MBS to visit India and Pakistan

Saudi Arabia’s Crown Prince Mohammed bin Salman is expected to announce investments in energy and infrastructure during a visit to India and Pakistan in coming days, as part of his efforts to wean the Saudi economy off oil exports.

Background

Mohammad Bin Salman is the Crown Prince of Saudi Arabia. He is currently serving as the country's deputy prime minister and is also chairman of the Council for Economic and Development Affairs, chairman of the Council of Political and Security Affairs, and minister of defence.

He has led several successful reforms, which include regulations restricting the powers of the religious police, and the removal of the ban on female drivers. Other cultural developments under his reign include the first Saudi public concerts by a female singer, the first Saudi sports stadium to admit women, an increased presence of women in the workforce, and opening the country to international tourists by introducing an e-visa system in which can be now easily issued for foreigners from the Internet to attend events and festivals.

Relations between India and Saudi Arabia are generally strong and close, especially in commercial interests. Indo-Saudi bilateral trade reached US$ 27.48 billion in the financial year 2017–18, up from US$ 25.1 billion in the preceding year. Saudi Arabia's exports to India stood at US$ 22.06 billion whereas India's exports were US$ 5.41 billion.

Relations between Pakistan and Saudi Arabia are historically close and extremely friendly, frequently described by analysts as constituting a special relationship. Despite Pakistan's close relationship with Iran and Saudi Arabia's even closer relationship with India, Pakistan has been called "Saudi Arabia's closest Muslim ally."

Analysis

Prince Mohammed is expected to sign agreements, mostly linked to a refinery and the power sector, during the trip to Pakistan on February 15; and he is expected in New Delhi the following week. He will be visiting along with leading Saudi businessmen, at the invitation of Prime Minister Narendra Modi, India’s foreign ministry said.

The memorandums of understanding will include renewable energy projects and investments in petrochemicals and mineral resources, Saudi state news agency SPA said.

Pakistani Prime Minister Imran Khan was among a handful of leaders who attended an investment conference in Saudi Arabia in October, an event boycotted by many companies and world leaders in protest over journalist Jamal Khashoggi’s killing.

PM Modi met the prince in November 2018, when they were both in Argentina for a Group of 20 summit. Saudi Arabia is India’s top supplier of crude oil but the two countries have expanded ties beyond energy, and their governments have agreed to build a strategic partnership, the foreign ministry said. A statement cited cooperation in areas including energy security, trade and investment, infrastructure, defence and security.

India is expecting Prince Mohammed to announce an initial investment in its National Investment and Infrastructure Fund (NIIF), a quasi-sovereign wealth fund, to help accelerate the building of ports and highways, an Indian official said. Saudi state media said Saudi officials will discuss an investment in NIIF.

Saudi Arabia has also flagged a desire to invest in India’s farm sector, with products to be exported to Saudi, another official at the trade ministry said. However, progress on a $44 billion refinery that Indian state-run oil companies agreed to build with Saudi Aramco on India’s west coast has been held up by strong opposition from mango farmers, who will lose their land.

Since taking office in 2014, Modi has sought to use India’s fast-growing economy to attract more investment from Saudi Arabia and other Islamic nations.

As a fellow Muslim country, Pakistan has long maintained strong ties with Saudi Arabia. In late October 2018, Riyadh offered Pakistan a $6 billion loan to help keep its ailing economy afloat. Saudi Arabia has also announced plans for a $10 billion refinery and petrochemical complex at the coastal city of Gwadar, where China is building a port as part of its vast Belt and Road initiative.

Saudi state news said Saudi officials will discuss investments with China, South Korea and Indonesia, in sectors including healthcare and telecommunications, without giving further details.

Assessment

Our assessment is that MBS’s visit to the Indian subcontinent should result in net economic gains for both countries. India will gain on the energy, technology and refineries sectors, whereas cash-strapped Pakistan will receive substantial and crucial FDIs, debt relief and trade pacts. We believe that MBS’s visit will enhance bilateral cooperation between India and Saudi Arabia on the trade and technology sectors. 

Image Courtesy: Prime Minister's Office, Government of India