Persian Gulf 2023: India’s Relations with the Region 9819963796, 9789819963799

Citation preview

PERSIAN GULF

PERSIAN GULF 2023 India’s Relations with the Region

Md. Muddassir Quamar Sameena Hameed P. R. Kumaraswamy

Persian Gulf India’s Relations with the Region

Series Editor P. R. Kumaraswamy, School of International Studies, Jawaharlal Nehru University, New Delhi, Delhi, India

Persian Gulf , the leading publication of the Middle East Institute, New Delhi, India systematically looks at the growing relationship between India and the countries of the Persian Gulf region. Due to rising economic interactions and political engagements, the region has assumed greater importance, and hence requires a methodical study. About two-thirds of India’s oil and gas imports are met by the Persian Gulf countries and the Gulf Arab countries are home to over eight million Indian expatriate labour force. The Persian Gulfis also India’s largest sub-regional trading partner and a potential source of investments. As the Persian Gulf witnesses rapid changes, there is a knowledge gap regarding the region and Persian Gulf seeks to redress this challenge by offering a systematic understanding of the region, its problems and opportunities for India in the political, economic, social, energy and strategic arena. Since the publication of the inaugural volume in 2012, the Persian Gulf Series covers India’s bilateral relations with nine countries, namely, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, UAE and Yemen as well as the Gulf Cooperation Council (GCC). It examines the relations of the major players such as the US, Russia, China and Pakistan and their impact upon the Indo-Gulf relations. Backed by various primary materials the series seeks to be a platform for informed discussion on this vital region towards its nuanced understanding.

Md. Muddassir Quamar · Sameena Hameed · P. R. Kumaraswamy

Persian Gulf 2023 India’s Relations with the Region

Md. Muddassir Quamar Jawaharlal Nehru University New Delhi, Delhi, India

Sameena Hameed Jawaharlal Nehru University New Delhi, Delhi, India

P. R. Kumaraswamy Jawaharlal Nehru University New Delhi, Delhi, India

ISSN 2523-8302 ISSN 2523-8310 (electronic) Persian Gulf ISBN 978-981-99-6379-9 ISBN 978-981-99-6380-5 (eBook) https://doi.org/10.1007/978-981-99-6380-5 © Middle East Institute New Delhi (MEI@ND) 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore Paper in this product is recyclable.

To Professor Avraham Sela With respect, admiration and gratitude

About MEI@ND

Founded in October 2009 as a private and not-for-profit academic initiative, Middle East Institute at New Delhi (MEI@ND) re-pledges its commitment to generating a serious, nuanced, scholarly and non-partisan understanding of the region for India. During this period, the MEI has undertaken several academic and outreach activities, including Contemporary Review of the Middle East, a refereed quarterly published by Sage (India), book series with Knowledge World and several edited volumes, with the participation of young and budding scholars. As the region dominates India’s political, strategic, economic, energy, cultural and social interests in the broader Middle East, the Persian Gulf Series was launched in 2012. It systematically tracks, analyses and details bilateral relations annually. The Series began as an edited volume and when we moved to Springer, we settled for co-authorship for greater coherence and timely execution. The fundamentals of the Series remain the same, namely, to present India’s relations with the region in a comprehensive, holistic and systematic manner.

vii

Contents

1

1

Introduction

2

Bahrain

41

3

Iran

81

4

Iraq

125

5

Kuwait

163

6

Oman

205

7

Qatar

243

8

Saudi Arabia

287

9

United Arab Emirates

335

10

Yemen

383

11

GCC

411

12

Policy Options

439

Index

445

ix

About the Authors

Md. Muddassir Quamar is Associate Professor at Jawaharlal Nehru University. Until March 2023, he was a Fellow at Manohar Parrikar Institute for Defence Studies and Analyses, New Delhi. He holds a Ph.D. in West Asian Studies from Jawaharlal Nehru University. He has wider interest in politics and societies in the Arabian Gulf, political Islam, Middle East strategic affairs and India’s relations with the Middle East. Among his works are Education System in Saudi Arabia: Of Change and Reforms (Palgrave Macmillan, 2021) and co-author India’s Saudi Policy: Bridge to the Future (2019). He has been associated with the Persian Gulf Series since the inaugural issue in 2012. He has edited and co-edited several volumes on contemporary issues in the Middle East including Politics of Change in Middle East and North Africa since Arab Spring: A Lost Decade? (2022). Sameena Hameed is Associate Professor at Jawaharlal Nehru University, New Delhi. Her areas of specialisation include the Middle Eastern economy, India’s economic relations with the Middle East and energy security issues, and she has contributed monographs, journal articles and chapters to edited volumes. In addition, she has prepared research papers and study reports for the Ministry of External Affairs and other trade and commerce organisations like ASSOCHAM. She has been a member of the MEA-constituted Select Group on Gulf and West Asia and of the Indian team for “India –GCC Strategic Partnership” project and the Indo-Saudi

xi

xii

ABOUT THE AUTHORS

Dialogue. She is also the Book Review Editor of Contemporary Review of the Middle East and editor of Youth Bloom in GCC (2022). P. R. Kumaraswamy is Professor of contemporary Middle East in Jawaharlal Nehru University (JNU), New Delhi. From 1992 to 1999, he was a research fellow at the Harry S. Truman Research Institute for the Advancement of Peace, Jerusalem. Since joining JNU in September 1999, he has been researching, teaching, and writing on various aspects of the contemporary Middle East. His works include The Arab-Israeli Conflict: A Ringside View (2023), Squaring the Circle: Mahatma Gandhi and the Jewish National Home (2018), India’s Israel Policy (2010), and Historical Dictionary of the Arab-Israeli Conflict (2015, second edition). In February 2010, he set up the virtual Middle East Institute, New Delhi and serves as its honorary director. In addition, he is the founder editor of Contemporary Review of the Middle East (Sage India, 2014), series editor of Persian Gulf: India’s Relations with the Region (Palgrave Macmillan) and editor of The Palgrave International Handbook of Israel.

Abbreviations

ADIA ADIPEC ADNOC AED AI APEDA AQAP B2B bcfpd bcm BEDB BHD BJP BNA BP bpd CBY CEPA COAS CoNS COO CSB DGFT DPIIT

Abu Dhabi Investment Authority Abu Dhabi International Petroleum Exhibition and Conference Abu Dhabi National Oil Company Emirati Dirham Artificial Intelligence Agricultural and Processed Food Products Export Development Authority, India Al-Qaeda in the Arabian Peninsula Business-to-Business billion cubic feet per day billion cubic metre Bahrain Economic Development Board Bahraini Dinar Bharatiya Janata Party Bahrain News Agency British Petroleum barrels per day Central Bank of Yemen Comprehensive Economic Partnership Agreement, India Chief of Army Staff, India Chief of Naval Staff, India Certificate of Origin Central Statistical Bureau, Kuwait Director General of Foreign Trade, India Department for Promotion of Industry and Internal Trade, India xiii

xiv

ABBREVIATIONS

ECR EIA EIU EPC EU FAO FATF FCSA FCSC FDI FICCI Fintech FNC FOB FSC FTA FTO GCC GCC-SG GCC-STAT GDI GDP GECF GGGR GII GNI GNP GoI GPC GRF GST GSTATS GW HDI HDR HRW IAEA IAF IBN ICA ICAI ICC IDEX

Emigration Check Required, India Energy Information Administration, US Economist Intelligence Unit engineering procurement and construction European Union Food and Agricultural Organisation, UN Financial Action Task Force Federal Competitive and Statistics Authority, UAE Federal Competitiveness and Statistics Centre, UAE Foreign Direct Investment Federation of Indian Chambers of Commerce and Industry Financial Technology Federal National Council, UAE Free On Board Federal Supreme Council, UAE Free Trade Agreement Foreign Terrorist Organisation Gulf Cooperation Council Secretariate-General of Gulf Cooperation Council GCC Statistical Centre Gender Development Index Gross Domestic Product Gas Exporting Countries Forum Global Gender Gap Report Gender Inequality Index Gross National Income Gross National Product Government of India General People’s Congress, Yemen General Reserve Fund Goods and Services Tax, India General Authority for Statistics Giga Watt Human Development Index Human Development Reports Human Rights Watch, New York International Atomic Energy Agency, Vienna Indian Air Force India Business Network Federal Authority for Identity and Citizenship, UAE Institute of Chartered Accountants of India International Cricket Council International Defence Exhibition, Abu Dhabi

ABBREVIATIONS

IDPs ILO IMF INSTC IOC IOCs IOR IORA IOSCG IoT IPGL IPL IPN IPO IPP IPU IQD IRCON IRFFI IRGC IRI IRNA IRR ISIS ISN ISPRL ISRO IT ITC ITEC ITUC IWPP JAFZA JCM JCPOA JWG KAPP KDP KIA KRG KSA KUNA KWD

Internally-Displaced Persons International Labour Organisation, UN International Monetary Fund International North-South Transportation Corridor Indian Oil Corporation International Oil Companies Indian Ocean Region Indian Ocean Rim Association India-Oman Strategic Consultative Group Internet of Things India Ports Global Limited Indian Premier League (cricket) Indian Professional Network Initial Public Offering Independent Power Producer Inter-Parliamentary Union Iraqi Dinar Indian Railways Construction Limited International Reconstruction Fund Facility for Iraq Iranian Revolutionary Guard Corps Islamic Republic of Iran Iranian News Agency Iranian Rial Islamic State of Iraq and Syria Indian Sports Network Indian Strategic Petroleum Reserves Limited Indian Space Research Organisation Information Technology International Trade Centre, Geneva Indian Technical and Economic Cooperation International Trades Union Confederation Independent Water and Power Plant Jebel Ali Free Zone, UAE Joint Commission Meeting, India Joint Comprehensive Plan of Action (Iran) Joint-Working Group Kuwait Authority for Partnership Projects Kurdistan Democratic Party Kuwait Investment Authority Kurdish Regional Government, Iraq Kingdom of Saudi Arabia Kuwait News Agency Kuwaiti Dinar

xv

xvi

ABBREVIATIONS

KWH LNG LPG MADLSA MBC mbpd MbS MbZ mcm MEA MEES MERS MFA MFNE MICE mmt MNCs MoD MoF MOFA MoH MoI MOM MoPH MoU MPNG mtpa MW NDC NEC NIA NPK NRI NSE NSSA OCHA OEC OECD OETC OIC

Kilowatt Hour Liquefied Natural Gas Liquefied Petroleum Gas Ministry of Administrative Development, Labour and Social Affairs, Qatar Middle East Broadcasting Centre, London million barrels per day Mohammed bin Salman, Crown Prince and Prime Minister of Kingdom of Saudi Arabia Mohamed bin Zayed, President of UAE and Ruler of Abu Dhabi million cubic metre Ministry of External Affairs, India Middle East Economic Survey, Nicosia Middle East Respiratory Syndrome Ministry of Foreign Affairs Ministry of Finance and National Economy, Bahrain Meetings, Incentive Conference and Exhibition million metric tons Multi-National Corporations Ministry of Defence, India Ministry of Finance, India Ministry of Foreign Affairs Ministry of Health Ministry of Interior Manage, Operate and Maintain Ministry of Public Health, Qatar Memorandum of Understanding Ministry of Petroleum and Natura Gas, India million tons per annum Mega Watt Nationally Determined Contribution National Election Commission, UAE National Investigation Agency, India Nitrogen, Phosphorous, and Potassium Non-Resident Indian National Stock Exchange, India National Space Science Agency, Bahrain UN Office for Coordination of Humanitarian Affairs Observatory of Economic Complexity, MIT Media Lab, US Organisation for Economic Co-operation and Development Oman Electricity Transmission Company Organisation of Islamic Cooperation

ABBREVIATIONS

OIJF OIR OMIFCO OMR ONGC OOC OPEC OPEC+

PAI Division PBD PDS PDTC PIB PIF PIO PPP PPP PSA PSF PSL PTA PVC QAR QIA RAS RBI RCC RSF RTA SABIC SAGIA SAMA SAR SARS SCO SDR SEP SFD SFDA SGD SGRF

Oman-India Joint Investment Fund Operation Inherent Resolve, US Oman-India Fertiliser Company Omani Rial Oil and Natural Gas Corporation, India Oman Oil Company Organisation of the Petroleum Exporting Countries OPEC plus (Members of OPEC and Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan) Pakistan-Afghanistan-Iran Division, MEA, India Pravasi Bharatiya Divas (Overseas Indians Day) Public Distribution System, Iraq Power for Defence Technology Co, Saudi Arabia Press Information Bureau, India Public Investment Fund, Saudi Arabia Persons of Indian Origin Public-Private Partnership Purchasing Power Parity Planning and Statistics Authority, Qatar Peninsula Shield Force, GCC Private Sector Participation Law, Saudi Arabia Preferential Trade Agreement Polyvinyl Chloride Qatari Riyal Qatar Investment Authority Recirculating Aquaculture Systems, UAE Reserve Bank of India Redeployment Coordination Committee, UN Reporters Without Borders Roads and Transport Authority, Dubai Saudi Arabian Basic Industries Corporation Saudi Arabian General Investment Authority Saudi Arabian Monetary Authority Saudi Rial Severe Acute Respiratory Syndrome Shanghai Cooperation Organisation Special Drawing Rights (IMF) Strategic Energy Partnership Saudi Fund for Development Saudi Food and Drug Authority Sustainable Development Goals State General Reserve Fund of Oman

xvii

xviii

ABBREVIATIONS

SII SLoCs SME SOMO SPC SPC SPR SSIFS STC STC SWF SWIFT TCE tcf TEUs TWH UAV UNCTD UNDP UNESCWA UNGA UNHRC UNMHA UNSC UPR USAID USCIRF VAT VoIP VPN WHO WLL WTI YER YOY

Serum Institute of India Sea Lines of Communication Small and Medium Enterprises State Organisation for the Marketing of Oil, Iraq Supreme Petroleum Council, UAE Supreme Political Council, Yemen Strategic Petroleum Reserve Sushma Swaraj Institute of Foreign Services, India Saudi Trading Corporation Southern Transition Council, Yemen Sovereign Wealth Fund Society for Worldwide Interbank Financial Telecommunication Tata Consulting Engineers trillion cubic feet Twenty-Foot Equivalent Units Tera Watt Hour Unmanned Aerial Vehicle United Nations Conference on Trade and Development UN Development Programme United Nations Economic and Social Commission for Western Asia United Nations General Assembly United Nations Human Rights Council United Nations Mission to support the Hodeida Agreement United Nations Security Council Universal Periodic Review (UN) US Agency for International Development United States Commission on International Religious Freedom Value Added Tax Voice Over Internet Services Virtual Private Network World Health Organisation, UN With Limited Liability West Texas Intermediate (Oil Standard) Yemeni Rial Year-On-Year

List of Figures

Fig. 1.1 Fig. 2.1

Fig. 2.2

Fig. 2.3

Fig. 3.1

Fig. 3.2

OPEC reference basket price, 2022 (Source OPEC, Annual Statistical Bulletin, 2023, https://asb.opec.org/) India’s trade with Bahrain, 2016–2022 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard. commerce.gov.in/commercedashboard.aspx) India’s top five import items from Bahrain, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedash board.aspx) India’s top five export items to Bahrain, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedash board.aspx) India’s top five export items to Iran, 2022–2023 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India) India’s top five import items from Iran, 2022–2023 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India)

21

74

75

76

120

120

xix

xx

LIST OF FIGURES

Fig. 4.1

Fig. 4.2

Fig. 4.3

Fig. 5.1

Fig. 5.2

Fig. 5.3

Fig. 6.1

Fig. 6.2

Fig. 6.3

India’s trade with Iraq, 2016–2022 (Source Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India, https://dashboard. commerce.gov.in/commercedashboard.aspx) India’s top five import items from Iraq, 2022–2023 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India, https://dashboard.commerce.gov.in/commer cedashboard.aspx) India’s top five export items to Iraq, 2022–2023 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India, https://dashboard.commerce.gov.in/commer cedashboard.aspx) India’s trade with Kuwait, 2016–2022 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard. commerce.gov.in/commercedashboard.aspx) India’s top five import items from Kuwait, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedash board.aspx) India’s top five export items to Kuwait, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedash board.aspx) India’s trade with Oman, 2016–2022 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India) India’s top five export items to Oman, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedash board.aspx) India’s top five import items from Oman, 2002–2023 (Source Directorate GoI, General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard. commerce.gov.in/commercedashboard.aspx)

156

156

158

198

198

199

235

236

236

LIST OF FIGURES

Fig. 7.1

Fig. 7.2

Fig. 7.3

Fig. 8.1

Fig. 8.2

Fig. 8.3

Fig. 9.1

Fig. 9.2

Fig. 9.3

Fig. 10.1

India’s trade with Qatar, 2016–2022 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India) India’s top five export items to Qatar, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://das hboard.commerce.gov.in/commercedashboard.aspx) India’s top five import items from Qatar, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedash board.aspx) India’s trade with Saudi Arabia, 2016–2022 (Source compiled from Goi, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://das hboard.commerce.gov.in/commercedashboard.aspx) India’s top five export items to Saudi Arabia, 2022–2023 (Source Goi, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard. commerce.gov.in/commercedashboard.aspx) India’s top five import items from Saudi Arabia, 2022–2023 (Source GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://das hboard.commerce.gov.in/commercedashboard.aspx) India’s trade with UAE, 2016–2022 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard. commerce.gov.in/commercedashboard.aspx) India’s top five import items from UAE, 2022–2023 (Source GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard. commerce.gov.in/commercedashboard.aspx) India’s top five export items to UAE, 2022–2023 (Source GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.com merce.gov.in/commercedashboard.aspx) India’s trade with Yemen, 2015–2022 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India)

xxi

278

279

280

326

327

327

372

375

375

406

xxii

LIST OF FIGURES

Fig. 10.2

Fig. 11.1

Fig. 11.2

India’s top five export items to Yemen, 2022–2023 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India) India’s top export items to GCC, 2022–23 (Source Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India) India’s top import items from GCC, 2022–23 (Source Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India)

407

433

433

List of Tables

Table Table Table Table Table Table Table Table Table Table

1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10

Table 1.11 Table 1.12 Table 1.13 Table 1.14 Table 1.15 Table 1.16 Table 1.17 Table 2.1 Table 2.2

Number of Covid-19 cases until 31 December 2022 Global Innovation Index, 2022 EIU Democracy Index, 2022 EIU Democracy Index, 2006–2022 Global Freedom Score, 2022 Gender Inequality Index, 2021 Corruption Perceptions Index ranking, 2017–2022 Global Passport Ranking, 2022 Proven oil and natural gas reserves (December 2022) Fiscal break-even oil prices for the Gulf exporters, 2000–2022 (US$per barrel) India’s trade with Persian Gulf countries, 2016–2022 (US$million) Emigration clearance given, 2021–2022 India’s natural gas imports, 2016–2021 (bcm) India’s electricity generation by fuel, 2020–2021 (terawatt hours) India’s top five sources and destinations for energy trade, 2022–2023 India’s energy trade with the Persian Gulf countries, 2021–2023 India’s LPG and LNG imports, 2021–2023 (US$million) Bahrain’s new cabinet as of December 2022 Bahrain’s economic growth, 2019–2023

13 13 14 15 15 16 17 18 20 22 31 32 33 34 35 36 37 48 56

xxiii

xxiv

LIST OF TABLES

Table 2.3 Table 2.4 Table 2.5 Table 3.1 Table 3.2 Table Table Table Table Table Table

3.3 3.4 3.5 4.1 4.2 4.3

Table Table Table Table Table Table

4.4 4.5 4.6 5.1 5.2 5.3

Table 5.4 Table 5.5 Table 5.6 Table 6.1 Table 6.2 Table Table Table Table Table

6.3 6.4 6.5 7.1 7.2

Table Table Table Table Table Table

7.3 7.4 7.5 8.1 8.2 8.3

Bahrain’s select current account indicators, 2019–2022 (US$million) Bahrain’s direction of trade, 2022 (US$million) India’s energy trade with Bahrain, 2019–2022 (US$million) Iran’s economic growth, 2019–2023 Iran’s select current account indicators, 2019–2022 (US$million) Iran’s direction of trade, 2022 (US$million) Iran’s energy statistics, 2018–2022 India’s trade with Iran, 2016–2022 (US$million) Iraqi Cabinet, October 2022 Iraq’s economic growth, 2019–2023 Iraq’s select current account indicators, 2019–2022 (US$million) Iraq’s direction of trade, 2022 (US$million) Iraq’s energy statistics, 2018–2022 India’s energy trade with Iraq, 2019–2022 Council of Ministers of Kuwait, October 2022 Kuwait’s economic growth rate, 2019–2023 Kuwait’s current account select indicators, 2019–2022 (US$million) Kuwait’s direction of trade, 2022 (US$million) Kuwait’s energy statistics, 2018–2022 India’s energy imports from Kuwait, 2019–2022 (US$million) Oman’s economic growth, 2019–2023 Oman’s select current account indicators, 2019–2021 (US$million) Oman’s direction of trade, 2022 (US$million) Oman’s energy statistics, 2018–2021 India’s energy trade with Oman, 2019–22 Qatar’s economic growth, 2019–2023 Qatar’s select current account indicators, 2019–2021 (US$million) Qatar’s direction of trade, 2021–2022 (US$million) Qatar’s energy statistics, 2019–2021 India’s energy trade with Qatar, 2019–2022 (US$million) Kings of Saudi Arabia since 1932 Saudi Arabia’s economic growth, 2019–2023 Saudi Arabia’s select current account indicators, 2019–2022 (US$million)

62 63 78 101 106 107 110 119 135 140 146 147 150 159 170 178 188 188 190 201 216 222 223 226 239 255 263 264 268 283 293 307 314

LIST OF TABLES

Table 8.4 Table 8.5 Table 8.6 Table 9.1 Table 9.2 Table Table Table Table

9.3 9.4 9.5 10.1

Table 10.2 Table 10.3 Table Table Table Table Table

10.4 10.5 11.1 11.2 11.3

Table Table Table Table Table

11.4 11.5 11.6 11.7 11.8

Table 11.9

Saudi Arabia’s direction of trade, 2022 (US$million) Saudi Arabia’s energy statistics, 2018–2022 India’s energy trade with Saudi Arabia, 2019–2023 (US$million) UAE’s economic growth, 2019–23 UAE’s select current account indicators, 2019–22 (US$million) UAE’s direction of trade, 2022 UAE’s energy statistics, 2018–21 India’s energy trade with UAE, 2019–22 (US$million) Members of Yemen’s Presidential Leadership Council, April 2022 Yemen’s economic growth, 2019–2023 Yemen’s select current account indicators, 2019–2021 (US$million) Yemen’s direction of trade, 2021 (US$million) Yemen’s energy statistics, 2018–2021 Economic growth in GCC, 2019–22 Profile of GCC labour market, 2021 Select external indicators in GCC states, 2019–21 (US$billion) GCC’s direction of trade, 2021 (US$billion) Share in energy production in GCC countries, 2021 GCC’s energy statistics, 2018–21 India’s trade with GCC, 2018–23 (US$million) Number of Indians in the GCC and registered in E-Migrate system, 2021–23 India’s energy trade with GCC, 2019–22 (US$million)

xxv 315 318 331 351 356 358 360 380 387 393 399 400 401 416 422 423 424 427 427 431 435 436

CHAPTER 1

Introduction

The Persian Gulf remains at the core of the political, economic, strategic and cultural developments in the Middle East. This emanates mainly from the ascendance of the Gulf Arab States in regional politics and global economy due to the energy resources, strategic location, and logistical and supply-chain infrastructure. The political turmoil in the Middle East since the Arab Spring made the Persian Gulf countries even more important due to their proactive involvement in geo-political contestations and counter-terrorism. The region has immense significance for India, as it is an extended neighbourhood, maritime neighbour, major supplier of oil and gas, and home to nearly 10 million Indian expatriates. Thus, the Persian Gulf is vital for India’s economic growth and energy security. Further, regional stability is vital for maritime security and the safety of the sea lines of communication (SLOCs) in the Western Indian Ocean. Notably, India’s trade, business, investments and strategic ties with the Persian Gulf have improved with the continued strengthening of political and diplomatic relations. Notwithstanding these, domestic, regional and international challenges need a constant, nuanced and prudent response to turn them into an opportunity.

© Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_1

1

2

MD. M. QUAMAR ET AL.

Regional Trends In 2022, the Persian Gulf witnessed some extraordinary developments which can have long-term implications for the region and India’s engagements with it. Some domestic, regional and international trends during the year have significant ramifications for the region and India and need closer scrutiny. Covid-19: Although Covid-19 remained a cause of global concern in early 2022, the spirit of human resilience and pharmaceutical and technological advancements began to show results. Consequently, by mid-to-late 2022, the signs of weakening of the global health crisis became apparent, and the focus shifted to managing the economic fallouts of the pandemic and the disruptions it caused. In the region, the energy-rich Gulf Cooperation Council (GCC) countries, especially Qatar, UAE and Saudi Arabia, were able to make strides in reversing the economic downturn. On the other hand, Bahrain and Oman struggled in their economic recovery due to depleting oil production and exports. Kuwaiti economy continued to lag because of political instability and uncertainty. Iran, Iraq and Yemen struggled due to mismanagement of resources, political instability, international sanctions, social unrest and the ongoing civil war in the case of Yemen. While the health and logistics crises witnessed since 2020 eased, the long road ahead for economic recovery continues to be challenging. Ukraine Crisis: Russian invasion of Ukraine in February 2022 rekindled the memory of Cold War era international politics when Eastern Europe was the battle ground for global geo-political contestations and the tensions between the US and the then Soviet Union. The crisis in Ukraine divided the world, with the US and Western European countries coming out in support of Ukraine and condemning the Russian invasion, while China, Iran and Belarus supported Russian claims and military action.1 Many others, such as India, Türkiye, Egypt and the GCC countries, chose to remain neutral while underlining the need to avoid escalation and respecting the sovereignty of each state. Saudi Arabia and UAE refused to explicitly side with the US in the United Nations

1 Robert S. Foa, Margot Mollat, Han Isha, Xavier Romero-Vidal, David Evans and Andrew J. Klassen, “A world divided: Russia, China and the West”, October 2022, Centre for the Future of Democracy, University of Cambridge, https://www.bennettinstitute.cam. ac.uk/wp-content/uploads/2023/01/A_World_Divided.pdf, accessed 27 July 2023.

1

INTRODUCTION

3

to condemn and sanction Russia and defied pressure to isolate Moscow, especially in the international energy market. Alternatively, Qatar capitalised by expanding gas supplies to the European market as a replacement for Russian supplies. The Saudi decision to go ahead with OPEC+2 plans to cut oil production kept the international oil prices stable, much to the chagrin of the Biden administration, which was hoping for lower prices to stifle Russian oil revenues. Partly because of the Qatari importance in the global energy market, the Western criticism of Qatari human rights records during the run-up to the FIFA World Cup became moderated. For its part, Doha used it to run a counter-media and public relations offensive, accusing Western governments and analysts of ulterior motives and racist behaviour.3 FIFA World Cup: The organisation of the FIFA World Cup in Qatar in November–December 2022 underlined the oil-rich Gulf countries’ quest to be the hub of international sporting, entertainment and cultural events. The international, especially Western European, criticism of Qatar hosting the mega football event over human and labour rights violations during the run-up to the event bordered on racism and reminded the world of the continued oriental lens of governments and civil society in Europe.4 For Qatar and Gulf Arab states, the event became a showpiece to display intra-GCC and intra-Arab bonhomie with various regional leaders, including Mohammed bin Salman (MbS) and Mohammed bin Zayed (MbZ) visiting Doha during the event and sharing screen space and photo ops with Emir Tamim bin Hamad al-Thani. The Iranian team did not lip sync the national anthem during their opening game against England in solidarity with protestors at home; but this led to a backlash domestically and forced them to abandon the symbolic defiance in subsequent matches. Some Iranian protestors,

2 OPEC+ includes 13 members of OPEC plus 10 other major oil producing countries, namely Azerbaijan, Brunei, Kazakhstan, Bahrain, Malaysia, Mexico, Oman, Russia, Sudan and South Sudan. 3 Belén Fernández, “The massive hypocrisy of the West’s World Cup ‘concerns’”, Al-Jazeera, 28 November 2022, https://www.aljazeera.com/opinions/2022/11/28/themassive-hypocrisy-of-the-wests-world-cup-concerns, accessed 27 July 2023. 4 Gulcin Kazan Doger, “Western media criticism of World Cup host Qatar ‘old orientalism refashioned for modern audience’”, Anadolu Agency, 30 November 2022, https://www.aa.com.tr/en/europe/western-media-criticism-of-world-cup-host-qatar-oldorientalism-refashioned-for-modern-audience/2752080, accessed 27 July 2023.

4

MD. M. QUAMAR ET AL.

however, showed public solidarity with the protests at home by organising small demonstrations outside the stadiums in Doha. Qatar allowed the sympathy and support for Palestine and hostility towards Israel among the Arab masses to be displayed during the matches and on the streets during the event. Beyond politics and geopolitics, the successful organisation of the World Cup by Qatar underlined the ability of the rich GCC countries to pull off mega sporting events despite their limited capacity in terms of size, population and infrastructure. Despite the much-discussed restrictive socio-cultural environment, it underscored the immense possibilities for such mega-cultural extravaganza. Iran Nuclear talks: The talks between Iran and the other signatories to the Joint Comprehensive Plan of Action (JCPOA) held in Vienna halted in March 2022 over different approaches to the core issues. While the US and Iran engaged in the talks indirectly, both sides reportedly insisted on different issues. The Iranian side wanted guarantees against future unilateral withdrawals in the event of change of US administration and the lifting of sanctions on the Iranian Revolutionary Guards Corps (IRGC). The US was keen to stop uranium enrichment by Iran and complete adhere to JCPOA commitments before any agreement. These differences escalated after the International Atomic Energy Agency (IAEA) inspection of Iranian nuclear sites in 2022 that Iran was in violation of JCPOA.5 Indirect talks between Iran and the US resumed in August, but the outbreak of protests in September over Kurdish-Iranian woman Mahsa Amini’s death derailed the process; the European countries, who were spearheading the revival of the nuclear deal, opted to go slow. Hence, until 31 December 2022, despite several rounds of talks, there were no notable signs of a breakthrough in the Vienna talks. Protests in Iran: The Islamic Republic faced one of the largest protests since the Green Movement (2009) in the wake of the death of Mahsa Amini on 16 September 2022 in the custody of the Ghast-e-Irshad (morality police). Iran has since 2018 witnessed sporadic protests over inadequate civic amenities, human rights abuse and curtailment of women’s freedom. The Raisi government, after coming to power in 5 International Atomic Energy Agency (IAEA), “NPT safeguards agreement with the Islamic Republic of Iran”, Report by the Director General, GOV/2022/26, 30 May 2022, https://www.iaea.org/sites/default/files/22/06/gov2022-26.pdf, accessed 27 July 2023.

