Opinion: India-UAE - A Budding Affair Powered By Chemistry And Opportunity

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Prime Minister Narendra Modi's recent visit to UAE - his seventh one - has many dimensions. Given India's rise and the governance changes taking place in the Gulf region, especially in the UAE and Saudi Arabia, the political, economic and security environment of Gulf nations has become important for New Delhi.

For India, the UAE is now the bridgehead of its deepening relations with the Gulf region. That the two countries finalised a Free Trade Agreement (FTA) in 88 days is remarkable. This also suggests that for India, an FTA with the Gulf Cooperation Council (GCC) has become secondary in importance. In fact, by signing the FTA with India, the UAE broke ranks with the bloc, a significant decision politically. Both sides saw the bilateral route as more productive.

The geopolitics of the region has been changing too. The perception that the Gulf region no longer has the same strategic importance for the US has grown, with the latter becoming the largest producer of oil in the world since 2018, surpassing Saudi Arabia and Russia. Control over the region's oil resources is thus no longer as critical. Although the US has bases in the area and Iran's nuclear programme and its regional role remains a challenge for it, the Gulf countries are now seeking to reduce their security dependence on the US and forge new partnerships. China has become a major partner and so has Russia. The UAE and Saudi Arabia have joined BRICS as part of the geopolitical balancing that India has been practising.

UAE's Big Vision

The UAE's 'Vision 2030' programme aims to transform the country's economy, promote its global integration and build a diversified, high-value-added economy. It obviously sees India, which is set to become the world's third-largest economy by 2030, if not before, as a partner in realising this vision. The 3.5 million Indians that are already part of the UAE's economic life are relevant in this regard.

To achieve its development plans, the UAE also decided to normalise ties with Israel in 2020 as part of the Abraham Accords. India's strong ties with Israel opened up possibilities of productive trilateral cooperation with the UAE. The I2U2 (India, Israel UAE and US) project emanated from this normalisation. In addition, the India-Middle East-Europe Economic Corridor (IMEC), announced on the margins of the G20 summit in New Delhi in September 2023, centres around enhancing connectivity between India, UAE, Saudi Arabia, Jordan, Israel and Greece in Europe. It was conceived on the assumption of a breakthrough in Saudi Arabia-Israel ties. Unfortunately now, the Israel-Gaza conflict has put a spanner in the works for both these projects.

Interestingly, during PM Modi's visit to the country, an agreement on an Intergovernmental Framework concerning cooperation on the India-Middle East Economic Corridor was signed. This comprises cooperation on logistics platforms and the provision of supply chain services covering all types of general cargo, bulk containers, and liquid bulk. The intention on both sides is to keep the project alive-at least its southern part.

The Oil Factor

The UAE is a significant supplier of oil and liquefied natural gas (LNG) to India, which constitutes another economic bond. India is the third largest importer of oil in the world. Climate change pressures will compel both producing and consuming countries to reduce their reliance on hydrocarbons as an energy source. Oil producers are already devising strategies to build an economic base that no longer depends principally on hydrocarbon resources. A switch to green and renewable energy will become an imperative for all. But for a country like India, reliance on imported oil to meet its rising energy needs cannot be dispensed with in the foreseeable future. This element in India-UAE ties will therefore endure, even as the two countries have plans to cooperate on green hydrogen projects. The UAE's National Hydrogen Strategy is to become a top global producer of the fuel by 2031. India, too, established a National Green Hydrogen Mission in January 2023, with the aim of making the country a hub for the production and export of this resource. The UAE's experience and know-how would help India in that vision, for which an agreement was also signed by the two countries in 2023.

In fact, India and the UAE have also agreed to advance cooperation in solar energy and grid connectivity, and increase investment across the energy spectrum, including in India's Strategic Petroleum Reserve Programme.

Many Firsts

During PM Modi's visit, 10 MoUs and agreements were signed between the two countries. Amongst the most important ones was the Bilateral Investment Treaty, which will not only protect existing investments but will also promote more capital flows between the two economies. Another important deal was on cooperation in the field of electricity connectivity and trade, with an energy security dimension. Clean energy trade and digital infrastructure projects were some other areas where agreements were signed.

The agreement on the interlinking of instant payment systems—the UPI of India and AANI of the UAE—seeks to achieve closer integration between the financial platforms of the two economies. It was agreed upon to interlink RuPay of India and JAYWAN of UAE, and PM Modi and the UAE Emir even witnessed a transaction using the JAYWAN card with its interface with RuPay.

India's Rail India Technical and Economic Service (RITES) and the Abu Dhabi Ports Authority have also joined hands for the development of multimodal logistics parks, which would include economic free trade zones, rail connectivity projects, and related infrastructure services.

That at PM Modi's request, the UAE Emir agreed to allot land for a Hindu temple shows how far the country, a conservative Arab monarchy, is changing its religious and cultural outlook and seeking to send a powerful message internationally of tolerance and respect for all religions. When Erdogan of Turkey has converted the Hagia Sophia, a museum made by Kemal Ataturk as part of his secular drive, the UAE by contrast is sending the opposite message, one of inter-faith harmony. That PM Modi inaugurated the Swaminarayan Temple in Abu Dhabi just a few days after presiding over the “Pran Pratishtha” ceremony at the Ram Temple in Ayodhya carries a very significant political message for the region at large where Islamic fundamentalism, radicalisation and terrorism have been on the rise in recent years. 

The UAE's message of tolerance sends a powerful message to political watchers both in India and abroad who have criticised the BJP government for allegedly promoting Hindutva and suppressing minorities in India. More importantly, a powerful message has gone to Pakistan, which continues its religious tirades on "Hindu India", keeps its terror machinery against India in play, besides destroying Hindu shrines. Relations between the UAE and Pakistan were strong in the past and Pakistan could play the Islamic card against India in the region. Today, Pakistan has been marginalised in the political, economic, security and strategic calculations of the UAE, and even Saudi Arabia relatively, as regards their long-term interests in the sub-continent. 

The UAE has sought to separate domestic controversies in India from state-to-state relations with the country. But it is more than that. The personal bond between PM Modi and the UAE Emir is an important part of the dynamics at play.

(Kanwal Sibal was Foreign Secretary and Ambassador to Turkey, Egypt, France, and Russia, and Deputy Chief Of Mission in Washington.)

Disclaimer: These are the personal opinions of the author.