in fact a product of this negligence.⁸

The negligence itself was a product of yet another assumption of the Indian establishment—the notion of Islamic solidarity. All the Gulf countries being a part of the Islamic world, India seemed to take it for granted that all the states professing their ‘Islamic’ credentials would be more inclined to lean towards Pakistan, while the states that tended to play down those credentials would be likely to favour India. Hence, India invested far greater diplomatic capital in Ba’athist Iraq and prerevolutionary Iran than in Saudi Arabia. Still more significantly, the ties with Tehran were considerably weakened in 1979, first in a knee-jerk reaction to the Islamic revolution and then the protracted Iraq–Iran war (1980–88) which hardened the Islamist postures of the Islamic Republic of Iran. It was only after the perceptible softening of the hardline Islamist postures during the presidential tenures of Rafsanjani and of the reformist Khatami that Indian ties with Tehran became cordial once more.

These two dubious assumptions have dominated policy-making in India for almost half a century because of the ‘Pakistan fixation’ that seems to afflict the Indian foreign policy. In almost everything that New Delhi has done in the realm of foreign policy since 1947, its effects on Islamabad’s policy seems to have been an unstated consideration—be it inclining towards Moscow (despite formally being non-aligned) to offset Islamabad’s axis with Washington and Beijing during the Cold War, or in trying to forge a new strategic and diplomatic relationship with Washington in the 1990s.⁹ The tendency to assume that international relations run along the lines of a ‘zero-sum gameȁ (where any country friendly to Pakistan cannot be meaningfully engaged with by India) severely restricted the policy options before New Delhi. It might seem perfectly reasonable that with the thorny issue of Kashmir being used by Pakistan to incommode India in the international fora, India necessarily considered intimacy of other nations with Islamabad as inversely related with their potential cordiality with itself. However, such a defensive posture prevented India from trying to engage herself with Islamabad’s allies for a very long time. This was considered to be especially true of the countries of West Asia, where the assumption of ‘Islamic solidarity’ made such a tie appear even more elusive. Pakistan made use of this fully, by using the platforms at the OIC and UN to denounce New Delhi’s activities in Kashmir, with support from friendly countries like Saudi Arabia, Kuwait and occasionally the UAE. Perhaps the only exception to this defensiveness was to be seen with respect to Iran in the 1970s, when India neutralized a burgeoning relationship between Pakistan and Iran by vastly increasing bilateral economic relations with the latter and conducting a ‘diplomatic offensive of profuse mutual assurances’.¹⁰ But it might be argued that such an exception was probably due to the very clear divergences in the strategic interests of Islamabad and Tehran, which made New Delhi hopeful about developing her community of interests with Tehran.¹¹

As a result of so many inhibitive assumptions, the Indian foreign policy forays in the Gulf region, with rare exceptions, have tended to be reactive rather than pro-active. New Delhi has invariably refrained from taking any sort of initiatives in the region, and tried to keep its involvements limited to its very narrowly defined self-interests—namely, undisturbed access to petroleum from the region, and to a lesser extent ensuring the security of its nationals working in the region as immigrant workers. Predictably, therefore, India developed close diplomatic ties with Iran and Iraq till the 1970s which coincided with India’s dependence on these two states for supply of crude oil. The 1980–88 Iran–Iraq war forced India to shift its oil purchases from Iran and Iraq to Saudi Arabia and other Persian Gulf states, especially Kuwait.¹² With the rise in the number of immigrant workers in Saudi Arabia since the 1980s, and increase in activities of the Indian business corporations, India’s diplomatic distance with Riyadh began to reduce.

The counter-productive character of this reactive policy manifested increasingly since the late-1970s and early 1980s. With the toppling of the regime of the Shah of Iran by the Islamic revolution in 1979, fearing a pro-Islamabad tilt in Tehran’s approach to South Asia, India had already begun to recoil from the idea of engaging the fledgling Islamic Republic. New Delhi liked to believe that the Iran–Iraq war changed the balance of power in West Asia by weakening Iran as a regional power and a potential supporter of Pakistan—hence India refrained from condemning Iraq’s invasion of the Islamic Republic. Although India performed a delicate diplomatic balancing act, officially taking a position of neutrality in the Iran–Iraq war, New Delhi maintained warm ties with Baghdad.¹³ To be fair, India also tried to build workable political and economic relations with Tehran despite misgivings about the foreign policy goals of the Islamic Republic—largely out of an apprehension that Tehran might lean too much towards Islamabad if neglected.