1

INTRODUCTION

5

August 2021, had promised a resolution of civic issues to contain social unrest, but Amini’s death sparked a widespread protest over women’s rights. What started as an angry outburst by family and friends of Amini quickly escalated into a country-wide protest demanding better rights and greater freedom, especially for women, and in a matter of weeks, transformed into a mass movement against a “repressive” regime. After initial reluctance, the Islamic Republic resorted to using force to quell the unrest and blamed external forces—Israel, Saudi Arabia and the US— for trying to destabilise Iran.6 Tehran also blamed the Iranian Kurdish opposition based in the Iraqi Kurdish autonomous region, for supporting the Iranian protestors and launched missile attacks against some targets in Iraq in November. Police and security action reportedly led to over 500 deaths and thousands of arrests.7 Regime supporters also organised counter-protests, and by the end of 2022, signs of weakening of protests could be noticed. Yemen Crisis: The crisis in Yemen continued through 2022 despite the six-month ceasefire between April and September. The three domestic belligerents—Houthis, the UN-recognised government and Southern Transition Council—were not ready to scale down violence and resolve differences through political negotiations. The Saudi inability to defeat the Houthi rebels and force a political solution underlined its limitations, although its strategic goal of preventing a complete Houthi takeover was successful. However, the lack of an exit plan and continued infighting among the Hadi government factions hurt Riyadh’s interests and international image. Moreover, Houthi missile and drone attacks heightened security concerns inside the Kingdom. In January 2022, drone and missile attacks were launched against targets in UAE, and in retaliation the Saudi-led coalition intensified air strikes against Houthis in northern Yemen and Sana’a. Due to regional and UN efforts, a two-month ceasefire was reached on 2 April, which helped in de-escalating. After two extensions in June and August, the ceasefire ended in October, but the fighting did

6 Reuters, “Iran says U.S. attempting to use unrest to weaken country”, 27 September 2022, https://www.reuters.com/world/middle-east/iran-says-us-trying-vio late-sovereignty-over-unrest-warns-response-2022-09-26/, accessed 27 July 2023. 7 Iran International, “Number of civilians killed during Iran protests rises to 506”, 21 December 2022, https://www.iranintl.com/en/202212216716, accessed 27 July 2023.

6

MD. M. QUAMAR ET AL.

not escalate to pre-cease fire levels. In April, Riyadh engineered a transition as Hadi relinquished power to a presidential council headed by Rashad al-Alimi.8 Iran continued its low-scale support for Houthis while the UAE strengthened its stronghold over Aden and Socotra Island areas by aligning with the STC.9 Political Stalemate in Iraq: The parliamentary elections in Iraq in October 2021 resulted in Moqtada al-Sadr gaining the upper hand as his Sairoon Movement bagged 73 seats in the 329-member Council of Representatives. In addition, the newly formed Sunni Taqaddum (Progressive) Party gained 37 seats. Since no bloc could get to a simple majority, a political stalemate ensued leading to inordinate delays in government formation. The parties could not agree on power sharing and electoral reforms. Contentious issues also included finding a successor for President Barham Salih. In August 2022, the political differences escalated into street fights with the Sadrist supporters descending on streets in the Green Zone, prompting counter-protests by pro-Iran militias, causing heightening fears of a civil war. Eventually, Sadr announced his withdrawal from politics leading to the mass resignation of Sairoon members from parliament in anticipation of forcing a fresh election.10 However, the move empowered the rival State of Law party of Nouri al-Maliki, which used the electoral laws to increase its seats after Sairoon’s withdrawal. It paved the way for Abdul Rashid Latif being elected president in October, who appointed Mohammed Shia al-Sudani as prime minister, who finally gained the confidence of parliament on 27 October 2022 to end the political stalemate. Elections in the GCC States: A key factor shared by the six members of the GCC is their less open political system. They are monarchies wherein the hereditary ruler controls the state and government. There 8 Ali al-Sakani, “Yemen inaugurates new presidential council”, Al-Jazeera, 19 April 2022, https://www.aljazeera.com/news/2022/4/19/yemen-inaugurates-new-pre sidential-council, accessed 27 July 2023. 9 Armed Conflict Location & Event Data Project (ACLED), “Regional overview: Middle East 11 December 2021-7 January 2022”, 13 January 2022, https://acleddata.com/2022/01/13/regional-overview-middle-east-11-december2021-7-january-2022/, accessed 24 May 2023. 10 Ahmed Rasheed, “Iraqi Shi’ite Sadrist lawmakers resign from parliament”, Reuters, 13 June 2022, https://www.reuters.com/world/middle-east/iraqi-shiite-cleric-sadr-askshis-partys-lawmakers-resign-parliament-statement-2022-06-12/, accessed 19 June 2023.

1

INTRODUCTION

7

are nonetheless nuanced differences in their functioning. For example, the UAE is a federation of seven family-ruled Emirates with a Federal Supreme Council (FSC) headed by a president to run the federal government. Bahrain, Kuwait and Qatar are constitutional monarchies, while Saudi Arabia and Oman have not adopted any constitution. In recent years, these monarchies have gradually adopted some form of elections for greater domestic legitimacy and acceptance by international observers. To a large extent, the elected bodies in the GCC States only have consultative or advisory functions and are inconsequential regarding government formation or policy orientation. Moreover, elections are contested by independent candidates, as political organisations or parties are prohibited in GCC countries, except for Bahrain and Kuwait. In the case of Saudi Arabia (and Qatar until 2021), the elections are confined only to the municipal councils, while the parliament (Majlis al-Shura) is a nominated body. In 2022, elections were held in Bahrain and Kuwait. Regional Reconciliations: The Abraham Accords between Israel and some Arab states concluded in 2020 started a trend of reconciliations among regional adversaries, rivals and foes. In January 2021, the GCC countries buried their hatchet by signing the Al-Ula Declaration ending the four-year Qatari isolation. The UAE worked towards easing tensions with Iran, Türkiye and Bashar al-Assad regime in Syria. Saudi Arabia and Iran began indirect talks in Baghdad in early 2021, leading up to the first Baghdad Conference in August 2021, attended by Iranian and Saudi representatives, among others. The trend strengthened in 2022, with UAE and Saudi Arabia resuming diplomatic engagements with Türkiye. In the meantime, efforts towards bringing Syria back to the Arab League fold gained momentum due to Emirati, Jordanian and Iraqi initiatives. Saudi Arabia also moderated its position on the Syrian re-entry into the Arab League. With Iran, the progress in talks halted because of the uncertain fate of the Vienna talks and the eruption of mass protests in September. In addition to the political and geo-political factors, the postCovid-19 geo-economic compulsions and the change of administration in Washington nudged regional countries to manage differences through diplomacy. Tense Relations with the US: The relations between Persian Gulf countries and the US have been tense since Joe Biden assumed office in January 2021, mainly due to the lack of clarity in prioritising

8

MD. M. QUAMAR ET AL.

mutual concerns. Under the Trump administration, the US followed a policy of isolating Iran and giving security assurances to the GCC monarchies. Further, transactional business ties were prioritised over issues of human rights. The Biden administration gave conflicting signals; the softening of its approach towards Iran was accompanied by the ramping up human rights issues to satisfy the domestic audience. Initially, the Biden Administration even refused to deal with MbS directly over to the Khashoggi affair11 and curtailed tactical support for the Saudi military operations in Yemen due to rising humanitarian concerns.12 The US also continued its “pivot to Asia” policy with the focus shifting away from the Middle East, with an emphasis on Indo-Pacific to contain China. Moreover, in 2022, the Biden administration’s attention shifted to Eastern Europe due to the Ukraine crisis. Thus, despite meeting MbS during his visit to Saudi Arabia in July 2022, the diplomatic and political tensions between Riyadh and Washington did not ease. Consequent to the lack of clarity in US policy towards the Middle East, the smaller GCC countries, except Qatar, were cautious in dealing with the US. In the case of Iran, despite the on-and-off talks for the resumption of the JCPOA, the situation has remained tense while the internal political instability in Iraq hampered strategic ties with the US. The relations between Persian Gulf countries and the US have also been affected by the increasing consciousness among the regional countries of the US reducing its commitments in the region, although it remains the only major external military power in the region. Growing Engagements with China: The China-Gulf relations are based on economic and energy engagements. China’s appetite for oil and gas increased it dependence on the region, while the Gulf producers seek an assured market. There is a complementarity in growing trade, business, investments, and connectivity and infrastructure development projects. Hence, the Gulf countries have been attracted to the Belt and Road Initiative (BRI) that aims to revive the historical Silk Routes between China and Europe through a series of infrastructure and connectivity projects in 11 Jonathan Guyer, “Biden promised a harder line on Saudi Arabia. Why can’t he deliver?” Vox, 23 January 2022, https://www.vox.com/22881937/biden-saudi-arabiambs-khashoggi-yemen-human-rights, accessed 27 July 2023. 12 Jonathan Landay and Jarrett Renshaw, “Biden ends U.S. support for Saudi Arabia in Yemen, says war ‘has to end’”, Reuters, 4 February 2021, https://www.reuters.com/ article/usa-biden-yemen-int-idUSKBN2A4268, accessed 27 July 23.

1

INTRODUCTION

9

South, Central and West Asia.13 This aligns with the regional countries pushing for infrastructure upgradation and transnational connectivity in preparation for a post-oil economy. As a result, China has signed strategic partnership agreements with major regional countries and is gradually enhancing its diplomatic, political and security engagements. The Gulf countries have also strengthened engagements with China for economic gains while gradually moving into strategic domains. Coming amidst reducing US commitments, there are suggestions of China seeking to fill the power vacuum in the Persian Gulf.14 The bonhomie between Xi Jinping and MbS during the former’s visit to Saudi Arabia in December 2022 underlined the potential of the diplomatic and political ties. In Riyadh, Xi held three summit-level meetings, respectively with the Saudi leadership, the GCC leadership and the Arab leadership, underlining the expanding scope of China-Saudi ties. China has simultaneously enhanced its partnership and cooperation with Iran, although the economic component of the relations remains relatively small, notwithstanding projections. The growing Chinese presence would, therefore, be closely watched for geo-political and geo-economic reasons. Bonhomie with Russia: The Persian Gulf countries have gradually improved their relations with Russia and, even after the invasion of Ukraine, have refused to curtail their engagements despite US pressure. Iran is at the forefront of courting Russia (along with China), despite the historical and geo-political differences, mainly as a counterweight to the US. According to media reports, Russia used Iran-made drones and missiles in Ukraine, confirming the strong strategic relations between the two countries.15 The ability of Moscow and Tehran to set aside differences and work together to save Bashar al-Assad regime in Syria has

13 Jonathan Fulton, “The G.C.C. Countries and China’s Belt and Road Initiative (BRI): Curbing their enthusiasm?” Middle East Institute, Washington, D.C., 17 October 2017, https://www.mei.edu/publications/gcc-countries-and-chinas-belt-androad-initiative-bri-curbing-their-enthusiasm, accessed 27 July 2023. 14 Emre Aytekin, “China eyeing greater clout in Middle East as US shifts focus towards Asia-Pacific”, Anadolu Agency, 8 December 2022, https://www.aa.com.tr/en/ politics/china-eyeing-greater-clout-in-middle-east-as-us-shifts-focus-towards-asia-pacific/ 2759027, accessed 27 July 2023. 15 Michael Knights and Alex Almeida, “What Iran’s Drones in Ukraine mean for the future of war”, 10 November 2022, https://www.washingtoninstitute.org/policy-ana lysis/what-irans-drones-ukraine-mean-future-war, accessed 27 July 2023.

10

MD. M. QUAMAR ET AL.

marked a turning point in their relations. Simultaneously, the GCC countries, too, have been working to improve relations with Russia, especially as they work through the OPEC+ arrangements. In October 2022, the decision of OPEC+ to go ahead with the production cuts led to escalating tensions in Saudi-US ties and the Biden administration warned the kingdom of “consequences.”16 Saudis and Emiratis, however, have disregarded the US warnings to work in tandem with Russia to control the international oil market and pricing. Energy Politics: The Russian invasion of Ukraine unfolded energy politics on multiple fronts. The initial sanctions avoided restrictions on Russian energy exports as Russia supplied 40 per cent of the EU’s gas imports and 30 per cent of its oil imports.17 In March the US, UK and Canada banned Russian energy imports and the European countries started looking towards the Gulf exporters for alternative energy supplies. At the same time, deeply discounted Russian oil was displacing the Gulf oil in key markets like India and China.18 The sanctions on Russia also encouraged many oil producers and buyers to resort to trading in national currencies, including Rubel, Renminbi and Rupee, giving rise to speculations about de-dollarisation of the energy trade. There were also constant American pressures on the countries like Saudi Arabia and UAE to increase oil production to cool energy prices. UAE reportedly expressed interest in increasing its oil output quota, prompting the visit of the British Prime Minister Boris Johnson to the Emirates and Saudi Arabia for commitments for additional supplies.19 16 Al-Jazeera, “Biden vows ‘consequences’ for Saudi Arabia after oil output cuts”, 12 October 2022, https://www.aljazeera.com/news/2022/10/12/biden-vows-conseq uences-for-saudi-arabia-after-oil-output-cuts, accessed 27 July 2023. 17 International Energy Agency (IEA), “How Europe can cut natural gas imports from Russia significantly within a year”, 3 March 2022, https://www.iea.org/news/howeurope-can-cut-natural-gas-imports-from-russia-significantly-within-a-year, accessed 27 July 2023. 18 Julian Lee, “China, India squeeze big oil discounts out of Russia, hitting Vladimir Putin’s war chest”, The Economic Times, 28 November 2022, https://economictimes. indiatimes.com/industry/energy/oil-gas/view-china-india-squeeze-big-oil-discounts-outof-russia-hitting-putins-war-chest/articleshow/95806472.cms?from=mdr, accessed 27 July 2023. 19 The Jordan Times, “British PM meets Saudi crown prince as Ukraine war roils oil prices”, 16 March 2022, https://www.jordantimes.com/news/business/british-pm-meetssaudi-crown-prince-ukraine-war-roils-oil-prices, accessed 12 July 2023.

1

INTRODUCTION

11

The energy crisis consequent to the Ukraine conflict, where countries like Germany had to resort to coal power plants, was used by the Gulf exporters to articulate the need for a realistic transition to renewable energy.20 They emphasised their importance in providing energy security as responsible actors. The UAE sent the largest delegations (about 1,000), several from the oil and gas industry, to the COP27 meet in Sharm el-Sheikh in November 202221 and would be hosting the COP28 in November–December 2023. Strategic Hedging: The region has witnessed intense geo-political and geo-economic activities due to various domestic, regional and international factors. While regional countries are reverting to diplomacy to manage their differences, the US-China and US-Russia tensions have given rise to speculations about a new Cold War. While some saw this as a contest for saving the liberal international order, most see it as a result of the friction between an established and a rising power.22 In the context of the Persian Gulf, the regional countries settled for strategic hedging to maximise their interest without being adversely affected by the US-China rivalry. Although it involves risks, the regional countries no longer wish to be seen as a vassal state of the US even while continuing to rely on it to ensure security. Hence, strategic hedging has become a preferred definition for scholars to underline the nuanced shift away from erstwhile strategic alliance.23 Minilateral Initiatives: The US has encouraged regional countries for minilateral initiatives to manage regional geo-political and geo-economic

20 Nader Itayim, “Saudi Arabia rejects one-size-fits-all climate strategy”, Argus Media, 24 October 2022, https://www.argusmedia.com/ru/news/2383431-saudi-arabia-rejectsonesisefitsall-climate-strategy?amp=1, accessed 23 July 2023. 21 Ruth Michaelson and Patrick Greenfield, “UAE using role as Cop28 host to lobby on its climate reputation”, The Guardian, 16 November 2022, https://www.thegua rdian.com/environment/2022/nov/16/uae-cop28-host-lobby-climate-reputation-cop27, accessed 23 July 2023. 22 Jo Inge Bekkevold, “5 Ways the U.S.-China Cold War will be different from the last one”, Foreign Policy, 29 December 2022, https://foreignpolicy.com/2022/12/29/ us-china-cold-war-bipolar-global-order-stability-biden-xi/, accessed 23 July 2023. 23 Jean-Loup Samaan, Strategic hedging in the Arab Peninsula: The politics of the GulfAsian rapprochement, London: Routledge, 2019; Sofie Hamdi and Mohammad Salman, “The Hedging Strategy of Small Arab Gulf States”, Asian Politics and Policy, 2020, vol. 12, no. 2, pp. 127–52.

12

MD. M. QUAMAR ET AL.

challenges. According to the American thought process, this would help ease US commitments in the region while encouraging transnational cooperation to address developmental issues. The Abraham Accords encouraged some analysts to suggest bringing other regional countries and India on board to have an Indo-Abrahamic Accords to be able to deter US adversaries—Russia, China and Iran—from becoming dominant regional powers.24 One of the first initiatives in this regard was announced in October 2021 with a quadrilateral grouping of Israel, India, the US and UAE (I2U2), and it began to take some shape during 2022 when the first I2U2 summit was held virtually in July. Gradually, analysts have also begun talking about expanding the grouping to include Egypt and Saudi Arabia to make it more effective.25 However, the continued suspense over a possible Saudi-Israeli normalisation has limited the scope of the grouping. Social and Developmental Issues Covid-19: Although the public health crisis and supply-chain disruptions caused by Covid-19 were contained in 2022, the social and developmental impact of the global pandemic remains unquantified, especially in poorer and conflict-ridden societies. In the Persian Gulf region, in 2022, the focus shifted to tackling the societal impact, including mental health and education, as normalcy began to set in. Overall, until 31 December 2022, the Persian Gulf recorded at least 14,160,450 cases of Covid-19 infections and 193,497 deaths (Table 1.1). Between 1 January and 31 December 2022, the numbers were 3,668,748 and 18,062, respectively. Innovation: Innovation can open new pathways towards development and growth. The oil-rich Gulf Arab countries have, in recent years, considerably invested in education, research and innovation to be able to deal with the developmental challenges as they prepare for a post-oil future.

24 Mohammed Soliman, “An Indo-Abrahamic alliance on the rise: How India, Israel, and the UAE are creating a new transregional order”, Middle East Institute, Washington, D.C., 28 July 2021, https://www.mei.edu/publications/indo-abrahamic-alliancerise-how-india-israel-and-uae-are-creating-new-transregional, accessed 27 July 2023. 25 Mohammed Soliman, “The I2U2 needs muscle, Cairo and Riyadh can help”, Middle East Institute, Washington, D.C., 22 August 2022, https://www.mei.edu/publications/ i2u2-needs-muscle-cairo-and-riyadh-can-help, accessed 27 July 2023.

1

INTRODUCTION

13

Table 1.1 Number of Covid-19 cases until 31 December 2022 Country

Total cases

Per cent of Vaccine population doses

Vaccine percentage

Total deaths

Per cent of population

Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE Yemen Persian Gulf India

696,614 7,561,058 2,465,373 662,918 399,308 489,332 826,984 1,046,918 11,945 14,160,450 44,678,384

47.31 8.53 5.54 15.52 8.72 18.15 2.27 11.08 0.03 13.01 3.14

236.14 – 43.95 – 154.84 – – – – – –

1,536 144,682 25,374 2,570 4,628 685 9,515 2,348 2,159 193,497 530,702

0.10 1.44 0.05 0.06 0.10 0.02 0.02 0.02 0.006 0.19 0.03

3,476,633 – 19,557,364 – 7,086,050 – – – – – –

Source World Health Organisation, WHO Coronavirus (COVID-19) Dashboard, https://covid19. who.int/; The World Bank, Population, Total, https://data.worldbank.org/indicator/SP.POP.TOTL

The UAE figures high on the innovation index at 30th position and is followed by Saudi Arabia (51), Qatar (52) and Iran (53) (Table 1.2). Democracy Index: The prevailing political systems in the Persian Gulf are far from democratic and democracy, as commonly understood, eludes the region. The Gulf countries continue to linger at the bottom of the Economist Intelligence Unit’s Democracy Index, with Kuwait being Table 1.2 Global Innovation Index, 2022

Country

Score

Rank

Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE Yemen India

28.0 32.9 11.9 29.2 26.8 32.9 33.4 42.1 13.8 36.6

72 53 131 62 79 52 51 31 128 40

Source World Intellectual Property Organisation, Global Innovation Index 2022, p. 19

14

MD. M. QUAMAR ET AL.

the most democratic at 111th position (Table 1.3). Regarding electoral process and pluralism, Iran, Saudi Arabia, UAE and Yemen have nothing to show and did not score anything. Qatar and UAE are at the top regarding government functioning, followed by Kuwait, Oman and Saudi Arabia. Iraq is at the top in political participation, and when it comes to political culture, Qatar and UAE take the top slot. The region continues to fare badly on civil liberties, with only Kuwait, Oman and Qatar marginally ahead of others. The trajectory of the Persian Gulf countries in terms of progress since 2006 provides an interesting picture (Table 1.4). Out of the nine Gulf countries, only Qatar and Saudi Arabia have sustained progressive scores; Iraq and Iran have registered a decline in the last few years. Bahrain, UAE, Kuwait and Oman have fluctuating scores. Countries showing incremental improvements signal their willingness to be more transparent and accountable, especially in terms of good governance. Limited Freedom: According to Freedom House assessment, much of the Persian Gulf remains “Not Free,” with only Kuwait being identified as “Partly Free” where there is a constant struggle between the ruling family and the elected Majlis for more reforms and accountability. Saudi Arabia remains the least free country in the Persian Gulf, with a Freedom Table 1.3 EIU Democracy Index, 2022 Country

Overall Global Electoral Functioning Political score ranking process of participaand government tion pluralism

Political Civil culture liberties

Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE Yemen India

2.52 1.96 3.13 3.83 3.12 3.65 2.08 2.90 1.95 7.04

4.38 2.50 3.13 4.38 5.00 5.63 3.13 5.63 5.00 5.63

142 154 124 111 125 114 150 133 155 46

0.42 0.00 5.25 3.17 0.08 1.50 0.00 0.00 0.00 8.67

2.71 2.50 0.00 3.93 3.93 4.29 3.57 4.29 0.00 7.50

3.33 3.33 6.11 4.44 2.78 3.33 2.22 2.22 3.89 7.22

1.76 1.47 1.18 3.24 3.82 3.53 1.47 2.35 0.88 6.18

Source EIU, Democracy Index 2022: Frontline Democracy and the Battle for Ukraine, https://www. eiu.com/n/campaigns/democracy-index-2022/

1

INTRODUCTION

15

Table 1.4 EIU Democracy Index, 2006–2022 Country 2006 2008 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE Yemen India

3.53 2.93 4.01 3.09 2.77 2.78 1.92

3.38 2.83 4.00 3.39 2.98 2.92 1.90

3.49 1.94 4.00 3.88 2.86 3.09 1.84

2.92 1.98 4.03 3.74 3.26 3.18 1.77

2.53 1.98 4.10 3.78 3.26 3.18 1.71

2.87 1.98 4.10 3.78 3.26 3.18 1.82

2.87 1.98 4.23 3.78 3.15 3.18 1.82

2.79 2.16 4.08 3.85 3.04 3.18 1.93

2.79 2.34 4.08 3.85 3.04 3.18 1.93

2.71 2.45 4.09 3.85 3.04 3.19 1.93

2.71 2.45 4.06 3.85 3.04 3.19 1.93

2.55 2.38 3.74 3.93 3.06 3.19 1.93

2.49 2.20 3.62 3.80 3.00 3.24 2.08

2.52 1.96 3.51 3.91 3.00 3.65 2.08

2.52 1.95 3.13 3.83 3.12 3.65 2.08

2.42 2.60 2.52 2.58 2.58 2.52 2.64 2.75 2.75 2.69 2.76 2.76 2.70 2.90 2.90 2.98 2.95 2.64 2.57 3.12 2.79 2.79 2.24 2.07 2.07 1.95 1.95 1.95 1.95 1.95 7.68 7.80 7.28 7.30 7.52 7.69 7.92 7.74 7.81 7.23 7.23 6.90 6.61 6.91 7.04

Source EIU, Democracy Index 2022: Frontline Democracy and the Battle for Ukraine, https://www. eiu.com/n/campaigns/democracy-index-2022/

Score of eight out of a possible hundred. Despite the societal and sectarian violence, Iraq fairs better than most politically stable and economically stronger countries (Table 1.5). Gender Inequality: Although some Gulf countries score “very high” on the Human Development Index (HDI), only UAE and Bahrain rank within 50 in the Gender Inequality Index (GII)—Yemen, with a GII value Table 1.5 Global Freedom Score, 2022 Country

Freedom Score

Status

Internet Freedom Score

Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE Yemen India

12 12 29 37 24 25 08 18 09 66

Not Free Not Free Not Free Partly Free Not Free Not Free Not Free Not Free Not Free Partly Free

29 16 42 NA NA NA 24 28 NA 51

Source Freedom House, Freedom in the World Report, https://freedomhouse.org/countries/freedomworld/scores

16

MD. M. QUAMAR ET AL.

of 0.820 ranks at the bottom in the world at 170. With a score of 0.049, the UAE occupies the top slot in the region, followed by Bahrain, Qatar, Saudi Arabia, Oman, Kuwait, Iran and Iraq (Table 1.6). The figures underline the widespread gender inequality in the Persian Gulf region. The loss to human development due to gender inequality is much less for the rich GCC countries, as reflected in the lower values of GII, while for countries struggling with conflicts and fiscal stress, like Yemen, Iraq and Iran, it is higher. Corruption: Despite measures to end corruption, the Persian Gulf countries continue to languishing beyond 50 in global corruption perception index rankings except for UAE and Qatar (Table 1.7). The global ranking of nearly all countries, except Bahrain and Iran, deteriorated between 2021 and 2022. War-torn Yemen and Iraq, and Iran continue to be the worst performers. Over the past five years, Bahrain has made the most gains and its ranking improved from 103 in 2017 to 69 in 2022. Iraq and Kuwait, too, have improved their ranking a few notches, from 169 to 157 and 85 to 77, respectively. While Saudi Arabia and Oman have made minuscule gains, the rankings of Qatar and UAE have come down. Table 1.6 Gender Inequality Index, 2021

Country

GII Value

GII Rank

HDI Value

Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE Yemen India

0.181 0.459 0.558 0.305 0.300 0.220 0.247 0.049 0.820 0.490

46 115 145 74 72 54 59 11 170 122

0.875 0.774 0.686 0.831 0.816 0.855 0.875 0.911 0.455 0.63

Note High GII score implies a greater loss to human development due to gender inequality Source United Nations Development Programme, Human Development Reports, Gender Inequality Index (GII), http://hdr.undp. org/en/content/gender-inequality-index-gii; and Human Development Index, http://hdr.undp.org/en/composite/HDI

1

INTRODUCTION

17

Table 1.7 Corruption Perceptions Index ranking, 2017–2022 Country

2022

2021

2020

2019

2018

2017

Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE Yemen India

69 147 157 77 69 40 54 27 176 85

78 150 157 73 56 31 52 24 174 85

78 149 160 78 49 30 52 21 176 86

77 146 162 85 56 30 51 21 177 80

99 138 168 78 53 33 58 23 176 78

103 130 169 85 68 29 57 21 175 81

Source Transparency International, https://www.transparency.org/

Human Rights: Human rights violations remain a concern in the Persian Gulf. It gained international prominence after Saudi agents killed journalist Jamal Khashoggi in Istanbul in October 2018. The assassination led to an international uproar and isolated the Kingdom and Crown Prince MbS and the Biden administration even vowed not to deal with MbS. However, in 2022, as the war in Ukraine raged, President Biden reached out to Saudi Arabia, and during his visit to the Kingdom in July 2022, the president met and engaged with MbS. In the run-up to the FIFA World Cup 2022 in Qatar, the issue of violation of the rights of workers and their pitiable work and living conditions became a major issue. Consequently, Qatar took several measures to underscore its commitment to improving the condition of immigrant workers and labour, including ending the kafala (sponsorship) system that tied the fate of the expatriate employees to the whims of their employers. The banning of LGBTQ symbols and alcohol consumption in stadiums during the matches invited criticism from many Western media outlets and governments as a violation of the rights of people. However, to a large extent, the war in Ukraine, media counter-offensive by Qatar, and the successful organisation of the World Cup moderated the criticisms in 2022. The issue of human rights violations in Iran gained prominence in the wake of Mahsa Amini’s death in the custody of the morality police.

18

MD. M. QUAMAR ET AL.

The way the Islamic Republic crushed the subsequent protest highlighted the human rights situation as Iran was accused of targeted and extra-judicial killing of protest leaders. Moreover, the issue highlighted the oppressive and discriminatory laws against women in Iran and other Persian Gulf countries, including the imposition of a “Islamic” dress code and restrictions on women’s private and public lives. Iranian authorities gave conflicting signals of easing dress code restrictions underling the continued problems faced by women in making life choices. Unlike Iran, however, the GCC countries, especially Saudi Arabia, have been taking incremental measures to ease women’s restrictions, including their education, work, marriage, divorce, custody, inheritance and public appearance. Passport Ranking: Since 2006, Henley and Partners, a London-based advisory firm, has been publishing Global Passport Ranking based on visafree travels granted to the non-diplomatic civilian population. Among 193 countries and destinations granting visa-free travel, Japanese passports get the topmost rank. In the Gulf region, the UAE remains the most popular passport ranking 16, followed by Qatar, ranking 56. The ranking of the Israeli passport—at 25th place—indicates its relative popularity over some Gulf countries and India. Compared to the past, except for UAE, which remains at 16, all Persian Gulf countries improved their ranking by a few positions in 2022 (Table 1.8). Table 1.8 Global Passport Ranking, 2022 Country

Ranking

Number of countries granting visa-free travel

UAE Qatar Kuwait Bahrain Oman Saudi Arabia Iran Yemen Iraq Israel India

16 56 57 61 63 63 97 104 107 25 82

178 100 97 87 82 82 44 34 29 160 60

Source The Henley Passport Index: Q1 2023 Factsheet, https://www.henleyglobal.com/passport-index/ ranking

1

INTRODUCTION

19

Economic Issues The Persian Gulf countries depend on hydrocarbon exports for their economic growth. Table 1.9 gives the proven hydrocarbon reserves in the region. According to OPEC, proven oil reserves increased only in the UAE by 1.8 per cent over the previous year while the proven natural gas reserves increased in Saudi Arabia by 11.8 per cent.26 The economic recovery underway in 2021 was further propelled by the windfall oil revenues. The governments used fiscal surpluses to boost manufacturing, augment infrastructure and support non-oil sector growth rates. The impact of windfall energy revenues was muted in sanction-constrained Iran and conflict-ridden Yemen. However, the Persian Gulf countries struggled with imported inflation, though the level was lower than most Western countries. Global supply-chain disruption puts downside risk on the region’s economic recovery. Covid-19 induced shortages and spurt in global demand from economic recovery spiked prices of commodities, metals (like aluminium and nickel) and fuels. The increase in demand for remote working with consequent demand for electronics led to shortages in the supply of semiconductors.27 Disruption to trade routes from Covid-19-induced restrictions and the Ukraine war kept ocean freight rates at record high. The non-oil sector in Saudi Arabia and Iran benefited from the spurt in Chinese demand after the latter lifted Covid-19 restrictions. The rebound in travel and tourism sectors due to FIFA World Cup 2022 in Qatar had a positive spill-over effect in the region and attracted about 1.4 million visitors.28 Financial Markets and Stock Exchanges: The US federal reserves increased interest rates in March 2022 in response to unprecedented 26 OPEC, Annual Statistical Bulletin, 2023, https://asb.opec.org/, accessed 23 July 2023. 27 Ruchira Kondepudi, “The Semiconductor Shortage: What caused the supply crunch and how long will it last?” Money Control, 25 September 2021, https://www.moneycont rol.com/news/business/in-depth-the-semiconductor-shortage-what-caused-the-supply-cru nch-and-how-long-will-it-last-7501241.html, accessed 27 July 2023. 28 Akansha Agnihotri, “World Cup fever spreads from Qatar in Middle East tourism boom”, Hindustan Times, 28 August 2022, https://www.hindustantimes.com/lifestyle/ travel/world-cup-fever-spreads-from-qatar-in-middle-east-tourism-boom-101661698167 503.html, accessed 27 July 2023.

20

MD. M. QUAMAR ET AL.

