External Affairs

India Needs a Comprehensive Strategy for the Gulf, Not a Piecemeal One

Prime Minister Narendra Modi with Crown Prince Mohammed bin Zayed al Nahyan of Abu Dhabi during the latter's visit to India. Credit: PTI

Prime Minister Narendra Modi with Crown Prince Mohammed bin Zayed al Nahyan of Abu Dhabi during the latter’s visit to India. Credit: PTI

The three-day visit of Sheikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, to India was treated as a state visit although the Ruler of Dubai is actually the Vice President and Prime Minister, while his own brother Sheikh Khalifa is the President. This was a welcome gesture as Sheikh Mohammad wields de facto power in UAE and will one day succeed his considerably older half-brother as President.

He was last in India in 2003, when I was ambassador to the UAE and a year before he became the Crown Prince. The invite then had gone from the external affairs minister Yashwant Sinha, who decided to return to Delhi only the morning of formal calls and to host a lunch, thereby missing to connect with the future ruler of UAE over dinner the previous evening. While Sheikh Mohammad met the panoply of Indian leadership, including President APJ Abdul Kalam, Prime Minister A.B.Vajpayee and Defence Minister George Fernandes, a real opportunity to strategically engage UAE was let slip.

Two UAE-based Indian businessmen, whose companies took out full page advertisements in the newspapers this time, were amongst a few Indian entrepreneurs I encouraged to be in Delhi so that they would gain access. In hindsight, they were the major beneficiaries of that 2003 trip as their businesses boomed after their return. But unfortunately, once the UPA government took over in 2004 it fell into the trap of using some of them for keeping in touch with the UAE’s decision makers. The access to highest levels of the ruling families, which had been created by close coordination between the embassy and the ministry withered, and wheeler-dealers positioned themselves as conduits.

Indian air rights ceded

Thus it is no surprise that Sheikh Mohammad felt no need to visit India over the last thirteen years. On the other hand Indian ministers allowed concessions to flow to the Emirates, without seeking countervailing advantage. The Joint statement issued on February 13 talks of UAE as a “dynamic business hub”. Over the last decade, Indian air rights were systematically ceded to Dubai and Abu Dhabi, crippling Air India and allowing two hubs with powerful airlines to emerge in the UAE. The statement adds that civil aviation needs to be further expanded, implying that airlines like Jet Airways, now controlled by Etihad, will be even stronger feeders into UAE hubs.

Both in the August 2015 Joint Statement and in the one issued now, trade targets are set from the current $59 billion to $100 billion by 2020. With the Emirates having created world-class infrastructure and relative ease of doing business the plane is actually tilted in its favour. In fact Dubai residents reveal a massive influx of high net-worth individuals from India to Dubai in the last one-year to escape the extremely harsh money laundering law introduced by the Modi government. Thus, despite joint Commission meetings and a likely Business Council, the Indian strategy should be to directly open up markets in Iran, Iraq and Central Asia instead of piggy-backing on the UAE and letting middlemen suck the profits.

The UAE is an oil-producing nation, its gas reserves consisting of sour gas, which is associated with oil fields, and thus unusable at economic costs. The world may be already in a post-OPEC era with energy sources diversifying and renewable energy in focus. Thus the period for real India-UAE convergence was when Sheikh Mohammed came last time. A case in point is the foot-dragging by ADIA (Abu Dhabi Investment Authority), which controls the UAE sovereign fund, and no visible progress towards, what the Joint Statement calls “the $75 billion target for UAE investments in India’s infrastructure development plans.” If the UAE company Etisalat’s investment in Indian telecommunication partnering Shahid Balwa, who got embroiled in the 2G controversy, is any indication then their investment decisions may be erratic or lack transparency. They normally want the benefit of market forces but also the host country’s sovereign guarantee. What the UAE has offered by way of India creating their strategic oil reserve is a welcome move, though a poor substitute for the promised $75 billion.

The other princes accompanying were two half-brothers, one their minister of interior and the other in-charge of the Crown Prince’s office. Also in the delegation was the Crown Prince of Dubai. Thus the UAE came prepared to keep focus on counter-terrorism, which the BJP government considers a focus area. Also Dubai has outstanding property disputes involving a local company EMAAR’s projects in Hyderabad etc. Dubai is also getting involved in Indian ports, which has been PM Modi’s area of interest in Gujarat.

Close UAE-Pakistan relations

However, two elements create a strategic overhang which cannot be ignored when engaging the UAE. One is Pakistan, which has a special place in the UAE hearts and particularly since the Pakistani army maintains special links with Abu Dhabi and Dubai ruling families. Thus despite effusive calls for non-discriminatory counter-terrorism, Pakistan will get leeway from UAE. Two is the UAE’s paranoia towards Iran and the larger Shia-Sunni contestation that has been exacerbated by US facilitating the nuclear deal leading to the lifting of sanctions. UAE has indicated it may send troops to Syria. Sheikh Mohammad would have set for himself the task of keeping India detached from Iran and as a major factor driving his India outreach. It was exactly the same consideration in 2003, following exchange of visits between Iranian President Khatami and PM Vajpayee, which brought him to India.

Thus once the expensive presents have been unwrapped and examined by the Toshakhana and Indian leaders have had time to reflect, it would help to remember that while PM Modi may have a penchant for theatre, the ruling families of the Gulf conduct a magic show where things defy gravity till they leave and only then do the strings show. What India needs is a comprehensive region-wide policy review and not dalliances with one Crown Prince at a time.

K C Singh is a diplomat and was India’s Ambassador to the UAE

  • ashok759

    With the price of oil falling to one fourth, the economic importance of this region is bound to diminish. It would also affect the flow of remittances at a time when exports continue to disappoint. The two investments listed in the column are examples of poor corporate governance. The magical days of the fabulously wealthy oil sheikhs are over. What India should be mindful of are the terrorist threats that this region continues to spawn and the long term durability of the ruling families.