NEW DELHI - India and Saudi Arabia are
seeking to deepen business ties that span several
sectors including the most crucial of oil and gas.
Saudi Commerce and Industry Minister
Tawfiq al-Rabiah held discussions early in January
with Indian Prime Minister Manmohan Singh, Finance
Minister Pranab Mukherjee, Oil Minister Jaipal
Reddy, Commerce Minister Anand Sharma and Foreign
Minister S M Krishna.
Mukherjee said that
India was keen to invest in the petroleum and gas
sectors in Saudi Arabia, which in turn could look at
participating in Indian
petroleum and gas-based industrial estates,
fertilizer businesses, petrochemical plants and
In an address to the Saudi
Arabia-India Joint Economic Commission, Mukherjee
said, "We hope that the Kingdom of Saudi Arabia
will be able to assist India in meeting its energy
security needs in the years to come."
India-Saudi bilateral trade exceeded US$25
billion last year. India imports almost a quarter
of its crude oil needs from Saudi Arabia.
Mukherjee emphasized that that the trade basket
could easily include more non-oil products. A
30-member high-level Indian trade delegation is
scheduled to follow up the ministerial meetings
with a visit Riyadh later this month.
Mukherjee said a proposed US$750 million
joint fund should be used for infrastructure
development and joint exploration and production
Speaking to this writer
following his meeting with Rabiah, Commerce
Minister Sharma said new initiatives were being
undertaken to identify areas of mutual benefit to
both the countries in the hydrocarbons sector.
"The idea is to amalgamate our expertise
in both downstream and upstream areas with Saudi
Arabia. That is why we are looking at more joint
ventures and tie-ups that will span refineries,
petrochemical projects, oil and gas exploration,"
said Sharma, adding that a joint working group on
hydrocarbons would explore further possibilities.
Sharma said Saudi Arabia was looking to
tap into India's significant expertise in science
and technology, software and telecoms.
India, Saudi Arabia and
Iran Some of the recent efforts by India to
seek out Saudi and other Gulf nations are to do
with the difficulties arising out of oil and gas
trading with Iran, including the chore of routing
back payments to Tehran due to sanctions by
America and the European Union.
have been some practical issues about dealing with
Iran," Sharma said. "The international clampdown
on Iran makes it difficult to do business with the
country. While we are looking at all the options
to make business transactions smooth, the going
has not been easy."
Indian refiners MRPL,
Bharat Petroleum, Hindustan Petroleum, IOC and
Essar are dealing with Saudi Aramco and Kuwait.
Saudi Arabia wants to boost global oil supply,
which Iran is not happy about. Iran supplies about
18% of India's oil imports.
"We do not
want to be caught in a difficult situation as our
energy consumption needs to be fulfilled via
imports of oil and LNG, at least in the short and
medium term. That is the reason we are looking to
diversify our hydrocarbon import base to
Australia, Africa, Middle East and Saudi Arabia,"
India has been under pressure
from Washington to abide by its efforts to squeeze
Iran financially, unlike European nations that
continue to deal with Tehran for oil. While there
is no ban against buying Iranian crude, sanctions
make financing the deals difficult.
is creating uncertainty over proposed US$8 billion
in investments by India's state-owned oil firms
ONGC, IOC and OIL to develop Iran's gas-rich Farsi
block. The US can impose sanctions if investments
by any firm exceed $20 million in a year in Iran's
India's private sector
major Reliance Industries Ltd (RIL), which
operates refineries that sell fuel to Iran, has
already substantially curtailed such exports. RIL
has invested $3.6 billion in US shale assets and
is wary of US political actions.
Indicating a more flexible stance in its
foreign trade policies as concerns mount that
sanctions on Iran will disrupt shipments of
petroleum-related products, India on December 30
lifted an anti-dumping duty on Saudi Arabian
polypropylene. India imposed a 6.5% duty in
November 2010. Polypropylene is a plastic polymer
used in products such as carpets, food containers
and car parts.
Saudi Arabia, meanwhile,
has been more than willing to occupy any trading
and business space that may arise due to Iran
Riyadh has said that it could
more than double the current supplies of oil to
India and sign a 30-year supply agreement, as it
has done with other nations. Saudi Arabia is
India's largest crude supplier followed by Iran
and then Iraq.
Yet, some observers point
out that squeezing out Iran as an oil supplier to
India could pose additional problems. In the
absence of more choice and existence of demand
from multiple markets, Saudi Arabia would be in a
position to dictate oil and gas prices. This would
also further buttress its dominant position in the
It will also introduce a
further element of uncertainty in oil supplies to
India, as Riyadh could call the shots in any
negotiations. Given the tenuous relations between
Saudi Arabia and Iran, the former will only be
happy to make matters difficult for the latter.
Given such equations, India will need to
calibrate its relations with Iran, Saudi Arabia
and the Gulf countries carefully.
Siddharth Srivastava is a New
Delhi-based journalist. He can be reached at
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