Kingdom of Saudi Arabia is the largest Arab State in Middle East and after Algeria the second largest in Arab World. The Kingdom is ruled by Saud family which founded the Islamic State in 1932. The country has since been an absolute monarchy governed along Islamic lines, namely under the influence of Wahhabism. Saudi Arabia is sometimes called "the Land of the Two Holy Mosques" in reference to Al-Masjid al-Haram (in Mecca), and Al-Masjid an-Nabawi (in Medina), the two holiest places in Islam.

Its economy is largely backed by its oil industry, which accounts for more than 95% of exports and 70% of government revenue. It is a member of Gulf Cooperation Council, Organisation of Islamic Cooperation, G-20 major economies and OPEC.

India-Saudi Relations:

India has sought to maintain strong ties with Saudi Arabia, an important regional power, with major source of energy resources and trading base in West Asia. Trade has been the dominant factor in India's relationship with Saudi Arabia, with the import of oil being a major component. India views Saudi Arabia as a country with which it can forge security ties in order to deal with terrorism, piracy and criminal elements. Diplomatically, it could be a gateway for India into the wider Arab and Islamic world.

The ties between the two countries have been overshadowed by close relations between Saudi Arabia and Pakistan till 2006. The two found it difficult to forge closer ties earlier given Saudi Arabia’s support for Pakistan both materially and diplomatically. Saudi Arabia supported Pakistan during the India-Pakistan War of 1971.

New era in Indo-Saudi ties

The landmark visit of King Abdullah bin Abdulaziz to India in January 2006 as the Chief Guest of Republic Day celebrations opened a new chapter in the Indo-Saudi bilateral relations. King Abdullah referred to India as his ‘second home’ and signed the ‘Delhi Declaration’, first such bilateral document ever signed by a Saudi King which provided a comprehensive road map for the bilateral relations.

The cornerstone of the strategic partnership between India and Saudi Arabia in recent years has been the 2010 Riyadh Declaration. Signed between King Abdullah and Indian Prime Minister Manmohan Singh, the declaration set forth a roadmap for a closer Saudi-Indian bilateral relationship

Grand Imam of the Holy Mosque of Makkah Sheikh Abdul Rahman Al-Sudais paid a five-day visit to India in March 2011.

The first indicator that India and Saudi Arabia were serious about cooperating on defense matters came in 2012 when the first meeting of the India-Saudi Arabia joint committee on defense cooperation took place in New Delhi.

MajorBilateral Agreements/MoUs

• Bilateral Promotion and Protection of Investments (BIPA)
• Agreement on Avoidance of Double Taxation and Prevention of Tax Evasion (DTAA)
• MoU on Combating Crime
• Extradition Treaty and Agreement on Transfer of Sentenced Persons

In February 2014, India and Saudi Arabia signed a Memorandum of Understanding (MoU) on Defense Cooperation which will allow exchange of defense-related information, military training and education as well as cooperation in areas varying from hydrograph and security to logistics.

Economic Ties:

Saudi Arabia is the 4th largest trade partner of India and the bilateral trade wasUSD 36 billion in 2011-12. The import of crude oil by India forms a major componentof bilateral trade with Saudi Arabia being India’s largest supplier of crude oil,accounting for almost one-fifth of its needs. Saudi Arabia is the 14th largest market inthe world for Indian exports and is destination of more than 1.86% of India’s globalexports. On the other hand, Saudi Arabia is the source of 6.35% of India’s globalimports.

Nitaqat effect

Saudi Arabia, the world’s biggest oil producer and exporter and a fast-growing economy, has an estimated nine million ‘legal’ expat workers Plus, at least two million illegal workers who do not possess valid papers. Non-Saudis make up nearly 40 per cent of the country’s total estimated population of 290 million. That percentage is a big worry for the government.

Nitaqat (Arabic for ranges or categories), which aims to replace a section of the large expatriate work force in the country with locals, ends on July 3, 2014. The Nitaqat is a carrot-and-stick incentive programme for companies and businesses to hire more Saudis across a spectrum of jobs. It categorises firms into four colour ranges: blue (premium), green, yellow and red. For example, if a company has 40 per cent Saudis on its under-500-member staff, it is in the blue (premium) category and will enjoy privileges in importing foreign manpower.

Nitaqat has a major political element as well -- aimed to forestall a likely ‘youthquake’ in the wake of the Arab Spring. In a country with one of the highest unemployment rates in the world, particularly educated unemployment, Saudi Authorities are worried about frustrations of these youth.

The ‘Saudi-isation’ programme, announced in June 2011 in the wake of the Arab Spring, was to have taken effect in April this year. But King Abdulla decreed a three-month extension.

There are more than two million Indians working, legally as well as illegally, in the kingdom. The authorities find them hard working and disciplined. Most of them are from Kerala.

The illegal workers from India are of two kinds: those who arrived on a ‘free visa’ and those who arrived on a ‘visit visa’ and overstayed. Under Saudi law, every foreign worker has to have a ‘sponsor’; he cannot work for another. A worker hired for a particular job cannot change his profession.

