Modi-MbZ meet: India has been investing heavily in ties with UAE, and the relationship is paying back in spades

Nobody usually pays too much attention to dry briefings by India’s foreign ministry. The bureaucrats taking questions are Picasso or Matisse in the fine art of parrying queries and downplaying developments. So, when another babu from the South Block told journalists on Thursday, a day before the prime minister’s pit stop in Abu Dhabi en route to his four-nation tour of Europe, that discussions between Narendra Modi and Sheikh Mohammed bin Zayed Al Nahyan will “focus on strengthening energy security, I repeat, energy security, which is an important aspect of our relationship,” that line didn’t create too many waves.

It may have. Critical threats to India’s energy security are endangering hard-earned fiscal stability. This forms the backdrop of Modi’s two-hour stopover at the UAE where the brevity of visit belied its extraordinary strategic density and outcomes.

Six landmark agreements were signed in the presence of UAE president MbZ spanning defence industrial collaboration, strategic petroleum reserves, LPG supply, maritime security and infrastructure, cyber defence, secure communications and fintech, capping a relationship that has become by every measurable metric the most consequential bilateral partnership India holds in the Gulf.

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But the icing on the cake was the strengthening of comprehensive energy partnership. The war in West Asia has dealt a vicious blow to India’s energy security. The rupee is in a free fall, current account deficit is widening, and depletion of forex reserves due to elevated crude prices has reached a level where Modi has been compelled to issue an appeal to Indians to cut down on foreign travel, buying of gold, consumption of edible oil and use of fertilizer in favour of natural farming.

The collateral damage for India from the deadlocked war in West Asia -- with deep regional repercussions -- and a double blockade of Strait of Hormuz through which we import 50 per cent of our crude needs, is becoming too steep to bear. The GCC nations that are indispensable to India’s economic growth, that serve as the primary engine for our energy procurement, trade, foreign remittances and massive capital investments have been the most affected. Consequently, our fundamental strategic interests are imperilled.

On top of it, decades of inertia have left India defenceless against fiscal strain from energy shocks such as the one the world is witnessing now. While the government’s Strategic Petroleum Reserve (SPR) provides only 9.5 days of buffer, commercial inventories give a combined 74-day operational cushion that still falls short of the 90-day benchmark. China, in comparison, has an emergency stockpile of crude of 1.4 billion barrels that covers 100 to 130 days of imports.

This widening gap between India’s energy needs and physical buffer during the world’s worst-ever energy shock that shows no signs of abating leaves us in danger of suffering another balance-of-payments crisis and derailing of economy. That’s why the strategic collaboration agreement signed Friday between Indian entities such as Strategic Petroleum Reserves Limited (ISPRL), Indian Oil (IOC) and UAE’s Abu Dhabi National Oil Company (ADNOC) carries such monumental significance and deserves a detailed unpacking.

Under the agreement, UAE’s state-owned ADNOC will explore a range of opportunities spanning crude, LNG and LPG storage as well as strategic reserves. This includes a potential increase in ADNOC’s crude storage in India up to 30 million barrels, including existing storage at Mangalore and potential new storage opportunities at Vishakhapatnam and Chandikol, according to a statement released by the firm.

The more interesting aspect, however, is that ADNOC is speeding up the construction of a pipeline that finishes at the Port of Fujairah on the Gulf of Oman, the harbour on UAE’s eastern coast. ADNOC already operates a China-built pipeline (the Habshan–Fujairah pipeline) that joins oil fields from deep within Abu Dhabi’s desert fields to international waters without entering the Presian Gulf. The 406-km existing steel pipeline, however, can transfer only 1.5 million barrels per day.

UAE’s oil firm, through the construction of the new pipeline, seeks to boost its capacity to 5 million barrels a day by next year, a strategic gambit aimed at bypassing chokeholds on the vulnerable Strait of Hormuz. By rerouting its fuel flow directly to the Gulf of Oman, Abu Dhabi hopes to insulate regional energy trade from new or escalating geopolitical frictions.

And in so doing, UAE’s new pipeline may directly bolster India’s energy security, insulating New Delhi’s energy imports from maritime toll booths or geopolitical blockades, ensuring an uninterrupted supply even during times of crisis.

UAE’s formal exit from OPEC reinforces this arrangement and dovetails with India’s strategic interests. It frees the Gulf nation from the production quotas previously dictated by Saudi Arabia. Before the exit, Abu Dhabi was capped at a production limit of roughly 3.5 million barrels per day, despite its actual extraction capacity having surged to 4.85 mbd following a $150 billion investment drive by ADNOC, as the Middle East Institute points out in a piece.

For India, the formal exit of the UAE, the fourth largest source of our crude imports, from OPEC is a geopolitical windfall. From the UAE’s point of view, India is a ‘guaranteed buyer’ for its increased output. Therefore, the ISPRL-ADNOC agreement, signed Friday, has a provision for potential crude storage in Fujairah as part of India’s strategic petroleum reserve, alongside LNG and LPG storage opportunities in India, supporting energy security and enhancing the resilience of UAE-India energy supply chains.

There’s more. Modi’s visit also saw the signing of the framework for Strategic Defence Partnership (SDP), under which both sides will deepen defence industrial collaboration and cooperation on innovation and advanced technology, training, exercises, maritime security, etc. The formalization of this framework marks the transition of India’s role from a regional participant to a security provider in the Gulf region. Such a framework is almost without precedent in India’s foreign policy posture and goes to show the depth in bilateral relationship and the enormous trust both sides place in each other.

The UAE framework “does not necessarily lead to the conclusion that we will get involved in particular ways in the conflicts of the region,” as foreign secretary Vikram Misri has clarified. In that sense it is not a mirroring of the Pakistan-Saudi defence pact. It emphasizes defence industrial co-production, technology transfers, and interoperability instead of treaty-based military obligations.

The UAE is today India’s third-largest trading partner, our second-largest export destination, seventh-largest cumulative source of foreign direct investment. No other Gulf state comes close in terms of breadth and institutional depth. The cornerstone of India’s Gulf engagement just became stronger with a clear strategic buy-in from both sides.

(Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.)