When the Iraq–Iran war gave way to the next major crisis in the region—Iraq’s invasion of Kuwait in 1990, and the Gulf War of 1991, waged by the US–led inter–national coalition—India’s policy of reactive diplomacy in defence of her self interests earned India, deservedly, a bad name. When Iraq invaded Kuwait in August 1990 in an act of aggression in breach of the international law, Indian policy–makers were torn between adopting the traditional non–aligned policy sympathetic to Iraq or favouring the coalition of moderate Arab and Western countries that could benefit Indian security and economic interests. India initially adopted an ambivalent approach, condemning both the Iraqi invasion of Kuwait and the intrusion of external forces into the region. ¹⁴ When the National Front government led by V.P Singh was replaced by the Chandra Shekhar minority government in November 1990, the Indian response changed. Wary of incurring the displeasure of the United States and other Western nations on whom India depended to obtain assistance from the International Monetary Fund (IMF), New Delhi voted for the UN resolution authorizing the use of force to expel Iraqi troopsfrom Kuwait. In January 1991, India also permitted United States military aircraft to refuel in Bombay. The refuelling decision stirred such a domestic controversy that the Chandra Shekhar government withdrew the refuelling privileges in February 1991 to deflect the criticism of Rajiv Gandhi’s Congress (I), which argued that India’s nominal pro–United States tilt betrayed the country’s non–aligned principles.¹⁵

Needless to say, the Indian ambivalence was guided less by ideological principles and more by pragmatic considerations. Baghdad had been one of the really few consistent supporters of India on the Kashmir issue in the international fora; moreover, a considerable number of Indian firms and expatriate workers were operating in Iraq;¹⁶ Iraq also owed Indian firms (public and private) a sum of nearly $500 million in deferred payments. Most importantly, by an agreement concluded on 14 March 1990, India was to import 2.5 million tonnes of oil for 1990–91, 30 per cent of which was to be adjusted against outstanding dues.¹⁷ Hence, India proved hesitant in condemning Iraqi action outright, and even though she chose to support the international consensus on the issue, her gestures of support were well short of categorical.

It can be argued, though, that India had equally pressing pragmatic reasons to extend full and unequivocal support to Kuwait. Nearly a hundred thousand Indians were working as expatriates in Kuwait; deposits from expatriates based in Kuwait constituted nearly 22 per cent (Rs 60,000 million) of all NRI deposits in Indian banks in 1990; Indo-Kuwaiti trade on the eve of Saddam Hussein’s invasion amounted to Rs 200–250 million.¹⁸ What presumably tipped the scale against Kuwait was its soft pro-Pakistan line on the Kashmir issue, coupled with Iraq’s consistent support for India on the same. Accordingly, upon the invasion of Kuwait, the first really noticeable action of New Delhi was a precipitate closure of the Indian embassy there. Although India was to subsequently send food and medicines to Kuwait after its liberation, her precipitate withdrawal from the war-torn kingdom was compared unfavourably against Pakistan’s clear and categorical support.¹⁹

The most dreadful exhibition of Indian ambivalence towards the Gulf area came as late as 2003, over the issue of invasion of Iraq by USA and a handful of its allies. Unlike the war of 1991, this war was fought without the backing of the United Nations, in the face of opposition from a considerable section of the inter- national community, and in breach of all international laws and code of conduct. The Vajpayee government had been working towards an improvement of the Indo-US relations since the time Clinton was the president, and had already taken the opportunity of ingratiating itself with the Bush administration by endorsing the National Missile Defence (NMD) programme. New Delhi was among the earliest supporters of the ‘coalition of the willing’ in the ‘war against international terrorism’ after 9/11. However, in the wake of the primacy accorded to Islamabad since the war in Afghanistan, New Delhi was determined to link its responses to Washington’s Pakistan connection. India’s stand on Iraq was therefore subjected to the implications the issue might have for the Kashmir issue. Vajpayee had given this message unambiguously to the all-party meeting on March 22, when he said: ‘We should be careful that neither our internal debate nor our external actions deflect our attention, or those of the world, away from the real source of terrorism in our neighbourhood’. By 28 March 2003 it was fairly obvious that ‘India [was] drawing connections between what the US says on the India–Pakistan–Kashmir issues and India’s formulation on the Iraqi issue. The message coming from official circles is that India’s concerns in the immediate neighbourhood are far more important than simply sticking to principles as far as the war on Iraq is concerned.’²⁰

Such wariness to categorical commitment contributed to what is called ‘the middle path’—neither supporting the United States nor openly criticizing it for its aggression against Iraq.²¹ For its part, the United States would have liked to receive India’s support in the war against Iraq, but it acknowledged that ‘the middle path’ in effect endorses the US position.²² Even after the United States defied the UN, international laws, and the international community with its massive military campaign against Iraq, the Indian government stuck to the middle path—in the hope that Washington would appreciate the fact that India did not denounce the invasion at a time when even long-standing allies like Germany and France were quite vocal in their resentment of US actions.²³ The Vajpayee government rejected the opposition demands for a parliamentary resolution on the crisis. India did not even support the 114-member-nation NAM summit at Kuala Lumpur, when its resolution affirmed that it ’rejected war’ and declared ‘the war against Iraq would be a destabilising factor for the whole world with far-reaching political and economic consequences.’²⁴ During a visit by Ali Akbar Veliyati, the special envoy of Iranian President Mohammed Khatami, on 23 March 2003, three days after the war started, members of the Indian government made it clear that India was not willing to take any initiative on Iraq, through NAM or otherwise, that could jeopardize its ties with the United States.

