In April, the United Arab Emirates (UAE) Minister of State for Foreign Trade, Thani Al Zeyoudi, announced that the recently concluded free trade agreement (FTA) between India and the UAE – the Comprehensive Economic Partnership Agreement (CEPA) – would come into force on May 1. That the deal was completed in less than three months is a testimony to the newly sensitized Indian bureaucratic mindset about diverse diplomatic outreach (from East Asia to Latin America), including non-traditional partners. It also demonstrates India’s changing international economic post-pandemic outlook, as New Delhi emphasizes concluding FTAs as a pathway for greater economic growth and development. Ripple effects from the deal are already showing: India’s Reliance Industries Limited and the Abu Dhabi Chemicals Derivatives Company RSC Limited (TA’ZIZ) have forged a USD 2 billion partnership deal that will produce chemicals within the UAE and bring a host of new opportunities for further industrial and energy cooperation – as well as people-to-people interactions – between the two countries.
Importantly, the FTA draws focus to India’s relationship with the UAE, and its approach towards West Asia in general. This Strategic Insight delves into the topic by exploring what the recently formulated, so-called ‘West Asia Quad’ grouping between Israel, India, the UAE and the US – officially referred to as the I2-U2 framework – means for India’s foreign policy posture, particularly in regards to balancing China’s ardent outreach to the West Asian region. How is the I2-U2 different from the Indo-Pacific Quad, and how will it impact future economic ties between the member states? Further, the paper looks at how, if at all, the new collaboration will impact China’s calculus with Russia, Pakistan and Iran.
India’s changing outlook and West Asia focus
As global geopolitics becomes increasingly complex, India’s foreign policy is focusing on strengthened bilateral and minilateral – which are more informal, issue specific and ad-hoc without a set institutional framework – engagements. India is gearing towards an era where regional states would not be overly dominated by great powers and have greater strategic autonomy. For example, in the economic sphere, post its withdrawal from the Regional Comprehensive Economic Partnership (RCEP), India has been pursuing bilateral engagements with greater alacrity – it has already concluded an FTA with the UAE and an interim one with Australia (full CECA by the end of 2022). Its FTAs with the EU, with which the negotiations – derailed in 2013 due to multiple issues, including tariff rules and market access – resumed in 2021, and the UK, which are expected to be finalized by the end of 2022, are likely to be fast-tracked following the visits of European Commission President Ursula von der Leyen and UK Prime Minister Boris Johnson (both in April).
On the security front too, India has enhanced its active participation in regional and global forums. It has launched several trilaterals, such as with Japan, Australia, France, Vietnam, and others. But one of the most important minilateral engagements for India has been the Indo-Pacific Quadrilateral Security Dialogue (Quad) framework. Over the years, the Quad has evolved as a response to the Asian and Indo-Pacific powers (India, Japan, and Australia), undertaking greater responsibility for their own regional interest in concert with a great power (the US), but without completely kowtowing to US interests. It is not just a tool to counter China (not as anti-China as Beijing repeatedly asserts) but has a wide-ranging ambit from global health and climate change to regional connectivity and security threats. Such smaller groupings are finding resonance because they enable plurilateral arrangements to flourish through common agendas and challenges, allowing for greater consensus and strategic maneuvering. The coming together of Israel, India, the UAE, and the US as a cooperative framework, officially called the I2-U2, in October 2021, is an indication of the success of such groupings, and also highlights India’s resolute focus on its West Asia policy.
Increasingly, India is becoming the fulcrum of Asian and Indo-Pacific geopolitics because of its geography, influence in the neighborhood, rising economic growth, flexible but assertive foreign policy, and its tense rivalry with China. On New Delhi’s part too, over the past decade or so, its ‘Look East’ focus has evolved to an ‘Act East’ Policy, and has further expanded to an Indo-Pacific outlook. India’s ties with Japan, Australia and the US have become a part of this focus. At the same time, India’s efforts to build upon its longstanding eastern policy have been complemented by a ‘Think West’ concept. However, India’s strategic policy westward has been a rather recent maneuver, despite its long-term, deep-rooted connect with the West Asian states since its non-alignment days. Even though the former Prime Minister Manmohan Singh’s administration launched the Look West Policy (LWP), starting FTA negotiations with the Gulf Cooperation Council (GCC) as well as individual GCC member states, the past foreign policy outlook towards West Asia lacked today’s assertiveness. In other words, India’s old order neutrality toward West Asia, which was primarily seen as a valuable source of trade, energy, and investment, lacked strategic calculations.