Table 1.9 Proven oil and natural gas reserves (December 2022)

Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE World’s Total

Proven crude oil reserves (billion barrels)

Share in global proven crude oil reserves (%)

Proven natural gas reserves (billion standard cubic metre)

Share in global proven natural gas reserves (%)

208.6 145.02 101.50 5.37 25.24 267.19 113.00 1,564

13.34 9.27 6.49 0.34 1.61 17.08 7.23 100

33,988 3,714 1,784 673 23,831 9,514 8,210 210,060

16.18 1.77 0.85 0.32 11.35 4.53 3.91 100

Source OPEC, Annual Statistical Bulletin, 2023, https://asb.opec.org/

inflation.29 The central banks in the region followed suit to maintain their currency pegs. The rising cost of production and tightening financial markets had a dampening effect on investors’ sentiments and private sector. The governments maintained high spending on infrastructure and other priority areas. UAE and Bahrain that were the hubs of traditional finance are moving fast to allow trading in crypto assets within a regulated framework and are seeking to capitalise on their abundant hydrocarbon and solar energy for this energy-intensive mining. The GCC stock market outperformed its global peers by recording a lower decline of about 6.4 per cent in the MSCI GCC index against the double-digit decline in the global markets.30 The GCC IPO market was robust in the first two quarters of 2022. Energy Market: Due to surging demand and supply bottlenecks, oil and gas prices were at a multi-year high in 2021. In August, OPEC+ members agreed to increase production by an average of 400,000 bpd per month until September 2022. Soon after the Russian invasion of Ukraine in

29 Jeff Cox, “Federal Reserve approves first interest rate hike in more than three years, sees six more ahead”, CNBC, 16 March 2022, https://www.cnbc.com/2022/03/16/ federal-reserve-meeting.html, accessed 27 July 2023. 30 Zawya, “GCC Index ‘declines in 2022’ led by Qatar and Saudi Arabia”, 2 January 2023, https://www.zawya.com/en/markets/equities/gcc-index-declines-in-2022-led-byqatar-and-saudi-arabia-otlrmktr, accessed 27 July 2023.

1

INTRODUCTION

21

February 2022, the oil price crossed US100 barrels for the first time since 2014.31 The initial sanctions were on Russian financial institutions and Central Banks, and energy trading was permitted to protect the European countries that depended on Russian supplies. Yet the traders avoided Russian oil due to fears of secondary sanctions on financial transactions with Russian entities, and oil, natural gas and LNG prices moved up. The international oil market remained tight due to economic recovery, with prices above US$100 for about six months (Fig. 1.1). The high oil prices had a depressing effect on economic recovery towards the end of the year. In the last quarter of the year, when the fears of a global economic slowdown appeared imminent, OPEC+ members announced production cuts of about 2 mbpd, the largest since the beginning of the pandemic.32 Fiscal Situation and Inflation: During the year, the countries in the region had a fiscal surplus after a long time. However, the break-even

Fig. 1.1 OPEC reference basket price, 2022 (Source OPEC, Annual Statistical Bulletin, 2023, https://asb.opec.org/)

31 Economist Intelligence Unit (EIU), Saudi Arabia Country Report, March 2022, p. 27. 32 Hanna Ziady, “OPEC announces the biggest cut to oil production since the start of the pandemic”, CNN, 5 October 2022, https://edition.cnn.com/2022/10/05/energy/ opec-production-cuts/index.html, accessed 27 July 2023.

22

MD. M. QUAMAR ET AL.

price of oil for a balanced budget increased for most regional countries (Table 1.10). There have been continued efforts to increase non-oil revenues and to push for private sector participation in economic diversification. Saudi Arabia aims to raise US$55 billion from privatisation over the next five years. Saudi Aramco raised US$12.4 billion by selling stakes in its pipeline business, while the long-planned privatisation of the Ras al Khair desalination and power plant was suspended due to a lack of investor interest.33 The GCC governments have prudently deployed their fiscal surplus in long-term programmes and economic diversification. Some supported people’s increasing cost of living due to sustained upward pressure on inflation. The average inflation in the region remained lower than the global average, though it was close to 50 per cent in Iran. The region, import-dependent for food supply, witnessed significant price escalation and supply disruption due to the Ukraine crisis. Russia and Ukraine accounted for 30 per cent of global trade in wheat, 17 per cent of maize and more than 50 per cent of sunflower seed oil.34 External Sector: The global energy prices remained high for several months, bringing in multi-year high export revenues. The countries had a current account surplus. The sanctions on Russian oil and gas exports Table 1.10 Fiscal break-even oil prices for the Gulf exporters, 2000–2022 (US$ per barrel)

Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE

Average 2000–2019

2020

2021

2022

83.2 85.6 75.8 46.8 69.1 45.1 80.4 49.9

113.7 546.5 56.6 76.2 86.4 49.3 76.3 51.7

134.8 259.4 53.3 62.4 76.7 46.5 83.6 53.1

133.6 278.3 66.3 63.2 62.1 44.7 85.8 55.1

Source IMF, Middle East, Central Asia Regional Economic Outlook Appendix May 2023, https://www.imf.org/en/Publications/REO/MECA/Issues/2023/04/13/regional-economicoutlook-mcd-april-2023

33 EIU, Saudi Arabia Country Report, February 2022, p. 6. 34 EIU, Saudi Arabia Country Report, April 2022, p. 29.

1

INTRODUCTION

23

expanded European markets for the Gulf energy exporters. The EU sanctions on the Russian oil trade led to its rerouting through Dubai. The tightening of the global financial markets increased the cost of servicing external debts for the Persian Gulf countries. However, rising returns from foreign assets greatly outweighed the cost for countries like Saudi Arabia. The disruptive effect of international sanctions on Russia was more on bilateral trade and investments with Saudi Arabia in wideranging sectors, including metals and minerals, rubbers and chemicals, transport equipment, edible commodities, plastics, security systems and energy products. Besides, in recent years, the countries like Saudi Arabia and UAE have been projecting their geo-economic power in the region by disbursing aid and bail-out packages to countries facing financial problems and struggling with rising food and fuel prices. Since the outbreak of Covid-19, these disbursements have increased significantly.35 The total ODA from the four GCC countries (Saudi Arabia, UAE, Kuwait and Qatar) was US$9.22 billion in 2022 against US$9.84 billion in 2021.36 Regional Integration: The year commenced on an optimistic note for greater regional integration. In December 2021, the 42nd annual summit of the GCC leaders in Riyadh (chaired by MbS) ended with a statement of unity on internal and external affairs. Saudi Arabia and Kuwait also committed to cooperate on various political and economic issues and increasing oil production from the partition neutral zone (PNZ). Saudi Arabia and Oman facilitated closer economic ties by opening the first direct land transport link by passing the UAE. It is the first border checkpoint along the 660 km Saudi-Oman border, and a 725-km desert highway running through the Empty Quarter that links Ibri in North Western Oman with Al-Ahsa in Eastern Saudi Arabia. It gives Oman alternate access to the other GCC countries via Saudi Arabia, which was earlier possible only through the UAE. Saudi Arabia and Iraq agreed to join their electricity grids. During the year, there were also renewed efforts to build 35 Hasan Alhasan, Camille Lons, Layal Alghoozi, Noor Hammad and Nawafel Shehab, “Gulf Bailout Diplomacy: Aid as Economic Statecraft in a Turbulent Region”, International Institute for Strategic Studies, Bahrain, 17 November 2022, https://www.iiss.org/research-paper/2022/11/gulf-bailout-diplomacy-aid-as-eco nomic-statecraft-in-a-turbulent-region, accessed 27 July 2023. 36 Organisation for Economic Cooperation and Development (OECD), “ODA levels in 2022—Preliminary data”, 12 April 2023, https://www.oecd.org/dac/financing-sustai nable-development/ODA-2022-summary.pdf, accessed 27 July 2023.

24

MD. M. QUAMAR ET AL.

the Saudi-Qatar stretch of the planned GCC railway network. There were moves to mend the rift between the four GCC states (Saud Arabia, UAE, Kuwait and Bahrain) and Lebanon that had led to severing trade links.37 Petro Yuan: Saudi Arabia played up its relations with China as there were spats with the US over OPEC production. There were talks of Saudi Arabia selling some of its oil in Chinese currency in March when tension with the US was brewing over pressure to increase oil production38 as oil prices crossed US$100 per barrel. During a ministerial meeting in October, Saudi Arabia and China pledged to deepen energy cooperation. The same month, President Biden discussed unspecified consequences for the OPEC+ agreement to cut production.39 The US administration reportedly had urged Saudi Arabia to delay the production cut agreement until the November mid-term elections in the US.40 During his visit to Riyadh for first China-Arab summit in December, President Xi Jinping called for the use of Yuan in oil and gas trade. However, the Saudi interest may be in limited use of Yuan to pay for the Chinese exports rather than de-dollarisation of oil trade. Most of its foreign assets and reserves are in US dollars (including about US$120 billion in US securities).41 Moreover, the GCC countries (except Kuwait) peg their currencies to the US dollar.

India and the Region The Persian Gulf has emerged as a preferred partner in India’s foreign relations. Trade, business, investments, energy and expatriates form the backbone of the relations, complemented by mutual concern for 37 EIU, Saudi Arabia Country Report, February 2022, p. 23. 38 Summer Said and Stephen Kalin, “Saudi Arabia considers

accepting Yuan INSTEAD of Dollars for Chinese oil sales”, The Wall Street Journal, 15 March 2022, https://www.wsj.com/articles/saudi-arabia-considers-accepting-yuan-instead-of-dol lars-for-chinese-oil-sales-11647351541, accessed 27 July 2023. 39 EIU, Saudi Arabia Country Report, November 2022, p. 20. 40 Jon Gambrell, “Saudis say US sought 1 month delay of OPEC+ production

cuts”, AP, 14 October 2022, https://apnews.com/article/russia-ukraine-biden-inflationbusiness-elections-a359717a7edd2e609701d03328b55418, accessed 27 July 2023. 41 Maha El Dahan and Azis El Yaakoubi, “China’s Xi calls for oil trade in yuan at Gulf summit in Riyadh”, Reuters, 10 December 2022, https://www.reuters.com/ world/saudi-arabia-gathers-chinas-xi-with-arab-leaders-new-era-ties-2022-12-09/, accessed 27 July 2023.

1

INTRODUCTION

25

maritime security in the Western Indian Ocean, counter-terrorism, and combating organised crime, drug and human trafficking, and terror financing. Frequent political and diplomatic engagements, increased cultural exchanges, and growing military-to-military ties have become the hallmark in India-Persian Gulf relations in recent years. During the Covid-19, New Delhi and Gulf capitals exchanged expertise, medical supplies, and vaccines and cooperated in repatriating stranded Indian expatriates. Further, India and Gulf countries are increasingly discussing new areas for cooperation including healthcare, renewable energy, space exploration, defence production and manufacturing, and technological partnerships. The signing of the India-UAE comprehensive economic partnership agreement (CEPA) in March 2022 rekindled the hope for an early conclusion of the India-GCC FTA. Strategic and Diplomatic Issues Normal political and diplomatic exchanges between India and Persian Gulf countries resumed in 2022 after two years of pandemic-induced dependence on virtual diplomacy and telephonic exchanges. Numerous high-level meetings, exchanges and visits took place during 2022. In June, Prime Minister Modi visited UAE, and in October, the prime minister met President Ebrahim Raisi of Iran on the sidelines of the Shanghai Cooperation Organisation (SCO) Summit in Samarkand, Uzbekistan. He also held telephone conversation with Crown Prince and Prime Minister of Bahrain Salman bin Hamad al-Khalifa in February and Qatari Emir Tamim bin Hamad al-Thani in October. External Affairs Minister S. Jaishankar visited Doha in February and UAE in September. He also met the president of the Kurdistan Regional Government, Nechirvan Barzani, on the sidelines of the Munich Security Conference in February. In June, Iranian Foreign Minister Hossein Amir-Abdollahian visited India and called on Prime Minister Modi. In November, Vice-President Jagdeep Dhankhar visited Doha to attend the FIFA World Cup 2022 inauguration ceremony. Earlier in June, the then Vice-President M. Venkaiah Naidu visited Doha on a maiden visit. There have been several other important engagements, especially with UAE and Saudi Arabia at the diplomatic and

26

MD. M. QUAMAR ET AL.

political levels, underlining the growing importance of the two countries for India in the Persian Gulf. Multilateralism: India has increased its engagement with the region through various minilateral and multilateral frameworks. It has participated in initiatives such as I2U2, India-UAE-France trilateral, IndiaIran-Afghanistan trilateral, India-Iran-Uzbekistan trilateral, and joined the Combined Maritime Force led by the US and based in Bahrain. India has also advocated accepting Persian Gulf countries as members or observers in multilateral organisations such as SCO and BRICS. As part of its forthcoming presidency of the G20, in September 2022, India invited UAE and Oman as guests countries among nine others to attend the G20 proceedings and summit meeting to be held in 2023. Further, India has resumed FTA talks with GCC to strengthen bilateral trade and business with members of the grouping. Defence Ties: India has gradually been enhancing its security, defence and military-to-military ties with the countries in the Persian Gulf, specifically with Saudi Arabia, UAE and Oman. There are some security and defence cooperation with Iran, Bahrain and Qatar. With UAE and Saudi Arabia, the focus is on developing a multifaceted strategic partnership encompassing all aspects of political, diplomatic, security, cultural and economic relations. Accordingly, the military-to-military engagements, exchanges among defence and military officials and naval forces, and discussions among defence industry representatives have increased. Defence manufacturing, exports and joint production have become important areas of interest between India, UAE and Saudi Arabia. With Bahrain, Oman and Iran, the focus is on maritime security cooperation, given their critical and strategic position in maritime chokepoints in the Persian Gulf, Strait of Hormuz and the Arabian Sea. Besides, National Security Advisor Ajit Doval has been actively engaging his regional counterparts in the Persian Gulf to advocate and advance India’s strategic interests. Dubai Expo—India Pavilion: The Dubai Expo 2020 opened on 1 October 2021 and closed on 31 March 2022. The Expo was delayed due to Covid-19. The India Pavilion was inaugurated by Minister of Commerce and Industry Piyush Goyal and displayed some of the most important aspects of India’s cultural, business and industrial life. The India Pavilion was among the most popular at the Expo and attracted more than 24 million visitors in six months. In March 2022, Goyal

1

INTRODUCTION

27

announced that the India Pavilion at the Expo would not be dismantled and would become a permanent feature in Dubai.42 Nupur Sharma Row: In May 2022, India faced a major diplomatic backlash from the Persian Gulf countries after Nupur Sharma, a spokesperson of the ruling Bhartiya Janata Party (BJP), made some disrespectful remarks against Prophet Muhammed during a prime-time television news debate.43 As the social media hyped the incident, it acquired international manifestations, and many social media users in Gulf countries, as in other parts of the Islamic world, condemned the statement. Persian Gulf states, including Iran, Kuwait, Qatar, Oman, Bahrain, Saudi Arabia and UAE, issued press statements condemning the remarks by the BJP leader and spokesperson.44 The issue was resolved after India’s Ministry of External Affairs and Indian embassies in the region clarified that the sentiments expressed by the spokesperson of a political party do not reflect the views of the Government of India.45 For its part, the BJP suspended Sharma and other office bearers who had publicly supported her or reiterated her sentiments and underlined that the views expressed by her are neither reflective of the party nor the Indian government. To a large extent, this helped in diffusing the row but did underline the possibility of domestic issues affecting foreign policy, including in the Persian Gulf. Indians Detained in Qatar: In October 2022, the case of eight former Indian naval officers’ detention in Qatar came to light. Media reports suggested that Dahra Global Technologies and Consultancy, a defence 42 The Economic Times, “India Pavilion at Dubai Expo is permanent, not going to be dismantled: Piyush Goyal”, 29 March 2022, https://economictimes.indiatimes.com/ news/india/india-pavilion-at-dubai-expo-is-permanent-not-going-to-be-dismantled-piy ush-goyal/videoshow/90525631.cms, accessed 27 July 2023. 43 Geeta Pandey, “Nupur Sharma: The Indian woman behind offensive Prophet Muhammad comments”, BBC, 1 July 2022, https://www.bbc.com/news/world-asiaindia-61716241, accessed 27 July 2023. 44 Suhasini Haidar and Kallol Bhattacherjee, “Hate remarks against the Prophet | West Asian nations demand public apology from Indian government”, The Hindu, 5 June 2022, https://www.thehindu.com/news/national/gulf-countries-protest-statement-bybjp-leaders-demand-public-apology-from-government/article65497958.ece, accessed 27 July 2023. 45 The Hindu, “Remarks on the Prophet do not reflect views of government: India”, 9 June 2022, https://www.thehindu.com/news/national/remarks-do-not-reflect-views-ofgovernment-mea-on-controversial-comments-on-prophet/article65510900.ece, accessed 27 July 2023.

28

MD. M. QUAMAR ET AL.

service and advisory company associated with Qatari Navy, employed these former officers. The company has been in the news as Indian ambassadors in Qatar lauded it for strengthening Indo-Qatari ties. Notably, Commander (retd.) Purnendu Tiwari was the company’s Managing Director and was awarded the Pravasi Bharatiya Samman in 2019. On 3 November, MEA’s spokesperson acknowledged that the GoI was aware of the detention of eight Indian nationals by the Qatari security agencies but did not divulge any further details on the case.46 The issue remained unresolved until the year end. China: China’s growing engagements with the Persian Gulf countries is a challenge to India. Over the years, China has developed close economic and energy partnerships with the region and has gradually begun to foray into strategic areas. It has cooperated closely with regional countries through the BRI infrastructure development and connectivity projects and has been working towards developing defence and maritime security cooperation, especially with Iran. With the GCC countries, China has been working towards developing partnerships in strategic technologies and emerging areas. It is seeking greater political cooperation and has been hosting a summit meeting with Arab and GCC countries in Beijing. In December 2022, during his visit to Riyadh, President Xi held ChinaSaudi, China-GCC, and China-Arab summit meetings and exchanged views on various regional and international matters. These economic, political and strategic forays open the doors for greater Chinese involvement in regional politics and will pose a challenge for India, given the current state of India-China bilateral relations and the growing tensions between China and the US over developments in the Indo-Pacific. Pakistan: The Pakistan factor is no longer prominent in India’s relations with the Persian Gulf. Despite close ties with Pakistan, the regional countries have de-hyphenated Pakistan in relations with India. The latest and most prominent example of this was when the Gulf countries refused to respond to Pakistani calls for condemnation of the Indian decision in August 2019 to revoke Article 370 of the Indian constitution to end the special status of Jammu and Kashmir (J&K). Nonetheless, there remains 46 The Indian Express, “8 ex-Navy officers detained in Qatar: Embassy making all possible efforts for their release, says MEA”, 4 November 2022, https://indianexpress. com/article/india/8-indian-navy-officers-detention-qatar-embassy-making-release-mea8248067/, accessed 27 July 2023.

1

INTRODUCTION

29

challenges as Pakistan tries to raise internal matters of India for brownie points at international forums, including at the Organisation of Islamic Cooperation (OIC) that from time-to-time issues statements condemning Indian actions in Jammu and Kashmir and on the condition of Muslims in India. Economic Engagements The global economy and trade witnessed quick shocks, beginning from the Covid-19 pandemic, Russian war in Ukraine and the consequent surge in global inflation in 2022. The US Federal Reserve responded with increased interest rates, driving capital inflows and consequent appreciation of the US dollar against most currencies. Thus, the post-Covid-19 recovery in 2022 was challenged by war-induced supply-chain disruptions, fragility of Chinese demand, tightening global financial markets and rising debt of the non-financial sectors. Despite these limitations, the Indian economy advanced successfully after its encounter with the pandemic and fully recovered in 2022–2023. It was one of the fastest-growing economies in the world, with a growth rate of 6.8 per cent during the year.47 The inflation had been in the tolerable range of 5–6 per cent in 2020. India has been concerned about surging energy prices since the second half of 2021, accentuated by the war in Ukraine. The Persian Gulf’s role in India’s energy security is paramount in this context. India’s economic engagement with the Persian Gulf region during the year highlighted new strengths and paradigms. Trade, investments, energy ties and Indian expatriates in the region remained the vital pillars of bilateral engagements. During the pandemic, both sides continued to maintain essential supply chains, repatriate Indian workers and provide a vital boost to the Covid-19 response. The bilateral economic engagements during the year displayed the vibrancy of the recovery process in a challenging global context. The return of the Indian workers was encouraging, but they had to navigate the renewed thrust on nationalisation of the job market in the region. Except with the UAE, trade continues to be oil and gas dominated, bilateral investment was far below their potential and issues of Indian expatriate labour would draw significant diplomatic 47 GoI, Ministry of Finance, Economic Survey 2022–2023, https://www.indiabudget. gov.in/economicsurvey/doc/echapter.pdf, accessed 27 July 2023.

30

MD. M. QUAMAR ET AL.

attention. Given enormous complementarities, greater convergence needs to be achieved towards mutual growth and development targets and challenges. Greater resilience to manage the downside risk of volatility of global energy prices, commodity and financial markets, geo-political conflicts and vulnerabilities of expatriate workers are the long-term goals in India’s engagements with the region. Bilateral Trade: India’s total trade with the Persian Gulf countries was about US$225.14 billion in 2022–2023, which constituted about 19.33 per cent of India’s total global trade (Table 1.11). It increased significantly by almost 17.27 per cent from US$191.98 billion in 2021–2022, partly due to increased energy imports and high energy prices. During the period, the UAE, Saudi Arabia, Iraq and Qatar were among the top 25 trading partners and ranked third, fourth, seventh and eighteenth positions, respectively. UAE was the second largest export destination after the US and the second largest source of imports after China. Due to the dominance of oil imports, India has a negative trade balance with all the regional countries, except Iran and Yemen. Due to high import bills, the regional trade deficit increased from US$94.70 billion in 2021–2022 to US$111.81 billion in 2022–2023 (Table 1.11). Trade deficit with the region constituted more than 42.50 per cent of India’s total trade deficit. India’s trade with the region fluctuates massively with the price of oil, with a consequent impact on its import bills. Except for UAE, India’s trade with the region had been oil and gas dominated, though some value-added items like machinery, precious stones, petroleum products and pharmaceuticals were gaining traction. The India-UAE comprehensive economic partnership agreement that took effect on 1 May 2022 led to a jump in the issue of Certificates of Origin and re-exports. India supplies 20 per cent of the global market of generic drugs, and its contribution to the global Covid-19 vaccination drive has raised its prestige. During the year, there were efforts to facilitate automatic registration and marketing authorisation in the UAE market of the Indian pharmaceutical products approved by the regulators of developed countries. Indian Expatriates: Even before the Covid-19 pandemic, the number of Gulf migrants from India had declined. Several factors, including the Arabisation of the labour force, taxes on emigrants, introduction of VAT and other taxes, slowing of the global economy and scaling down of construction projects leading to falling demand for migrant labourers, were reasons for the declining Gulf migration from India. Thus, from

303,526.15 14.52 95,960 465,580.25 20.61

140,028 769,057.68 18.21 −51,892

275,852.42 16.57 77,392 384,356.39 20.14

123,098 658,828.66 18.68 −31,686

−67,965

844,156.51 19.34

163,291

514,078.42 22.49

115,628

330,078.09 14.43

47,663

2018–2019

Source Compiled from GoI, https://tradestat.commerce.gov.in/eidb/default.asp

44,068

2017–2018

45,706

2016–2017

−59,194

788,070.32 19.30

152,074

474,709.28 22.25

105,634

313,361.04 14.82

46,440

2019–2020

−42,414

686,244.36 15.45

106,050

394,435.88 18.82

74,232

291,808.48 10.90

31,818

2020–2021

India’s trade with Persian Gulf countries, 2016–2022 (US$ million)

Total exports to Persian Gulf countries India’s total exports Share of Persian Gulf in India’s total exports (%) Total imports from Persian Gulf countries India’s total imports Share of Persian Gulf in India’s total imports (%) Total trade with Persian Gulf countries India’s total trade Share of Persian Gulf in India’s total trade (%) Trade balance with Persian Gulf

Table 1.11

−94,709

1,035,056.45 18.55

191,975

613,052.05 23.38

143,342

422,004.40 11.52

48,633

2021–2022

−111,814

1,165,000.88 19.33

225,138

714,042.45 23.59

168,476

450,958.43 12.56

56,662

2022–2023

1 INTRODUCTION

31

32

MD. M. QUAMAR ET AL.

a high of 2.8 million in 2016, only 1.58 million Indians went to the GCC countries in the pre-Covid-19 year of 2019. This dropped by a fifth in 2020 and did not take off in the first half of 2021. However, with economic recovery boosted by multi-year high oil revenues in the region, emigration of Indian expatriates to some of the countries like Saudi Arabia, UAE and Kuwait in 2022 exceeded the previous year (Table 1.12). Remittances: India was the largest recipient of remittances globally, crossing the threshold of US$100 billion in 2022 against US$89.4 billion in 2021. Remittances constituted three per cent of the GDP in India. The UAE was India’s second leading source of remittances after the US.48 The share of the GCC countries in India’s total remittances was 30 per cent. During the year, the Indian expatriates benefited from dollar appreciation between January and September and invested in real assets in India. Their ability to remit was also protected by the GCC government policy of keeping the inflation low. The economic recovery and rebound of construction activities in the GCC countries are likely to maintain the demand for Indian unskilled and semi-skilled workers. The easing of the tourist and work visas in many GCC countries to revive tourism and real estate opens the challenge of more expatriate workers Table 1.12 Emigration clearance given, 2021–2022

Country

2021

January–June 2022

Bahrain Iraq Kuwait Oman Qatar Saudi Arabia United Arab Emirates Total

6,382 935 10,158 19,452 49,579 32,845 10,844 130,195

5,949 348 33,631 17,967 13,628 99,452 15,235 186,210

Source Rajya Sabha Session—257 Starred Question No 49. Cited in https://data.gov.in/resource/country-wise-emigration-clearanceec-data-period-2021-30th-june-2022

48 Sunainaa Chadha, “Remittances to India to hit record $100 billion mark: What is driving this surge”, The Times of India, 6 December 2022, https://timesofindia.indiat imes.com/business/india-business/us-replaces-uae-to-become-top-source-of-remittanceflow-to-india-report/articleshow/96025878.cms, accessed 27 July 2023.

1

INTRODUCTION

33

seeking the tourist visa route for employment in the region rather than having a valid work permit. At the same time, expatriates with professional skills are becoming new drivers for India-Gulf commercial ties in a range of knowledge-intensive sectors. India-UAE collaboration for delivering healthcare services in Africa is illustrative of enormous potential. However, the work force nationalisation policies in the region would most likely impact mid-level jobs in education and other sectors. Energy Ties: Energy forms the fulcrum of India’s relations with the Persian Gulf. The region has vast proven oil and gas reserves in India’s proximity that are expected to last up to 70–100 years (Table 1.9). Coal is the most abundant fuel in India, accounting for 55 per cent of its primary energy consumption and more than three-fourths of its power generation (Table 1.14). However, India aims transition to the dominant use of clean fuels like natural gas, and its import dependence on natural gas has increased (Table 1.13). Transition to clean energy would be meaningful if the country’s electricity production also comes from renewable sources. Table 1.14 gives the fuel mix for electricity generation in India and shows the dominance of coal. India aims to have 30 per cent electric vehicle usage by 2030 and pursues the goal through the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles programme, which is in its second phase. The registration of electrical vehicles has increased from 329,808 in 2021 Table 1.13 India’s natural gas imports, 2016–2021 (bcm)

Year

Quantity Imported

2016 2017 2018 2019 2020 2021 2011–2021 decadal growth rate (%) Share in global LNG import (%)

24.3 26.1 30.6 32.4 36.7 33.6 6.8 6.5

Source BP, Statistical Review of World Energy 2022, p. 34

34

MD. M. QUAMAR ET AL.

Table 1.14 India’s electricity generation by fuel, 2020–2021 (terawatt hours)

Source

2020

2021

Share in 2021 (%)

Oil Natural gas Coal Nuclear energy Hydro-electricity Renewable Other Total

4.9 70.8 1,125.2 44.6 163.6 151.2 0.6 1,560.9

2.3 64.2 1,271.1 43.9 160.3 171.9 1.1 1,714.8

0.13 3.74 74.13 2.56 9.35 10.03 0.061 100

Source BP, Statistical Review of World Energy 2022, p. 67

to 1,020,679 in 2022, indicating its growing pace.49 India’s electricity generation needs to increase manifold to facilitate this transition. Besides, LNG as a transport fuel is predicted to touch 14 million tons by 2035 as it can displace diesel consumption. Gas and its derivatives, such as blue hydrogen and ammonia, are poised to have a greater role in India’s transition from peak to net-zero emissions. The Indian government targets to increase the share of natural gas in primary energy consumption from the current 6.2 per cent to 15 per cent by 2030.50 In this energy calculus, India’s top oil and gas suppliers are dominanted by the Persian Gulf region (Table 1.15). Despite competition from discounted Russian oil, Iraq was the leading supplier of crude oil during the year while Russia was the leading supplier of petroleum products. Qatar ranked first in LPG and LNG supplies. Saudi Arabia and UAE are also important suppliers of petroleum products, including LPG. UAE and Oman were also among the top five LNG suppliers. Tables 1.16 and 1.17 provide the breakup of India’s energy trade with the Persian Gulf countries. Due to the oil price hike during the year, the total crude oil imports from the Persian Gulf region in 2022–2023

49 Ajay Kumar, “India’s electric mobility dream: Is 2030 achievable? Exploring challenges of EV industry and the solutions”, ABP Live, 8 June 2023, https://news.abp live.com/india-at-2047/india-s-electric-mobility-dream-is-2030-achievable-exploring-cha llenges-of-ev-industry-and-the-solutions-1607382, accessed 27 July 2023. 50 The Economic Times, “Government sets target to raise share of natural gas in energy mix to 15% by 2030”, 25 July 2022, https://economictimes.indiatimes.com/industry/ energy/oil-gas/government-sets-target-to-raise-share-of-natural-gas-in-energy-mix-to-15by-2030/articleshow/93112104.cms, accessed 27 July 2023.

1

INTRODUCTION

35

Table 1.15 India’s top five sources and destinations for energy trade, 2022– 2023 Crude oil imports

Petroleum products imports

LPG imports

LNG imports

Petroleum products exports

Iraq Russia Saudi Arabia UAE US

Russia UAE South Korea Singapore Iraq

Qatar UAE Saudi Arabia Kuwait –

Qatar UAE US Oman Australia

Netherlands UAE US Israel Togo

Source GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://tra destat.commerce.gov.in/eidb/default.asp

was worth about US$92.07 billion against US$80.13 billion in 2021– 2022 (Table 1.16). Nevertheless, the region’s share in India’s total crude oil imports decreased from 65.4 per cent in 2021 to 56.76 per cent as India increased Russian oil imports. The Russian supplies also reduced India’s imports of petroleum products from the Persian Gulf region. The total import of petroleum products from the Persian Gulf was US$5.11 billion in 2022–2023 against US$4.13 billion in 2021–2022, with share reducing from 51.13 per cent to 38.02 per cent during the period. Similarly, LNG imports from the region were about US$12.45 billion in 2022–2023 against US$8.25 billion in 2021–2022 (Table 1.17). The share of the Persian Gulf countries in India’s total LNG imports increased from 61.21 per cent to 72.75 per cent during the period. LNG imports were predominantly under long-term contracts and had oil-indexed prices. The region is also an important supplier of LPG, used for domestic cooking. Over 90 per cent of India’s LPG imports come from Qatar, UAE, Saudi Arabia and Kuwait (Tables 1.15 and 1.17). Total imports of LPG from the region increased from US$11.79 billion in 2021–2022 to US$13.41 billion in 2022–2023. Affordable access to clean cooking gas fuels is central to redressing the problem of indoor pollution caused by burning solid fuels, which adversely affects the health of women and children below five years in India. India’s total oil and gas imports from the region were about US$105.28 billion in 2021–2022, which increased to US$122.06 billion in 2022–2023, but its share in India’s total oil and gas imports decreased from 66.29 per cent to 59.58 per cent. For the last few years, the share

36

MD. M. QUAMAR ET AL.

