The only question is, what took so long?
Saudi Arabia, OPEC’s leading oil producer and rising BRIC superstar India are deepening their energy ties.
India is seeking massive foreign investment of nearly $1 trillion over the next 5-7 years.
Where is such largesse to come from?
Well, on 5 January, at the at the 9th India-Saudi Arabia Joint Commission meeting in New Delhi, Finance Minister Pranab Mukherjee proposed establishing a $ 750 million fund to be set up in cooperation with Saudi Arabia to develop joint of infrastructure, exploration and production of hydrocarbons with Saudi Arabia.
Mukherjee told his audience that the investment fund, "to be jointly set up by the Public Investment Fund, Saudi Arabia, and a counterpart Indian agency, needs to be given high priority as it is mutually beneficial."
As an indication of the high priority India sets on the investment fund, it represents 75 percent of the foreign investment that India is seeking.
Saudi Arabia is the largest economy in the Middle East and posted the best economic performance in 2011 in two decades despite the ongoing global recession. In 2011 Saudi Arabian-Indian bilateral trade was worth more than $25 billion.
Mukherjee commented, "There is a great scope to expand our bilateral trade basket to include non-oil products and we need to mount a concerted effort to enlarge and widen our trade basket. There is immense potential for increasing our trade in services as well. 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. We have specialists in both the upstream and downstream areas, including training, capacity building and research and development. India would be happy to participate in the exploration and production activities with Saudi Arabia in our two countries and also in third countries... The Joint Working Group on Hydrocarbons could explore mutually beneficial bilateral cooperation initiatives."
Underscoring the importance that Saudi Arabia attaches to deepening its ties with India, the 9th India-Saudi Arabia Joint Commission meeting was attended by a 50-member Saudi delegation led by Commerce and Industry Minister Tawfiq Al-Rabiah, his first official visit abroad after he became the minister last month. During their three-day visit, Al-Rabiah’s delegation will discuss strengthening investment and trade cooperation and setting up joint ventures with their Indian counterparts.
Indian officials and businessmen have given high priority to the visit of the Saudi delegation, which includes the top executives of 30 major Saudi companies.
In the wake of 9/11 and the global recession, which began in 2008, Saudi Arabia and other Gulf Cooperation Council states began increasingly to look eastwards for investment opportunities, especially in India and China. New Delhi is seeking to take advantage of the trend to mobilize funds necessary for its infrastructure and service projects. Unscathed by the global downturn, in 2011 Saudi Arabia’s industrial sector achieved a 15 percent growth rate, with the private sector's rising contribution to the Kingdom’s gross domestic product (GDP) reaching 49 percent.
And what is Saudi Arabia looking for in the short term? Well, as Saudi Arabia is home to a two million-strong Indian workforce, Riyadh has asked the Indian government immediately to relax visa rules to boost bilateral trade and investment.
Letting no grass grow under its economic opportunities, Associated Chambers of Commerce and Industry of India (ASSOCHAM) Secretary-General D.S. Rawat said that a 30-member trade delegation from India will visit Riyadh, Jeddah and Dammam during third week of January to meet key Saudi government officials and businessmen. More than 190 Indian companies are currently active in the Saudi market with investments totaling $2 billion, while 55 Saudi companies or joint ventures are currently operating in India with a total investment of $200 million.
We will leave the last word on the potential for bilateral trade growth to India’s Commerce, Industry and Textiles Minister Shri Anand Sharma, who after meeting with Al-Rabiah told journalists, “The economic ties between India and Saudi Arabia would constitute a very solid foundation for the development of a strategic partnership. While the trade ties at present are already quite substantial, there exists immense potential for taking the bilateral trade relations to the higher level.”
Needless to say, neighboring energy-poor Muslim Pakistan will be watching the developments very closely, as its Hindu nemesis draws closer to the government of “The Land of the Two Holy Places” in a “strategic partnership.”
Hardly a recipe for regional stability.
By. John C.K. Daly of Oilprice.com