CIAO DATE: 01/03

India Plays Both Sides In The Middle East

Willard Smith and Teresita C. Schaffer

The South Asia Monitor
Number 28
December 1, 2000

The Center for Strategic and International Studies

 

In the past year, India’s economic and security ties with Israel have made remarkable strides, while its political relations with Arab countries have drifted. On the other hand, growing oil trade and substantial remittances from Indians living in the Gulf have made India and the Arab states even more economically intertwined. India’s growing energy needs make energy trade one of the key elements in its security and economic health. While some BJP-friendly thinkers see India’s future in a strategic relationship with Israel and Japan, a more likely Indian approach will involve concurrent efforts to build ties with Israel, Iran and the major Arab countries.

Israel: hot new friendship: During the independence movement, Nehru and Gandhi rejected the Zionist claim to Palestine. When the Israeli state became a reality, Nehru viewed Israel as an imperialist creation, and another sectarian state like Pakistan. The BJP and its predecessors in the Hindu nationalist movement saw Israel in a different light, as a fellow struggler against Muslim militancy. But the Nehruvian perspective dominated Indian intellectual circles for decades. More pragmatically, India needed Arab oil. It may also have hoped, however vainly, that pro-Arab policies would earn it some sympathy on the Kashmir issue.

The end of the Cold War, the upheavals of the Gulf War, and the post-1990 Middle East peace process changed Indian thinking. India wanted to be part of the opening of formerly Soviet Central Asia and to engage itself in some of the region-wide aspects of the Middle East peace process. This set the stage for India’s 1992 decision to establish full diplomatic relations with Israel. New embassies in Tel Aviv and Delhi were followed in short order by high level political contacts and reciprocal visits by senior defense officials, along with reported contact between the two intelligence services.

This trend has strengthened in the past twelve months, under the BJP government. This year Home Minister Advani, Foreign Minister Jaswant Singh and West Bengal Chief Minister Jyoti Basu have paid visits to Israel, with a visit by Defense Minister George Fernandes slated for late November. At the diplomatic level the two countries have initiated a formal dialogue on counter-terrorism. A team of security experts from Israel was reported in the press to have been touring Jammu and Kashmir and parts of embattled Northeastern India.

Burgeoning defense ties: In October, Israel announced that it was lifting its self-imposed ban on export licensing approvals to India. Since then, a number of high technology deals have been discussed. Examples include the Phalcon aerial early warning radar system and the Green Oren anti-missile radar system. Both these systems, and potentially many others, involve technology over which the U.S. asserts a requirement to license exports from Israel, an issue that needs to be dealt with if major sales are to take place. (Israel recently withdrew a proposed Phalcon sale to China after strenuous U.S. objections.) Israeli sources have also said they would sell remote-controlled surveillance aircraft to India. In addition, there are reports of Israel performing upgrade servicing on some of India’s Russian-built equipment.

It is not clear how far the defense trade relationship will go. Economic pressures and the desire to maintain a meaningful relationship with Russia will undoubtedly send the Indian military back to Moscow for much of their major foreign procurement. Indian defense scientists have always had a strong preference for developing their own technology-however long it took-rather than buying it off the shelf. But Israel may become an important “niche” supplier, and should India decide to accelerate its military upgrade, Israel would probably participate in the surge of foreign procurement that would require. Collaborative research and development is another potentially important area. Israel had to scrap development of the Lavi fighter in 1987 due to financial constraints. India has been working on its own light combat aircraft since 1983, and faces development delays and budget problems as well.

Indo-Israeli trade quintupled from $202 million in 1992 to nearly $1 billion this past year. India’s booming information technology industry may find useful collaborations in Israel, and Israel’s success in arid zone agriculture may also offer some avenues for cooperation.

With the Arabs, strong economic links: On the Arab side, India’s economic links, always important, have grown in the past year and are likely to continue doing so. In the next decade, India is expected to be the source of the second largest increase in energy demand in the world, after China. Most of its oil comes from Saudi Arabia, the U.A.E., and Kuwait. Total oil imports are expected to increase from $6.4 billion last year to $8.5 billion this year, close to one-fourth of their import bill. India’s dependence on foreign oil to meet its energy needs have increased from forty percent in 1985-86 to sixty-six percent in 1999 and this trend will only increase as domestic reserves begin to decrease. Trade with the Persian Gulf states, an increasingly important export market, stands at around $10 billion a year. And the Gulf is still an important source of offshore employment for Indians, with an estimated 3.8 million Indians working there and remitting some $6 billion in 1999-2000.