During the initial years of Modi’s first term, India was looking to “insulate” its interests in West Asia and not create “parallel mechanisms” that could derail its bilateral ties with regional powers. Toward the latter half of his first term, however, India started to ‘Think West’, no longer willing to be a passive player and realizing that the changing developments in the region, especially the growing US desire to extricate itself from the Middle East, were an opportunity to not just find areas of synergy but also be part of the normalization process in West Asia.
Against this scenario, the formation of the so-called West Asian Quad led by the West – for now dubbed an “international forum for economic cooperation” – is a natural progression of India’s West Asia focus, adding to Modi’s Look West. It also adds to India’s increasing ties with the Gulf states, particularly the UAE and Israel, post Modi’s ascension to power and India’s growing economic and defense convergence with the US in recent years.
The route to I2-U2: A future restructuring of MENA?
A significant factor in the development of a regional cooperative mechanism in West Asia is the Abraham Accords (2020) – a product of the US’s push to reduce dependencies enabled by the regional states’ inclination to develop local connections – which were crucial in normalizing relations between Israel and the UAE. Notably, Iran and Palestine, the states in the center of the Middle East conflict, are not part of the deal, which could bolster resistance groups like Hamas and Hezbollah, even though experts have contended that diplomatic outreach and less American intervention offer a better chance at rapprochement than continued disengagement.
India’s addition to the mix will no doubt accelerate the minilateral dynamics into what has been aptly referred to as the “Indo-Abrahamic” order. The new geometry in the region provides India an avenue to take its LWP into a more action-oriented Act West Policy structure. Similar to the Act East Policy (AEP), such an Act West overture must become more ingrained as a formal policy in Indian diplomacy; at present, the terms ‘Look West’ and ‘Act West’ are used interchangeably. The I2-U2 will allow India to build outreach in West Asia akin to its approach in East Asia, which saw a gradual and definable shift from Look East to Act East.
Notably, strategic security and deterring authoritarian actions – as seen with the Indo-Pacific Quad’s focus on China – is not within the immediate ambit of the newly formed grouping. Nonetheless, keeping in mind China’s rapidly growing economic footprint and political clout in the West Asia and North Africa region, containing rapidly expanding Chinese influence in the region will remain an objective for both India (in keeping with its recalibrated threat perception that focuses on China) and the US in this partnership. Moreover, since the grouping’s inception, the four foreign ministers have already discussed joint infrastructure projects in several areas including transportation, technology, and maritime security in their first meeting. Given the current global (the war in Ukraine and China-Russia “no-limits” friendship) and local (an antagonistic Iran tilting toward China) circumstances, it is clear that strategic deterrence will be a core agenda soon – provided the synergy between the four states takes off – and will draw from parallel growth in ties of competing powers with states like China and the US.
For India, such a dual-pronged effort with the US will be an added signal of Washington’s trust in Delhi as a strategic partner and allow further development of the India-US global partnership, with synergy in both West Asia and the Indo-Pacific. Indeed, the creation of the I2-U2 that seeks to expand “economic and political cooperation in the Middle East and Asia” highlights that the intent of the US to initiate a potential geographic restructuring of the region from Middle East and North Africa (MENA) to Middle East and Asia, and embrace India within its Asia pivot, has long been an elusive strategic bet that is perhaps starting to pay off.
Nonetheless, the comparison of the I2-U2 with the Indo-Pacific Quad is premature. Not every permutation between four states can become ‘the Quad’ unless the states in question have a meaningful dynamic or synergy that is propelled by strong common interests and can sustain relevance in difficult periods, which can only be assessed over time. The Quad, too, has evolved over time; its first outing remained a loose grouping until it disintegrated in 2008 and regained footing in 2017 with the assertion of the universal values-based free and open Indo-Pacific concept. Today, ties between the Quad states are strong enough to successfully tide over speculations of rift, especially during the Russia-Ukraine crisis when India’s posture differed significantly versus the other three partners. Similarly, the West Asian Quad is presently a rather abstract grouping that must build upon the bilaterals between the four states in order to successfully institute itself in the region. The I2-U2 cooperation framework, too, will thus need a stronger common ethic – driven by a stronger contingency plan of action against regional threats – to help it coalesce as a long-term solution for deep-seated (trans)regional differences.
