India-Gulf Relations beyond Transacationalism

Summary

India is now one of the most sought-after Asian players by energy-producing Gulf countries, as a promising long-term buyer, a provider of a cheap labour force, a reliable maritime security partner, a net supplier of necessary goods, and a potential defence partner. Nevertheless, India has been a reluctant player in the Middle East’s fragile security architecture, staying out of the warring sides in the region’s multiple conflict flashpoints. Since the Arab revolutions, India has faced immense pressure to take a side in the Arab-Israeli conflict, the Syrian civil war, the Libyan crisis, the Qatari-Gulf diplomatic crisis, and the escalating rivalries between Iran and Israel and Iran and the Gulf states. The tedious search for a balancing act has yielded little result. China, meanwhile, has made significant progress in achieving strategic relations with the Gulf nations, at the expense of India’s maritime and trade interests in the region.

India’s key and strategic interests in the region include energy security, maritime security and attracting investments. At the global and regional levels, India’s primary security and trade rivals are China and Pakistan. India seeks close defence and strategic partnerships with Israel, the United States (US), the United Kingdom and Russia. While India’s relations with the West and Israel align with its South Asia and Indo-Pacific security outlook, the Gulf and Arab nations' views of South Asia and the Indo-Pacific are not necessarily in alignment with India's. Since India has shown little interest in defence and military cooperation, Gulf nations continue to view the US, China, Türkiye and Pakistan as key players in the Gulf’s regional security. This makes India’s Gulf relations a complex set of balances where Israel, China and Pakistan remain in equal competition for influence. To avoid these competitions, India has shifted from a regional approach to a bilateral approach in securing strategic deals and mutual agreements. The paper highlights the historical and contemporary context of India-Gulf relations, as well as the challenges these relations face as Gulf nations undergo social and economic transformations. The paper concludes that India’s rivals have gained ground in the region, as India has yet to develop a strategic outlook for its Gulf diplomacy beyond transactionalism.

Introduction

India’s Gulf relations were and are primarily defined by its dependency on energy imports. Minus energy, like other countries, India-Gulf relations would have taken a different direction. India is emerging as one of the most promising countries for the Gulf Cooperation Council (GCC)’s changing strategic landscape, offering a vast energy market, opportunities for direct investment, and support for non-oil economic diversification, along with the supply of skilled and semi-skilled labour. The Gulf countries' massive energy industry has led to significant urbanisation, drastically altering the urban landscape of the region. This became possible only with the presence of 30 million expatriate workers, (2) including nine million Indians in the Gulf. With a strong Indian diaspora, India has received nearly half of the $118 billion in annual remittances from Gulf countries, a slight decline from previous years. (2) Meanwhile, India’s exports to the region have reached $56.3 billion in 2023-2024, up from $27.76 billion in 2020-21, marking the steepest growth of any area in the world. In the same period, India’s energy imports from the region have increased from $59.59 billion to $105.3 billion of India’s total energy import of $157.53 billion in 2022-23. (3) India and the GCC have been negotiating a Free Trade Agreement for a long time, with little progress. India launched, in September 2023, with the help of the US and Israel, one of the most ambitious connectivity projects: the India–Middle East–Europe Economic Corridor. This initiative appears to be a counter to China’s Belt and Road Initiative, of which several Gulf nations are members. On the one hand, India’s Free Trade Agreement negotiations have largely stalled, as the country remains reluctant to sign FTAs with developing economies due to concerns about import inflows.

The Gulf region has undergone significant economic, diplomatic and social transformations over the last two decades, particularly following the failed revolutions that swept the Arab capitals in 2010 and 2011. Then came the disruptive blockade of Qatar in 2017, which weakened regional cooperation within the GCC as Qatar sought urgent supplies from Iran, India, Türkiye and other countries. India called the blockade an internal affair and desired it to be resolved through dialogue. (4) The Qatar blockade helped India to seek a more bilateral engagement, avoiding the complex balancing act. In a bilateral setting, India sought to establish deeper relations with each country in all sectors, particularly in energy and security. This indicates that India has finally prepared itself for a fractured Gulf and has formulated a bilateral approach, rather than the traditional regional approach.

