Prime Minister Modi singularly deserves the credit for transforming India’s relationship with the Middle East. Since his first visit to the UAE in 2015 after a gap of 34 years by an Indian Prime Minister to his latest official visit to Abu Dhabi on July 15th while returning from France, India’s engagement with the country grew phenomenally. PM Modi was received by Crown Prince Khaled bin Mohamed Al Nahyan signifying the importance UAE attaches to India. Indeed, on PM Modi’s landmark visit in 2015, UAE announced its decision to allot land for the construction of a temple in Abu Dhabi.
Cognizant of
the realignment underway in the region and focused efforts of the countries in
the middle east to diversify their diplomatic engagement, Modi made a quick
stop over at Abu Dhabi. Amid the decline of the US influence in the region and Beijing’s
concomitant attempts to expand its economic and diplomatic footprint, New Delhi
is also stepping up its overreach with the region. India has huge stakes in the
region due to her diaspora, energy reliance, trade, and investments. Of the 9
million people in GCC countries, 3.5 million Indians are in UAE forming the
most important and strongest pillar of the India-UAE relationship.
India’s
extensive overreach and engagement peaked in the last 8 years of the Modi
government’s tenure and rejuvenated the ties. In 2017, both countries elevated
the ties to Comprehensive Strategic Partnership when the Crown Prince of Sheikh
Mohammed bin Zayed Al Nahyan, in short MBZ, graced the Republic Day
Celebrations when the UAE army contingent marched along with Indian troops. The
frequent exchange of high-level visits has energised the ties which are
tremendously progressing on all fronts. Further cementing these ties, brushing
aside the protestations from Pakistan, UAE extended the rare honour of inviting
the then Indian Foreign Minister Sushma Swaraj to address the Foreign Ministers
meeting of OIC (Organisation of Islamic Countries) states in March 2019.
UAE is the
third largest trade partner of India registering bilateral trade of $85 billion
as of 2022-23. It is the fourth largest investment partner of India and the
first foreign country to invest in Jammu & Kashmir. In March 2023, Dubai’s
Emaar announced $60 million shopping and office complex in Srinagar. To
reinforce investments between the two countries Abu Dhabi Investment Authority
(ADIA) is planning to set up an office in Gujarat International Finance-Tech
City (GIFT) City.
India is the
first country UAE has signed the Comprehensive Economic Partnership Agreement
(CEPA) which came into force in May 2022. Since then, there has been a 15%
increase in the trade and inching close to the set target of $100 billion in
bilateral trade by 2025. CEPA has a unique record of being concluded in the
shortest time frame. Buoyed by this success, UAE ratified with Israel
subsequently.
In addition
to deepening economic cooperation, India and UAE are now collaborating in the
plurilateral format, I2U2 (India, Israel, UAE and the US) and India-France-UAE
trilateral relationship. The trilateral dialogue has agreed on a framework of
cooperation in defence, environment, energy and people-to-people ties. Forging
maritime cooperation, India, France and UAE held maiden joint exercises in the
Gulf of Oman last month. Another mini-lateral with a focus on connectivity and
infrastructure recently took off when the NSAs of India, the US, UAE and Saudi
Arabia met in Riyadh.
With an
emphasis on food security, UAE has announced an investment of $2 billion to
develop a series of “food banks” under the I2U2 pivoted on the pillars of economic
and technological cooperation. While India caters for food security, UAE is a
vital partner for India’s energy security. UAE’s ADNOC (Abu Dhabi National Oil
Company) is part of SPR (Strategic Petroleum Reserves)1.
As part of
energy cooperation countries agreed to increase investment in the SPR program
and extend it to green hydrogen, solar energy, and grid connectivity. Countries have agreed to strengthen maritime
cooperation, and connectivity, and enhance defence exchanges, training, and capacity
building. and health sector cooperation
bilaterally and with third countries2.
Post Article-370
abrogation, when Pakistan urged OIC to up the ante against India, UAE
categorically stated that Kashmir is India’s internal issue. UAE backs India’s
Comprehensive Convention on International Terrorism (CCIT) and together during
Modi’s current visit sent a strong and indirect message to Pakistan on
harnessing terrorism. Leaders emphasised the importance of promoting peace,
moderation, coexistence and tolerance and called for renouncing all forms of
extremism, hate speech, discrimination and incitement.
Both
countries are currently playing significant global roles with India’s G20
Presidency and UAE’s COP28 prominently promoting the Global South interests.