In perspective: India’s relations with UAE and Israel
The I2-U2 further cements and modernizes India’s decades-old economic engagements with the region. The Gulf Cooperation Council (GCC) – comprising Saudi Arabia, Qatar, Kuwait, Oman, Bahrain, and the UAE – is one of the largest trading partners of India, with substantial oil and gas reserves to fulfil India’s growing energy needs. This becomes especially important in light of the sanctions against Russia that are threatening to undermine India-Russia energy and defense trade. As the UAE (with Saudi Arabia) seeks to lead the way for Gulf states to move toward a post-oil period, the Indian market offers itself as an appealing option, both as an export destination and an overall investment destination, owing to its large energy needs in industrial sectors as well as growing population. India’s recently concluded CEPA with the UAE will allow for a smoother bureaucratic process, clear rules on trade, lower tariffs, better procurement opportunities, and enhanced market access. India’s first comprehensive trade pact in a decade, the CEPA agreement with the UAE promises to boost trade up to USD 100 billion in just five years. As the UAE is a major trading hub of the region, the FTA will enable India’s market entry into Africa, the wider Middle East, and Europe, thereby providing India with strategic advantages besides improving the competitiveness of Indian businesses.
This year India is also looking to close its FTA negotiations with Israel, which remains its fourth-largest arms supplier, with exports reaching USD 2.7 billion between 2011 and 2020. India and Israel have had diplomatic relations for 30 years (including cooperation in defense, science, technology, and agriculture). However, prior to the 2017 visit by Modi to Israel, their ties were largely under-the-radar and walked a tightrope in order to protect what India saw as historic obligations to Palestine, to not derail its energy dependency on the Gulf, and to check Pakistani influence among the Gulf states (which were closer to Pakistan) on Kashmir. Over time, however, the Modi government has shed this view, realizing that India could pursue closer relations with both Israel and the Gulf states – which were already open to new constellations emerging – simultaneously.
Interestingly, India-Israel ties have not been affected by New Delhi’s delicate balancing act on Palestine, which is a policy reminiscent of India’s strategic stance on Russia-Ukraine. India is ambiguous in its support for the ‘Palestinian cause’, but voted against Israel in three United Nations Human Rights Council resolutions in 2021, and abstained from one.
India has also seen an upsurge in its synergy with the UAE and Israel in the crucial domain of emerging technologies. Both countries are two of the most powerful tech hubs in West Asia and can hence prove to be invaluable for India, which is looking to build up its emerging technology ambitions via cooperation with like-minded states such as Japan, the UK, and the US. To this regard, signing FTAs with West Asian states (including Israel) figures highly in India’s strategic calculus as this is expected to help Delhi diversify its existing supply chains.
The Iran tangle
Given that the Iran threat was a key push for the Abraham Accords, Iran’s labelling of the UAE-Israel deal as a “shameful” act and a betrayal was only natural. However, the UAE and Israel do not have similar threat perceptions; as opposed to Israel, the former does not view Iran as an “imminent existential” threat. Even as the two have been covertly working together to counter Iran, overtly, they are unlikely to join hands – whether in defence or economic terms – in a more active format. Moreover, recently, Iran and the UAE (as with other Gulf states like Saudi Arabia and Qatar) are witnessing a thaw – or a “new chapter” – in their tense ties, especially on economic grounds; however, the future might depend on the success of the Joint Comprehensive Plan of Action (JCPOA) talks in Vienna.
Against this scenario, the UAE with its call for “collective diplomacy” could facilitate de-escalation between Iran and Israel. One of the ways this could be achieved would be through greater engagement via initiatives such as the I2-U2. The presence of India is a stimulus, mainly for its long-standing deft, geostrategic maneuvering of the three regional powers of West Asia: the Arab Gulf states, Israel, and Iran. Hence, Iran’s inclusion into the I2-U2 format, either as a dialogue partner or part of a larger “Plus” mechanism, could facilitate further regional rapprochement. An added incentive would be to check Iran’s growing closeness with China; Iran signed a comprehensive strategic partnership with China in 2021, deepening the Belt and Road Initiative (BRI) connect (it formally joined the BRI in 2016).
Further, the US withdrawal from Afghanistan has spurred actions by the US-hostile neighboring states – China, Iran, Russia, and Pakistan – which are all keen to utilize the momentum provided by exerting their own influence through ties with the Taliban. The Taliban has already expressed its interest in extending the China-Pakistan Economic Corridor (CPEC) to Afghanistan, which will hasten China’s entry as an active stakeholder in Afghanistan to India’s discomfiture. Thus, Iran’s entry into the “Indo-Abrahamic” grouping could help stem China’s continuing expansion in Eurasia, a proposition to which India might not oppose. However, consensus on such an addition would have to be reached among all current members, likely driven by India’s push as it builds stronger ties with Tehran.
Notwithstanding the idealistic aims of the normalization process, whether the thawing ties in the Middle East are enough to initiate a long-term convergence of interests, or are mere acts of tokenism, remains to be seen.
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