Once the war was over, and Saddam’s regime was replaced by US military occupation, Washington began to press for India to send a ‘stabilisation force’ of 15,000 peacekeepers to Mosul, in northern Iraq.²⁵ New Delhi was torn between the two contradictory possibilities left open by its ambivalence on the road to war. Some thinkers in New Delhi supported Washington’s argument that the UN Security Council Resolution 1483 of 23 May 2003 (calling on member nations to contrib-ute men and material for humanitarian assistance in Iraq) constituted a justifiable rationale for India to send troops.²⁶ They believed it would be a clear indicator of India’s intent to step out ‘of the narrow South Asia political box and assume a military role in the region’.²⁷ Critics pointed out that such a participation in the US-led coalition would make India squander whatever little goodwill she enjoys in the region. They also pointed out that the domestic political implications of a Hindu nationalist government sending troops that could be deployed near the Shi’ite holy places like Najaf and Karbala could be enormous.²⁸ Others pointed to the anomaly of India being asked to send 15,000 troops while US allies like Italy and Spain were sending 3,000 and 2,000 troops, respectively,²⁹ and countries like Egypt, Saudi Arabia, China, Russia, Canada, France, Germany and Mexico were not sending any troops altogether.³⁰

The Indian government did not rule out the possibility of participation on principle, and till the middle of July 2003 indications abounded that it was merely stalling for the right conditions to go in. The most vocal protagonist of the Indian intervention, Home Minister L.K. Advani went to the extent of expressing dismay at the opposition’s ‘one-sided fatwa’ against sending troops, and remarked: ‘They [the opposition] are entitled to their views, but the government will take a decision keeping the national interest in mind.’³¹ However, in the next seven months, the government discreetly shelved the issue of intervention in Iraq, without explaining clearly the rationale for its changed perception of national interest—whether it was the domestic compulsions of an impending general election, or the realization that Washington’s friendliness with New Delhi was not going to under-mine the strategic relationship the Bush administration sought with Islamabad in its fight against (Islamic) terrorism.³²

Even a brief survey of India’s Gulf policy brings out pretty clearly what B. A. Robertson had said in the mid-19080s:‘The geopolitical effects of the Gulf region on India are peripheral to its primary concerns except where a crisis in the Middle East either brings about an alteration to the strategic position of Pakistan, or brings the military presence of a superpower into the region.’³³ This is particularly odd in the light of India’s repeatedly professed intention of seeking to play the role of a major player in the international arena. Hesitance in multilateral engagements and sensitiveness to Pakistani manoeuvres in the global circuit has made India ‘subordinate [her long-term] emerging power aspirations to the short-term need to counter Pakistan.’³⁴

The Quest for a Pro-Active Gulf Policy

Indian foreign policy began to undergo a gradual change from the 1990s; that to-wards the Gulf countries was no exception. While India continues to be basically reactive in its approach to the Gulf issues, the 1990s have occasionally witnessed India trying to break out of the limitations that characterized the Indian policy towards the region. Such developments seem to open further possibilities for India to have a coherent Persian Gulf policy for the first time since 1947.

In the two coherent theoretical formulations of India’s changed policy towards West Asia, C. Rajamohan and Sushil J. Aaron give two interesting, if occasionally converging, theses.³⁵ Both agree that India was inordinately shy in engaging West Asia and was wary of addressing its full range of ‘national interests’ as a result of its preoccupation with some concerns (such as Kashmir, Pakistan, and domestic Muslim sensibilities). They concur in the assessment that India had taken too inflexible a stand on the issue of Israel–Palestine, putting too much premium on Arab solidarity (which was axiomatically taken to mean resentment towards any state friendly to Israel) and the supposed concern of Indian Muslims for their Palestinian co-religionists. As Aaron and Rajamohan then proceed to argue, the fall of the USSR prompted India to look for a new source for its defence procurements as also a market for Indian exports, which Israel was eminently suited to be. In light of the willingness of both the Palestinians and Israelis to resolve their differences, India’s establishment of full diplomatic relations in 1992 with Israel did not occasion any backlash from the Arab world. Both Aaron and Rajamohan then go on to say establishment of progressively deep defence ties (especially under the Vajpayee government) also have not caused negative repercussions among the ‘pragmatic’ Arab world politicians. This has enabled India, for the first time since 1947, to think of engaging Israelis and Arabs simultaneously with confidence.³⁶

Aaron and Rajamohan argue that the basis of this newfound confidence was the pragmatic world of economic and commercial considerations. Rajamohan relates this new approach as much to a shift from an ideological foreign policy (‘Third Worldism’) to a pragmatic worldview, as to economic considerations in the light of India’s policy of economic liberalization; Aaron is much more categorical in ascribing this to the course of economic liberalization itself.³⁷ By and large, the course of India’s engagement with the Gulf States in the 1990s would bear this out.