But violations of these rules are common. Most ‘free visa’ (actually, there is no such thing as a free visa) workers are those who have jumped sponsorship and professions, and are hence illegal expat workers.

In the run-up to the deadline, the authorities have also launched a drive against illegal workers.

Future of relations in view of geo-political dynamics

India’s foreign policy in the Middle East continues to remain relatively independent of the region’s geopolitical dynamics. The MoU on defense cooperation with Saudi Arabia comes at a time when India’s relations with Israel and Iran continue to remain warm.

Despite their promise, India-Saudi ties will have to be carefully nurtured. On the bilateral side, the welfare of millions of Indian workers in the Kingdom has to be ensured, especially at a time when authorities in Riyadh have embarked on a major undertaking to generate maximum employment for their own nationals, shrinking job opportunities for expatriates. The future of ties between New Delhi and Riyadh would also have to be insulated from the differing perceptions of the two countries of developments in West Asia. Besides, India has to stay clear of the crossfire between Saudi Arabia and Iran, which are at loggerheads on account of the situation in Syria, and whose hostility towards each other has acquired a dangerous sectarian dimension in the region. While it bonds with Riyadh, India has an abiding interest in the simultaneous development of its relationship with Iran, which not only is a major energy-supplier but — after the American withdrawal later this year — is bound to play a pivotal role in Afghanistan. Simultaneously, India has no basis to grudge Saudi Arabia’s “all weather” ties with Pakistan, so long as they do not harm New Delhi’s core interests. In fact, distancing itself from zero-sum expectations, India, if invited, can turn its proximity with Riyadh and Tehran to its advantage, by making its contribution in defusing tensions between the two regional heavyweights.

PM MODI’s SAUDI ARABIA VISIT

Prime Minister Narendra Modi’s two day visit to Saudi Arabia on April 2-3, 2016 further bolsters India’s engagement with the Kingdom. Saudi Arabia has remained an important partner for India in the Gulf region. Modi’s visit brings the India-Saudi relationship further closer from where it stood when the Delhi Declaration of 2006 and Riyadh Declaration of 2010 were issued.

In the past, the relationship has been inhibited by a number of historical factors such as the Kashmir issue, Pakistan factor, regional and global politics. In recent decades, with India’s rise as a major player in world politics and economy, Saudi Arabia came to realise the importance of maintaining strong ties with India. India has been a natural choice for an economic and developmental partnership in Saudi Arabia’s efforts to diversify its relationships by engaging various Asian countries. Saudi Arabia’s ties with Pakistan and India’s links with Iran have remained two important factors affecting the India-Saudi Arabia relationship.

The rise of terrorism has been a concern for both India and Saudi Arabia, especially the surge of terrorism in West Asia and beyond since the outbreak of the Arab Spring. Saudi Arabia has been targeted by the Islamic State (IS) militants operating from neighbouring Iraq and Syria. The IS has also declared its intention to capture Mecca and Medina, thereby throwing a direct challenge to the Kingdom. India is continuously suffering from the menace of terrorism perpetrated by Pakistan. Thus, security cooperation and intelligence sharing have also been an important element of the partnership that the two countries are forging. This has led them to sign agreements on intelligence sharing and terror financing during Modi’s visit.

As a result of enhanced cooperation in recent years, bilateral trade has significantly increased reaching around USD 40 billion in 2014-15. India also intends to further promote bilateral trade and widen its scope particularly in the non-oil sectors. Modi, during his visit to Riyadh, encouraged more investments from Saudi Arabia into India. According to the Sovereign Wealth Fund Institute, Saudi Arabia holds the world’s fourth largest sovereign wealth fund with the present holding standing at USD 632.3 billion. India intends to tap into this huge fund by inviting investments from the Kingdom. Saudi investments in India during the last 15 years have totalled only USD 53.37 million, which is far below the potential. Both sides signed an agreement to promote investment and Saudi Arabia has shown interest in investing in India’s infrastructure sector.

Since the outbreak of the Arab Spring, the region has been witnessing turmoil, with political uncertainty and the emergence of new security challenges. Saudi Arabia is a major player in regional politics. It has experienced both internal and regional security challenges in the wake of the Arab Spring. Saudi Arabia favours military intervention in countries like Syria and Yemen, while India calls for restraint and resolution of the crises through dialogue. Despite their political differences over regional issues, both countries are building cooperation on issues of mutual interest such as terrorism, piracy, security cooperation, intelligence sharing, etc. Thus, without being seen as interfering in the affairs of the region, Modi has engaged with the Saudi leadership on the issues of mutual concern.

There is a visible change in India’s priorities in its engagements with Saudi Arabia. Previously bilateral trade and commerce, dominated by energy trade, was the backbone of the relationship. During the last decade, there is an evident shift in India’s approach. India has been trying to move beyond the buyer-seller relationship in the energy sector and laying emphasis on strengthening cooperation in political, security and defence matters. While recent achievements in security and intelligence cooperation have been remarkable, new vistas are also being explored to further strengthen the relationship. Modi’s visit is a reflection of changing India-Saudi Arabia relations.