Table 1.16 India’s energy trade with the Persian Gulf countries, 2021–2023 Country

UAE Saudi Arabia Iraq Qatar Kuwait Oman Iran Bahrain Yemen Total Persian Gulf countries India’s total import/ export of that commodity Share of Persian Gulf in India’s total (%)

Crude oil imports

Petroleum productsa imports

2021–2022

2022–2023

2021–2022 2022–2023 2021–2022 2022–2023

12,304.83 22,869.27

16,840.67 29,077.41

1,630.53 1,614.61

2,128.27 520.78

5,702.57 2 404.47

8,047.83 1,884.19

30,342.10 981.44 9,981.44 3,600.00 – – 52.05 80,131.13

33,599.57 1,874.62 8,024.61 2,657.57 – – – 92,074.45

1,118.95 319.38 238.22 177.61 8.07 – 0.24 5,107.61

540.73 267.53 170.71 477.82 21.07 – – 4,126.91

766.68 145.23 10.74 941.28 1.69 – 19.98 9,992.64

878.88 206.62 12.87 2,122.99 3.23 – 0.92 13,157.53

122,449.32 162,205.16 9,990.37

10,853.35

66,688.64

96,507.58

65.44

38.02

14.98

13.63

56.76

51.13

Petroleum products exports

Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://tradestat.commerce.gov.in/eidb/default.asp; a Excludes LPG

of the Persian Gulf in India’s total oil and gas imports has been above 64 per cent. Renewable energy and gas derivatives like blue hydrogen and ammonia have been gaining traction in India and the Persian Gulf. Despite challenges from the rising cost, record-low solar energy tariff bids continue in the Persian Gulf countries, mainly in UAE. Saudi’s ACWA power has a global presence and the lowest bidding record in solar energy. India has a solar installed capacity of about 49.35 GW by the end of December 2021 as against the target of 100 GW under the National Solar Mission started in 2014–2015. Excluding large hydropower plants, the share of

1

INTRODUCTION

37

Table 1.17 India’s LPG and LNG imports, 2021–2023 (US$ million) Country

UAE Saudi Arabia Qatar Kuwait Oman Iran Bahrain Total Persian Gulf countries India’s total import/export of that commodity Share in India’s total (%)

LPG imports

LNG imports

2021–2022

2022–2023

2021–2022

2022–2023

3,700.94 2,737.79 3,675.77 1,648.01 0 0 31.91 11,794.42 12,895.51

3,921.25 2,849.79 4,042.44 2,312.05 134.84 82.66 66.74 13,409.77 14,669.78

1,665.30 0 5,906.42 0 674.09 0 0 8,245.81 13,472.23

3,162.44 0 8,324.95 0 963.55 0 0 12,450.94 17,113.60

91.46

91.41

61.21

72.75

Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://tradestat.commerce.gov.in/eidb/default.asp

renewables in India’s total electric generation in 2021 was 10.3 per cent (Table 1.14). About 14.21 GW of renewable energy capacity was added between January and October 2022, ranking India fourth in installed renewable energy capacity and fourth in wind power capacity, and in solar power capacity worldwide.51 Renewable energy could be the next frontier of India’s engagement with the Persian Gulf countries through commercial and research collaboration. However, high cost of financing, land procurement and inefficient power sector in India are some of the obstacles to overcome. Commerce in Culture and Entertainment: India and the Persian Gulf countries have been pushing ahead in improving the business environment to attract foreign investment to promote the knowledge sector and start-ups with a consequent increase in employment opportunities for their citizens. Both regions have enormous complementarity in resources, skills and capacities and can engage bilaterally to combat some of the key challenges facing their economies, build resilience to shocks and

51 Press Information Bureau (PIB), GoI, “Year—End review 2022—Ministry of new and renewable energy”, 20 December 2022, https://pib.gov.in/PressReleasePage.aspx? PRID=1885147, accessed 27 July 2023.

38

MD. M. QUAMAR ET AL.

contribute to regional stability. People of both regions display an enormous appetite for sports, cultural events, media entertainment, fitness through yoga, etc. opening new avenues for commerce in cultural and creative sectors. Indians were among the largest purchasers of tickets (400,000) for the World Cup matches, and about 60,000 spectators from India visited Qatar during the event.52

About the Volume Persian Gulf 2023, the tenth in the series, examines India’s relations with the nine countries in the region and the GCC during 2022, with a few caveats and notes. Kindle published the inaugural issue.53 Two subsequent volumes, Persian Gulf 2013 54 and Persian Gulf 2014,55 were published by Sage (India). Smashwords published the fourth in the Series Persian Gulf 2015.56 The 2016–2017 volume pertaining to events of 2015 and 2016 was published in collaboration with Institute for Defence Studies and Analyses (IDSA, renamed Manohar ParrikarIDSA in February 2020).57 Thanks to Sagarika Ghosh, our series found a home in Springer that has published the 2018,58 2019,59 202060 and 2021–202261 volumes. The present Persian Gulf 2023 is the tenth in the Series and the fifth under Palgrave Macmillan banner. The Series began

52 Taman Nandi, “Indians throng Qatar for the FIFA World Cup, second highest after Saudi Arabia”, Mint, 7 December 2022, https://www.livemint.com/news/india/ indians-throng-qatar-for-the-fifa-world-cup-second-highest-after-saudi-arabia-116703946 99575.html, accessed 27 July 2023. 53 Persian Gulf, 2012, https://www.amazon.in/Persian-Gulf-2012-Indias-Relationsebook/dp/B0099RZ6NG. 54 Persian Gulf 2013, https://us.sagepub.com/en-us/nam/persian-gulf-2013/book24 2306. 55 Persian Gulf 2014, https://us.sagepub.com/en-us/nam/persian-gulf-2014/book24 5036. 56 Persian Gulf 2015, https://www.smashwords.com/books/view/549471. 57 Persian Gulf 2016–2017 , https://idsa.in/book/book_persian-gulf-2017. 58 Persian Gulf 2018, https://www.palgrave.com/gp/book/9789811319778. 59 Persian Gulf 2019, https://www.palgrave.com/gp/book/9789811514319. 60 Persian Gulf 2020, https://link.springer.com/book/10.1007/978-981-15-6415-4. 61 Persian Gulf 2021–2022, https://link.springer.com/book/10.1007/978-981-19-

4434-5.

1

INTRODUCTION

39

as an edited volume, and when we moved to Springer, we settled for coauthorship for greater coherence and timely execution. The fundamentals of the Series remain the same, namely to present India’s relations with the region in a comprehensive, holistic and systematic manner. The MEI@ND prefers Persian Gulf to other expressions only because of its historical nature and is an UN-recognised nomenclature. When there are water bodies like the Arabian Sea, Indian Ocean or Bay of Bengal, why object to the Persian Gulf? However, like other geographical expressions, the term does not denote the Iranian ownership of the said waters. For the benefit of the readers, we have expanded the itineraries of the Key Information at the beginning of country-specific chapters. India is included in major statistical tables to indicate its relative advantages and disadvantages vis-à-vis Persian Gulf states. For readability, we are using UK English spellings. Since Persian Gulf 2020, the economic data of Persian Gulf countries are sourced primarily from respective official national databases, if available. Some of the figures are given in national currencies, and for the benefit of a wider audience, they are converted into US dollars (based on the average official exchange rates for the year). There may be discrepancies in the national data and other sources like international bodies due to the differences in definition, methodology or base year. Wherever possible, the data discrepancies have been highlighted. Some countries do not share oil export destination data. The same has been supplemented by the international sources like Geneva-based International Trade Centre (ITC) and the United Nations Conference on Trade and Development (UNCTAD), which are often at variance. The different entries in the table are often sourced differently and may not add up. However, they are insightful of the trend. The two-digit HS code the ITC gave has been used for the commodity description for the export and import figures. Moreover, the accounting years also differ; while India uses financial years that cover the AprilMarch period, some countries use the current year, and Iran’s fiscal year begins on 20 March. Likewise, the figures put out by India’s Directorate General of Foreign Trade (DGFT) for the current year are often revised in the following year. Hence, there could be a slight discrepancy. For example, the trade figures for 2021–2022 might be different in Persian Gulf 2021–2022 and Persian Gulf 2023. Moreover, references to the internet websites (URLs) were accurate when the manuscript was finalised

40

MD. M. QUAMAR ET AL.

on 31 July 2023, and authors or publishers are not responsible for URLs that may have expired or changed since then. As authors, we sincerely thank all the previous contributors who made the Series possible and flourishing. We record our appreciation to our innumerable scholar friends, especially Joseph A. Kéchichian, C Raja Mohan, C Uday Bhaskar, Girijesh Pant, Gulshan Dietl, Meena Singh Roy, Rajesh Rajagopalan, Sanjay Singh, Santishree Pandit, Shyam Babu, Srabani Roychoudhary, Sreeradha Datta and Vivek Mehra. Above all, we are grateful to Honourable M Hamid Ansari for his wholehearted, valuable and unflinching support for the MEI@ND. Special thanks are reserved for Rohit for his delicate skills in fine-tuning the references and for Suneethi Raja for preparing the index. We are also thankful to Anuradha, Deepika, Irfan and Prabhat, for helping collect material for the volume. We immensely value the support of Aparajita Singh in getting this volume out in a short time. Above all, we acknowledge and appreciate the unconditional love, affection, inspiration and support of our family in completing this volume. With great respect and gratitude, we are dedicating this volume to Professor Avraham Sela, one of the finest scholars on the Middle East and a true friend of MEI. And all omissions and commissions are ours alone. P. R. Kumaraswamy, Md. Muddassir Quamar and Sameena Hameed 31 July 2023 New Delhi

CHAPTER 2

Bahrain

Key Information Political System: Constitutional Monarchy; Ruling Family: Al-Khalifa; Ruler: Hamad bin Isa al-Khalifa (since 6 March 1999); Crown Prince and Prime Minister: Salman bin Hamad al-Khalifa (since 9 March 1999 and 11 November 2020, respectively); National Day: 16 December; Parliament: Bicameral National Assembly [40-member nominated Majlis al-Shura or Consultative Council and 40-member elected Majlis alNuwwab or Council of Deputies; Last Parliamentary Election: 12 and 19 November 2018; Major Group in Parliament: Independents; National Carrier: Gulf Air. Socio-Economic Indicators Area: 785 sq. km; Population: 1.55 million; Citizens: 55%; Expats: 45%; Major Population Groups: Native Bahrainis 46%, Asians 45.5%, Arab 4.7%, African 1.6%, European 1% and other 1.2%; Religious Groups: Citizens: 99% Muslim (Shia 55–60% and Sunni 35–40%), Other (Christian, Hindu, Jew and Baha’i) 1%, Residents: 73.7% Muslim, 9.3% Christian, 0.1% Jew and 16.9% other (Hindu, Baha’i, Sikh and Buddhist); Age Structure: 0–14 years 18.14%, 15–64 years 77.83%, 65+ years 4.03%; Population Growth Rate: 0.85%; Life Expectancy at Birth: 80.13 years; Adult Literacy Rate (Ages 15 and older): 97.5%; Currency: Bahraini Dinar (BHD); GDP (Current): US$38.87 billion; © Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_2

41

42

MD. M. QUAMAR ET AL.

Foreign Trade: Merchandise Exports: US$29.79 billion, Merchandise Imports: US$15.54 billion; Military Expenditure: 3.2% of GDP; Sovereign Wealth Fund: Bahrain Mumtalakat Holding Company, Assets US$18.26 billion; National Debt: US$37.4 billion; GNI (Per Capita, PPP): $46,900; GDP (Per Capita, PPP): $54,256.8; Oil Reserves: 186 million barrels (57th in the world); Gas Reserves: 2.89 tcf (52nd in the world); Human Development Index: 0.875; HDI Rank: 35 out of 191; Infant Mortality Rate (deaths per 1,000 live births): 6; Maternal Mortality Ratio (deaths per 100,000 live births): 9; UN Education Index: 0.769; Gender Development Index: 0.927; Gender Inequality Index: 0.181; Labour Force: 0.82 million; Employment to Population Ratio (Ages 15 and older): 71%; Unemployment Rate: 1.87%; Urban Population: 89.9%; Rate of Urbanisation: 1.99% (2020–2025 Estimates); Last National Census: 2010; World Press Freedom Index: Rank 171 out of 180, Score 30.59; Corruption Perception Index: Rank 69 out of 180, Score 44/100; Foreign Direct Investment (Inflows): US$1.77 billion; Individuals Using Internet (per cent of population): 99%; Net Migration Rate (per 1,000 people): −0.99; Forest Area (per cent of total Land Area): 0.7%; Carbon Dioxide Emissions (tons per capita): 31.69 megatons; Global Peace Index: Rank 99 out of 163, Score 2.09; Global Innovation Index: Rank 78 out of 132; Global Cybersecurity Index: Rank 60 out of 194, Score 77.86. India Related India Cultural Centre: Proposed; Number of Indians: 326,558; Currency Exchange Rate: 1BHD = INR 218.32; Number of NonMuslim Places of Worship: 1 Temple, 5 Churches and 3 Gurudwaras; No. of Indian Schools: 8; Indian Banks: State Bank of India (2), ICICI Bank (1) and HDFC Bank (1); Last Visit to India by the ruler: King Hamad bin Isa al-Khalifa (February 2014); Last Visit by an Indian Prime Minister: Narendra Modi (August 2019). Sources: CIA World Factbook 2023; UN Development Programme 2023; World Bank 2023; World Intellectual Property Organisation 2023; Vision of Humanity, 2023; UNCTAD World Investment Report 2023, Transparency International 2023; Reporters without Borders 2023; U.S. EIA 2023; Embassy of India, Bahrain, 2023. ∗ ∗ ∗

2

BAHRAIN

43

The Covid-19 pandemic exacerbated economic problems of Bahrain generated by depleting petroleum revenues, and the recovery remains marred in financial constraints and political disturbance. Two new oil and gas field discoveries announced in 2018 and 2022, respectively, have generated hopes for an economic turnaround, but their commercial viability is yet to be guaranteed. The tiny island nation has witnessed turbulent times over the past decade due to political unrest and economic challenges. The trust deficit between the majority Shia community and the ruling Sunni family has grown, especially since the 2011 uprising. Accusations of repression, human rights violations and an uncompromising government response have worsened the situation. Financial challenges have created a greater dependence on the neighbouring Gulf Cooperation Council (GCC) States, especially Saudi Arabia. The IndoBahraini relations go back to historical times and a large Indian expatriate population is employed in the oil, financial services and other sectors. The political ties strengthened with the first (since 1947) prime ministerial visit to Bahrain in 2019. India’s decision to join the Bahrain-based and USled Combined Maritime Force (CMF) as its 35th member in May 2022 underlined New Delhi’s commitments to maritime security in the Gulf region and Bahrain’s significance role in it.

Domestic Developments The Kingdom of Bahrain’s struggle to overcome political, economic and societal challenges continued in 2022.1 Economic slowdown due to reduced oil and gas production and exports,2 political and sectarian unrest since the 2011 uprisings3 and societal challenges due to demographic divisions, accusations of human rights violations and repression by 1 BTI-Project, “Country report: Bahrain”, https://bti-project.org/fileadmin/api/con tent/en/downloads/reports/country_report_2022_BHR.pdf, accessed 23 May 2023. 2 International Monetary Fund (IMF), “Gulf Cooperation Council: Economic prospects and policy challenges for the GCC countries”, 29 November 2022, https://www.imf. org/en/Publications/Policy-Papers/Issues/2022/11/29/Gulf-Cooperation-Council-Eco nomic-Prospects-and-Policy-Challenges-for-the-GCC-Countries-525945, accessed 23 May 2023. 3 Economic Intelligence Unit (EIU), “Bahrain—Political stability”, 20 April 2021, https://country.eiu.com/article.aspx?articleid=1450957728&Country=Bahrain&topic= Summary&subtopic=Political+forces+at+a+glance&subsubtopic=Political+stability, accessed 23 May 2023.

44

MD. M. QUAMAR ET AL.

security agencies4 were exacerbated by the Covid-19 outbreak in 2020.5 After the pandemic wreaked havoc globally for two years, 2022 brought some relief from the health scare with improved economic prospects. However, security remains a concern in Bahrain, given its small size and the looming Iranian threat. Besides, a challenging regional strategic environment and uncertainties related to American commitments in the region have heightened Bahraini concerns.6 This has partially led to the Kingdom normalising relations with Israel in September 2020 under the Abraham Accords. Further, in January 2021, the Gulf discord with Qatar ended following the Al-Ula GCC Summit.7 Politics The political situation in Bahrain remains fragile but stable. Since the 2011 uprisings, the majority Shia community has been restive and has allegedly faced serious discrimination and abuse at the hands of security agencies that fear the community as a fifth column for Iran. Tehran’s historical claims over Bahrain heightened the tensions.8 With the Shia community continuing to express their grievances, the ruling family and Sunni-dominated government agencies have resorted to a securitised response leading to accusations of widespread repression, abuse and stifling of freedoms.9 The passing away of Prime Minister Khalifa bin

4 Human Rights Watch (HRW), “Bahrain—Events of 2021”, https://www.hrw.org/ world-report/2022/country-chapters/bahrain, accessed 23 May 2023. 5 Sameena Hameed et al., Persian Gulf 2021–22: India’s relations with the region, Singapore: Palgrave Macmillan, 2022, pp. 65–98. 6 Gerald M. Feierstein, Bilal Y. Saab and Karen E. Young, “US-Gulf relations

at the crossroads: Time for a recalibration”, Middle East Institute (MEI), 5 April 2022, https://www.mei.edu/publications/us-gulf-relations-crossroads-time-recalibration, accessed 23 May 2023. 7 Tuqa Khalid, “Full transcript of Al-Ula GCC Summit Declaration: Bolstering Gulf unity”, Al-Arabiya News, 6 January 2021, https://english.alarabiya.net/News/gulf/ 2021/01/06/Full-transcript-of-AlUla-GCC-Summit-Declaration-Bolstering-Gulf-unity, accessed 23 May 2023. 8 Hussein Ibish, “Iran’s new ploy to disrupt the Mideast: Laying claim to Bahrain”, Bloomberg, 21 September 2022, https://www.bloomberg.com/opinion/articles/2022-0921/iran-claims-bahrain-to-shake-up-nuclear-talks-and-rebuff-israel, accessed 23 May 2023. 9 HRW, “Bahrain—Events of 2021”, https://www.hrw.org/world-report/2022/cou ntry-chapters/bahrain, accessed 23 May 2023.

2

BAHRAIN

45

Salman al-Khalifa, the longest-serving prime minister in the world, and an uncle of King Hamad, in November 2020 saw the passing of the baton to the Crown Prince and eldest son of the King, Salman bin Hamad al-Khalifa. Given the latter’s reputation as a reconciliatory figure, it had generated hopes for a turnaround in the Shia-Sunni ties in the Kingdom and a gradual reduction in the discord between the majority community and the ruling family. However, the unrelenting approach of both sides has obscured these hopes. Parliamentary and municipal elections were held in Bahrain in November 2022. The Bahraini National Assembly is a bicameral legislative body consisting of the 40-member elected Majlis al-Nuwwab (Council of Representatives) and a 40-member appointed Majlis ashShura (Consultative Council). The term of the assembly is four years. The previous parliamentary elections were held in 2018. A total of 344,713 Bahrainis were eligible to vote in the 2022 parliamentary (and municipal) elections, and the executive committee for elections confirmed the turnout at 73.18 per cent, up from 67 per cent in 2018.10 There were 330 candidates, including 94 women. Compared to 2018, the number of candidates, including women, increased from 293 and 41, respectively.11 Eight women were elected to the lower house in 2022.12 Except for six candidates who were declared elected in the first round on 12 November, 34 constituencies went into the second round on 19 November as none of the candidates crossed the threshold of 50 per cent votes at the first instance.13 The municipal elections were held simultaneously for 30 members in the 40-member council (the government nominates the

10 Inter-Parliamentary Union (IPU), “Bahrain”, https://data.ipu.org/node/13/electi ons?chamber_id=13566, accessed 23 May 2023. 11 Al-Jazeera, “Bahrain votes in parliamentary elections”, 12 November 2022, https:// www.aljazeera.com/news/2022/11/12/polls-open-in-bahrain-parliamentary-elections, accessed 23 May 2023. 12 Bahrain News Agency (BNA), “Winners of the 2022 parliamentary elections announced”, 20 November 2022, https://www.bna.bh/en/news?cms=q8FmFJgiscL2fwI sON1%2BDsIPmKqrrrY%2FpMgsoEqKvcw%3D, accessed 23 May 2023. 13 Kingdom of Bahrain, “Results and statistics”, https://www.vote.bh/first-round, accessed 23 May 2023.

46

MD. M. QUAMAR ET AL.

remaining ten members). According to government sources, 175 candidates, including 20 women, contested the municipal elections.14 Most municipal seats (23) also went into the second round before a winner could be declared. Only two female candidates secured seats among the 30 elected members.15 Bahrain has a resident population of 1.54 million, with nearly 55 per cent or 850,000 citizens. All citizens who have attained the age of 20 were eligible to vote. Notably, the number of registered voters decreased from 365,467 in 2018.16 While the Bahraini authorities did not explain the reduction in registered voters, the opposition and media alleged that many Bahrainis eligible to vote were systematically disallowed from registering as voters for their political views and sectarian affiliation. According to one estimate, nearly 100,000 Bahrainis were made ineligible based on the Political Rights Law.17 Bahraini rights groups based outside the country and international rights groups, including Amnesty International and Human Rights Watch, accused the Kingdom of conducting a “sham” election because of the ban on members of political societies like Al-Wefaq, Wa’ad and other Shiite political groups.18 On the eve of the elections, Bahraini authorities reported that many government and election-linked websites experienced a cyberattack and

14 Kuwait Times, “Bahrainis vote for members of parliament, municipal council”, 12 November 2022, https://www.kuwaittimes.com/bahrainis-vote-for-members-of-parlia ment-municipal-council/, accessed 23 May 2023. 15 Kingdom of Bahrain, “Results and statistics”, https://www.vote.bh/m-results, accessed 23 May 2023. 16 Al-Jazeera, “Bahrain votes in parliamentary elections”, 12 November 2022, https:// www.aljazeera.com/news/2022/11/12/polls-open-in-bahrain-parliamentary-elections, accessed 23 May 2023. 17 Bahrain Institute for Rights & Democracy (BIRD), “Report: Bahraini elections a ‘sham’ as boycott calls lead to imprisonment”, 11 November 2022, https://birdbh. org/2022/11/report-bahraini-elections-a-sham-as-boycott-calls-lead-to-imprisonment/, accessed 23 May 2023. 18 Amnesty International, “Bahrain: Elections, But no civic space”, 10 November 2022, https://www.amnesty.org/en/documents/mde11/6124/2022/en/, accessed 23 May 2023.

2

BAHRAIN

47

alleged a foreign hand to disrupt the peaceful elections.19 The reference to foreign hand was to Iran, which Bahrain has long accused of interfering in its internal matters and supporting dissident and extremist elements. However, Iran has constantly denounced such allegations, saying that Bahrain’s legitimate opposition parties and societies have been at the receiving end of repression by the authorities and security agencies.20 Nonetheless, the electoral process went smoothly. A new cabinet (Table 2.1) was formed under Crown Prince and Prime Minister Salman al-Khalifa with many high-level ministers, including Foreign Minister Abdullatif al-Zayani, Oil and Environment Minister Mohammed bin Mubarak bin Daina and Finance Minister Salman bin Khalifa al-Khalifa, retaining their positions.21 The exclusion of Shiite political societies from the electoral process does raise questions about the credibility of the process. A report published by the London-based Bahrain Institute for Rights and Democracy (BIRD) underlined that nearly 80,000 Bahraini citizens were disqualified from contesting in the elections in accordance with the Political Rights Law amended in 2018.22 Accordingly, it was alleged that nearly 70,000 eligible Bahrainis lost their right to vote.23 The report called for boycotting the elections until the contentious law is repealed, alleging that the elections were “the most restricted in 20 years” and that the state has weaponised the legislation “to obstruct the democratic process and

19 Ghaida Ghantous, “Bahrain hails election turnout, rights groups criticise ‘repressive’

climate”, Reuters, 13 November 2022, https://www.reuters.com/world/middle-east/bah rain-holds-parliament-polls-rights-groups-slam-repressive-climate-2022-11-12/, accessed 23 May 2023. 20 Reuters, “Iran supreme leader: People’s will prevail in Bahrain after protests”, 31 July 2019, https://www.reuters.com/article/us-mideast-iran-bahrain-idUSKCN1U Q1M4, accessed 23 May 2023. 21 Reuters, “Bahrain’s king approves new Cabinet”, 22 November 2022, https:// www.reuters.com/world/middle-east/bahrains-king-asks-crown-prince-form-new-cabinet2022-11-21/, accessed 23 May 2023. 22 BIRD, “The entire political process if fraudulent: A legal and political study of the 2022 parliamentary elections in Bahrain”, November 2022, https://birdbh.org/wpcontent/uploads/2022/11/The-Entire-Political-Process-is-Fraudulent-A-Legal-and-Politi cal-Study-of-the-2022-Parliamentary-Elections-in-Bahrain-%C2%A9BIRD.pdf, accessed 23 May 2023. 23 Ibid.

48

MD. M. QUAMAR ET AL.

Table 2.1 Bahrain’s new cabinet as of December 2022 Name

Position

Crown Prince Salman bin Hamad al-Khalifa Khalid bin Abdullah al-Khalifa Rashid bin Abdullah al-Khalifa Abdullatif bin Rashid al-Zayani Salman bin Khalifa al-Khalifa

Prime Minister Deputy Prime Minister Minister of Interior Minister of Foreign Affairs Minister of Finance and National Economy Minister of Labor Minister for Shura Council and House of Representatives Affairs Minister of Defence Affairs Minister of Municipal Affairs and Agriculture Minister of Oil and Environment Minister of Transportation and Telecommunications Minister of Works Minister of Legal Affairs Minister of Social Development Minister of Electricity and Water Affairs Minister of Health Minister of Justice, Islamic Affairs and Waqf Minister of Cabinet Affairs Minister of Housing and Urban Planning Minister of Sustainable Development Minister of Tourism Minister of Information Affairs Minister of Education Minister of Industry and Commerce Minister of Youth Affairs

Jameel bin Mohammed Ali Humaidan Ghanim bin Fadhel al-Buainain Abdullah bin Hassan al-Nuaimi Wael bin Nasser al-Mubarak Mohammed bin Mubarak bin Daina Mohammed bin Thamer al-Kaabi Ibrahim bin Hassan al-Hawaj Youssef bin Abdulhussein Khalaf Osama bin Ahmed Khalaf al-Asfoor Yasser bin Ibrahim Humaidan Jalila bint al-Sayyed Jawad Hassan Jawad Nawaf bin Mohammed al-Maawda Hamad bin Faisal al-Malki Amna bint Ahmed al-Rumaihi Noor bint Ali al-Khulaif Fatima bint Jaffer al-Sairafi Ramzan bin Abdulla al-Nuaimi Mohammed Mubarak Juma Abdulla bin Adel Fakhro Rawan bint Najeeb Tawfiqi

Source Kingdom of Bahrain, eGovernment Portal, 20 December 2022, www.bahrain.bh

actively disempower its citizens, who are deprived of the ability to exercise their rights to vote safely.”24 Bahraini authorities denied any wrongdoing and insisted that the Kingdom is a constitutional monarchy that adheres to the laws and rights laid down in the constitution. The government

24 Ibid., p. 2.

2

BAHRAIN

49

argues that the laws only bar people with criminal convictions and records and people with membership in banned societies.25 Foreign Policy and Security Being a small state in a turbulent region, the security and foreign policy of the Kingdom are intertwined and determines its internal and external choices. That explains why the tiny island nation hosts the Fifth Fleet of the US Navy along with the headquarters of the Combine Maritime Force (CMF) and the US Naval Forces Central Command (NAVCENT). Security considerations are a major reason for the foreign policy alignment between Saudi Arabia and Bahrain. The security concerns emerge from internal political and demographic realities, terrorist threats from Jihadist groups and historical Iranian claims over Bahrain and the calls since 1979 for the export of the revolutionary ideals through religious linkages and networks. That the Shias are a demographic majority and are restive due to a sense of discrimination and repression, and their religious and political links with Iran make the two into an intertwined threat and a major security preoccupation of the ruling Al-Khalifa family, government and security agencies. Against the backdrop of the 2011 uprising, the government banned all opposition political societies and imprisoned their leadership and members and outlawed their participation in the electoral process. Notably, this led to accusations against the monarchy of disenfranchising a section of its citizens of their political rights.26 The outbreak of the Russia-Ukraine war on 24 February 2022 led the global community to take notice and Bahrain voted in favour of the 2 March UNGA resolution condemning the Russian invasion and demanding a full and immediate withdrawal.27 On 15 March, King Hamad spoke with President Vladimir Putin of Russia, emphasising the 25 Kuwait Times, “Bahrainis vote for members of parliament, municipal council”, 12 November 2022, https://www.kuwaittimes.com/bahrainis-vote-for-members-of-parlia ment-municipal-council/, accessed 23 May 2023. 26 HRW, “You can’t call Bahrain a democracy—Bahrain’s political isolation laws”, 31 October 2022, https://www.hrw.org/report/2022/10/31/you-cant-call-bahrain-democr acy/bahrains-political-isolation-laws, accessed 23 May 2023. 27 Margaret Dene, Hannah Labow and Carol Silber, “Middle East responses to the Ukraine crisis”, The Washington Institute for Near East Policy, 4 March 2022, https:// www.washingtoninstitute.org/policy-analysis/middle-east-responses-ukraine-crisis, accessed 23 May 2023.

50

MD. M. QUAMAR ET AL.

“importance of solving conflicts by diplomatic means.”28 In November, the Russian News Agency, TASS, reported that King Hamad has offered to mediate between warring sides.29 The report noted that Bahrain “calls on great powers to review and resume their commitments to maintain international peace and security, to avoid escalation and confrontation, and calls for directing global efforts to combat waves of extremist ideology by means of joint work to resolve any political, economic or social problems.”30 This, in a way, underlined the constraint and dilemma faced by smaller Gulf monarchies, traditionally considered Western or American allies, in responding to the Russian military action in Ukraine. That Russia is a global power and a major oil and gas producer complicated the matter for them. The Gulf leaders were also mindful of the mixed American signals regarding its regional security commitments and the increased Russian military involvement in the Middle East. The growing Russia-China geo-political alignment and Russia-Iran concurrence on many important regional and international issues already forced many Gulf and Middle Eastern countries to take note of the global geo-political developments and seek cooperation with regional and multilateral groupings such as the Shanghai Cooperation Organisation (SCO) and the BRICS. During the annual SCO summit in Samarkand, Uzbekistan, in September 2022, Bahrain and other regional countries initiated the process of becoming a dialogue partner of the SCO, further underlining the hedging policy pursued by the Gulf Arab states.31 Bahrain has thus followed a policy of strengthening regional partnerships and cultivating relations with world powers, including the US, UK and major European countries, while developing relations with Russia, China and other rising Asian powers, including Japan, India and South Korea. 28 Reuters, “Putin, Bahrain king discuss importance of diplomatic solutions—King’s adviser”, 15 March 2022, https://www.reuters.com/world/putin-bahrain-king-discussimportance-diplomatic-solutions-kings-adviser-2022-03-15/, accessed 23 May 2023. 29 TASS, “King of Bahrain ready to act as intermediary between Russia and Ukraine— Embassy”, 4 November 2022, https://tass.com/world/1532569, accessed 23 May 2023. 30 Ibid. 31 Bahrain News Agency, “Bahrain welcomes accession to Shanghai Cooperation

Organisation as dialogue partner”, 17 September 2022, https://www.bna.bh/en/Bah rainwelcomesaccessiontoShanghaiCooperationOrganisationasdialoguepartner.aspx?cms= q8FmFJgiscL2fwIsON1%2BDmVk6rOBeq%2Bisg9z3c%2BUVFk%3D#:~:text=Manama% 2C%20Sept.,annual%20summit%20in%20Samarkand%2C%20Uzbekistan, accessed 23 May 2023.

