Diplomatist Magazine Diplomatist August 2018 | Page 17

By Swati Gupta*
Oil: The Crux of Arab-Indian relations
Since 1947, India has tried to maintain
strong relations with Saudi Arabia, an
important state and trading base in West
Asia. Beginning in the 1950s when King Ibn
Saud made a historic trip to New Delhi which
was followed by Prime Minister Jawaharlal
Nehru’s visit to the kingdom in 1956, a
strong foundation for bilateral cooperation
based on mutual respect was created which
continued to be fostered in the years that
foll owed, culminating in Indira Gandhi’s visit
to Saudi Arabia in October 1982 as Indian
Prime Minister.
Her visit was a watershed moment in the
bilateral relationship. During her four-day
visit, Gandhi was accorded a red-carpet
welcome and told that “all of Saudi Arabia
is here to meet you.”
It was during this visit that myths and
perceptions held by most Saudis about India
changed, as Gandhi assured the Saudi king
that Muslims in India were not discriminated
against. It was as a result of this visit that
Saudi Arabia agreed to replace the ad hoc
system of crude-oil supply to India with a
regular, long-term arrangement.
Energy Relations
Energy has been one of the key pillars of
the India-Saudi Arabia relationship. The visit
of King Abdullah to India in 2006 underlined
the importance of Saudi Arabia’s energy
resources to India’s fast-growing economy.
During the visit, the two sides entered into
a Strategic Energy Partnership (SEP) based
on the principles of complementarity and
interdependence. The SEP called for Saudi
Arabia to provide “reliable, stable and
increased crude supply” to India through
‘evergreen’ long-term contracts. Until only
very recently, Saudi Arabia has consistently
been India’s number one supplier of crude
oil, accounting for around 20 per cent of the
latter’s total oil demand.
However, with Iran’s re-entry into the
energy market following the removal of
nuclear-related sanctions and increased
production in neighbouring Iraq, their [Iran
and Iraq] shares of India’s oil imports have
risen, eating into that of Saudi Arabia. In
April 2015, as the competition for market
share under conditions of low oil prices and
relatively weak demand intensified, Iraq
briefl y overtook Saudi Arabia as India’s top
Extraordinary and Plenipotentiary Diplomatist • Vol 6 • Issue 8 • August 2018, Noida • 17
The Future of
Saudi-India Energy
Relationship