One of the principal factors behind the balance of payments crisis that plagued the late 1980s, which persuaded the Indian establishment to liberalize the economy, was the yawning deficit on the ‘oil pool account’.³⁸ The crisis was accentuated by the Gulf War of 1991, which removed Iraqi oil from the international market, as a result of which, not only was India unable to procure oil from Baghdad under preferential terms previously agreed upon, but actually had to buy oil at international prices higher than in the late 1980s. Accordingly, India began to pursue a multi-pronged energy policy, which had its impact on India’s foreign policy.

On the one hand, India tried to reduce its excessive reliance on a few countries (such as Iraq, Kuwait, Saudi Arabia and UAE) by diversifying its sources of procurement to include countries such as Iran, Libya, Sudan and Vietnam. This attempt at diversification is best seen in the agreements not merely to procure crude oil but also to develop and explore oil deposits. ONGC Videsh Limited(OVL, the overseas arm of the ONGC) is at the forefront of this, focussing princi pally in areas where the USA and other Western countries do not allow their companies to operate because of political reasons – such as Iran, Libya and Sudan. In the Gulf region, the chief areas of OVL activity in the 1990s have been Iran and (until recently) Iraq. In the Islamic Republic of Iran, OVL secured the bid in early 2002 and has finalized the draft Exploration Service Contract with the National Iranian Oil Company, for the Farsi Offshore Block.³⁹ The Exploration and Development Contract for Exploration Block-8, Western Desert in Iraq was signed by OVL Limited with the Oil Exploration Company (OEC) of the Iraqi ministry of oil on 28 November 2000 at New Delhi. The contract was ratified by the Iraqi government and went into effect from 15 May 2001. But, of course, after the Iraq war and toppling of the Saddam regime, the fate of the agreement has become uncertain.⁴⁰

On the other hand, India tried to increase efforts to secure energy from non-conventional energy sources; moving from an overwhelming dependence on petroleum to increased demand for natural gas, India developed close ties with Gulf states of Oman and Iran. Still more importantly, in order to reduce the impact of ‘oil pool deficit’, India began to rely less on exclusively the remittances from Indian expatriates based in the Gulf countries, and to develop industrial and commercial links far more extensive than any time in the past. India set up a joint commission with Oman in 1993 to enhance cooperation in the realm of oil and gas. The most ambitious Indo-Oman project involved the laying of a $5 billion deep-sea pipeline for the supply of natural gas to India.⁴¹ Although the project became mired by various technological, environmental and financial problems, Oman assured India of its readiness to supply alternative fuel, liquefied natural gas (LNG) to downstream units in India if the pipeline project did not take off.⁴²

The most significant development in this area, however, involves the proposed 2,670 km natural gas pipeline from Iran to India, passing via Pakistan.⁴³ The project is basically an extension of Iran–Pakistan pipeline connecting Iran’s South Pars natural gas fields to Karachi; Pakistan is then to route the excess capacity of 70 per cent to Delhi, in order to meet India’s annual shortfall of natural gas, to the tune of 29 million cubic metres.⁴⁴ New Delhi is hesitant at the prospect of allow- ing such a crucial strategic weapon in the hands of a hostile neighbour. Tehran’s keenness about the project can be measured by the fact that it even explored the options of other onshore and offshore routes—but the offshore deep-sea route was found prohibitively expensive at $10 billion, as against the on-land option of $6 billion.⁴⁵ Islamabad is keen on getting the project underway, looking forward to royalties of $700 million from the project.⁴⁶ Yet, despite the repeated assurances from Islamabad (which stands the risk of accruing penalties of $250–400 million per year in case of wanton sabotage),⁴⁷ the pipeline project remains elusive in view of the pronounced scepticism of the Indian government over the past five years—especially that of L. K. Advani, home minister in the Vajpayee government, till May 2004. The fate of this project seemed to have improved in the early phase of the Congress-led UPA government as the minister for petroleum, Mani Shankar Aiyyar, adopted a vigorously proactive policy on the matter. The entire effort was, however, thrown out of gear when in November 2005 India voted at the IAEA with the USA advocating a tough line against Tehran’s nuclear programme.⁴⁸ Tehran refused to take this lightly, and had at one point even suggested that India would be charged a higher per unit price for the gas that is sold under the scheme. Subsequently, however, government delegations have assured New Delhi that one single vote would not be allowed to come in the way of years of good relations. This could of course be a bargaining counter–extending the promise of favourable relations in return for future diplomatic support for Iran on the international forums. However, with the increased deepning of India’s ties with the USA, observers are no longer particularly hopeful of seeing this project pushed towards fruition by Prime Minister Manmohan Singh’s UPA-led government. India’s persistent wrangling with Pakistan over transit fees and its avoidance of pipeline talks since July 2007 have been interpreted in Tehran and Islamabad as evidence of India’s lack of any further interest in the project.