2

BAHRAIN

51

In March 2022, the Crown Prince and Prime Minister Salman al-Khalifa visited the US32 during which bilateral strategic dialogue, including political, economic, security and cultural relations, were discussed. The joint statement noted the “discussions focused on advancing key priorities such as expanding strategic cooperation to support peace and security; deepening professional, educational, and cultural ties; enhancing prosperity by strengthening bilateral economic cooperation; and countering terrorism and transnational threats.”33 During the visit, both countries signed six agreements in industry, logistics, information technology and space sciences.34 Shortly after the visit, on 24 March, media reports suggested that the US State Department approved the sale of M270 multiple launch rocket systems and related equipment worth US$176 million to Bahrain.35 On the other hand, China has continued to seek closer partnership with Bahrain. In January 2022, Foreign Minister al-Zayani visited China’s eastern Jiangsu Province and met with his Chinese counterpart Wang Yi. The visit focused on expanding bilateral cooperation and strengthening friendly relations. Some important areas discussed included “5G communications, e-commerce, digital economy, big data, and advance cooperation in infrastructure and photovoltaic projects.”36 The visit coincided with visits from Saudi, Omani, Kuwaiti and Iranian foreign ministers and GCC Secretary-General to China. This acquired significance in the backdrop of the Winter Olympic Games in Beijing in February 2022, 32 Bahrain News Agency, “The Court of the Crown Prince announces HRH the Crown Prince and Prime Minister’s official visit to the United States of America”, 1 March 2022, https://www.bna.bh/en/news?cms=q8FmFJgiscL2fwIsON1%2BDrXHlBv WsrcSDLdz9ZBsl7s%3D, accessed 23 May 2023. 33 U.S. Department of State, “Joint Statement of the Second U.S.-Bahrain Strategic

Dialogue”, 7 March 2022, https://www.state.gov/joint-statement-of-the-second-u-s-bah rain-strategic-dialogue/, accessed 23 May 2023. 34 Reuters, “Bahrain signs agreements on industry, logistics, space sciences with U.S.—Tweet”, 4 March 2022, https://www.reuters.com/world/middle-east/bahrainsigns-agreements-industry-logistics-space-sciences-with-us-tweet-2022-03-03/, accessed 23 May 2023. 35 Reuters, “U.S. approves potential sale of rocket launchers to Bahrain—Pentagon”, 25 March 2022, https://www.reuters.com/world/us-approves-potential-sale-rocket-lau nchers-bahrain-pentagon-2022-03-24/, accessed 23 May 2023. 36 CGTN, “China, Bahrain call to expand bilateral cooperation in all fronts”, 11 January 2022, https://news.cgtn.com/news/2022-01-11/Chinese-FM-holds-talks-withBahrain-counterpart-16JAOaORhJu/index.html, accessed 23 May 2023.

52

MD. M. QUAMAR ET AL.

which came under some boycott calls and criticism over China’s human rights record and its handling of the Covid-19 pandemic. In comparison, many countries refused to send official representatives, and others, like India, did not participate. In December 2022, when Chinese President Xi Jinping was visiting Riyadh, he met with King Hamad on the sideline of the China-GCC and China-Arab summits.37 Among the Middle Eastern countries, Bahrain’s relations with Israel have improved rapidly since the signing of the Abraham Accords in September 2020. On 14 February 2022, Naftali Bennett became the first Israeli prime minister to visit the Kingdom and met with his Bahraini counterpart and Crown Prince Salman al-Khalifa. The two sides discussed several important bilateral, regional and global issues, including security and stability in the Gulf and the Iranian threat.38 A week before Bennett’s visit, Israeli Defence Minister Benny Gantz visited Bahrain and signed an MoU on security cooperation, the first such agreement between Israel and a Gulf Arab country. This led to suggestions of greater security cooperation between Israel and its Abraham Accords allies in the Gulf on countering the Iranian threat.39 The Gulf Arab states might also be interested in exploring the possibility of acquiring the Israeli anti-rocket and missile system, the Iron Dome, in the light of the attacks from Iranbacked militias in Iraq and Yemen.40 Bahrain confirmed that an officer from the Israel Defence Forces would be stationed in the Kingdom as part of Israeli cooperation with the CMF, underlining the potential for cooperation in the maritime domain.41

37 Ministry of Foreign Affairs, People’s Republic of China, “Xi Jinping Meets with King

of Bahrain Hamad bin Isa Al Khalifa”, 10 December 2022, https://www.fmprc.gov.cn/ mfa_eng/zxxx_662805/202212/t20221210_10988580.html, accessed 23 May 2023. 38 Dan Williams, “Israeli prime minister lands in Bahrain in first visit”, Reuters, 15 February 2022, https://www.reuters.com/world/middle-east/israeli-prime-ministermake-first-visit-bahrain-monday-2022-02-14/, accessed 23 May 2023. 39 Reuters, “Israel defence minister signs security agreement with Bahrain”, 3 February 2022, https://www.reuters.com/world/middle-east/israel-defence-minister-visits-us-navybase-bahrain-2022-02-03/, accessed 23 May 2023. 40 The Times of Israel, “Israel said ready to sell Iron Dome to UAE, build regional defences against Iran”, 1 February 2022, https://www.timesofisrael.com/israel-said-readyto-sell-iron-dome-to-uae-build-regional-defenses-against-iran/, accessed 23 May 2023. 41 Reuters, “Bahrain confirms Israeli officer will be stationed in the country-state agency”, 12 February 2022, https://www.reuters.com/world/middle-east/bahrain-con firms-israeli-officer-will-be-stationed-country-state-agency-2022-02-11/, accessed 23 May 2023.

2

BAHRAIN

53

Growing strategic component of the Abraham Accords was reflected through the convening of a two-day strategic consultations in Sde Boker in Israel on 27–28 March 2022, wherein the foreign ministers of the US, Israel, Bahrain, Egypt, Morocco and the UAE discussed important regional issues and decided to form a regional strategic framework called Negev Forum.42 This was followed by convening the first meeting of the Negev Forum Steering Committee in Manama on 27 June 2022 with the objective of deciding the modalities of the forum. It opted for a four-part structure with a ministerial track represented by foreign ministers, the presidency, a steering committee and six working groups on clean energy, education and coexistence, food and water security, health, regional security and tourism.43 Notably, Jordan, the second Arab country after Egypt to normalise relations with Israel in 1994, was also invited to the Forum but chose not to attend.44 Besides developments in strategic areas, diplomatic efforts to increase economic cooperation with Israel have been going on. In December 2022, Israel’s President Isaac Herzog visited Bahrain accompanied by a large business delegation underlining the eagerness of Israeli industries and businesses to cooperate with their Bahraini counterparts.45 President Herzog held discussions with King Hamad. The visit acquired importance in the backdrop of the change of government in Israel after the November Knesset elections that resulted in the return of Benjamin Netanyahu as prime minister after a hiatus of a year and a half. Questions were raised on his choice of extreme right-wing coalition partners, leading to speculations about the response of Israel’s new Arab friends. Bahrain, however, made it clear that it would continue to develop relations with Israel irrespective of the ideological position of the parties who 42 Humeyra Pamuk, “Israel’s U.S., Arab partners close ranks on Iran, urge Palestinian talks”, Reuters, 29 March 2022, https://www.reuters.com/world/middle-east/blinkenjoins-rare-israel-arab-summit-iran-deal-looms-2022-03-28/, accessed 23 May 2023. 43 U.S. Department of State, “Negev Forum Steering Committee Joint Statement”, 27 June 2022, https://www.state.gov/negev-forum-steering-committee-joint-statement/, accessed 23 May 2023. 44 Humeyra Pamuk, “Israel’s U.S., Arab partners close ranks on Iran, urge Palestinian talks”, Reuters, 29 March 2022, https://www.reuters.com/world/middle-east/blinkenjoins-rare-israel-arab-summit-iran-deal-looms-2022-03-28/, accessed 23 May 2023. 45 Reuters, “Israeli president touts business ties on first Bahrain visit”, 4 December 2022, https://www.reuters.com/world/middle-east/israeli-president-touts-bus iness-ties-first-bahrain-visit-2022-12-04/, accessed 23 May 2023.

54

MD. M. QUAMAR ET AL.

form Netanyahu’s government, underlining the strength and maturity of the partnership.46 In September, Bahrain and Israel began negotiating a free trade agreement47 and, in October, entered into an agriculture cooperation agreement as part of a regional food security commitment.48 Bahrain also took gradual steps towards reconciliation with Qatar. In July 2022, on the sidelines of the Jeddah Summit for Security and Development, King Hamad met Emir Tamim al-Thani, their first public one-on-one meeting since the discord among GCC countries led to the boycott of Qatar by the quartet of Saudi Arabia, the UAE, Bahrain and Egypt in June 2017. The boycott ended in January 2021, but BahrainiQatari relations remained frosty due to continued differences. Besides other issues, historical disputes over the control and sovereignty of Hawar and Janan islands and the town of Zubarah remain contentious.49 The meeting between the two leaders was cordial and led to the lifting the travel ban and visa requirements for Qatari citizens to visit Bahrain showing signs of a thaw.50 On 3 November 2022, Bahrain hosted Pope Francis on the first papal visit to the Kingdom. Bahrain became the third regional country to host the Pope after the UAE in 2019 and Iraq in 2021.51 The visit generated global attention over the situation of minorities, including Christian minorities, in the region. During his meetings with Bahraini authorities,

46 Philip Pullella, “Bahrain will build on partnership with Israel, says king’s adviser”, Reuters, 6 November 2022, https://www.reuters.com/world/middle-east/bahrain-willbuild-partnership-with-israel-says-kings-adviser-2022-11-05/, accessed 23 May 2023. 47 Reuters, “Israel, Bahrain start free trade agreement talks”, 20 September 2022, https://www.reuters.com/world/middle-east/israel-bahrain-start-free-trade-agreem ent-talks-2022-09-20/, accessed 23 May 2023. 48 Reuters, “Israel, Bahrain agree to cooperate on agriculture, food security”, 20 October 2022, https://www.reuters.com/world/israel-bahrain-agree-cooperate-agricu lture-food-security-2022-10-20/, accessed 23 May 2023. 49 Amwaj, “Is real rapprochement between Bahrain, Qatar on the horizon?”, 5 August 2022, https://amwaj.media/article/a-cautious-assessment-of-the-bahrain-qatar-rapproche ment, accessed 23 May 2023. 50 The New Arab, “Bahrain removes Qatar from travel ban list as diplomatic relations improve”, 18 July 2022, https://www.newarab.com/news/bahrain-removes-qatar-travelban-list-ties-improve, accessed 23 May 2023. 51 Aljazeera, “Pope Francis arrives in Bahrain on first trip to the Gulf nation”, 3 November 2022, https://www.aljazeera.com/news/2022/11/3/pope-francis-urges-res pect-for-human-rights-during-bahrain-trip, accessed 23 May 2023.

2

BAHRAIN

55

including King Hamad and public engagements in the Kingdom, the Pope emphasised the need for better inter-community and inter-faith relations in the Gulf, Middle East and the wider world. He also underlined the need to uphold individual rights and spoke against discrimination and the death penalty.52 During his four-day stay in the Kingdom, the Pope also held a public mass for the Catholic community53 and visited the oldest Catholic Church in the Gulf region.54 On 5 November, a small protest by families of political activists serving jail terms or on death row was held along the way of the Pope’s motor cavalcade.55 Economy Bahrain’s economic recovery after the Covid-19-induced contraction was facilitated by increased oil revenues and a surge in non-oil sector activities. Real GDP growth turned positive in 2021 and was estimated to be about 3.4 per cent in 2022 (Table 2.2). GDP at current prices increased from US$38.86 billion in 2021 to US$43.54 billion in 2022. The economic growth was driven by strong performance in the non-oil manufacturing, retail trade and hospitality sectors.56 The real non-oil sector growth rate was about 4 per cent in 2022 (Table 2.2). The financial sector is the second most significant contributor to the GDP after oil, comprising a 17 per cent share in 2021, employing over 13,600 people, of which 70 per cent were Bahraini nationals.57 The Kingdom has one of the region’s oldest banking systems. During the year, the Central Bank of Bahrain 52 Ibid. 53 Philip Pullella, “Pope Francis thrills small Gulf Catholic community with big Mass”,

Reuters, 5 November 2022, https://www.reuters.com/world/europe/pope-francis-thrillssmall-gulf-catholic-community-with-big-mass-2022-11-05/, accessed 23 May 2023. 54 RTE, “Pope wraps up Bahrain trip with visit to Gulf’s oldest church”, 6 November 2022, https://www.rte.ie/news/world/2022/1106/1333452-pope-francisbahrain/, accessed 23 May 2023. 55 Aljazeera, “Bahraini prisoners’ families hold small protest during pope visit”, 5 November 2022, https://www.aljazeera.com/news/2022/11/5/bahraini-prisoners-fam ilies-hold-small-protest-during-pope-visit, accessed 23 May 2023. 56 MEES, vol. 65, no. 28, 15 July 2022, p. 12. 57 Bahrain Economic Development Board, “Bahrain attracts US$72.7 million worth of

investment in financial services”, 1 November 2022, https://www.bahrainedb.com/latestnews/bahrain-attracts-us72-7-million-worth-of-investment-in-financial-services, accessed 23 May 2023.

56

MD. M. QUAMAR ET AL.

Table 2.2 Bahrain’s economic growth, 2019–2023

GDP at current prices (US$ million) Real GDP growth (annual per cent) Real non-oil GDP growth (annual per cent)

2019

2020

2021

2022a

2023a

38,653 2.1 2.1

34,723 −4.9 −4.9

38,869 2.1 2.8

43,544 3.4 4.0

45,440 3.0 3.7

Source Central Bank Bahrain, Annual Report 2021; IMF, Datamapper; IMF, Regional Economic Outlook Middle East and Central Asia April 2022; a Estimates

granted a licence to the world’s largest cryptocurrency exchange Binance. This was the company’s first licence in the GCC region.58 There has been a gradual strengthening of insolvency and resolution frameworks that would help the banks to swiftly deal with loans affected by the Covid-19 crisis thus limiting the impact of bad loans on overall growth prospects. Economic activities increased significantly by 25.8 per cent in transportation and communication during the year.59 Bahrain aims to push its logistics sector to world-class with easy inter-model connectivity to reclaim its historical role as a regional transport hub. The retail and hospitality sectors performed well but remained below pre-Covid-19 levels despite the re-opening of the King Fahd causeway to Saudi Arabia in May 2021 to non-commercial traffic. The number of tourists to the Kingdom was estimated to increase five folds in 2022, supported by the return of the Bahrain Grand Prix in March with a full audience for the first time since the Covid-19 outbreak.60 In 2021, about 3.6 million tourists entered the Kingdom, almost reaching the pre-pandemic level of 3.8 million in 2019.61 In 2022, about 6.9 million tourists passed through Bahrain international airport, nearly double the previous year.62 58 Reuters,

“Binance gets its first Gulf crypto licence in Bahrain”, 15 March 2022, https://www.reuters.com/business/finance/binance-gets-its-first-gulf-cry pto-licence-bahrain-2022-03-15/, accessed 23 May 2023. 59 Central Bank of Bahrain, “Annual report 2021”, https://www.cbb.gov.bh/publicati ons/, accessed 23 May 2023. 60 Bahrain economists, “Monthly Bulletin August 2022”, https://www.bahrainecono mists.com/monthlynewsbulletin, accessed 23 May 2023. 61 Bahrain Economists, Monthly Bulletin, June 2022. 62 Bahrain News Agency, “BIA’s passenger traffic spikes to 6.9 million in 2022”,

1 March 2023, https://www.bna.bh/en/BIAspassengertrafficspikesto6.9millionin2022. aspx?cms=q8FmFJgiscL2fwIzON1%2bDvION60K9AnatGuUo5GqW%2b4%3d, accessed 23 May 2023.

2

BAHRAIN

57

The oil sector declined marginally by 0.3 per cent.63 The government continued to support the national economy through fiscal stimulus packages and recovery plan announced in 2021. However, economic challenges remained over fiscal deficit and public debt. Fiscal Situation and Inflation Government revenues increased as the price of a barrel of Bahraini oil crossed US$120 in June 2022.64 Bahrain achieved a mid-year fiscal surplus, the first in 14 years.65 The government revenue as a percentage of GDP increased from 17.83 per cent in 2020 to 24.37 per cent in 2022.66 The preliminary estimates of the Finance Ministry revealed that non-oil revenues increased by 15 per cent over budget estimates and by 28 per cent over the previous year.67 After two years of implementation, the VAT rate was doubled from 5 per cent to 10 per cent with effect from 1 January to boost government revenues and curb budget deficits. However, zero tax items or those exempted from VAT, such as basic food, building and construction material, oil and gas, education and healthcare, remained unchanged. The Kingdom exempted about 1,820 government services from VAT.68 There was a reported decline in gold and jewellery sales since the levy of 10 per cent VAT; subsequent VAT refund granted to non-resident tourists and citizens residing abroad boosted their sales.69 Investment incomes also grew; Sovereign Wealth Fund Mumtalakat, with

63 IMF, online statistical appendix Middle East and Central Asia, 2022. 64 MEES, vol. 65, no. 28, 15 July 2022, p. 12. 65 Bahrain economists, Monthly Bulletin, May 2022. 66 Bahrain News Agency, “Finance Ministry: Initial financial estimates for 2022 showed

a decrease in deficit levels”, 20 February 2023, https://www.bna.bh/en/FinanceMinis tryInitialfinancialestimatesfor2022showedadecreaseindeficitlevels.aspx?cms=q8FmFJgiscL2 fwIzON1%2bDrBkhYgbIUBSD5hnSHQ8%2frk%3d, accessed 23 May 2023. 67 Ibid. 68 Tawfiq Nasrallah, “Bahrain officially implements 10% VAT”, Gulf News, 2 January

2022, https://gulfnews.com/world/gulf/bahrain/bahrain-officially-implements-10-vat-1. 84713313, accessed 23 May 2023. 69 News of Bahrain, “VAT refund makes gold hot favourite for Bahrain tourists”, 10 July 2022, https://www.newsofbahrain.com/bahrain/82448.html, accessed 23 May 2023.

58

MD. M. QUAMAR ET AL.

about US$18 billion in assets under its management, turned around in 2021 from losses in 2020.70 The central government wage bills were about 9–10 per cent of GDP in 2021. Due to increasing government expenditure, the fiscal breakeven price of oil has been increasing in recent years. An average of about US$82.2 per barrel between 2000 and 2018 increased to US$99.2 in 2019 and US$128.9 per barrel in 2021.71 However, with increased government revenues, some planned cut in capital expenditure to bridge fiscal deficits until 2024 would be eased and result into higher investments.72 Bahrain’s fiscal transparency suffers from limited disclosures and needs improvement in areas of fund allocation, earnings and debt obligations of all major state-owned enterprises. The Royal Court expenditures are not publicly available, but the Supreme Court audit reports are partially published.73 The Kingdom consistently pursued reforms to attract more foreign investments in diversified sectors. It aims to improve the efficiency of government services through e-governance, e-transformation, digitalising documents, e-payments, use of artificial intelligence (AI), strengthening digital infrastructure and developing cybersecurity standards. The Kingdom has a liberal approach towards foreign investment and maintains a friendly business environment and permits 100 per cent business or branch office ownership without requiring a local sponsor or business partner. There is a particular emphasis on attracting FDI in manufacturing, logistics, financial services, ICT, tourism, health and education sectors. The efforts came to fruition when Bahrain ranked first among MENA countries for financial investment, trade and economic freedom in the various rankings for 2022.74 The internet charges have been the most 70 Reuters, “Bahrain to restructure board of wealth fund Mumtalakat, BNA reports”, 4 September 2022, https://www.reuters.com/world/middle-east/bahrain-restructureboard-wealth-fund-mumtalakat-bna-reports-2022-09-04/, accessed 23 May 2023. 71 IMF, Online statistical appendix Middle East and Central Asia, 2022. 72 Fitch Solutions, Bahraini growth to gain from Russia-Ukraine war in 2022, 5 April

2022, https://www.fitchsolutions.com/country-risk/bahraini-growth-gain-russia-ukrainewar-2022-05-04-2022, accessed 23 May 2023. 73 U.S. Department of State, “2022 Investment Climate Statements: Bahrain”, https:// www.state.gov/reports/2022-investment-climate-statements/bahrain/, accessed 23 May 2023. 74 Bahrain News Agency, “Bahrain tops global and regional rankings in 2022”, 27 February 2023, https://www.bna.bh/en/Bahrainstopsglobalandregionalrankingsin2022. aspx?cms=q8FmFJgiscL2fwIzON1%2bDqgPa%2fCzwdFGrhRVZMaMN4o%3d, accessed 23 May 2023.

2

BAHRAIN

59

competitive in the region. For doing business in the ICT sector, Bahrain enjoys direct cost advantage of up to 28 per cent compared to other GCC countries.75 The Economic Development Board (EDB) attracted over US$1.1 billion in FDI from 89 investment projects and was estimated to generate 6,300 jobs over the next three years.76 According to the EDB, FDI inflows were about US$390 million in the first three quarters of 2022 in manufacturing and logistics.77 Financial services attracted about US$72 million in FDI in the first nine months of 2022.78 Bahrain is reportedly finalizing FDI deals with cloud computing companies from China, the US and the UAE.79 The fallouts of the Ukraine war have been limited in the Kingdom due to its little exposure. Mumtalakat Fund had a minor exposure of 1.5 per cent of its assets in Russia, mainly through Russian Direct Investment Fund (RDIF).80 Less than 1 per cent of food imports to Bahrain came from Russia and Ukraine and hence, the inflationary effects of the war were relatively subdued.81 Nonetheless, the inflation hovered around 3.5 per cent during the year and caused some anxiety. The average inflation for 2021 was −0.6 per cent, which increased multiple folds in 2022, 75 KPMG, “Cost of doing business in the GCC”, https://www.bahrainedb.com/app/ uploads/2022/12/Cost-of-Doing-Business_ICT_Final_06112022.pdf, accessed 23 May 2023. 76 Bahrain Economic Development Board, “Bahrain tops global and regional rankings in 2022”, 27 February 2023, https://www.bahrainedb.com/latest-news/bahrains-topsglobal-and-regional-rankings-in-2022, accessed 23 May 2023. 77 Reuters, “Bahrain attracts $921 mln direct investment, more than 30% in manufac-

turing, logistics”, 5 October 2022, https://www.reuters.com/markets/asia/bahrain-att racts-921-direct-investment-more-than-30-manufacturing-logistics-2022-10-05/, accessed 23 May 2023. 78 Bahrain Economic Development Board, “Bahrain attracts US$72.7 million worth of investment in financial services”, 1 November 2022, https://www.bahrainedb.com/latestnews/bahrain-attracts-us72-7-million-worth-of-investment-in-financial-services, accessed 23 May 2023. 79 Yousef Saba, “Bahrain in talks for cloud computing, FDI deals”, Reuters, 23 June 2022, https://www.reuters.com/markets/rates-bonds/bahrain-talks-cloud-computing-fdideals-2022-06-23/, accessed 23 May 2023. 80 IMF, “GCC: Economic prospects and policy challenges for the GCC countries”, 29 November 2022, https://www.imf.org/en/Publications/Policy-Papers/Issues/2022/ 11/29/Gulf-Cooperation-Council-Economic-Prospects-and-Policy-Challenges-for-theGCC-Countries-525945. accessed 24 May 2023. 81 Ibid.

60

MD. M. QUAMAR ET AL.

weighing heavily on consumer spending. By May, ten members of parliament unsuccessfully moved a proposal to temporarily suspend 10 per cent VAT and double the anti-inflation allowance due to rising prices consequent to the Russian-Ukraine war.82 There were lower points of sale transactions in July and August 2022, offsetting the higher spending in the earlier months with the easing of Covid-19 restrictions.83 Employment and Expatriates The Bahraini government has been keen on employing its nationals through various Bahrainisation programmes. The financial sector has about 70 per cent Bahraini workers as of 2021, and of that more than 60 per cent is female.84 The transportation and communication sector, which contributes about 6 per cent of the GDP, employs Bahraini nationals for one-fourth of its workforce.85 There was continued progress in reforms in the labour market. It has legislation prohibiting genderbased discrimination in employment. Since its launch in 2006, the labour fund Tamkeen has undertaken extensive support programmes for skilling Bahraini nationals in various sectors. It specifically focused on training and supporting women in different professional fields. The fund has supported more than 24,000 women-led enterprises.86 A revamped national employment plan was launched to boost the employment of Bahrainis in the private sector. The mean monthly wages for Bahraini nationals in the public sector was about Bahraini Dinar (BHD) 733 (US$1,944.22), whereas in the private sector, it was about BD462

82 Zawya, “VAT suspension ‘will help tackle inflation’: Bahraini MPs”, 18 May 2022, https://www.zawya.com/en/economy/gcc/vat-suspension-will-help-tackle-inf lation-bahraini-mps-pqs0jc6i, accessed 23 May 2023. 83 Fitch Solutions, Bahrain growth will slow in 2023, after 14 year high in 2022. 84 Central Bank of Bahrain annual report 2021. 85 Tamkeen, “Transportation & logistics”, https://www.tamkeen.bh/sectors/transport

ation-logistics-sector/, accessed 23 May 2023. 86 Tamkeen, Twitter, “Since establishment, Tamkeen focused on empowering Bahraini women through increasing their participation in the economy and supporting their inclusion in the labour market”, 8:13 PM, 5 December 2022, https://twitter.com/Tamkee nBahrain/status/1599776600257548288/photo/2, accessed 23 May 2023.

2

BAHRAIN

61

(US$1,225.42).87 Unemployment rates declined from 7.7 per cent in 2021 to 5.4 per cent in December 2022.88 There are initiatives to attract players in the education sector to facilitate the skilling of Bahrainis. During the year, leading digital marketing academy Growth Velocity shifted its regional headquarter to Bahrain to offer invaluable skills and hands-on training to meet the rising job demands. Digital governance strategy 2022 aims to foster digital transformation in the Kingdom and would, in turn, require trained professionals at a growing pace. To attract highly skilled expatriate professionals, Bahrain has undertaken several reforms, including visa reforms and changes in employment contracts, digital residency services for expatriate labour and new employment and training portal. In February 2022, the Interior Ministry announced a new golden permanent residency visa, including the right to work in Bahrain, unlimited entry and exit and residency for close family members.89 The Labour Market Regulatory Authority (LMRA) initiated a Labour Registration Programme in which all the expatriate workers holding expired, invalid or flexi permits were required to register to correct their legal status except for those with criminal records or in violation of their current permits.90 About 563,332 expatriates were employed by the end of the second quarter of 2022, which was 5.5 per cent more than that of the previous quarter.91 Expatriate workers sent abroad about BD950 million (US$2.52 billion) in 2021; in the first three quarters of 2022, it was about BD753 million (US$1.99 billion).

87 Kingdom of Bahrain, Labour Market Regulatory Authority, “Total employment reaches 724,762 workers in the second quarter of 2022”, https://blmi.lmra.gov.bh/ 2022/06/mi_dashboard.xml, accessed 23 May 2023. 88 Kingdom of Bahrain, Information & E-Government Authority, https://www.iga.gov. bh/en/category/reports, accessed 23 May 2023. 89 Kingdom of Bahrain, Information & eGovernment Authority, “Reports”, https:// www.reuters.com/world/middle-east/bahrain-introduces-golden-permanent-residencyvisas-attract-talent-2022-02-07/, accessed 23 May 2023. 90 Bahrain News Agency, “Labour Minister highlights efforts to employ Bahrainis”, 9 February 2023, https://www.bna.bh/en/LabourMinisterhighlightseffortstoemployBahrai nis.aspx?cms=q8FmFJgiscL2fwIzON1%2bDgR4az%2bjY9NI64bvmUEdoEg%3d, accessed 23 May 2023. 91 Kingdom of Bahrain, Information & eGovernment Authority, “Total employment reaches 724,762 workers in the second quarter of 2022”, https://blmi.lmra.gov.bh/ 2022/06/mi_dashboard.xml, accessed 23 May 2023.

62

MD. M. QUAMAR ET AL.

External Sector Economic growth in 2022 was facilitated by high oil prices and strong economic linkages with Saudi Arabia,92 its second largest export destination (Table 2.3). The exports of goods and services increased from US$25.25 billion in 2020 to US$35.24 billion in 2021. The non-oil exports and re-exports increased significantly from US$8.2 billion in 2019 to US$15.1 billion in 2022 (Table 2.3), implying substantive progress in economic diversification. Table 2.3 also shows that the share of petroleum exports was about 50 per cent of total merchandise exports in 2022. The re-exports averaged about US$1.9 billion but were less than the preCovid-19 level of US$2.1 billion in 2019. The imports of goods and services increased from US$23.30 billion in 2020 to US$27.58 billion in 2021. An increase in both oil and non-oil exports facilitated a positive current account surplus of US$975.5 million in 2021 after years of deficits. Table 2.4 gives the direction of trade for Bahrain. Saudi Arabia was the leading non-oil export destination in 2022. Besides oil, Bahrain has significant economic ties with Saudi Arabia. The total FDI stock from Saudi Arabia amounted to about US$9.8 billion, with a share of 29 per cent of the total inward FDI stock in Bahrain.93 Saudi tourists reportedly Table 2.3 Bahrain’s select current account indicators, 2019–2022 (US$ million)

Exports of goods and services Petroleum exportsa Non-oil exports and re-exportsa Imports of goods and services Current account balance

2019

2020

2021

2022

29,569.2 9,892.5 8,225 25,211.4 −298.6

25,253.2 5,938.5 8,145 23,300.5 −1,222.0

35,240.2 9,940.3 12,428 27,580.2 978.5

– 15,069.0 15,123 – –

Source IMF, data.imf.org; ITC, itc.org; a Information and e-government authority, Kingdom of Bahrain, https://www.data.gov.bh/en/ResourceCenter

92 Fitch Solutions, “Bahrain growth will slow in 2023, after 14 year high in 2022”, 27 September 2022, https://www.fitchsolutions.com/country-risk/bahrains-growth-willslow-2023-after-14-year-high-2022-27-09-2022, accessed 24 May 2023. 93 Bahrain Economic Development Board, “Saudi FDI stock in Bahrain amounts to USD9.8 billion”, 26 October 2022, https://www.bahrainedb.com/latest-news/saudi-fdistock-in-bahrain, accessed 23 May 2023.

2

BAHRAIN

63

Table 2.4 Bahrain’s direction of trade, 2022 (US$ million) Top five non-oil export destinations

Top five non-oil import sources

Top five energy export destinationsa

Saudi Arabia (3,048.11)

China (2,246.46)

US (1,921.23) UAE (1,642.29) The Netherlands (772.50) Oman (639.38)

Brazil (1,649.24) Australia (1,352.87) UAE (1,285.69) US (1,005.21)

Areas not specified (7,127.16) UAE (7.20) India (5.69) Singapore (0.40) Saudi Arabia (0.28)

Sources a ITC, itc.org; Information and e-government authority, Kingdom of Bahrain, https://www. data.gov.bh/en/ResourceCenter

spent Saudi Riyal (SR) 4.7 billion (US$1.22 billion) in Bahrain in 2022. Saudi Arabia’s Public Investment Fund (PIF) set up investment companies in Bahrain.94 Both countries were in talks for bilateral cooperation in the labour sector. The US was also among the top five export destinations and sources of import for non-oil trade (Table 2.4). In February, the Ministry of Industry, Commerce and Tourism inaugurated the US Trade Zone to incentivise US companies to build turnkey industrial, manufacturing, logistics and distribution facilities to access the GCC market.95 This would increase bilateral trade and investments between the two countries in the next few years. Its European customers were reportedly reluctant to place orders for aluminium for the next year due to the fear of recession.96 Israel reportedly began importing aluminium from the Kingdom. Non-oil imports

94 Reuters, “Saudi Arabia’s wealth fund sets up investment firms in five Mideast countries”, 26 October 2022, https://www.reuters.com/world/middle-east/saudi-arabias-wea lth-fund-sets-up-investment-firms-five-mideast-countries-2022-10-26/, accessed 23 May 2023. 95 U.S. Department of State, “2022 Investment Climate Statements: Bahrain”, https:// www.state.gov/reports/2022-investment-climate-statements/bahrain/, accessed 23 May 2023. 96 Joan Faus, “Bahrain’s Alba says Europe wary of ordering aluminium for next year”, Reuters, 15 September 2022, https://www.reuters.com/markets/commodities/bah rains-alba-says-europe-wary-ordering-aluminium-next-year-2022-09-15/, accessed 23 May 2023.