The Gulf countries’ oil and gas rents have started declining amid Western economies’ search for alternative energy suppliers and renewable energy sources. Asian economies have surpassed those of Western countries as the primary consumers of Gulf energy exports, accounting for a total of 70 percent of Gulf energy exports. Nevertheless, there has also been a steady decline in Gulf energy exports to the world, with an 8.2% decline in crude oil exports in 2023. The Gulf countries’ dependency on energy rents makes them highly vulnerable to geopolitical, technological and economic risks associated with the energy industry. They have been pushing for a post-oil economy to reduce their dependency on the rentier economy and expand the non-oil economy. For this, the Gulf countries need long-term energy markets, security from any disruptions, and support for their diversification programmes. Saudi Arabia and the United Arab Emirates (UAE) have heavily invested in non-oil programmes, including the 2030 Economic Vision of Saudi Arabia, launched by the Crown Prince Mohammed bin Salman in 2016.

The energy-led ‘Asia pivot’ of Gulf countries has led to a shift beyond Western diplomatic, security, defence and strategic relations. With declining energy imports from the Middle East, the West and Europe have adopted a bold stance in support of the Israeli occupation of the Palestinian territories and have asked the Middle East to look beyond the two-state solution, including the controversial Abraham Accords. The Biden administration’s rapid prioritisation of Israeli interests (5) has shocked and divided the region, forcing it to search for an alternative security architecture that allows for strategic autonomy, where it can work with both Western and non-Western powers, notably the powerful member states of BRICS, Türkiye, Iran, Pakistan and Indonesia.

In less than five years, China has successfully mediated a peace agreement between Saudi Arabia and Iran. Saudi Arabia and the UAE have ended their feud with Türkiye and have invested in Türkiye’s growing defence industry. There are also growing relations with Pakistan, Indonesia and Iran. In a weaker regional security environment, the Gulf needs Pakistan more than ever amid Israel’s unchecked expansionism. Saudi-Pakistani relations have remained strategic since the Cold War and the Afghan Jihad against the Soviet Union. With the recent India-Pakistan conflict in May 2025, Gulf nations will be even more cautious in dealing with India and Pakistan. Amid a weakening regional security architecture, a push for a non-oil economy, and most importantly, the dramatic fall of the Bashar al-Assad regime in 2024, Gulf states are in search of a new framework to reset their global relations. The hurriedly announced the India–Middle East–Europe Economic Corridor in September 2023 is a perfect example of this search.

While the UAE and Saudi Arabia were at the forefront of the corridor, countries like Qatar, Oman, Kuwait, Egypt, Iran and Iraq showed little interest. The corridor presented two main challenges: first, it required normalisation with Israel, should the corridor end at an Israeli port; and second, it gave the UAE significant leverage over other Gulf countries and Egypt. The three Middle Eastern countries with the largest share in the Mediterranean Sea — Egypt, Syria and Türkiye — were not included in the IMEC project. Soon after the announcement, the Gaza war erupted and delayed the project indefinitely as Saudi Arabia put the normalisation of relations with Israel on hold. Despite much effort by the Trump administration, the Abraham Accords were caught in the crosshairs of the Gaza war. Meanwhile, Egypt and Türkiye have expressed reservations, (6) if not complaints, against IMEC. If implemented without Egypt's inclusion, Egypt is likely to lose significant revenues due to the decline in shipments through the Suez Canal. Iraq and Türkiye have rushed to announce their own Development Road, connecting Basra to Türkiye. (7)

Besides, India’s ambitious Gulf diplomacy also faces stiff competition from two major regional powers: China and Türkiye. China has not only brokered peace between Saudi Arabia and Iran, but it has also signed major cooperation agreements with Saudi Arabia, including Aramco’s $10 billion refinery in Liaoning, China (2023), as well as Huawei’s AI and cloud partnerships with Saudi Arabia. Chinese companies are major partners in Saudi Arabia’s Vision 2030, and Oman’s Duqm port is the main point of the Belt and Road Initiative. China is supplying various drones to Gulf nations, including Saudi Arabia and the UAE. Now, Qatar and the UAE are dialogue partners at the Shanghai Cooperation Organisation. Similarly, Türkiye has accelerated its rapprochement with the UAE and Saudi Arabia, securing several defence supply contracts, including the purchase of Turkish drones. After the reconciliation, the UAE has promised a $50 billion investment in Türkiye. (8) Qatari-Turkish strategic relations also stand out in the entire scramble for the Gulf.