Quite apart from the oil sector, the shift ‘from the mercantilism of the past to the quest for deeper economic integration’ with this region began to set the tone for India’s policy towards the Gulf as a whole since the 1990s.⁴⁹ India began to market its relatively advanced industrial expertise in the region in order to balance the trade with the Gulf countries. The intensity of such an exchange of industrial expertise is not uniform—countries with reasonably stable industries of their own (viz. Iran) or those with extensive Western presence (viz. Saudi Arabia, Kuwait) do not bend over backwards to accommodate India; but countries like Oman, UAE, Bahrain, Qatar etc., tend to rely on India to build a part of their countries’ industrial infrastructure.

Among the economic ties recently developed by India in this region, the deepest are those forged with Oman. The visit to Muscat by Indian Premier P V. Narasimha Rao in 1993 resulted in New Delhi and Muscat according each otherthe most favoured nation (MFN) status and set up a joint commission to enhance cooperation not only in oil and gas but also in the spheres of fertilizer and hydro-carbon. As a goodwill gesture, India decided to gift Oman a 4-KW solar power project valued at Rs 2.5 million. Oman sought Indian assistance in providing re-mote sensors of water reservoirs through the satellite. In 1994, a $900 million joint venture fertilizer project was also set up, partly to cater to the Omani demand, and partly for the international market. Apart from these, Oman increased considerably imports of Indian products such as electric motors and generators, milled rice, beef products, textiles etc, sending in return oil, copper, dates and other consumer goods.⁵⁰

Indian commercial links with the UAE became equally vibrant since the 1990s. Abu Dhabi had begun to show considerable interest in India’s investment climate with the onset of liberalization. The UAE International Petroleum Investment Corporation undertook a feasibility study with the Indian Oil Corporation for in-vesting in an oil refinery in India that resulted in an investment of $45 million. Further $18 million were invested in industrial development and another $15 mil-lion in the Garhwal Rishikesh Chila Hydro-Electric Project. But subsequently both India and UAE moved away from petroleum as the core sector of Indo-UAE economic relations. By March 2000, of the total Indian exports to UAE (worth $2.092 billion), nearly $1.5 billion constituted of manufactured goods, apart from traditional exports of gems and jewellery to the tune of over $260 million. The proportion of oil has declined progressively in India’s commodity composition from 70.7 per cent of overall Indian imports from UAE in 1989–90 to 27.2 per cent in 1998–99.⁵¹

Even Saudi Arabia, the kingdom that antagonized India in many ways, proved more willing to expand trade ties with India. India imports nearly a third of all its petroleum from Saudi Arabia, which kept Indian exports to Riyadh at nearly a seventh of imports of the kingdom in 1991 (valued at Rs 2.89 billion).⁵² In November 1991, the Saudi minister for industry and electricity presented a list of nearly 50 projects, including engineering, plastic, food processing and steel plants; India responded with a list of 12 projects (including hospitals and petrochemicals). By 1994, 18 medium and small joint ventures had been set up, mainly in railways, hotels, foodstuffs and electrical services. New Delhi also invited Saudi investment in the oil refining and fertilizer sectors in India and agreed to study possibilities of joint ventures with Riyadh in the areas of pharmaceuticals and spare parts of machineries.⁵³

India continued with its older economic relations with Iraq as well, although under the restrictions put in place by the United Nations, the scope of such ex-changes became less. India acquired contracts for power equipment worth $350 million, which was nearly half of the total orders placed by Baghdad. Power generation plants and electrical equipment comprised half of India’s exports to Iraq, valued at $700 million, with which India was to pay off its oil bills. In 2000, a series of agreements were concluded between Iraqi firms and Indian companies under the aegis of the Federation of Indian Chambers of Commerce and Industry (FICCI). Under these, India agreed to supply raw materials and equipment to Iraq’s war-ravaged and sanction-hit industry, and participate in developing Iraq’s telecommunications, transport and power sectors.⁵⁴

Perhaps the most promising engagement since the 1990s has been with the Islamic Republic of Iran. A range of industries such as iron and steel, aluminium, agro-based industries, chemicals, optical instruments, textile machinery and engineering goods were identified as thrust areas for Indo-Iranian industrial cooperation. Far more importantly, though, Iran has undertaken the role of conduit in Indo-Russian overland trade. According to the Inter-Governmental Agreement on International North-South Transport Corridor between New Delhi, Moscow and Tehran, goods moving from Russia through the Central Asia would be routed through Iran into India—cutting journey time by 10–12 days, thereby cutting transport costs.⁵⁵ In order to ensure swift transportation of goods between Central Asia and Iran, India is to build a railway track between the Iranian port of Chahbahar and the Afghan entrepôt of Zaranj. In a bid to strengthen such close commercial ties, President Khatami led a 65-member business delegation that deliberated over proposals amounting to $800 million in joint investments involving 400 Indian and Iranian companies.