64

MD. M. QUAMAR ET AL.

were more widely sourced, with China in the lead. Energy exports were diversified and largely went to “unspecified” regions. The top five items for non-oil exports in 2022 were aluminium and its products, iron ore, mechanical machinery, dairy products and fertilisers. The top five items for non-oil imports in 2022 were iron ores and concentrates, other aluminium oxide, parts for aircraft engines, gold ingots and petroleum coke. Foreign direct investment abroad was about BD24.2 million (US$64.37 million) in 2021, significantly increasing to BD725.4 million (US$1,929 million) in the first three quarters of 2022. Top FDI investors in Bahrain by the end of the third quarter of 2022 were Kuwait (US$10 billion), Saudi Arabia (US$9.8 billion), Libya (US$2.9 billion) and UAE (US$2.5 billion).97 Energy and Environment Bahrain produces about 196,000 b/d of crude oil, of which 150,000 b/ d come from the Saudi Aramco-operated Abu Safa field. Though located in Saudi territorial waters, 50 per cent output of the field is handed over to Bahrain to be exported from Ras Tanura as Banoco Arab medium.98 The remaining oil production is from its onshore fields; both imported and domestically produced oil was refined in its only Sitra refinery. During the year, the average price of Bahrain’s oil export was US$70.4 per barrel. The discovery of unconventional Khaleej al-Bahrain oil reserves in 2018 was the largest since 1932, with an estimated 80 billion barrels of reserves.99 It generated significant excitement by signing preliminary contracts with major oil companies like Chevron, Total and ENI. However, the newly appointed CEO of Nogaholding, a state energy investment and development arm, deemed the development of offshore tight oil reserves as uneconomical in the current price scenario.100 The Kingdom aims to focus on deep onshore gas reserves (below the Bahrain

97 Kingdom of Bahrain, Information & eGovernment Authority, “Resource centre”, https://www.data.gov.bh/en/ResourceCenter, accessed 23 May 2023. 98 MEES, Vol 65, no 28, 15 July 2022, p. 12. 99 Mohamed Al Khalifa, “Oil & gas sector: Bahrain’s Banagas hopeful of increased gas

production”, 16 April 2013, https://marcopolis.net/oil-a-gas-sector-bahrains-banagashopeful-of-increased-gas-production.htm; Reuters, “Bahrain announces two new natural gas discoveries”, 8 November 2022, https://www.reuters.com/world/middle-east/bah rain-announces-two-new-natural-gas-discoveries-2022-11-08/, accessed 23 May 2023. 100 MEES, vol. 65, no. 20, 20 May 2022, p. 7.

2

BAHRAIN

65

field) to bridge the domestic supply deficit. The field is estimated to have about 35 tcf reserves, but actual drilling would determine the true potential. During the year, two new natural gas discoveries were announced in Al-Joubah and Al-Jawf reservoirs.101 Bahrain currently produces about 300 million standard cubic feet of natural gas which are consumed in the power sector, aluminium smelting and petrochemical plants. If additional volumes of natural gas are not produced, LNG imports through idle FRSU would be necessary in the coming years.102 There are plans for downstream expansion and refinery upgrades. Bahrain is committed to reaching net-zero carbon emissions by 2060 and has restructured its energy sector. The National Oil and Gas Authority was abolished, and its function was transferred to the Ministry of Oil and Environment with a new minister in June 2022, signalling an intent towards the sustainable operation of its energy sector. The Sustainable Energy Authority (SEA), within the Ministry of Electricity and Water Affairs, promotes renewable energy technology deployment and energy efficiency policy to support the Kingdom’s long-term climate action and environmental protection goals. Vision 2030 lays the blueprint to protect the natural environment, minimise pollution, reduce carbon emissions and promote sustainable energy.103 In January, Aluminium Bahrain (Alba) signed an MoU with Mitsubishi Heavy Industries to facilitate reduction of its carbon footprints.104 Infracorp, an infrastructure fund, aimed to issue around US$800 million in perpetual green sukuk Islamic bonds to boost sustainability.105

101 Offshore Technology, “Bahrain makes new onshore natural gas discoveries”, 9 November 2022, https://www.offshore-technology.com/news/bahrain-onshore-gas-dis coveries/, accessed 23 May 2023. 102 MEES, vol. 65, no. 20, 20 May 2022, p. 7. 103 International Trade Administration, “Bahrain—Country commercial guide”, 1

August 2022, https://www.trade.gov/country-commercial-guides/bahrain-renewable-ene rgy-0, accessed 23 May 2023. 104 Reuters, “Aluminium Bahrain, Mitsubishi Heavy Industries sign MoU for carbon capture”, 19 January 2022, https://www.reuters.com/business/sustainable-business/ aluminium-bahrain-mitsubishi-heavy-industries-sign-mou-carbon-capture-2022-01-19/, accessed 23 May 2023. 105 Saeed Azhar and Yousef Saba, “Bahrain’s Infracorp plans $800 million perpetual green sukuk sale”, Reuters, 17 January 2022, https://www.reuters.com/markets/deals/ bahrains-infracorp-plans-800-million-perpetual-green-sukuk-sale-2022-01-17/, accessed 23 May 2023.

66

MD. M. QUAMAR ET AL.

The small size of the island country inhibits the development of largescale renewable energy projects. It looks forward to jointly producing power on large solar plants in neighbouring countries and transmitting it through submarine cables. In this context, Saudi Arabia would be the most likely partner with whom Bahrain has long-standing energy cooperation. Manama hosted the fifth Global Renewable Energy Forum in February under the theme “Climate change, renewable energy, cooling strategy, waste to energy, sustainable green buildings and clean environment.”106 Society Bahraini society has been divided along sectarian lines, and while the divisions were there earlier, the 2011 uprisings turned this into a serious political, economic and social challenge. The trust deficit between the communities has increased significantly over the decade. Issues of human rights violations and freedoms get muddled with the sectarian divisions making it difficult for rights and advocacy groups to function independently and without government interference.107 Sectarian divisions lead to accusations of bias and prejudice highlighting rights violations. Besides the Shia community, the expatriates, who form nearly 45 per cent of the resident population, also regularly face challenges due to violations of rights and freedoms and sectarian divisions. For example, a section of the Shia community feels neglected and isolated at the cost of Sunni expatriates from Arab and South Asian countries, who sometimes are preferred over the Bahraini Shias for sensitive government and security positions.108 On the other hand, migrants from poorer countries engaged in menial

106 Electricity & Water Authority, “The launch of the Fifth International Renewable Energy Forum in cooperation with WREN”, 7 February 2022, https://www.ewa.bh/ en/Media/PressReleases/the-launch-of-the-fifth-international-renewable-energy-forum-incooperation-with-wren, accessed 23 May 2023. 107 HRW, “Bahrain—Events of 2021”, https://www.hrw.org/world-report/2022/cou ntry-chapters/bahrain, accessed 23 May 2023. 108 Americans for Democracy & Human Rights in Bahrain (ADHRB), “Sectarian discrimination and extremism in Bahrain’s security forces—Questions for US policy”, http://www.adhrb.org/wp-content/uploads/2017/11/2017_Sectarianisat ion-of-Security-Forces_White-Paper_Final.pdf, accessed 23 May 2023.

2

BAHRAIN

67

and unskilled work in unorganised sectors often complain of racial, ethnic and religious discrimination.109 At times, professional expatriates feel discriminated against when the government tries to implement Bahrainisation to reduce unemployment among youth, a common phenomenon in the GCC countries.110 The authorities in these states, including Bahrain, have brought legislation and regulations to offer permanent residency or citizenship to highvalue, well-to-do and skilled professional expatriates to overcome such complaints. In February 2022, Bahrain unveiled the Golden Residency Visa to attract talent and investments from across the globe with provisions for the right to work, multiple entry-exit and residency for close family members.111 According to the Bahraini Interior Ministry, the visa is “aimed at attracting investors, entrepreneurs, and highly talented individuals” who can contribute to Bahraini economic growth and development.112 Although progress has been made, challenges remain so far as gender issues and women’s rights are concerned. Some laws related to inheritance and transfer of citizenship to children are discriminatory.113 Penal codes for domestic violence, sexual offences and sexual orientation are also mired in customary and religious laws based on conservative values and norms, leading to repeated discrimination and violation of rights.114 In

109 United Nations Human Rights, Office of the High Commissioner, “Experts of the Committee on the Elimination of Racial Discrimination commend Bahrain on efforts to provide COVID-19 vaccination for all, ask about the practice of stripping persons of their Bahraini citizenship and protections for migrant workers”, 18 November 2022, https://www.ohchr.org/en/news/2022/11/experts-committee-elimination-racialdiscrimination-commend-bahrain-efforts-provide, accessed 23 May 2023. 110 Gulf Center for Economics and Business Research, “GCC job nationalisation policies: A trade-off between productivity and employment”, https://www.conference-board. org/pdfdownload.cfm?masterProductID=24713, accessed 23 May 2023. 111 Reuters, “Bahrain introduces ‘golden’ permanent residency visas to lure talent”, 7 February 2022, https://www.reuters.com/world/middle-east/bahrain-introduces-goldenpermanent-residency-visas-attract-talent-2022-02-07/, accessed 23 May 2023. 112 Ibid. 113 ADHRB, “Report: Women’s rights in Bahrain… Postponed dreams”, 24 January

2022, https://www.adhrb.org/2022/01/report-womens-rights-in-bahrain-postponed-dre ams/, accessed 23 May 2023. 114 HRW, “Bahrain—Events of 2022”, https://www.hrw.org/world-report/2023/cou ntry-chapters/bahrain#5758a3, accessed 23 May 2023.

68

MD. M. QUAMAR ET AL.

terms of the social, political and economic situation, some improvements have been noted in recent years, with the royal family and government taking interest and measures to improve the condition of women, especially in terms of the availability of healthcare facilities, education and employment opportunities and participation in public life.115 Nonetheless, women continue to face serious challenges in realising their potential in all aspects of life. Bahrain had a high Human Development Index (HDI) score of 0.875 in 2021 and a good Gender Development Index (GDI) score of 0.927. Its Gender Inequality Index (GII) score of 0.181 in 2021 marked a decline in the score over the long-term showing improvement in the indicators.116 Covid-19 Towards late 2021 and early 2022, Bahrain witnessed a third wave of Covid-19 outbreak with a steep rise in cases of the Omicron variant.117 A total of 416,060 new cases of Covid-19 and 145 associated deaths were reported in 2022. The maximum number of cases were reported during February and March with milder symptoms compared to the Delta variant, wherein 112,000 cases were reported with 787 associated casualties.118 Bahrain reported some cases of monkeypox in September 2022. However, it did not become a major healthcare crisis as the cases remained limited.119 An agreement between Bahrain’s Information and eGovernment Authority and Microsoft and Cisco was signed that entailed

115 UN Women, “Bahrain”, https://data.unwomen.org/country/bahrain, accessed 23 May 2023. 116 United Nations Development Programme (UNDP), Human Developments Report, “Bahrain”, https://hdr.undp.org/data-center/specific-country-data#/countries/BHR, accessed 23 May 2023. 117 Kingdom of Bahrain, Ministry of Health, “Dr. Al Qahtani: 100,000 Omicron cases; 14 deaths since January 2022”, 3 February 2022, https://healthalert.gov.bh/en/article/ News-574862, accessed 23 May 2023. 118 Kingdom of Bahrain, Ministry of Health, “Dr. Al Qahtani: 100,000 Omicron cases; 14 deaths since January 2022”, 3 February 2022, https://healthalert.gov.bh/en/article/ News-574862, accessed 23 May 2023. 119 Reuters, “Bahrain detects first monkeypox case—State media”, 16 September 2022, https://www.reuters.com/world/middle-east/bahrain-detects-first-monkeypox-case-statemedia-2022-09-16/, accessed 23 May 2023.

2

BAHRAIN

69

the US “sovereignty right over its subscribers’ information in the cloud computing centres located in Bahrain.”120

Bilateral Relations Indo-Bahrain relations have witnessed a rapid improvement in recent years. New Delhi’s emphasis on increasing political and diplomatic engagements towards greater economic and security cooperation has been a major factor in improved ties. However, while the potential in bilateral relations was noted for a long time, the realisation remained tardy due to limited political and diplomatic engagements. Gradually, there has been an effort to change this through the visit of Prime Minister Narendra Modi to the Kingdom in 2019. India and Bahrain showed urgency in bilateral cooperation to tackle the challenges emanating from Covid-19, to seek greater economic, healthcare, business and security cooperation. Politics and Security The political and security engagements continued in 2022. On 1 February, Prime Minister Modi telephoned the Crown Prince and Prime Minister Salman al-Khalifa and the two leaders expressed satisfaction over the progress made in bilateral relations on a diverse set of issues, including in “trade and investment, energy, health, security and people-to-people contacts.”121 The Prime Minister invited the Crown Prince to visit India at the earliest date. On 28 March, the fifth India-Bahrain Foreign Office Consultation (FOC) was held in New Delhi and was co-chaired by Secretary (CPV&OIA) in MEA, Ausaf Sayeed, and Abdullah bin Ahmed al-Khalifa, Undersecretary (Political Affairs) in Ministry of Foreign Affairs (MoFA), Bahrain.122 The FOC followed up issues discussed during the

120 Ibid. 121 GoI, MEA, “Prime Minister speaks on telephone with His Royal Highness Prince

Salman bin Hamad Al Khalifa, Crown Prince and Prime Minister, Kingdom of Bahrain”, 1 February 2022, https://mea.gov.in/press-releases.htm?dtl/34783/Prime_Minister_spe aks_on_telephone_with_His_Royal_Highness_Prince_Salman_bin_Hamad_Al_Khalifa_C rown_Prince_and_Prime_Minister_Kingdom_of_Bahrain, accessed 23 May 2023. 122 GoI, MEA, “5th India—Bahrain Foreign Office Consultations”, 28 March 2022, https://mea.gov.in/press-releases.htm?dtl/35086/5th_India__Bahrain_Foreign_Office_ Consultations, accessed 23 May 2023.

70

MD. M. QUAMAR ET AL.

third High Joint Commission Meeting between the two foreign ministers in April 2021. The FOC underlined the successful efforts of the two countries in overcoming the challenges posed by Covid-19 and welcomed the bilateral cooperation on managing the health crisis. Among the areas that the two sides agreed to have greater engagement and cooperation included “trade and investment, hydrocarbons and renewable energy, health and pharmaceuticals, IT, Fintech, food security, civil aviation, space, defence and security, parliamentary cooperation, culture, education and peopleto-people connect focusing on youth, skill development and startups.”123 During the visit, Abdullah al-Khalifa called on the Minister of State (MoS) for External Affairs, V. Muraleedharan and met Deputy National Security Advisor Vikram Misri and held meetings at different think tanks in New Delhi to interact with the strategic community and develop a greater understanding of bilateral, regional and international issues.124 In February 2022, the first meeting of the Joint Working Group (JWG) on healthcare cooperation between India’s Ministry of Health and Family Welfare and Bahrain’s Ministry of Health was held virtually to discuss and explore possibilities in enhancing cooperation in the healthcare sector between the two countries.125 The greater momentum in healthcare cooperation results from how India highlighted its success in meeting the health consequences of the Covid-19 pandemic, especially in fulfilling the demands for pharmaceuticals and vaccines, not only for itself but also supplying them to several countries across the world.126 This was followed by a virtual meeting in November between the Ministry of Ayush, India and the National Health Regulatory Authority (NHRA) of Bahrain to expand cooperation in Yoga and Ayurveda.127 Among the

123 Ibid. 124 Ibid. 125 Embassy of India in Bahrain, “India—Bahrain 1st Joint Working Group Meeting on Healthcare Cooperation”, 22 February 2022, https://www.eoibahrain.gov.in/pdf/Press% 20Release-Healthcare.pdf, accessed 23 May 2023. 126 Priyanka Pandit, “Understanding the role of health in foreign policy: The Indian experience”, Observer Research Foundation (ORF), 27 April 2021, https://www.orf online.org/expert-speak/understanding-the-role-of-health-in-foreign-policy/, accessed 23 May 2023. 127 Embassy of India in Bahrain, “Virtual meeting between Ministry of Ayush, Govt. of India and National Health Regulatory Authority (NHRA), Kingdom of Bahrain on

2

BAHRAIN

71

issues discussed during the meeting was the possibility of accreditation and certification procedure for practitioners of Indic medicine in Bahrain. India invited the NHRA authorities to visit the country and discuss these issues further. A political row emerged in June 2022 over the derogatory remarks made against Prophet Mohammed by Nupur Sharma, a national spokesperson of the ruling Bharatiya Janata Party (BJP), during a television debate.128 The issue generated public outrage in India and abroad among the Muslim community, given that the Prophet is considered divinely ordained and beyond any human criticism. This was a diplomatic embarrassment for the government and Prime Minister Modi, who invested serious diplomatic capital in cultivating ties with the Gulf countries. Consequently, the BJP suspended Sharma and clarified that the party does not endorse or tolerate such views against any religion, group or sect and this calmed the outrage to a large extent. Consequently, the Bahraini MoFA on 6 June welcomed the decision stressing the importance of all religious beliefs.129 The Indo-Bahrain security relations have improved, with maritime security in the Gulf region increasingly emphasised. In May 2022, India decided to join the Bahrain-based CMF as an associate partner.130 The CMF is a multilateral grouping of 34 countries to monitor the maritime security in the Persian Gulf, Arab Sea and the Red Sea region and to ensure the safety and security of commercial shipping in two of the world’s busiest shipping choke points, the Strait of Hormuz and Bab al-Mandab. The decision underlines a change in the Indian approach

cooperation in the field of Yoga & Ayurveda on 15th November 2022”, 16 November 2022, https://www.eoibahrain.gov.in/pdf/Press%20Release-Ayush-nkht.pdf, accessed 23 May 2023. 128 Krishn Kaushik, “Row over remarks on the Prophet: UAE and Maldives join Islamic world criticism; India hits back at OIC, Pakistan”, The Indian Express, 7 June 2022, https://indianexpress.com/article/india/gulf-nations-uae-condems-remarksprophet-bjp-nupur-sharma-7956014/, accessed 23 May 2023. 129 Kingdom of Bahrain, Ministry of Foreign Affairs, “Kingdom of Bahrain welcomes BJP decision to suspend spokeswoman due to insulting remarks against Holy Prophet”, 6 June 2022, https://www.mofa.gov.bh/Default.aspx?tabid=7824&language=en-US&Ite mId=19931, accessed 23 May 2023. 130 Ajay Banerjee, “New Delhi to join 34-nation Bahrain-based naval force”, The Tribune, 25 May 2022, https://www.tribuneindia.com/news/nation/new-delhi-to-join34-nation-bahrain-based-naval-force-397848, accessed 23 May 2023.

72

MD. M. QUAMAR ET AL.

towards maritime security in the region and the overcoming of the hitherto aversion to joining any multilateral grouping, especially if led by Western powers, even when the goals and objectives of the group match with India’s interests.131 The decision that came during the India-US 2+2 dialogue in April is likely to give India a say in maintaining maritime security in the region as well as help its navy towards greater international cooperation, networking and capacity building. In July, the Deputy Chief of Naval Staff Admiral Sanjay Mahindru visited Bahrain and met with the political and military leaders in the Kingdom to discuss enhancing cooperation with the country in security and defence domains.132 His agenda was to discuss the modalities of India’s association with the CMF; hence Admiral Mahindru met the Commander of the US NAVCENT. The same month India formally began the partnership with CMF, and in September Indian Navy participated in the multinational naval exercise Operation Southern Readiness organised by the CMF off the coast of Seychelles.133

131 Muddassir Quamar, “India and the Persian Gulf: Bilateralism, regional security and the China factor”, Institute for Security & Development Policy (ISDP), May 2022, https://isdp.se/publication/india-and-the-persian-gulf-bilateralism-regionalsecurity-and-the-china-factor/, accessed 23 May 2023. 132 Embassy of India in Bahrain, “Deputy Chief of Naval Staff, India visits Kingdom of Bahrain”, 29 July 2022, https://www.eoibahrain.gov.in/pdf/Press%20Release%20-% 20Deputy%20Chief%20of%20Naval%20Staff,%20India%20visits%20Kingdom%20of%20Bahr ain%20-%2028%20July%202022.pdf, accessed 23 May 2023. 133 Dinakar Peri, “Indian Navy participates in maiden exercise with CMF as associate partner”, The Hindu, 29 September 2022, https://www.thehindu.com/news/nat ional/indian-navy-participates-in-maiden-exercise-with-cmf/article65947101.ece, accessed 23 May 2023.

2

BAHRAIN

73

Trade and Commerce India has been among the top trading partners of the Kingdom,134 with bilateral trade touching its highest level in 2022–2023. Figure 2.1 shows bilateral trade increased from a pre-Covid-19 level of US$981 million in 2019 to US$1.653 billion in 2021–2022, a 53 per cent growth over the previous year. In 2022–2023, the bilateral trade was about US$1.98 billion. India was the sixth largest source of non-oil imports and the ninth largest destination for non-oil exports for the Kingdom in 2022.135 The leading five items of India’s imports from Bahrain in 2022 were inorganic chemicals, aluminium products, petroleum products, fertilisers, and iron and steel (Fig. 2.2). The imports that registered a high growth rate in the last few years were fertilisers, aluminium products, inorganic and organic chemicals, gems and precious stones, among many others. The top five items of India’s exports to Bahrain were petroleum products, gold and precious stones, ship, boats and floating structures, aluminium products and iron & steel (Fig. 2.3). India is a trusted supplier of industrial and medicinal gas equipment to Bahrain, and the sector provides immense potential for further ties. Valves for gas cylinders were among the major exports to the Kingdom. India is also an important source of building materials, hardware, plumbing, electrical and high-value HVAC items; the Golden Desert Trading WLL, an Indian investment arm dealing with these items, was inaugurated during the year.136 Export items that registered a high growth rate in the last few years have been petroleum products, gems, jewelleries and precious stones, plastics and articles.

134 Noreen Al Thawadi, “Bahrain, India to continue advancing relations, strengthening bonds”, Bahrain News Agency, 26 January 2023, https://www.bna.bh/en/BahrainIn diatocontinueadvancingrelationsstrengtheningbonds.aspx?cms=q8FmFJgiscL2fwIzON1% 2bDn%2fgP9Mo1fdy7mLa3Gmd9WM%3d; Noreen Ai Thawadi, “Bahrain’s Ambassador to India hails commitment to deepening cooperation”, Bahrain News Agency, 26 January 2023, https://www.bna.bh/en/BahrainsAmbassadortoIndiahailscommitmenttodeepening cooperation.aspx?cms=q8FmFJgiscL2fwIzON1%2bDjwfJM2GaKo8V0GtURiVA28%3d, accessed 23 May 2023. 135 Information & eGovernment Authority, “Resource center”, https://www.data.gov. bh/en/ResourceCenter, accessed 23 May 2023. 136 Embassy of India in Bahrain, “India-Bahrain relations”, November 2022, https:// www.eoibahrain.gov.in/india-bahrain-bilateral.php, accessed 23 May 2023.

74

MD. M. QUAMAR ET AL.

Fig. 2.1 India’s trade with Bahrain, 2016–2022 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

India’s FDI stock in Bahrain was about US$1.41 billion by the end of the third quarter of 2022,137 which has marginally declined from US$1.55 billion by the end of the first quarter, implying some disinvestments. On a cumulative basis, India was the sixth largest investor in the Kingdom. The FDI investments have been predominantly in the financial sector.138 Besides, there has been a broad range of Indian engagements

137 Information & e-Government Authority, “Research center”, https://www.data.gov. bh/en/ResourceCenter, accessed 23 May 2023. 138 India in Bahrain, Twitter, “1/2 Ambassador Piyush Srivastava inaugurated service centre of @ICICIBank in Dana Mall. This is 3rd physical touch point of the bank in Bahrain, the first being the main branch at Manama Centre and second, a service centre at Juffair”, 3:11 PM, 17 February 2023, https://twitter.com/IndiaInBahrain/status/162 6517245995151361, accessed 23 May 2023.

2

BAHRAIN

75

Fig. 2.2 India’s top five import items from Bahrain, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedash board.aspx)

that have carved a niche for themselves. The Lulu chain of hypermarkets owned by the UAE-based Indian businessman M. A. Yusuf Ali contributed immensely to the growth of the retail sector in Bahrain. UltraTech Cement Bahrain (a subsidiary of US$60 billion Aditya Birla Group), with an annual production capacity of 1.2 million tons, has the largest market share in the Kingdom and has contributed significantly to the infrastructure development. There is a growing engagement in education, health and pharmacy sectors, and emerging ties in newer areas of IT, big data, space-tech and renewable energy. There are endeavours to increase collaboration in youth-intensive sectors like start-ups, sports and innovation. Bahrain is an increasingly favourable destination for lavish Indian weddings due to its ambience and hospitality.139 139 Noreen Al Thawadi, “India-Bahrain cooperation highlighted during media familiarisation trip”, Bahrain News Agency, 29 January 2023, https://www.bna.bh/en/Ind iaBahraincooperationhighlightedduringmediafamiliarisationtrip.aspx?cms=q8FmFJgiscL2 fwIzON1%2bDulW903sJXeLTfgqDduUJTA%3d, accessed 23 May 2023.

76

MD. M. QUAMAR ET AL.

Fig. 2.3 India’s top five export items to Bahrain, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

Bahrain has been projecting itself as the regional hub of manufacturing and logistics. Bahrain’s EDB organised an interactive session on “Opportunity for Indian Companies to Expand Business in MENA and GCC region via Bahrain” in New Delhi in partnership with the Federation of Indian Export Organization (FIEO) on 6 September.140 In August, a Bahraini delegation participated in the eighth India International SMSE Startup and Expo Summit 2022. In November, a 40-member Indian delegation comprising 21 food and agri-business companies and farmer producer organisations visited Bahrain and interacted with more than 80 Bahraini companies and visited several supermarkets in the Kingdom to get a sense of the local market.141 Al Jazeera Bahrain, the leading chain of supermarkets in the Kingdom, organised “India Fest” to display a

140 Outlook, “India’s exports to GCC countries grew by 44% in 2021–22: FIEO”, 21 September 2022, https://www.outlookindia.com/business/india-s-exports-to-gcc-cou ntries-grew-by-44-in-2021-22-fieo-news-224840, accessed 23 May 2023. 141 Embassy of Indian in Bahrain, “India-Bahrain relations”, November 2022, https:// www.eoibahrain.gov.in/india-bahrain-bilateral.php, accessed 23 May 2023.

2

BAHRAIN

77

variety of Indian foods, vegetables, consumer goods and sweets. Al Maya, another leading supermarket chain, frequently displayed India-focused food products. An Indian food and beverage sector delegation visited the Kingdom early in September. The FDI from Bahrain in India from April 2000 to December 2022 was about US$183.69 million, which was 0.02 per cent of the total FDI in India during the period.142 During 2022, only US$2.06 million in FDI from the Kingdom was reported. In December, the RBI imposed a penalty of IND|2.66 on the Bank of Bahrain and Kuwait, India for failing to comply with cybersecurity norms.143 Energy Ties Bahrain’s share in India’s energy imports was insignificant at 0.21 per cent in 2020–2021, which further fell to 0.04 per cent in 2021–2022. The share of mineral fuels in India’s total imports from Bahrain has declined significantly from 37.39 per cent in 2020–2021 to 13.88 per cent in 2022–2023. The imports were mainly liquefied propane and butane gases used as cooking fuel. At the same time, there is a noticeable increase in the exports of petroleum products, mainly of light oil distillates to Bahrain. The share of Bahrain in India’s total exports of petroleum products more than doubled from 0.17 per cent in 2020–2021 to 0.36 per cent in 2021–2022 (Table 2.5). Consequently, the share of petroleum products in India’s total exports to the Kingdom increased more than threefold from 8.89 per cent in 2020–2021 to 27.59 per cent in 2021–2022 but declined to 20.54 per cent in 2022–2023. There is growing convergence in exploiting the potential of renewable and alternative energy sources. Bahrain joined International Solar Alliance as the 86th member in March 2022.

142 GoI, Department for Promotion of Industry and Internal Trade, “FDI statistics”, https://dpiit.gov.in/publications/fdi-statistics, accessed 23 May 2023. 143 Reserve Bank of India (RBI), “RBI imposes monetary penalty on Bank of Bahrain & Kuwait BSC, India Operations”, 19 December 2022, https://rbidocs.rbi.org.in/rdocs/ PressRelease/PDFs/PR14080A510BB9A1CC4E4DBD80FEE0D8849F87.PDF, accessed 23 May 2023.

78

MD. M. QUAMAR ET AL.

Table 2.5 India’s energy trade with Bahrain, 2019–2022 (US$ million) 2019–2020 Imports of mineral fuels from Bahrain India’s total imports of mineral fuels (HS 27) Bahrain’s per cent share in India’s total mineral fuels imports Per cent share of mineral fuel in India’s total imports from Bahrain Exports of mineral fuels to Bahrain India’s total exports of mineral fuels (HS 27) Bahrain’s per cent share in India’s total exports of mineral fuels Per cent share of mineral fuel in India’s total exports to Bahrain

2020–2021

2021–2022

2022–2023

113.42

204.68

70.21

140.86

153,646.45

99,703.45

194,857.08

260,921.01

0.07

0.21

0.04

0.05

26.91

37.39

9.32

13.88

45.49

46.94

248.27

198.23

42,708.83

26,907.73

69,570.14

101,172.68

0.11

0.17

0.36

0.20

8.14

8.89

27.59

20.54

Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India

Social and Cultural India and Bahrain completed the golden jubilee of their diplomatic relations in October 2021, and a series of cultural and social events were organised by the Indian Embassy in Manama.144 In January 2022, the Bahraini authorities agreed to allocate land for constructing a Hindu Temple in Bahrain by the Bochasanwasi Akshar Purushottam Swaminarayan Sanstha (BAPS), which has a following among Indian expatriates in the Gulf region. Despite a focus on enhancing social and cultural cooperation, especially among the youth and in education and higher education, fewer students from Bahrain are coming to India on student

144 Embassy of India in Bahrain, “India-Bahrain relations”, November 2022, https:// www.eoibahrain.gov.in/india-bahrain-bilateral.php, accessed 23 May 2023.