India recognizes that its energy needs will require expanded and diversified foreign sources of supply. India’s government-owned Oil and Natural Gas Corporation (ONGC) is expanding its involvement in overseas exploration and production. It has been negotiating for partnerships in Yemen, Tunisia, Iran and Iraq, but its highest profile and most advanced operations are outside the Middle East-Central Asia, Vietnam, Sakhalin Island, and Malaysia. India has also been developing sources of natural gas supply, through LNG contracts with Qatar and others. It hopes that Bangladeshi policy will change to permit gas imports from that country. There has been much speculation about gas from Central Asia, but this would require either a pipeline through Iran or one through Afghanistan and Pakistan (see below). However, even if the diversification efforts are successful, oil will be critical to the Indian economy, and the Persian Gulf will remain India’s dominant supplier of oil for a good many years to come.

Political drift: India’s political ties to the Arab countries are not as strong as one might expect, given this level of economic interdependence. India has made some effort to maintain its links to the Muslim world. Its voting record on Middle East questions in the United Nations is still consistently pro-Arab. Advani and Singh both called on Yasser Arafat while on their trips to Israel. However, India’s reaction to the recent Arab-Israeli violence has been relatively muted.

Iraq, traditionally one of India’s closest friends in the region, has been receptive to India’s efforts to keep in touch. In September 2000, Indian Minister of State for External Affairs Ajit Kumar Panja headed a business delegation to Iraq. Panja called for an end to sanctions and affirmed that stronger ties with Israel would not be at the expense of the Arab world. A return visit by Iraqi Vice-President Taha Yassin Ramadan is taking place with considerable fanfare this week. (Reports in Israel that India would be buying surveillance aircraft were awkwardly timed to coincide with his visit.) Both ONGC and India’s private sector energy companies such as Reliance are keenly interested in working in the Iraqi oil sector, and India has little enthusiasm for anti-Iraq sanctions.

India has received increasing criticism for its closer ties with Israel. A concrete sign of Arab displeasure was the abrupt last-minute cancellation of Foreign Minister Jaswant Singh’s visit by the Saudis on the grounds that it conflicted with a meeting with the Presidents of Egypt and Syria, which, in fact, did not take place until a number of days later. The Organization of Islamic Conference (OIC) at its November, 2000 summit requested that the U.N. Secretary General name a special envoy on Kashmir, another decision distasteful to the Indian government. India’s reaction to these events has been to note the many countries – including the U.S. – that have good relations with both Israel and the Arab countries. The government will undoubtedly be trying to mend fences, but there is a sense of drift.

Iran: moving closer: India has been putting considerable effort into its relations with Iran. Jaswant Singh visited Tehran this spring, and in November, India hosted a number of high-level officials at the Iran-India Dialogue Conference. India and Iran are also both upset with the activities of the Afghan Taliban and Pakistan’s relations with the movement. On the economic side, there has been much discussion of the possibility of a pipeline for gas and/or oil from Central Asia through Iran to India, either through Pakistan or under the sea. India is most reluctant to route its energy supplies through Pakistan, and the undersea route faces formidable technical challenges. However, even a pipeline terminating on the Iranian coast could be an important element in broadening India’s energy supply. Iran is already India’s most significant non-Arab source of imported oil, with 1999 imports at $780 million.

A balancing act: Some Indian commentators portray India’s ties to the Middle East as a classic reversal of alliances, with a new strategic alliance among India, Israel and Japan forming the skeleton of a “China containment” strategy. According to this view, India’s defense ties with Israel will protect India’s energy sources in the Middle East, and relationships with the countries on China’s periphery will deter threatening moves from Beijing.

While the pattern of India’s ties in the Middle East has changed significantly in the past decade, this analysis overstates the importance of the Indo-Israeli connection, and understates the risk of an Arab backlash. India’s ties with Israel may well continue strengthening, especially if more defense deals are completed. However, India’s relationships in the Middle East need not be a zero-sum game. Within the Arab world, the countries of greatest importance to India have shifted: Egypt is somewhat less important to India than it once was; Saudi Arabia, the Gulf states and Iran are more so. Further diplomatic engagement with the Arabs is key, as is building bridges with issues of mutual concern – the threat of terrorism and the security of the largest oil-producing region in the world.

As long as relations between India and Pakistan are volatile, India’s Middle East policy must also deal with Pakistan’s efforts to shore up its support in the region. We will be exploring the relationship between Pakistan and the Middle East in a future issue.