Needless to say, expansion of such ties between India and the Gulf countries has mostly been of a bilateral nature, true to India’s usual way of doing business. But more than ever before, the Arab countries of the Gulf region have tended to emerge as a collective entity—the Gulf Cooperation Council—after the Gulf War of 1991. Set up in March 1981 in the wake of the beginning of the Iraq–Iran war, the Gulf Cooperation Council (GCC) was meant initially to promote stability and cooperation in the Gulf region. Kuwait, Bahrain, Qatar, Oman, Saudi Arabia, and the United Arab Emirates were the members of this organization. Broadening the definition of security from military security to economic security, the GCC also pledged to coordinate its economic and defensive efforts. As expected economicgrowth in the entire region was slowed by the fall in oil prices in the mid-1980s, the countries of Arabia made plans, individually and collectively (using the GCC as a platform), to diversify their economies and to institute austerity measures in the face of falling prices. The financial cost of the Gulf War proved disastrous for the crisis ridden Gulf economies, which encouraged the Gulf states to think that theyhad to swim or sink together.⁵⁶ In this context, the GCC increasingly began to coordinate its economic, foreign and military policies in the 1990s.

India has only recently begun to seriously engage the GCC as an entity, capitalizing on the progressively strengthening bilateral ties with each member state. Building on the positive experience of multilateral diplomacy gained in dealing with the European Union (EU), India engaged with the region for the first time in the past six decades neither in order to keep Islamabad away, nor to tend to its energy requirements, but actually to develop substantive economic relations. The GCC countries were, collectively, India’s second largest trading partner. The GCC countries also constituted the largest single origin of imports into India and the second largest destination for exports from India. The overall GCC–India trade amounted to about $12.5 billion in 2002.⁵⁷

On 1 October 2003, the GCC admitted India as a dialogue partner with the council. India thus became the third dialogue partner of the council, the other two dialogue partners being the United States and Japan—giving New Delhi a leverage that previously it never exercised in this region.⁵⁸ In February 2004, a landmark trade agreement came in the course of a conference on ‘Opportunities and Challenges in the 21st Century’ between India and the GCC. The conference focussed on four select priority areas covering GCC and India—(i) trade, (ii) investments, (iii) industrial cooperation including small and medium enterprises (SMEs)/small scale industries (SSI), and (iv) transfer of technology including information technology. The conference invited attention for investing in large joint ventures in GCC, India and third countries in areas of their core economic competencies and mutual interest like petroleum and petrochemicals, gas exploration and production, refineries and pipelines, fertilizers, power and water, metals, telecom, environmental management, food processing and packaging industries, automobiles and auto component industries and pharmaceuticals.⁵⁹

In the light of such developments, India’s engagement with Gulf countries in the 21st century is on the threshold of a new era. India needs to play its card with some dexterity; by not seeming too intrusive yet appearing adequately concerned about the region to increase the diplomatic capital it has been gaining over the past decade and a half. This can come by closer and symbiotic economic relation-ship with the GCC, Iraq and Iran, and then by developing closer political ties that would increase India’s general leverage over this region—something that has eluded New Delhi so far.

The Realm of Possibilities

The greatest impediment in the path of a pro-active Gulf policy has been, as mentioned earlier, the fixation about Pakistan that afflicts the Indian foreign policy. Even the giant strides in India’s relations with the Gulf countries have, accordingly, tended to be justified through the prism of Pakistan. Rajamohan, for instance, would argue that, ‘the biggest transition [in India’s Middle East policy] has been India’s handling the Pakistan factor…. Neutralising Pakistan and its ability to play the card of Islam in the Middle East has been an important consideration for India since independence.’⁶⁰

The outcome of such a mindset has been to simply think of the Gulf as a set of countries that have to be taken out of the Islamabad’s influence which was taken to mean that no country should be antagonized. As a result, New Delhi generally took a policy of ambivalence, of ‘running with the hare and hunting with the hound’. The most brazen instance of this being New Delhi’s see saw diplomacy during the Gulf crisis of 1991. India’s refusal to condemn Iraqi invasion of Kuwait in 1990, the public act of embracing Saddam Hussein by the foreign minister, I. K. Gujral, caused a great deal of annoyance in Riyadh, Abu Dhabi and later Kuwait.⁶¹ India very consciously sought to dispel that pro-Saddam image by vigorously engaging the Gulf region subsequently, lest Pakistan gained still more diplomatic capital in these ‘Muslim’ countries.

It is worth remembering, though, that the Gulf countries have reached out for India neither in spite of their Islamic dispensation, nor because they have fallen out with Pakistan or any of their other allies. The wide array of economic problems affecting the Gulf countries since the late 1980s, occasioned by warfare (in the case of Iraq and Iran) and drop in oil revenues, compelled the Gulf countries to diversify their economic base and concentrate on industrial development. Their needs of particular industrial and economic expertise coincided with India’s areas of strength. Hence, the great advancement of economic relations that characterized the 1990s was a result of a community of interests that emerged in a particular conjuncture; just as the earlier Indo-Iraqi and Indo-Iranian friendships as also Islamabad–Riyadh axis were the results of other particular conjunctures.⁶² Unlike India’s previous alignments in the region, though, the opportunities offered by the present historical conjuncture are potentially of a long-term nature, even thoughties forged at present might be driven by the fact that the region is awash with fossil fuel.