2

BAHRAIN

79

visas. According to MEA, in 2022, only 31 study visas were issued to Bahraini citizens, a sharp decline from 371 in 2018.145 Expatriates According to estimates, nearly 320,000 Indian citizens reside in Bahrain and work in different sectors. The Covid-19-induced return migration stopped in 2022, with many Indians beginning to return to the Gulf Kingdom to find work. According to the MEA, 27,453 Indians used the Vande Bharat Mission flights to return to India from Bahrain during the Covid-19 pandemic. Normal commercial flights resumed in March 2022.146 Between January and November 2022, a total of 9,706 Indians travelled to Bahrain after emigration clearance; this was one-third increase from the 6,382 who travelled to Bahrain in 2021.147 The number of travellers to Bahrain from India also picked up during 2022 with 299,293, including 112 on a student visa, travelling to the Gulf Kingdom.148 The Indian Embassy has been actively conducting open houses by a panel of lawyers to solve the long-pending grievances of the Indian community. Indian workers were advised on flexi permits to register under the new labour market scheme. It organised wellness and awareness campaigns with several Indian community voluntary and welfare organisations.149 The embassy also extends assistance to Indian workers facing problems, such as the 21 workers of Alison and Magnum Ship Care Company and 16 jailed inmates.150 The Indian community organises

145 GoI, MEA, “Nationality wise and year wise arrivals for foreigners on student visa from 01.01.2018 to 31.12.2022”, https://mea.gov.in/Images/CPV/ru861-09-02-20232-en.pdf, accessed 23 May 2023. 146 GoI, MEA, “Question no. 2268 connectivity between GCC countries”, 29 July 2022, https://mea.gov.in/lok-sabha.htm?dtl/35579/QUESTION_NO2268_CON NECTIVITY_BETWEEN_GCC_COUNTRIES, accessed 23 May 2023. 147 GoI, MEA, “State wise number of emigration clearances issued during 2021 for GCC countries”, https://mea.gov.in/Images/CPV/lu1658_01.pdf, accessed 23 May 2023. 148 GoI, MEA, “Destination-wise departure of Indians from 2017 to November 2022”, https://mea.gov.in/Images/CPV/lu657-09-12-2022-2-en.pdf, accessed 23 May 2023. 149 India in Bahrain, Twitter, 9:56 PM, 18 September 2022, https://twitter.com/Ind iaInBahrain/status/1571536083518734336, accessed 23 May 2023. 150 India in Bahrain, Twitter, 12:23 PM, 27 August 2022, https://twitter.com/IndiaI nBahrain/status/1563419424203603968, accessed 23 May 2023.

80

MD. M. QUAMAR ET AL.

festivals and cultural programmes widely attended by Bahraini delegates creating greater opportunities for people-to-people contacts and appreciation of Indian cultures and traditions.

Opportunities and Challenges Though small, Bahrain is an important country in the Gulf region. Despite political instability and disruption caused by the Covid-19, Bahrain economic recovery has been significant and with consistent focus on diversification beyond oil. Skilling of the Bahraini nationals is the major drive and this opens avenues for opportunities in education and training services. Conventionally, Bahrain has been the financial services hub among the GCC which can be a potential area for cooperation, especially as India is promoting the success of digital financial services in the emerging markets. Tourism, recreational activities, sports and festivals can also generate new economic activities, and India and Bahrain can work to explore possibilities in these sectors. Bahrain being host to US Fifth Fleet and USNAVCENT makes it attractive for greater maritime security cooperation. India joining the CMF underlines the possibilities for further cooperation. Post-Covid-19 trade and business growth also present an opportunity. Indian public and private oil companies can explore the newfound oil and gas fields in Bahrain for mutural benefit. Challenges remain as far as the gap in promise and delivery is concerned. Being a smaller economy, Bahrain is often ignored in Indian diplomatic and political engagements and this needs to be rectified. While Prime Minister Modi visited Bahrain in 2019, there has been no senior visit from Bahrain since 2014. Even in B2B ties, Bahrain is often ignored due to its size. Given that Indians constitute a substantive number of expatriates and Indians have done business with and in Bahrain traditionally, it is important to explore the newer opportunities and invest in the Kingdom that will help its economy while creating goodwill for India.

CHAPTER 3

Iran

Key Information Political System: Islamic Republic; Ruling Group: Principlists; Supreme Leader (Velayat-e-Faqih): Ali Khamenei (since 4 June 1989); President: Ebrahim Raisi (since 3 August 2021); National Day: 1 April (sometimes also falls on 31st March due to the timing of the vernal equinox; also known as the Iranian Islamic Republic Day); Parliament: Majles-e Showra-ye Eslami (Islamic Consultative Assembly); 290-member unicameral legislature; Last Parliamentary Election: 21 February 2020; Major Group in Parliament: Conservative (also known as Principlists); National Carrier: Iran Air. Socio-Economic Indicators Area: 1,648,195 sq. km; Population: 87.59 million; Native: 100 per cent; Expats: NA; Religious Groups: Muslims: 99.6% (Shia: 90–95%; Sunni: 5–10%); Christians, Jews, Zoroastrians: 0.3%; Un-specified: 0.2%; Age Structure: 0–14 years 23.51%, 15–64 years 69.82%, 65 years and over 6.67%; Population Growth Rate: 0.93%; Life Expectancy at Birth: 75.44 years; Major Population Groups: Persians (61%), Azeris (16%), Kurds (10%), Lurs (6%), Balochs (2%), Arabs (2%), Turkmens and other Turkic tribes (2%) and others (1%); Adult Literacy Rate (Age 15 and older): 88.7%; National Currency: Iranian Rial (IRR); GDP (US$ Current): US$359.71 billion; Foreign Trade: Total Exports: © Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_3

81

82

MD. M. QUAMAR ET AL.

US$73 billion; Total Imports: US$55.45 billion; Military Expenditure: 2.5% of GDP; Sovereign Wealth Fund: National Development Fund of Iran, Value of Assets: US$10 billion; External Debt: US$9,142 billion; GNI Per Capita PPP (Current International): $16,540; GDP Per Capita PPP (Current International): $16,484.1; Oil Reserves: 157.8 billion barrels (World no. 3; 9.1% of world’s proven reserves; Gas Reserves: 1,133.6 tcf (World no. 2; 17.1% of world’s proven reserves); Human Development Index: 0.774; HDI Rank: 76 out of 191; Infant Mortality Rate (deaths per 1,000 live births): 14.58; Maternal Mortality Ratio (deaths per 100,000 live births): 22; UN Education Index: 0.756; Gender Inequality Index: 0.459; Employment to Population Ratio (15 and older): 45.3%; Labour Force: 27.682 million; Unemployment Rate: 11.46%; Urban Population: 77.3%; Rate of Urbanisation: 1.32% (2020–2025 Estimates); Last National Census: 2016; World Press Freedom Index: Rank 177 out of 180; Score 24.81; Corruption Perception Index: Rank 147 out of 180; Score 25; Foreign Direct Investment (Inflows): US$1.43 billion; Individuals Using Internet (per cent of population): 79%; Net Migration Rate (per 1,000 people): −39,998; Forest Area (per cent of Land Area): 6.6%; Carbon Dioxide Emissions (tons per capita): 7.3; Gender Development Index: 0.880; Global Peace Index: Rank 141 out of 162; Score 2.687; Fintech Index: Rank 81 out of 83; Global Innovation Index: Rank 53 out of 132; Global Cybersecurity Index: Rank 54 out of 141; Score 14.29. India Related Indian Cultural Centre: Tehran (since 2013); Number of Indians: 4,337; Currency Exchange Rate: 1 IRR = INR 0.0019; Number of places of Worship for Indians: Two Temples and Three Gurudwaras; Indian Schools: 1; Indian Banks: State Bank of India and UCO Bank; Last Visit to India by Head of State: President Hassan Rouhani (February 2018); Last Indian Prime Minister to Visit Iran: Narendra Modi (May 2016). Sources: CIA World Factbook 2023; UN Development Programme 2023; World Bank 2023; World Intellectual Property Organisation 2023; Vision

3

IRAN

83

of Humanity, 2023; UNCTAD World Investment Report 2023, Transparency International 2023; Reporters without Borders 2023; U.S. EIA 2023; Embassy of India, Iran, 2023. ∗ ∗ ∗ Iran continued to grapple with extraordinary social, economic, political, security and foreign policy challenges in 2022. Social unrest over various issues, including poor economic prospects, water and power scarcity and meagre civic amenities, were reflected periodically through protests in different parts of Iran. Combined with a continued focus on external issues, they have eroded the regime’s legitimacy in the people’s eyes. In September, the killing of Mahsa Amini by the morality police led to one of the biggest protests since the 1979 revolution. Along with this, the economic situation remained deplorable due to the US and international sanctions and Covid-19 pandemic. However, the increase in oil prices and the ability to overcome US sanctions by selling oil through third parties and other means improved the financial outlook in 2022. The impact of Covid-19 has also been waning. The stalemate over nuclear negotiations with the European Union (EU) prolonged over political conditions related to human rights. Meanwhile, despite denials Iran is reportedly enriching uranium up to 80 per cent. Indo-Iranian relations have continued to be affected by a host of exogenous factors. While the US sanctions have hampered trade and commercial relations, the cooperation on the development and operation of Chabahar Port has continued. The heightened security threat due to the political transition in Afghanistan has led to increased diplomatic, political and security engagements. India and Iran have been worried over international terrorists finding a safe haven in Afghanistan under Taliban, and this has led to greater bilateral and multilateral engagements on counter-terrorism. In June 2022, Foreign Minister Hossein AmirAbdollahian visited India and in September, Prime Minister Narendra Modi met President Ebrahim Raisi on the sidelines of the Shanghai Cooperation Organisation (SCO) leadership summit in Samarkand, Uzbekistan. There were calls from the Iranian side for the resumption of oil imports by India, especially since New Delhi defied American and European pressure against buying Russian oil. The Government of India, however, has remained silent on this option, focusing on the political and security engagement and continued cooperation on Chabahar Port.

84

MD. M. QUAMAR ET AL.

Domestic Developments In 2022, Iran witnessed one of the biggest and most widespread protests in decades.1 The protests erupted in the wake of the death of Mahsa Amini on 16 September after she was tortured in the custody of the morality police (Ghast-e-Ershad) for not wearing hijab properly while walking on a road in Tehran. Initially, family and friends of the 22-yearold Kurdish woman demonstrated outside the hospital in Tehran where Amini died and in her hometown Saqqez in Kurdistan Province and demanded justice and action against officials responsible for beating and torturing her.2 They were later joined by feminist and Kurdish activists who expanded the demands to broader rights of women and ethnic minorities. Gradually, the protests spread to all 31 provinces, with Tehran and Kurdistan witnessing the largest outpouring, and the demonstrations continued for months.3 Eventually, the protests metamorphosed into a demand for the end of the regime, which angered the Islamic Republic and its supporters.4 The demonstrations began to fragment only after a series of crackdowns by security agencies which reportedly led to hundreds of deaths while thousands were imprisoned. According to one report, nearly 500 had died while more than 18,000 people

1 United Nations Human Rights, Office of the High Commissioner (OHCHR), “Iran: Crackdown on peaceful protests since death of Jina Mahsa Amini needs independent international investigation, say UN experts”, 26 October 2022, https://www.ohchr.org/en/press-releases/2022/10/iran-crackdown-peaceful-pro tests-death-jina-mahsa-amini-needs-independent, accessed 18 July 2023. 2 Ramy Inocencio, “‘She was tortured’: Mahsa Amini’s family speaks out amid Iran protests”, CBS News, 26 September 2022, https://www.cbsnews.com/news/ mahsa-amini-iran-protests-family-cousin-erfan-mortezaei-speaks-out-torture/, accessed 18 July 2023. 3 Anders Anglesey, “Iran protests timeline: How death of Mahsa Amini caused shockwaves”, Newsweek, 12 April 2022, https://www.newsweek.com/iran-protests-timelinehow-death-mahsa-amini-caused-shockwaves-1764454, accessed 18 July 2023. 4 Iran International, “Open demand for regime change marks Iran protests”, 12 May 2022, https://www.iranintl.com/en/202212054935, accessed 18 July 2023.

3

IRAN

85

were imprisoned.5 There have also been reports of judicial executions.6 The international community, including the United Nations Office of the High Commissioner for Human Rights (OHCHR), criticised the high-handed regime response.7 In the process, Amini became a symbol of youth and women unrest in Iran and an idol for feminist movements across the region and the world. Arguably, the protests were one of the biggest popular demonstrations in Iran since the 1979 revolution, and many analysts underlined that this was a serious threat to the stability of the Islamic regime.8 Nonetheless, it was clear that the regime was not taking any chances and was ready to suppress protests of the young men and women by force,9 and hence, many Iran observers overruled prospects for a regime change.10 The protests nonetheless underlined internal fissures between the Reformists and Principlists in the regime and the liberal and conservative sections of the society.11 Two weeks into the protests, prominent human rights activist and daughter of former president Hashemi Rafsanjani, Faezeh 5 Anders Anglesey, “Iran protests timeline: How death of Mahsa Amini caused shockwaves”, Newsweek, 12 April 2022, https://www.newsweek.com/iran-protests-timelinehow-death-mahsa-amini-caused-shockwaves-1764454, accessed 18 July 2023. 6 Death Penalty Information Center, “Iran continues aggressive use of death penalty

despite international condemnation”, 24 May 2023, https://deathpenaltyinfo.org/ news/iran-continues-aggressive-use-of-death-penalty-despite-international-condemnation, accessed 25 July 2023. 7 OHCHR, “Iran: Crackdown on peaceful protests since death of Jina Mahsa Amini needs independent international investigation, say UN experts”, 26 October 2022, https://www.ohchr.org/en/press-releases/2022/10/iran-crackdown-peaceful-pro tests-death-jina-mahsa-amini-needs-independent, accessed 18 July 2023. 8 Ziryan Rojhelati, “The demonstrations for Mahsa Amini: A turning point in Iran”, The Washington Institute for Near East Policy, 7 October 2022, https://www.washingto ninstitute.org/policy-analysis/demonstrations-mahsa-amini-turning-point-iran, accessed 18 July 2023. 9 The Hindu, “Iran protests rage on streets as officials renew threats”, 10 November 2022, https://www.thehindu.com/news/international/iran-protests-rage-on-streets-as-off icials-renew-threats/article66118592.ece, accessed 18 July 2023. 10 Frederick W. Kagan and Marie Donovan, “Don’t be fooled: The Iran protests won’t overthrow the regime”, American Enterprise Institute (AEI), 7 January 2018, https://www.aei.org/articles/dont-be-fooled-the-iran-protests-wont-overth row-the-regime/, accessed 18 July 2023. 11 James Denton, “Will Popular Protests Destroy Iran’s Islamic Regime?”, Fair Observer, 2 February 2023, https://www.fairobserver.com/politics/will-popular-protestsdestroy-irans-islamic-regime/, accessed 18 July 2023.

86

MD. M. QUAMAR ET AL.

Hashemi, was arrested on unknown charges after speaking up in support of the protests.12 As of December 2022, despite the crackdown by the regime, the protests continue to rage across Iran. Politics and Governance The Mahsa Amini protests exposed political fragility in Iran. Over the past few years, Iran has witnessed a series of protests over various grievances, including the rise in food prices, water and power scarcity, compulsory imposition of hijab and the downing of a Ukrainian civilian aircraft in January 2020.13 These protests underline the increasing socio-economic unrest, especially among the youth, as the regime’s legitimacy has been eroding due to its inability to respond to the people’s demands. One must recall that the parliamentary elections of 2020 and presidential elections of 2021 that brought Ebrahim Raisi to power had very low turnouts, one of the lowest since 1979.14 One of the major factors for the lower turnouts was the disenchantment among the people with the continued manipulation of the Ayatollah Khamenei-led regime to bring his loyalists among the conservative sections of the clergy to the legislature and in government, even though a majority of the Iranians would like to see a more participatory political process and a reformist government.15 The government’s response to the protests was mixed with some accommodating voices endorsing peaceful protests and calls for dialogue

12 Mohammad Zarghami Golnaz Esfandiari, “Former Iranian President’s daughter arrested for supporting protests triggered by death of woman in custody over Hijab”, Radio Free Europe Radio Liberty (RFERL), 28 September 2022, https://www.rferl.org/ a/iran-hashemi-arrested-amini-protests/32056172.html, accessed 18 July 2023. 13 BBC, “Iran plane crash: Ukrainian jet was ‘unintentionally’ shot down”, 11 January 2020, https://www.bbc.com/news/world-middle-east-51073621, accessed 18 July 2023. 14 Ali Afshari, “Low election turnout points to larger changes in Iranian politics”, Middle East Institute, 16 June 2021, https://www.mei.edu/publications/low-electionturnout-points-larger-changes-iranian-politics, accessed 18 July 2023. 15 Maryam Sinaee, “Over 60% of Iranians want transition from Islamic Republic”, Iran International, 4 January 2022, https://www.iranintl.com/en/202204015794, accessed 18 July 2023.

3

IRAN

87

over the demands.16 At one point, the Iranian judicial body chief indicated that the government was mulling over reducing the powers of the morality police and might dilute the strict hijab rule.17 However, soon the statist media reported that these were mere speculations.18 In December, Supreme Leader Ali Khamenei called for the revitalisation of the revolutionary culture.19 Most Iranian leaders and state-owned media blamed the US, Israel and Saudi Arabia for funding and inciting protests.20 November was one of the bloodiest months during the protest and several instances of rioting, deaths and killing at the hands of the security personnel were reported.21 The state media reported 200 deaths until early December.22 For many weeks, the authorities blocked internet services to prevent the mobilisation and spread of protests.23 Students and workers in many public universities and industries joined the protests 16 Syed Zafar Mehdi, “As unrest persists, Iran’s judiciary chief calls for dialogue with protesters”, Anadolu Agency, 10 October 2022, https://www.aa.com.tr/en/middle-east/ as-unrest-persists-irans-judiciary-chief-calls-for-dialogue-with-protesters/2707746, accessed 25 July 2023. 17 Siladitya Ray, “Iran Abolishes Morality Police and mulls changes to Mandatory Hijab Law after anti-government protests, Official Says”, Forbes, 4 December 2022, https://www.forbes.com/sites/siladityaray/2022/12/04/after-months-of-anti-govern ment-protests-iran-abolishes-morality-police-and-mulls-changes-to-mandatory-hijab-law/? sh=69a77a4d3f50, accessed 18 July 2023. 18 Akhtar Makoii, Arash Azizi and Alex Stambaugh, “Iran says hijab law is under review, as state media dismisses claims morality police has been abolished”, CNN , 4 December 2022, https://edition.cnn.com/2022/12/04/middleeast/iran-hijab-lawunder-review-intl/index.html, accessed 18 July 2023. 19 The Print, “Iran’s supreme leader Khamenei calls for ‘revolutionary reconstruction’ of country’s culture”, 7 December 2022, https://theprint.in/world/irans-supreme-leaderkhamenei-calls-for-revolutionary-reconstruction-of-countrys-culture/1252401/, accessed 25 July 2023. 20 Tehran Times, “Foes incited riots through ‘scandalous miscalculation’: Raisi”, 2 December 2022, https://www.tehrantimes.com/news/479284/Foes-incited-riots-thr ough-scandalous-miscalculation-Raisi, accessed 18 July 2023. 21 Ibid. 22 Reuters, “Iran state body reports 200 dead in protests, Raisi hails ‘freedoms’”,

4 December 2022, https://www.reuters.com/world/middle-east/iranian-security-bodysays-200-people-lost-lives-recent-riots-misan-news-agency-2022-12-03/, accessed 18 July 2023. 23 Wired, “Iran’s Internet shutdown hides a deadly crackdown”, 23 September 2022, https://www.wired.com/story/iran-protests-2022-internet-shutdown-whatsapp/, accessed 25 July 2023.

88

MD. M. QUAMAR ET AL.

by observing strikes underlining the growing disenchantment. These also attracted serious crackdowns and targeting of protest leaders and activists by Basij militias, associated with the IRGC. A major controversy erupted on 21 November after Iranian football team players remained silent when the national anthem was played during their first group match against England in the FIFA World Cup in Qatar.24 This led to the players getting some support from the youth protestors and Iranian diaspora but attracted a backlash from regime supporters leading to serious threats to the players and their families.25 Iran losing the match 6-2 did not help the players’ cause, and they reverted to singing the national anthem in their subsequent matches in the FIFA World Cup.26 In March, after prolonged and secret negotiations, the regime released two Iranian-British academics and activists, Nazanin Zaghari and Anoushe Ashouri, who were charged with espionage while they were visiting their families in Iran.27 In October, Iranian American Baquer Namazi28 and a couple from New Zealand—Christopher Richwhite and Bridget Thackwray—were also released from Iranian prisons.29 However, over the

24 Martin Petty, “Iran World Cup players silent as anthem plays, signalling protest support”, Reuters, 21 November 2022, https://www.reuters.com/lifestyle/sports/udp ate-1-soccer-iran-chose-not-sing-anthem-world-cup-opener-2022-11-21/, accessed 18 July 2023. 25 Ibid. 26 Nils Adler, Eshlin Aravinda Vedan and Elisabeth Melimopoulos, “England v Iran 6-2:

World Cup 2022—As it happened”, Al-Jazeera, 21 November 2022, https://www.aljaze era.com/sports/liveblog/2022/11/21/live-england-vs-iran-world-cup-2022, accessed 18 July 2023. 27 Tehran Times, “Nazanin Zaghari released, returns to Britain”, 16 March 2022, https://www.tehrantimes.com/news/471104/Nazanin-Zaghari-released-returns-to-Bri tain, accessed 18 July 2023. 28 Larry Kaplow, “Iran allows ailing American Baquer Namazi to leave the country for treatment”, NPR, 5 October 2022, https://www.npr.org/2022/10/05/1126854328/ iran-allows-ailing-american-baquer-namazi-to-leave-the-country-for-treatment, accessed 18 July 2023. 29 Tess McClure, “New Zealand couple detained in Iran for months leave the country”, The Guardian, 25 October 2022, https://www.theguardian.com/world/2022/oct/25/ new-zealand-couple-detained-in-iran-for-months-leave-the-country, accessed 18 July 2023.

3

IRAN

89

year, many other foreign nationals visiting Iran were detained on suspicion of spying and espionage, including two French tourists in May,30 and a British-Iranian national was detained in November for talking to foreign media.31 Two Spanish nationals of Kurdish descent were detained in Kurdistan Province for participating in protests,32 while a Belgian aid worker, Olivier Vandecasteele, who was arrested in February on charges of espionage, and was given a 28-year prison term in December.33 In addition to the popular unrest, Iran has witnessed a rise in terrorist attacks. In April, a cleric was stabbed to death, and two others were injured in a knife attack at the Imam Reza shrine in Mashhad, which the authorities reported, was carried out by a “takfiri” terrorist of Uzbek origin who had entered through Pakistan.34 In October, a bomb attack at Shah Cheragh Shrine in Shiraz killed 15 people, and Islamic State claimed responsibility for the attack.35 Several other minor terrorist strikes led to the killing of key Iranian officials in various parts of the country. In response, the security agencies have, from time to time, targeted terrorist cells of ISIS and other terrorist networks.36 In some cases, the

30 Tehran Times, “Intelligence minister: Two French citizens were not tourists”, 20 May 2022, https://www.tehrantimes.com/news/472796/Intelligence-minister-Two-Fre nch-citisens-were-not-tourists, accessed 18 July 2023. 31 Patrick Wintour, “Iran arrests British-Iranian citizen for ‘communicating’ with foreign news channels”, The Guardian, 23 November 2022, https://www.theguardian. com/world/2022/nov/23/iran-arrests-british-iranian-citisen-for-communicating-with-for eign-news-channels, accessed 25 July 2023. 32 Reuters, “Iran has detained two Spanish nationals during anti-government protests

-Kurdish rights group”, 9 November 2022, https://www.reuters.com/world/middleeast/iran-has-detained-two-spanish-nationals-during-anti-government-protests-kurdish2022-11-09/, accessed 18 July 2023. 33 BBC, “Olivier Vandecasteele: Iran jails Belgian aid worker for 28 years—Family”, 14 December 2022, https://www.bbc.com/news/world-middle-east-63973683, accessed 18 July 2023. 34 Tehran Times, “One cleric martyred, two wounded in stabbing attack at holy shrine of Imam Reza”, 6 April 2022, https://www.tehrantimes.com/news/471440/One-clericmartyred-two-wounded-in-stabbing-attack-at-holy-shrine, accessed 18 July 2023. 35 Al-Jazeera, “Attack on Shiraz shrine kills 15: Iranian state media”, 27 October 2022, https://www.aljazeera.com/news/2022/10/26/attack-on-shiraz-shrine-kills-15-ira nian-state-media, accessed 18 July 2023. 36 Tehran Times, “Iran arrests ‘biggest’ network of sabotage in Tehran neighbourhood”, 23 December 2022, https://www.tehrantimes.com/news/480045/Iran-arrestsbiggest-network-of-sabotage-in-Tehran-neighborhood, accessed 18 July 2023.

90

MD. M. QUAMAR ET AL.

regime figures have said that the busted network was supported and funded by Israeli spy agency Mossad.37 After continued protests since September over Amini’s death, the Iranian Revolutionary Guard Corps (IRGC) launched drone strikes on targets in Iraqi Kurdistan, alleging that Iranian Kurdish opposition groups based in northern Iraq were behind the continuing protests in Iranian Kurdistan.38 President Raisi’s government has been trying to cope with the economic sanctions by rejuvenating local industries and businesses. Raisi undertook a national tour, visiting provincial capitals and major industrial hubs. By the end of the first six months of 2022, Raisi had covered almost the entire length and breadth of the country. In July, after finishing his visit to Markazi Province, he held a press conference in Arak, the provincial capital, and lauded the industrial base in the city. He also underlined the need for the people to continue working in agriculture and local industries and announced a slew of measures, including “50 infrastructure plans, 39 resolutions for agriculture, water and soil, 65 projects in the field of culture, sports and education, 30 projects in the field of health and treatment, nine projects in the field of employment, eight projects in the field of industry and mining, 23 projects in the field of welfare and social and ten projects in the field of law enforcement and justice.”39 On the nuclear talks, there were hopes in the early months of 2022 that Iran and the international negotiators were on the verge of a breakthrough to restore the Joint Comprehensive Plan of Action (JCPOA) from which the US withdrew in May 2018 under the Trump administration. Tehran Times reported in January that the Vienna talks are in the “final stages.”40 This led to nearly 250 Iranian lawmakers writing to President Raisi not to compromise on Iran’s red lines to enter into 37 Tehran Times, “IRGC demolishes network of thugs affiliated with Israeli regime”, 22 May 2022, https://www.tehrantimes.com/news/472886/IRGC-demolishes-networkof-thugs-affiliated-with-Israeli-regime, accessed 18 July 2023. 38 Tehran Times, “KRG ignores Iran’s warnings, IRGC resumes operation in northern Iraq”, 28 September 2022, https://www.tehrantimes.com/news/477135/KRG-ignoresIran-s-warnings-IRGC-resumes-operation-in-northern, accessed 18 July 2023. 39 Tehran Times, “President Raisi wraps up 29th provincial trip”, 23 July 2022, https://www.tehrantimes.com/news/474953/President-Raisi-wraps-up-29th-provincialtrip, accessed 18 July 2023. 40 Tehran Times, “Iran nuclear talks enter ‘final stage’”, 30 January 2022, https:// www.tehrantimes.com/news/469644/Iran-nuclear-talks-enter-final-stage, accessed 18 July 2023.

3

IRAN

91

an agreement with the West. Among the key demands of the lawmakers were American guarantees against unilateral withdrawal from the deal and removal of IRGC from the list of foreign terrorist organisations.41 A section of the hardline Iranian politicians have long opposed any nuclear talks with the US and Western powers and were also against the JCPOA, arguing that it undermined Iranian interests and sovereign rights.42 Although negotiations continued, by March–April it was clear that the talks were stuck again amidst reports of Iran not allowing IAEA inspectors to access some of the sites. In June, the IAEA Board of Governors passed a resolution deploring Iran’s continued defiance of the IAEA inspection regime, and this was seen as a political move in Iran to obstruct the nuclear talks.43 Talks in Vienna resumed in August but were derailed by the eruption of protests over Amini’s death in September and the subsequent regime’s response. In November, the IAEA underlined that Iran has been enriching uranium up to 60 per cent at its Fordow site.44 Iran continues to grapple with US sanctions, and many Iranian political figures have deplored the continuation of sanctions underlining their impact on humanitarian work. In December, the US slapped sanctions on 26 firms and five individuals, including Sitki Ayan, that smuggled oil from Iran via Türkiye to China and Russia, blocking millions of dollars in revenue.45 Earlier in March, prompted by an Iranian attack in

41 Tehran Times, “Iranian lawmakers draw red lines on Vienna talks”, 20 February 2022, https://www.tehrantimes.com/news/470325/Iranian-lawmakers-drawred-lines-on-Vienna-talks, accessed 18 July 2023. 42 Iran International, “Iranian lawmakers divided over cooperation with IAEA”, 7 February 2023, https://www.iranintl.com/en/202307022968, accessed 25 July 2023. 43 Tehran Times, “Iran deplores IAEA board resolution”, 10 June 2022, https://www. tehrantimes.com/news/473469/Iran-deplores-IAEA-board-resolution, accessed 18 July 2023. 44 Francois Murphy, “Iran enriching to up to 60% at Fordow, plans massive expansion, IAEA says”, Reuters, 23 November 2022, https://www.reuters.com/world/middle-east/ iran-enriching-up-60-fordow-plans-further-expansion-iaea-says-2022-11-22/, accessed 18 July 2023. 45 Tehran Times, “U.S. slaps sanctions on 26 firms, 5 individuals for allegedly assisting Iran oil shipments”, 9 December 2022, https://www.tehrantimes.com/news/479540/US-slaps-sanctions-on-26-firms-5-individuals-for-allegedly, accessed 18 July 2023.

92

MD. M. QUAMAR ET AL.

Erbil, the US sanctioned four companies and an individual for procurement of equipment used in the Iranian ballistic missile programme.46 In May, the US sanctioned nine companies and ten individuals involved in an oil smuggling network that allegedly funded the Quds Force and Hezbollah activities.47 Another sanction was put on an Iranian network that smuggled petrochemical and non-oil products to China and East Asian countries.48 These were third-party sanctions on individuals trading Iranian products after Biden Administration assumed office.49 In August, the US also sanctioned six companies, including four Chinese, one Emirati and one Singaporean, for aiding sales of millions of dollars worth of Iranian oil and petrochemical products to East Asian countries.50 Sanctions were also placed for Iran’s alleged role in the Ukraine war. The US sanctioned four Iranian companies and a defence contractor for their role in supplying UAVs to Russia for use in Ukraine.51 Iran’s escalating cyber programme also invited sanctions, with two companies and ten Iranians linked to the IRGC being sanctioned for an alleged hack that involved the installation of ransomware in targets that included individuals in the US, including diplomats and government officials and various private companies in energy, business, media houses and telecommunication sector.52 Another wave of sanctions was focused on Iran’s 46 United States Institute of Peace (USIP), The Iran Primer, “U.S. sanctions Iran’s Ballistic missile program”, 30 March 2022, https://iranprimer.usip.org/blog/2022/mar/ 30/us-sanctions-irans-ballistic-missile-program, accessed 18 July 2023. 47 USIP, The Iran Primer, “U.S. sanctions Iranian oil smuggling network”, 25 May 2022, https://iranprimer.usip.org/blog/2022/may/25/us-sanctions-iranian-oil-smu ggling-network-0, accessed 18 July 2023. 48 Ibid. 49 U.S. Department of the Treasury, “Treasury targets Iranian oil and petrochem-

ical trade network”, 6 July 2022, https://home.treasury.gov/news/press-releases/jy0851, accessed 18 July 2023. 50 USIP, The Iran Primer, “U.S. Sanctions firms helping Iran smuggle oil”, 1 August 2022, https://iranprimer.usip.org/blog/2022/aug/01/us-sanctions-firms-hel ping-iran-smuggle-oil, accessed 18 July 2023. 51 US Department of State, “Designating Iranian proliferators of shipping unmanned aerial vehicle technology to Russia for Use in Ukraine”, 8 September 2022, https://www.state.gov/designating-iranian-proliferators-of-shipping-unmanned-aer ial-vehicle-technology-to-russia-for-use-in-ukraine/, accessed 18 July 2023. 52 US Department of the Treasury, “Treasury Sanctions IRGC-affiliated cyber actors for roles in ransomware activity”, 14 September 2022, https://home.treasury.gov/news/ press-releases/jy0948, accessed 18 July 2023.