India hosted the Voice of Global South Summit while UAE through COP 28, “COP in
Action” is emphasising on impact of climate change on developing countries that
constitute the vast majority of Global South. Indeed, India is setting the tone
for CoP28 through G20 ministerial meetings. UAE is a special guest at G20
meetings. PM Modi reiterated a personal invite to MBZ to attend the G20 leaders
summit in September.
Leaders have
issued a joint statement on Climate Change highlighting the importance of
Global Stocktake (GST) and the indispensability of developing a Global Goal on
Adaptation (GGA). They called upon the developed countries to fulfil the $100
billion delivery plan to finance the climate adaptation plans of the developing
countries. India extended its support to UAE for the successful conclusion of
COP283. PM Modi met Dr. Sultan Al Jaber, President
designation of CoP28, and Group CEO of ADNOC and highlighted India’s climate
change initiatives- Coalition of Disaster Resilient Infrastructure (CDRI),
International Year of Millets, and Mission LiFE (Lifestyle for Environment).
Leaders
oversaw the signing of three MoUs including those on establishment of a
framework to promote the use of local currencies, interlinking payment and
messaging systems and to start a campus of IIT Delhi at Abu Dhabi. This will be
the second IIT campus abroad after the latest one in Tanzania.
In a huge
fillip to trade in local currencies, India’s RBI has signed an MoU with the
Central Bank of the United Arab Emirates to lay down a framework called the ‘Local
Currency Settlement System’. This is an attempt to move away from the dollar. But these isolated arrangements which can
hardly dent the dollar unless adopted by a huge block can’t be summarily termed
as de-dollarization. Hence the US shouldn’t be wary of this development. By and
large, the pursuit is in its infancy given India’s trade making up for a mere
2% of the global economy.
Substituting
the use of the dollar with local currency, India is slowly advancing the UPI or
RuPay or Rupee Switch and preparing the ground for internationalising Rupee. As
of now, 18 countries obtained RBI’s nod to trade in the Indian rupee which
includes- Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius,
Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania,
Uganda, and the UK4. France and UAE have accepted
rupee-denoted trade, UPI and RuPay. India has just initiated talks with
Indonesia on UPI payments.
NRI from 10
countries- Australia, Canada, Oman, Qatar, UAE, US, UK, Singapore, Hongkong and
Saudi Arabia can receive or send money in Indian rupees and make payments using
UPI with their international numbers5. All these point to
India’s attempts to make the Indian rupee internationally tradable.
Dirham became
the unofficial dollar for Indian oil dealers to trade with Russia in the wake
of Western sanctions against Russia over the Ukraine conflict. RBI’s new
arrangement of payment will make the trade simpler. Dirham emerged as an
alternative to the Rupee trade with Russia. After Switzerland joined the
sanctions regime against Russia, the global trading ecosystem was forced to
shift to a neutral place for an uninterrupted oil flow.
Consequently,
Dubai's free zone has emerged as the new hub for Russian oil trading. Russian
oil traders started registering with Dubai Multi Commodities Market becoming
the new centre for Russian oil trading. Additionally, the absence of personal
tax favourably disposed Russian traders to Dubai. Encapsulating this new
geoeconomic shift, the Financial Times column, “Dubai is the new Geneva”6
highlighted the rising prominence of UAE, which is now a major trading location
for gems, gold, diamonds, and agricultural commodities like tea and coffee.
UAE’s banking services, modern infrastructure and business-friendly regulations
are turning it into a vibrant trading hotspot for global merchants.
The Western
sanctions are designed in a way to prevent complete supply disruptions of oil
within an inbuilt caveat of fixing a price cap on Russian oil which ensured
reduced oil revenues to Moscow. Trading Russian oil from UAE is not illegal. Russian
trade dealers are hiring non-Western shipping and insurance agencies to escape
sanction threats. Endowed with modern and largest storage facilities Dubai free
zones are well-positioned to become the most thriving global trading hub even
after the Russian oil boom wanes. India hasn’t clearly lost sight of UAE’s
burgeoning rise as a trading hub. As India continues its economic and political
ascent a convergence of cooperation with India can be mutually beneficial.
Ostensibly,
the framework of trading the local economies can over a period of time be a
real game-changer. Moreover, the strategic convergences over maritime security
and the commitment to promote peace, stability and prosperity can strengthen
the partnership. The Middle East once dominated by the US is witnessing major
realignment with countries seeking new partners to diversify their relations.
Dispelling diplomatic inertia, India is constantly renewing its ties with
partners and widening the gamut of cooperation. India’s exemplary outreach to the
Middle East is a case in point for New Delhi’s evolving foreign policy.
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