One of the principal charms of the Gulf region for India is that it is one of the few areas in the developing world where the economic conditions are ideal for the Indian industry to participate. In view of the weakness of the industrial profile of the Gulf countries, the significance of technical cooperation had always been present. For a very long time, the Gulf states (except Iran) had chosen to develop their industries by purchasing state-of-the-art technology from the developed world, which needless to say, were expensive.⁶³ With the decline in oil revenues (a decline which is not likely to be reversed, as the reserves keep on diminishing), the Gulf countries have now begun to give preference wherever possible to less expensive technology—which is where India comes in. Although the future of India’s presence in Iraq is uncertain in the short run, the future in GCC states is likely to be distinctly better, principally because of foreign investment-friendly commercial regulations.⁶⁴ The most crucial indicator of the promises of the future is that most Indian ventures are in collaboration with GCC enterprises, which under the GCC laws are treated on a par with local ventures. With the progressive economic integration and prospective customs union that is underway in the GCC states, industrial ventures set up jointly between India and any one of the states of the GCC (say Oman), would have unrestricted access to the markets of the whole GCC, and special privileges accorded to such ventures by the signatory state, would either be carried over to all the states automatically, or a special status would have to be swiftly negotiated.⁶⁵ The accordance of dialogue partner status to New Delhi creates the platform precisely for such negotiations.

India is thus in a position to gain an unprecedented leverage in the region, being for the first time sought after almost equally by all the Gulf states. All India now needs to do is to shed its hesitancy and ambivalence, and take stands on issues affecting the region, whenever the occasion arises. One such occasion came with the Iraq crisis of 2002–03, when the USA and a few of its allies invaded Iraq searching for alleged weapons of mass destruction and in order to oust Saddam Hussein, bypassing the United Nations. India had three options to choose from. First, New Delhi could extend full diplomatic and military support to Washington;thereby emerge as the most significant strategic ally of the USA in the Indian Ocean. Second, India could publicly and categorically denounce the manifestly illegal conduct of the USA, while also urging Saddam to abdicate—this would conform to both the popular sentiment and official position of the West Asian countries. Third, India could refrain from taking any categorical stand but tacitly take a pro-Washington line, in order to displease no one in the Arab world, while continuing to work on the Indo-US bonhomie that was setting in since the 1990s. New Delhi, needless to say, went for this third option of ambivalence. But, the other two options were equally substantive, which would have given India considerable leverage in the region.

The option of actually taking a categorically pro-Washington stand on the issue was given serious consideration for mainly three reasons—it would have strengthened India’s ties with the USA, particularly in the light of opposition from the USA’s European allies; and, India could have gained many lucrative contracts once reconstruction of Iraq began in earnest under US occupation upon the ouster of Saddam’s regime; finally, this would have been a signal that India was emerging from its ‘narrow South Asian political box’. It is the last reason that could be the most suggestive. The USA wields major political and diplomatic leverage in the Gulf region, principally by virtue of its military presence. India, by participating in the US-led coalition, could have gained some diplomatic mileage in the region—somewhat like the clout London enjoys in many parts of the world by being on board the US bandwagon. The economic benefits of such a move also would have been considerable. Most reconstruction efforts in Iraq were commissioned to US firms that had no expertise in working in the region. Most of such contracts were then sub-let to Iraqi, or other Arab firms. Being on the US bandwagon would have won India some of these, as Indian firms have that required expertise of working in the region, and could even have teamed up with their Iraqi counterparts. The problems of the US connection would, however, have been greater than its benefits. Given the considerable unpopularity Washington has earned among the people in the Arab world in general, and Iraq in particular, close proximity with the USA could be a double edged sword—as evinced by the swathe of abductions in 2004, targeting either US nationals, or nationals of countries participating in the invasion, occupation or interim administration of Iraq.⁶⁶

The option of denouncing the USA’s activities in Iraq came principally from either advocates of ‘nonalignment’, or those who have real concern for international law and multilateralism hin international relations, or simply those who are uncomfortable with the growing proximity with the ‘imperialist’ USA (which they love to hate). Skillful use of the issue of Iraq war to gain long-term advantage did not make it into the debate over the issue. If New Delhi were to categorically denounce Washington’s conduct because of its illegality and disregard of multilateralism, it would have been in illustrious company; it would be unlikely for India to pay any major price in either short run or long run since the objection was to be on a matter of principle. But by making its stand clear, India would most certainly have gained in esteem among the authorities in the Gulf as being concerned about the Gulf beyond the access to oil. Even more importantly, by simultaneously asking Saddam to abdicate so that the people of Iraq could be spared the war, New Delhi could also have distanced itself from a ruler who was loved by neither his own people nor anyone else. Such a stand could have ensured continuation of cordial ties with whichever order would eventually arise in Baghdad in the short, medium and long terms—be it dominated by anti-Saddam political figures, or by reformed Ba’ath nationalists.