Evidence suggests that many flashy announcements of investments in India have been delayed or under-implemented. Among many reasons is the absence of an investment-friendly legal and political environment. The exit of UAE-based Etislat DB Telecom from the Indian market left behind a negative and discouraging message for foreign investors. (9) Under Indian Prime Minister Narendra Modi, Indian authorities have addressed many issues to provide a more assured environment for foreign investors; however, India’s complex and prolonged bureaucratic hurdles remain a primary concern. According to various estimates, India requires at least $4-5 trillion to achieve the necessary level of development in transportation, healthcare, urban infrastructure, energy, logistics and digital infrastructure. This is a perfect investment opportunity for the rich Gulf sovereign funds, but they need an investment-friendly environment in place. (10)

India-GCC Relations

Since 1947, India’s foreign policy has been shaped by the Indian National Congress-led governments, which were deeply influenced by India’s struggle for independence, its anti-imperialist and anti-colonial sentiments, and the Cold War era. They viewed the creation of the state of Israel within the battle between Western colonialism and the Asian and Arab quest for independence. (11) India vehemently opposed Western military alliances in South Asia, such as CENTO, which included Iran and Pakistan. Nehru said, “I can understand, although I would disapprove of it, military alliances between great powers. I do not understand military pacts and alliances between a huge giant of a power and a little pigmy of a country. It has no meaning in a military sense to me. It has absolutely no sense.” (12) However, with the end of the Cold War, the Soviet Union weakened, and Egypt signed a peace treaty with Israel, shifting closer to the West. This created a new challenge for India, as most of the Arab countries were still against Israel, and India’s closest Arab ally was the first Arab country to recognise the state of Israel. India rushed to develop full diplomatic ties with Israel. This was the beginning of a significant shift in India’s West Asia policy. The Bhartiya Janata Party (BJP) had continually challenged the Indian National Congress, and the post-Cold War transformations strengthened the BJP’s perspective. In its 2004 manifesto, the BJP said, “The time of Indian Renaissance has arrived again. We have set the stage to reclaim our rightful inheritance as a Great Power contributing to humanity’s all-around progress.” (13) The BJP’s view of Israel as well as Arab, Islamic and third world nations no longer follows the idealism of the Non-Aligned Movement. The BJP has been consistently more assertive against Pakistan-based militant groups and wants the Indian government to stop all contact with Pakistan as long as anti-India militant groups remain active there. India hardens its Pakistan policy every time there is a terrorist attack inside India, with a suspicious Pakistan involvement. The 2008 Mumbai attack along with the Pulwama and Pahalgam attacks in 2019 and 2025 have created military tension between India and Pakistan. However, the 2025 air battle marked the most dangerous escalation, prompting serious concern in the US and the Middle East over the possibility of a nuclear conflict.

Pakistan and Gulf air forces have historically maintained good relations, ranging from training to operational cooperation. (14) Pakistan’s nuclear assets remain a critical strategic option for Gulf nations. The Pakistan factor remains the most critical yet undiscussed subject between India and Israel. Some analysts see a direct link between Indian-Israeli relations and the Gulf countries’ support for Pakistan’s nuclear programme. Former Indian Prime Minister Rajiv Gandhi had once called it an “Arab-funded Pakistani bomb”. (15) As foreign policy analyst Vaasu Sharma and political scientist Carmela Lutmar argue, Saudi-Pakistani relations remained a shared concern for India and Israel. (16)

Bilateral Transactions

The overall economic and financial transactions between India and the Gulf countries have surpassed $300 billion, encompassing bilateral trade, remittances and investments. India has emerged as an essential non-oil trade partner. In the UAE alone, more than 35,000 Indians own approximately 69,000 real estate properties, which account for 20% of Dubai's real estate, with an estimated value of $30 billion. (17) In terms of economic and financial relations, the increasing volume of transactions suggests that the future of India-Gulf relations is being shaped, primarily, by the post-oil economy, energy relations, the diaspora, and, to some extent, maritime security. India shows limited interest or competition in the region’s changing and complex security architecture, where China, Türkiye, and Iran have made significant progress. The launch of the India–Middle East–Europe Economic Corridor marks a shift in India's strategic outlook, aiming to counter China’s Belt and Road Initiative. At the same time, India has strongly encouraged the UAE and Saudi Arabia to join BRICS, a bloc that now has surpassed the GDP of the G7 nations. In return, Saudi Arabia and the UAE may support India's efforts to secure either full membership or Observer status within the Organisation of Islamic Cooperation (OIC).

Military and Defence

The prospect of military and defence cooperation between India and the Gulf states has been under discussion for years. While there is growing willingness among Gulf countries to view India as a defence partner contributing to regional security, India has been reluctant to formally engage beyond limited defence exports, though it seeks to expand its defence exports globally. Interestingly, in the post-Cold War era, Gulf states have become increasingly averse to political Islam and violent Islamist groups, many of which are based in Pakistan. Against this backdrop, the 2006 New Delhi Declaration and the 2010 Riyadh Declaration (18) marked a turning point, establishing an extraordinary partnership between India and Saudi Arabia—the first of its kind between India and any Arab nation. A major shift occurred in 2012 when Saudi Arabia extradited to India a suspect wanted in connection with the 2008 Mumbai terror attack. (19) Further signalling flexibility in India's approach to regional dynamics, in 2014, after Pakistan declined to support the Saudi-led war in Yemen, India sent hospitals and medical personnel to Yemen and provided treatment for coalition soldiers in Indian hospitals. Since then, India-Gulf relations have taken on new strategic significance, including the signing of a defence cooperation agreement. The UAE has expressed interest in acquiring Indian air defence systems, such as the Akash and BrahMos missile systems, alongside other forms of security cooperation. (20) With these deepening defence and security ties, India aims to safeguard maritime trade routes, counter the influence of China and Pakistan, and strengthen its naval presence through initiatives like the Indian Ocean Rim Association, where the UAE has emerged as a key player. India has also advanced its Indo-Pacific diplomacy, with Western backing. However, while many in the West expect India to act as a counterbalance to China, India remains focused on achieving greater strategic autonomy in its maritime policy.

India-Gulf Defence and Military Cooperation

Sources: EDGE(21) , Embassy of India in Riyadh(22)  

For India to become part of the region's security architecture, it risks upsetting its delicate balancing act. Over the past few years, India and the UAE have explored options to deepen defence cooperation and investment in the defence sector. However, in the post-blockade era, any overt defence alignment with one side of the Gulf divides risks complicating India's broader regional relations. India has been particularly reluctant to engage in active military cooperation, especially in regional conflicts. Foreign Minister Dr. S. Jaishankar has been one of the strongest proponents of shifting India’s traditional non-aligned foreign policy towards a 'multi-aligned' approach. Within this evolving doctrine, India has gradually upgraded its strategic partnerships across the Gulf. Nevertheless, it remains hesitant to pursue more direct defence or military arrangements in the region. After Pakistan declined to join the Saudi-led military operation against Yemen’s Houthis, India had an opening to recalibrate its approach to Gulf security. Yet, as foreign policy analyst C. Raja Mohan observes, there was no effort in Delhi to develop a more strategic approach to the region where the old political order is breaking down. India's lack of sensitivity to the region's changing political dynamics persists to this day.

Indian Skilled Workforce

The supply of skilled labour to the Gulf’s evolving economies—primarily in non-oil sectors—is a critical need on which Gulf nations rely heavily on India. For various reasons, the number of Chinese and Korean workers remains limited, while the workforce from Pakistan and Egypt has started to decline as their domestic economies grow. Reports indicate that sectors such as IT, artificial intelligence (AI) and machine learning (ML), and data engineering are driving this new demand. (23) These sectors are evolving under the vision of a non-oil economy. As non-oil industries expand, demand is rising for Indian workers in healthcare (particularly doctors and nurses), engineering and technology, IT and software, finance and banking, management, and education. Nearly 30 percent of India’s total workforce is now classified as skilled labour.

Conclusion

India’s rush to upgrade its ties with the Gulf nations is driven by its two strategic objectives: to meet the rising energy demand and to attract investments. India also views the region as necessary for its regional and global security. At the same time, the Gulf nations view India as a promising long-term energy market and a supplier of an affordable, skilled and semi-skilled labour force. They also examine India’s growing technological and defence capabilities, as well as its strategic depth in various global geographies. While they maintained strong relations for their key strategic mutual interests, including energy supply and labour supply, they have been exploring the possibilities of defence and security relations, where their interests converge by and large, but contradict in some areas. While Indian and Gulf views on Israel have fewer contradictions, Gulf-Pakistani relations remain a major source of mistrust. Even though the Gulf nations have de-hyphenated India and Pakistan relations, Pakistan remains an ally, thanks to India’s reluctant approach towards Gulf security and India’s deeper defence cooperation with Israel. While India remains a favourable nation for Gulf countries, China and Türkiye have recently emerged as two active partners in their overall defence and trade profile. The absence of India’s strategic vision for the Gulf, as well as unresolved conflicts in the Middle East, including in Syria, Libya, Gaza and Iran, complicate India’s promises.