Interestingly, India is still in a position to benefit from the crisis in Iraq. There is a growing realization in the United States that the Bush administration has handled Iraq with remarkable clumsiness. The 2006 Congress elections proved to be probably the first to be lost by the ruling establishment on a largely foreign policy matter since Vietnam. It was being widely believed that the Iraq study group, led by James Baker (foreign secretary to Bush senior) would suggest an exit strategy for the US to quit Iraq—disengagement from Iraq is supposed to be a matter of ‘when‘, not ‘whether’. Once US troops clear out, and the inevitable blood-letting gets over, it will be business as usual. A considerable lot of reconstruction activity would inevitably follow, much of it would require considerable technology inputs. However, because of the dilapidated state of Iraq’s oil infra-structure, Iraq is unlikely to be a back to its 1989 levels of production and consumption before at least 2010, and maybe even 2015. Thus, with state expenditures being required to be on a less lavish scale than before the first Gulf War, Iraq may choose to prefer slightly less expensive industrial technology. If New Delhi would in such an occasion venture forth in establishing good relations with whichever government comes to power in Baghdad, India might establish a degree of influence in the region that she never previously enjoyed.

Yet another dimension could be opened up if India were to cease being ambivalent. The Gulf region has become the most heavily militarized region of the world in the past two decades and a half, and accordingly has degenerated into potentially one of the more unstable regions of the world in terms of security. Military build-up in the Gulf region was principally a spinoff effect of Iraqi armaments development programme, which in turn was related with the arms race Iraq had with pre-revolutionary Iran. Vis-à-vis the standing armies of both Iraq and Iran, armed forces of the rest of the Gulf states suffer from acute numerical inferiority.⁶⁷ In the 1990s, defence expenditure of even cash-strapped Bahrain was $526.2 million per annum (6.7 per cent of GDP); Kuwait spent $1.6 billion (3.1 per cent of GDP); UAE $1.6 billion (3.1 per cent of GDP). Saudi Arabia, however, is the trailblazer in this respect—it spends $18.3 billion annually (13 per cent of GDP), which is several times over the defence expenditures of even Iraq ($1.3 billion) or Iran ($9.7 billion, 3.1 per cent of GDP).⁶⁸

In the last decade or so, in the light of the disastrous effects of the Gulf War of 1991 on the finances of the region, the GCC has tried to engage the other major power in the Gulf region—Iran—in order to ease the tense security situation. Being a ‘dialogue partner’ of the GCC, and enjoying the confidence of Tehran, New Delhi could be the ideal interlocutor between the two sides. If such a venture is to succeed, Baghdad would also have to be a participant—and even there the good offices of India could be availed. It is unlikely that Washington would permit any military alliance or a security bloc to emerge among the GCC, Iraq, Iran and India in the short run or even in the medium term, because that would surely lead to a diminution of the US influence in the region. But, ever since the magnitude of the debacle in Iraq began to be apparent, pressure had mounted to bring American soldiers home. On top of that, the US failure to condemn Israeli bombardment of Lebanon in a failed attempt to destroy Hizbollah lost Washington whatever good-will it had gained during the administrations of Bush the senior, and Clinton. Thus, there are increasing number of discussions suggesting that in the long run, the USA might want to roll back some of its active military presence in the region.⁶⁹ In such a situation, security cooperation between India and the Persian Gulf might seem a desirable notion.

Conclusion

The Persian Gulf, despite being an immensely resource-rich region in India’s neighbourhood, has hitherto appeared as remote as Mars in the considerations of the Indian foreign policy establishment. Had India’s petroleum imports not originated principally from this region, the Gulf might have featured even less in the Indian horizon of concerns—because no single power from this region was significant enough to be valuable as an ally against Pakistan in the international arena. The ‘Pakistan’ factor preoccupied the foreign policy circles in New Delhi so overwhelmingly that, the region was never engaged with as a region, except as a source of petroleum or useful individual counterweights to Pakistan in the Muslim world. Putting it mildly, New Delhi possibly wasted plenty of opportunities in fifty-odd years for developing links that should have been forged ages ago.

In the 21st century, India is poised on the threshold of new possibilities in the Gulf region. Taking relations beyond steady access to petroleum from the region, India is in a position to develop a deep symbiotic relationship with all the Gulf countries. The foundations of this new relationship would have to be trade and industry, which tend to develop a life and logic of their own that favour close integration among participants. Such integration among close neighbours like India and the Gulf countries could benefit millions of people on either side by stimulating their economies in hitherto uncharted avenues. Also, New Delhi should try supplementing its trademark bilateralist practices, and go ahead with more multilateral engagements whereby a group of countries can be addressed within a uniform body of regulations. Sensitivity about other countries’ relationship with Islamabad has only served to limit the number of countries India could do business with. Multilateral diplomacy would be useful in establishing relation-ship with even such countries in the Gulf that had been thus neglected—the status of ‘dialogue partner’ of the GCC provides precisely such an opportunity. India simply needs to shed her typical response of maintaining a measured distance for all things outside the subcontinent, and be a bit ambitious in its engagement with the region for the promises to be fulfilled.