3

IRAN

93

human rights records in the light of the protests against morality policy and the wider anti-regime protests following the death of Amini. The US sanctioned Gasht-e-Ershad and seven senior officials in the security establishment. Several successive sanctions were announced on IRGC commanders, administrators and police officials.53 The US State Department sanctioned Khordad Foundation after the organisation announced a US$3.3 million bounty for the murder of Salman Rushdie.54 Sanctions were announced on six senior officials of the state-run Islamic Republic of Iran Broadcasting (IRIB) for their involvement in forced confessions of Iranians, dual nationals and international detainees on spying and related charges.55 The US sanctioned the Prosecutor General of Iran and four other military officials for their role in a crackdown on protests over hijab.56 Foreign Policy and Security In recent years, Iranian foreign policy has focused on “looking east,” especially to overcome the US and European sanctions regime. Iran has developed strong strategic relations with Russia and China while reaching out to regional and middle powers in the Global South. It has also sought full membership or partnership with China-led multilateral organisations such as the SCO and BRICS to seek greater economic integration with Asia.57 In MENA, Iran continues to seek expansion of its strategic presence to offset security threats and enhance regional influence. Its presence

53 USIP, The Iran Primer, “U.S. sanctions morality police, senior officials”, 22 September 2022, https://iranprimer.usip.org/blog/2022/sep/22/us-sanctions-moralitypolice-senior-officials, accessed 18 July 2023. 54 US Department of State, “Sanctioning the Iranian entity responsible for a bounty on Salman Rushdie”, 28 October 2022, https://www.state.gov/sanctioning-the-iranianentity-responsible-for-a-bounty-on-salman-rushdie/, accessed 18 July 2023. 55 US Department of the Treasury, “Treasury sanctions senior officials and “interrogator journalists” of Iran’s state-run media”, 16 November 2022, https://home.treasury.gov/ news/press-releases/jy1109, accessed 18 July 2023. 56 US Department of the Treasury, “Treasury sanctions Iranian officials connected to the continued protest crackdown”, 23 November 2022, https://home.treasury.gov/ news/press-releases/jy1125, accessed 18 July 2023. 57 Tehran Times, “Dynamic diplomacy: From SCO to BRICS”, 29 June 2022, https://www.tehrantimes.com/news/474222/Dynamic-diplomacy-From-SCO-toBRICS, accessed 18 July 2023.

94

MD. M. QUAMAR ET AL.

in Syria, Iraq and Lebanon remains intact while support for groups such as Hamas and Houthis continues. The antagonism and competition with Arab powers, particularly Saudi Arabia, define Iran’s regional policy and have kept the region on the boil for over a decade.58 Until the end of the year, there was no sign of easing tensions between the two Gulf neighbours, despite political engagements in Muscat and Baghdad between Iranian and Saudi officials.59 The Iranian response to the Ukraine war differed from many regional powers in MENA. It avoided directly condemning the Russian invasion and called for a political solution. During a joint conference with his Polish counterpart in Tehran in May, the Iranian foreign minister said that Iran was opposed to the war in Ukraine and that the crisis could be resolved politically.60 However, as the war progressed, it became increasingly clear that Iran was supplying drones and missiles to Russia for use in Ukraine. Iran initially denied the charges despite the proof offered by the Ukrainian side.61 Gradually, Iran admitted that it supplied drones to Russia but underlined that this was done before the beginning of the war.62 Towards the end of 2022, it was clear that Iranian drones and

58 Al-Jazeera, “How has the Saudi-Iran divide affected the Middle East?”, 7 April 2023, https://www.aljazeera.com/news/2023/4/7/how-has-the-saudi-iran-divideaffected-the-middle-east, accessed 25 July 2023. 59 Lazar Berman, “Saudi-Iran talks could move to Oman, an intriguing shift for Israel”, The Times of Israel, 6 July 2021, https://www.timesofisrael.com/saudi-iran-talks-couldmove-to-oman-an-intriguing-shift-for-israel/, accessed 25 July 2023. 60 Tehran Times, “Iran FM says diplomacy is only solution to Ukraine war”, 8 May 2022, https://www.tehrantimes.com/news/472389/Iran-FM-says-diplomacy-isonly-solution-to-Ukraine-war, accessed 18 July 2023. 61 Tehran Times, “Top general dismisses claims of Iranian drones in Ukraine war”, 25 December 2022, https://www.tehrantimes.com/news/480117/Top-general-dismisses-cla ims-of-Iranian-drones-in-Ukraine-war; Joby Warrick, Ellen Nakashima and Shane Harris, “Iran plans to send missile, drones to Russia for Ukraine war, officials say”, The Washington Post, 16 October 2022, https://www.washingtonpost.com/national-security/2022/10/ 16/iran-russia-missiles-ukraine/, accessed 18 July 2023. 62 Reuters, “Iran says it shipped drones to Russia before Ukraine war”, 5 November 2022, https://www.reuters.com/world/iran-acknowledges-drone-shipmentsrussia-before-ukraine-war-2022-11-05/, accessed 18 July 2023.

3

IRAN

95

missiles proved effective in giving Russia a cost-effective military advantage in the battlefield.63 After Ukrainian President Vladimir Zelensky accused Iran of partnering in Russia’s genocidal policy, Tehran warned him not to test Iran’s “strategic patience.”64 The Iranian supply of drones to Russia underlined the growing strategic relations between the two. President Raisi visited Moscow in January and held bilateral talks with Vladimir Putin.65 He also visited Iran’s neighbours in Central Asia and hoped for greater Russia-Iran regional cooperation.66 Before the Raisi-Putin meeting in Moscow, the two foreign ministers had telephonically discussed the plans for the visit.67 Raisi and Putin again met in September on the sidelines of the SCO summit in Samarkand under a completely changed circumstance—the growing Russian dependence on Iranian drones for use in Ukraine.68 The Iran-Russia cooperation is set to expand as the two sides have identified new areas such as infrastructure development, petroleum supplies and logistics and strategic weapons and technologies.69 In December, it was 63 Lakshmi Priya, “Implications of Iranian Drones in Ukraine”, Indian Council of World Affairs (ICWA), 14 December 2022, https://www.icwa.in/show_content.php?lang=1& level=3&ls_id=8702&lid=5698, accessed 18 July 2023. 64 Tehran Times, “Iran cautions Zelenskyy that Tehran’s ‘strategic patience’ is not

infinite”, 23 December 2022, https://www.tehrantimes.com/news/480026/Iran-cau tions-Zelenskyy-that-Tehran-s-strategic-patience-is, accessed 18 July 2023. 65 Tehran Times, “Raisi voices hope trip to Russia be turning point in relations”, 22 January 2022, https://www.tehrantimes.com/news/469343/Raisi-voices-hope-tripto-Russia-be-turning-point-in-relations, accessed 18 July 2023. 66 Tehran Times, “President clarifies on outcomes of his Moscow visit”, 26 January 2022, https://www.tehrantimes.com/news/469522/President-clarifies-on-out comes-of-his-Moscow-visit, accessed 18 July 2023. 67 Tehran Times, “Amir Abdollahian, Lavrov hold talks ahead of Raisi visit to Moscow”, 19 January 2022, https://www.tehrantimes.com/news/469269/Amir-Abdollahian-Lav rov-hold-talks-ahead-of-Raisi-visit-to-Moscow, accessed 18 July 2023. 68 Elena Teslova, “Russia’s Putin meets Iranian counterpart Raisi on sidelines of regional SCO summit”, Anadolu Aganci, 15 September 2022, https://www.aa.com.tr/ en/asia-pacific/russias-putin-meets-iranian-counterpart-raisi-on-sidelines-of-regional-scosummit/2686228, accessed 25 July 2023. 69 Tehran Times, “Raisi and Putin call for expanding infrastructure cooperation”, 13

November 2022, https://www.tehrantimes.com/news/478636/Raisi-and-Putin-call-forexpanding-infrastructure-cooperation; Reuters, “Russia wants to cooperate with Iran on gas turbines”, 20 December 2022, Reuters, “Russia wants to cooperate with Iran on gas turbines”, 20 December 2022, https://www.reuters.com/world/russia-wants-cooperatewith-iran-gas-turbines-2022-12-20/, accessed 18 July 2023.

96

MD. M. QUAMAR ET AL.

reported that Moscow had agreed to supply Su-35 Sukhoi fighter jets to Iran.70 British officials also accused Russia of supplying dangerous defence technologies to Iran that could offset the regional balance of power.71 Besides Russia, Iran’s relations with China expanded rapidly in the post-Covid-19 period. Although the promised US$400 billion Chinese investments in Iran, as outlined in the 25-year strategic partnership agreement signed in March 2021, have not progressed much, the two sides have been constantly working to seek greater economic cooperation.72 China is one of the major powers that has defied US sanctions to continue buying oil from Iran, and the quantities have constantly increased after Covid-19. The two sides continue political and diplomatic dialogues. Notwithstanding the promises and Iranian expectations, Beijing has balanced relations with Tehran by developing greater cooperation with Saudi Arabia. In December, Iran was upset with the China-Saudi and China-GCC joint statement issued during Xi Jinping’s Riyadh visit as it refereed to the Iranian nuclear issue and the disputed Emirati islands. Tehran summoned the Chinese envoy to protest the statement.73 Later, the Chinese ambassador in Tehran clarified that Beijing respects Iran’s territorial integrity, which temporarily settled the matter74 but underlined the regional complexities of the Iran-China relations. Iran’s relations with the Western powers, including EU member states, the US, the UK and Canada, deteriorated during the year, especially as the nuclear talks prolonged, while Iranian strategic cooperation with Russia in the Ukraine war came to the fore. The situation became even

70 Iran International, “Moscow to supply Tehran with Sukhoi Su-35 fighter jets: Report”, 25 December 2022, https://www.iranintl.com/en/202212255446, accessed 18 July 2023. 71 Iran International, “London says Russia providing Iran with dangerous military technology”, 22 December 2022, https://www.iranintl.com/en/202212229588, accessed 18 July 2023. 72 Tehran Times, “Iran underscores timetable for implementing 25-year agreement with China”, 14 December 2022, https://www.tehrantimes.com/news/479735/Iran-unders cores-timetable-for-implementing-25-year-agreement, accessed 18 July 2023. 73 Maziar Motamedi, “Iran summons China envoy over islands dispute statement with UAE”, Al-Jazeera, 11 December 2022, https://www.aljazeera.com/news/2022/12/11/ iran-summons-china-envoy-over-disputed-islands-with, accessed 18 July 2023. 74 Tehran Times, “Chinese envoy underscores preservation of Iranian territorial integrity”, 21 December 2022, https://www.tehrantimes.com/news/479985/Chineseenvoy-underscores-preservation-of-Iranian-territorial, accessed 18 July 2023.

3

IRAN

97

more complicated due to European criticisms of the Iranian crackdown on the demonstrators.75 The EU also joined the US to sanction various Iranian entities over their involvement in thwarting the protests.76 In December, Iran was removed from the UN Commission on the Status of Women after increasing pressure from Iranian and international human and women’s rights activists who charged Tehran with suppressing all voices of dissent and gross violation of women’s rights.77 With the regional neighbours, the relations continued to improve. The UAE ambassador returned to Tehran after seven years in September.78 This culminated in nearly a year-long reconciliation process. They cut off relations in 2016 following mass attacks on Saudi Embassy and consulate in Tehran and Mashhad. Iran’s relations with Qatar and Oman continued to improve. President Raisi visited Qatar in February and held wide-ranging talks, underlining the growing relations.79 A Qatari foreign ministry delegation visited Tehran in May for bilateral talks and focused on regional trade, commercial relations and strategic issues.80 In January, the Iranian foreign minister visited Oman,81 and a month later, the Omani counterpart undertook a return visit and met with Iranian 75 AP, “Iran sanctions Europeans over criticism of protest crackdown”, 25 January 2023, https://apnews.com/article/iran-politics-protests-and-demonstrations-uni ted-kingdom-european-union-63d76d9148122030c0f09f352cfbf28c, accessed 25 July 2023. 76 Sabine Siebold. “EU sanctions 29 Iranians, three organisations over crackdown on protests”, Reuters, 14 November 2022, https://www.reuters.com/world/eu-setpile-more-sanctions-iran-over-violent-crackdown-protesters-2022-11-14/, accessed 18 July 2023. 77 UN News, “Iran removed from UN Commission on the status of women”, 14 December 2022, https://news.un.org/en/story/2022/12/1131722, accessed 18 July 2023. 78 Tehran Times, “UAE ambassador resumes work in Iran after 7 years”, 13 September 2022, https://www.tehrantimes.com/news/476723/UAE-ambassador-resumes-work-inIran-after-7-years, accessed 18 July 2023. 79 Tehran Times, “Iran president visits Qatar”, 21 February 2022, https://www.tehran times.com/news/470360/Iran-president-visits-Qatar, accessed 18 July 2023. 80 Tehran Times, “Bagheri: Iran’s regional cooperation not “temporary tactic””, 11 May 2022, https://www.tehrantimes.com/news/472509/Bagheri-Iran-s-regional-cooper ation-not-temporary-tactic, accessed 18 July 2023. 81 Tehran Times, “Iran FM visits Oman, says Tehran prioritises strong ties with Muscat”, 10 January 2022, https://www.tehrantimes.com/news/468951/Iran-FM-visitsOman-says-Tehran-prioritises-strong-ties-with, accessed 18 July 2023.

98

MD. M. QUAMAR ET AL.

leaders, including President Raisi.82 Facilitated by Baghdad, Iran has also sought to improve relations with Egypt.83 Iran welcomed the signing of the truce in Yemen in April and the two months extension in June.84 Nonetheless, Iran has continued to support the Ansar Allah movement in Yemen.85 Despite several rounds of official talks and secret meetings in Iraq and Oman, relations with Saudi Arabia remained cold during 2022. There were indications that Iran is keen to resume bilateral ties. In May, the Iranian Foreign Minister Hossein Abdollahian said that Tehran was ready to send a delegation to Saudi Arabia to oversee the preparation for the arrival of Iranian pilgrims for Hajj.86 In July, Iranian pilgrims did participate in Hajj, without any controversy.87 In December, Abdollahian, the Iranian foreign minister, reiterated that Iran was ready to resume diplomatic relations with and reopen embassy in Saudi Arabia.88 Relations with Türkiye have remained complicated for a variety of reasons. While the two sides have sought to improve economic relations, their neighbourhood policies in Syria, Iraq and South Caucuses kept them on the opposing sides. On Syria, the two sides have engaged through the Astana 82 Tehran Times, “Raisi calls Oman’s attention to regional issues significant”, 23 February 2022, https://www.tehrantimes.com/news/470454/Raisi-calls-Oman-s-attent ion-to-regional-issues-significant, accessed 18 July 2023. 83 Tehran Times, “Iraq may mediate between Tehran and Cairo: Egyptian official”, 28 December 2022, https://www.tehrantimes.com/news/480188/Iraq-may-mediate-bet ween-Tehran-and-Cairo-Egyptian-official, accessed 18 July 2023. 84 Tehran Times, “Iran hails Yemen truce extension, insists on political solution”, 5 June

2022, https://www.tehrantimes.com/news/473280/Iran-hails-Yemen-truce-extension-ins ists-on-political-solution, accessed 18 July 2023. 85 Seth G. Jones, Jared Thompson, Danielle Ngo, Joseph S. Bermudez Jr., and Brian

McSorley, “The Iranian and Houthi War against Saudi Arabia”, Center for Strategic and International Studies (CSIS), 21 December 2021, https://www.csis.org/analysis/iranianand-houthi-war-against-saudi-arabia, accessed 25 July 2023. 86 Tehran Times, “Amir Abdollahian: Iran to send team to S. Arabia to facilitate Hajj pilgrimage”, 29 May 2022, https://www.tehrantimes.com/news/473140/Amir-Abdoll ahian-Iran-to-send-team-to-S-Arabia-to-facilitate, accessed 18 July 2023. 87 Taghrib News, “First group of Iranian pilgrims for Hajj 2022 depart for Saudi Arabia”, 12 June 2022, https://www.taghribnews.com/en/news/553221/first-group-ofiranian-pilgrims-for-hajj-2022-depart-saudi-arabia, accessed 18 July 2023. 88 Tehran Times, “Tehran ready to reopen embassies, ball in Riyadh court”, 19 December 2022, https://www.tehrantimes.com/news/479910/Tehran-ready-to-reopenembassies-ball-in-Riyadh-court, accessed 18 July 2023.

3

IRAN

99

process,89 but Iran has been critical of Turkish plans for military incursion into that country.90 The two sides have also found themselves on the opposing side of the divide on Iraqi Kurdistan, wherein Iran has been uncomfortable with the growing Turkish military presence.91 On the Armenia-Azerbaijan conflict, Türkiye and Iran have supported opposing sides, adding another layer to their antagonism.92 Iranian position on the Nagorno-Karabakh conflict has also complicated Tehran-Baku ties, sometimes threatening to escalate into a border fight.93 Iran’s foreign and security policies are intertwined, and most of the Iranian regional policy can be viewed through the prism of threat perception based on the extensive American military presence in the region as a source of threat. It also views Israel through a theological-securitised lens that explains their proxy fight in Syria94 . The two sides have also used cyber-attacks and hybrid warfare.95 The same situation can be viewed in the case of Afghanistan, wherein Iran was extremely critical of the American military presence and welcomed the US withdrawal in 2021 but relations with the Taliban regime are complicated, with

89 Tehran Times, “Astana process in Tehran ends on positive note”, 20 July 2022, https://www.tehrantimes.com/news/474864/Astana-process-in-Tehran-endson-positive-note, accessed 18 July 2023. 90 Tehran Times, “Iran slams Turkey’s threat to launch incursion into Syria, urges dialogue”, 30 May 2022, https://www.tehrantimes.com/news/473191/Iran-slams-Tur key-s-threat-to-launch-incursion-into-Syria-urges, accessed 18 July 2023. 91 Yousif Ismael, “Turkey’s growing military presence in the Kurdish region of Iraq”,

The Washington Institute for Near East Policy, 18 May 2022, https://www.washingtonin stitute.org/policy-analysis/turkeys-growing-military-presence-kurdish-region-iraq, accessed 25 July 2023. 92 Tehran Times, “Iran FM visits Armenia, says Iran opposed to changes in internationally-recognised borders”, 21 October 2022, https://www.tehrantimes.com/ news/477828/Iran-FM-visits-Armenia-says-Iran-opposed-to-changes-in-internationa lly-rec, accessed 18 July 2023. 93 Luke Coffey, “Iran the big loser in Nagorno-Karabakh war”, Arab News, 13 November 2020, https://www.arabnews.com/node/1762626, accessed 25 July 2023. 94 Udi Evental, “The religious-ideological reason Iran calls for Israel’s destruction”, The Jerusalem Post, 21 February 2022, https://www.jpost.com/christianworld/article698136, accessed 25 July 2023. 95 USIP, The Iran Primer, “Israel-Iran Cyber War, Gas Station Attack”, 24 February 2022, https://iranprimer.usip.org/blog/2021/nov/02/israel-iran-cyber-war-gas-stationattack, accessed 18 July 2023.

100

MD. M. QUAMAR ET AL.

Tehran seeking partners for border security, refugee management and counter-terrorism.96 Iran’s security policy has hovered around expanding strategic footprints in the neighbourhood and developing strategic and advanced weapons with a relatively high degree of success. Over the years, Iran has developed a cache of strategic weapons by seeking advanced technology through external and indigenous sources. It has developed long-range missiles, and precision drones, has launched dual-use satellites and has continued to invest towards modernising its armed forces, especially the IRGC, despite economic constraints.97 In November, it was reported that Tehran had developed a hypersonic ballistic missile system, but US security officials were sceptical over the claims.98 Iran has sought to procure strategic technologies through partnerships with Russia and China and has engaged in bilateral and trilateral military exercises in the Gulf and Arabian Sea, showcasing its defence and maritime security capabilities.99 Economy Iran remains one of the largest economies in the region and is relatively more diversified than its peers despite being subjected to several years of US sanctions. Oil and gas still contributed to a significant portion of its export revenues. However, unlike its regional peers, it could not substantially reaped the windfall gains from hike in international oil prices during the year. Multiple factors constrain Iran’s economic growth rate ranging from increasing Western sanctions, restricted access to foreign exchange and foreign investments, falling domestic currency, spiralling inflation and high unemployment. Despite higher oil revenues, its real growth rate 96 Tehran Times, “Iran suggests cooperation with Afghanistan in combating terror”, 21 November 2022, https://www.tehrantimes.com/news/478928/Iran-suggests-cooper ation-with-Afghanistan-in-combating-terror, accessed 18 July 2023. 97 Tehran Times, “ Defence ministry unveils upgraded, advanced defence systems”, 13 February 2022, https://www.tehrantimes.com/news/470126/Defense-Ministry-unveilsupgraded-advanced-defense-systems, accessed 18 July 2023. 98 Reuters, “Iran says it has built hypersonic ballistic missile -Tasnim”, 10 November 2022, https://www.reuters.com/world/middle-east/iran-says-it-has-built-hyp ersonic-ballistic-missile-tasnim-2022-11-10/, accessed 18 July 2023. 99 Tehran Times, “IRGC launches large-scale military drill in northwest Iran”, 17 October 2022, https://www.tehrantimes.com/news/477706/IRGC-launches-large-scalemilitary-drill-in-northwest-Iran, accessed 18 July 2023.

3

IRAN

101

Table 3.1 Iran’s economic growth, 2019–2023

GDP at Current Prices (US$ million) Per Capita GDP (at Current Price US$) Real GDP growth (Annual per cent) Real non-oil GDP growth (Annual per cent)

2019

2020

2021

2022

2023a

241,658

195,528

289,294

352,213

367,968

2,908.92

2,326.66

3,409.83

4,110.33

4,251.67

−3.1

3.3

4.7

2.2

2.0

–

2.9

4.3

2.5

2.0

Sources IMF Data Mapper; IMF, Regional Economic Outlook Middle East and Central Asia 2023; a IMF Estimates

declined from 4.7 per cent in 2021 to 2.2 per cent in 2022 (Table 3.1). Its GDP increased from US$289.29 billion in 2021 to US$352.21 billion in 2022. The per capita GDP was about US$4,110.33 in 2022. The real growth rate of non-oil GDP was low at 2.5 per cent in 2022 and was forecasted to be about 2.0 per cent in 2023 (Table 3.1). However, according to the Central Bank of Iran, the growth rate of nonoil GDP at fixed (2016) price was about 4.7 per cent in the Iranian calendar year.100 The economic policy was directed to boost domestic production and generating job opportunities. The economy lagged from the continuing risk of the US sanctions and faced several years of deep recession.101 The business environment is opaque, and the banking sector is weak and inefficient. Private sector opportunities mostly benefited those closer to the political elites.102 The IRGC and its affiliates are prominent players in the construction sector.103 Besides the risks of sanctions, the abysmal business climate deterred foreign investment.

100 Islamic Republic news agency, Economic growth at 4% in year to late March: CBI, July 19, 2023. 101 EIU, Iran Country Report, February 2023. 102 Arash Hasan-Nia, “Khamenei pro-privatisation plans will inevitably lead to more

monopolies”, Iran Wire, 39 March 2023, https://iranwire.com/en/economy/115093khameneis-plan-to-restructure-irans-economy/, accessed 25 July 2023. 103 USIP, “U.S. Sanctions Iran’s construction sector”, 1 November 2019, https://ira nprimer.usip.org/blog/2019/nov/01/us-sanctions-iran%E2%80%99s-construction-sector, accessed 25 July 2023.

102

MD. M. QUAMAR ET AL.

Its petrochemical sector is the second largest in the Middle East, with an annual production capacity of about 90 million tons in 2021. About one-third of its output is exported. Several water and energy-intensive industries suffered from seasonal shortages of water and power. It has adversely affected food production and has threatened social stability.104 In September, water projects in Khuzestan were inaugurated to redress shortages that had triggered protests in the previous year. There are two flagship projects to build huge desalination plants on the coast of Gulf of Oman. There is a need to increase infrastructure spending, and Iran’s chronic water shortage would necessitate building new dams.105 Fiscal Situation and Inflation Higher oil revenues boosted private and government spending. According to the IMF, gross official reserves increased from US$17.7 billion in 2021 to US$25.4 billion in 2022. The government was able to spend on critical infrastructure upgrades. The total government revenues as a per cent of GDP marginally increased from 8.1 per cent in 2021 to 8.3 per cent in 2022. The fiscal deficit slightly decreased from 4.2 per cent to 4 per cent in the same period. During the year, the government’s gross debt as a percentage of GDP was 34 per cent, less than that of Qatar, Oman and Bahrain.106 The US sanctions continued to strain public finance and limit access to international borrowing. The overseas foreign reserves of about US$100 billion of the Central Bank of Iran remained frozen.107 The government relied on domestic revenue and funding sources, including the issue of bonds and sale of assets in the stock market and borrowing from the central bank (Bank Markazi). By mid-year, the Iranian privatisation organisation listed 20 government companies for immediate disinvestment to raise revenues. The government pledged to reform the privatisation process and improve the privatised entities’ transparency and

104 USIP, “Iran suffers twin power & water crises”, 3 August 2021, https://iranprimer. usip.org/blog/2021/jul/13/iran-suffers-twin-power-water-crises, accessed 25 July 2023. 105 EIU, Iran Country Report, February 2023. 106 IMF, Regional Economic Outlook Middle East and Central Asia 2023. 107 EIU, Iran Country Report, February 2023, p. 7.

3

IRAN

103

management. High-profile companies have been struggling and laying off workers after being privatised.108 Iran’s limited ability to export under US sanctions has continuously put downward pressure on its currency, eroding people’s purchasing power and frequent monetisation of fiscal deficits added to the inflationary pressure in the economy. In the last few years, there has been massive social unrest over shortages and has increased the pressures for populist policies like increase in salaries and subsidies. However, up to 70 per cent of the subsidy money would leak before it could reach the people. About 15 million people living close to Iran’s border in neighbouring countries of Iraq, Pakistan, Afghanistan and along the Northern borders benefited from the subsidised commodities through smuggling.109 When the threat to global food security was looming as the Ukraine war raged, the Raisi government increased the prices of food items and introduced coupons.110 On 1 May, the decision to end subsidies for imported wheat led to an increase in the price of flour by 500 per cent, spiralling the cost of staple food like bread, pasta, confectionaries and other flour-based products.111 Protests broke out in several cities in oilrich Khuzestan Province against the massive hike in food prices.112 In response, President Raisi announced that he would transform the subsidy system introduced by his predecessor to stabilise commodity prices. An overwhelming majority received cash subsidies totalling US$1.6 billion,

108 EIU, Iran Country Report, November 2022, p. 30. 109 Maziar Motamedi, “Nuclear Talks: Iran’s Raisi launches major economic reform”,

Al-Jazeera, 12 May 2022, https://www.aljazeera.com/news/2022/5/12/nuclear-talksirans-raisi-engages-in-major-economic-reform, accessed 27 July 2022. 110 Sayeh Isfahani, “The Ebrahim Raisi government just jacked up food prices. Iranians are understandably angry.”, Atlantic Council, 12 May 2022, https://www.atlanticcouncil. org/blogs/iransource/the-ebrahim-raisi-government-just-jacked-up-food-prices-iraniansare-understandably-angry/, last accessed 18 July 2023. 111 Michael Scollon, “As bread costs skyrocket in Iran, so does the risk of social unrest”, REFRL, 6 May 2022, https://www.rferl.org/a/iran-bread-costs-skyrocket-unr est/31838051.html, accessed 18 July 2023. 112 Maryam Sinaee, “Protests ignite in southern Iran against government price hikes”, Iran International, 5 December 2022, https://www.iranintl.com/en/202205123473, accessed 18 July 2023.

104

MD. M. QUAMAR ET AL.

which they could use to buffer market prices.113 An electronic coupon system was envisaged. Implicit subsidies continued to drain the budget, and the government was slow in implementing reforms due to fear of exacerbating social unrest.114 Household consumption has been affected by declining real incomes and weak job prospects. The currency value further depreciated with the imposition of new Western sanctions over the government’s brutal response to the widespread protest in September over the death of Mahsa Amini in police custody. The Rial plummeted to a record low (IRR440,000 to US$1) in December in the parallel free market, triggering the replacement of the Governor of Bank Markazi, Ali Salehabadi. The falling Rial led to high inflation rates of 48.5 per cent in December. The country suffered from a hyper-inflationary spiral due to the cumulative effect of downward pressure on the Rial, sanction-related shortages and monetisation of fiscal deficits. According to the IMF, the average consumer price index increased from 40.1 per cent in 2021 to 49 per cent in 2022. The stock market witnessed high capital outflows by the end of October, and securities and exchange organisations deposited additional money in the capital market development and stabilisation fund. The Iranian stock market was once considered a safe haven for savers seeking to hedge against inflation. Due to the looming economic and fiscal uncertainties, President Raisi could not present his government’s budget for 2023–2024, due by 6 December, till the end of the year. Employment and Refugees Economic recovery after Covid-19 was short-lived, and the slow economic growth offered limited employment opportunities. The average unemployment rate was 10.96 per cent, and the female labour force participation rate was 15.67 per cent in 2022.115 According to the ILO 113 Maziar Motamedi, “Nuclear talks: Iran’s Raisi launches major economic reform”,

Al-Jazeera, 12 May 2022, https://www.aljazeera.com/news/2022/5/12/nuclear-talksirans-raisi-engages-in-major-economic-reform, accessed 18 July 2023. 114 Ibid. 115 Statistical, Economic and Social Research and Training Centre for Islamic Coun-

tries, “OIC statistical database”, https://www.sesric.org/oicstat-result.php, accessed 18 July 2023.

3

IRAN

105

database, about 27.5 per cent of youth aged 15–24 had no education, employment or training in 2021. About 36.7 per cent of youth aged 15–14 years with advanced levels of education were unemployed in 2021, while female youth unemployment was about 52.5 per cent. The share of women in senior and middle management positions in 2021 was about 19.9 per cent, less than the pre-Covid-19 level of 21.7 per cent in 2018.116 A higher proportion of females work in agriculture. To focus on employment among youth, the Iranian calendar year, beginning on 21 March 2022, was declared the year of knowledge-based employment-generating production.117 Iran is pursuing a population increase policy to reboot its human force. Its Supreme Leader Ayatollah Sayyid Ali Khamenei has repeatedly flagged concerns about the ageing population and urged Iranians to have more children to become self-sufficient.118 Employment and skill generation were also the focus of its first international employment office that became operational in 2020. It aims to send skilled labour to Scandinavian and other countries. In August, the governor of the Central Bank of Iran urged the members of the intergovernmental group G24119 to direct investments to generate jobs and increase economic growth.120 Iran hosts 63 per cent of Afghan refugees (about 5 million) and has established support systems, including employment. It has been urging international organisations to support its humanitarian efforts towards their rehabilitation. Over 700,000 Afghan students are enrolled in Iranian schools.121 The government provides refugees with Amash cards that 116 ILO, “ILOSTAT explorer: Islamic Republic of Iran”, https://www.ilo.org/shinya pps/bulkexplorer42/?lang=en&segment=indicator&id=SDG_0552_NOC_RT_A&ref_are a=IRN, accessed 18 July 2023. 117 Tehran Times, “Leader titles new year as year of “production: Knowledge-based and job-creating”, 20 March 2022, https://www.tehrantimes.com/news/471149/Leader-tit les-New-Year-as-year-of-Production-Knowledge-Based, accessed 25 July 2023. 118 Ali Ranjipour, “Special Report: Khamenei’s delusional population growth policy endangers Iran’s future”, Iran Wire, 23 July 2022, https://iranwire.com/en/features/ 67343/, accessed 18 July 2023. 119 Kayhan, “CBI Chief Urges G24 to direct investment to employment”, 21 April 2022. https://kayhan.ir/files/en/publication/pages/1401/1/31/2266_18082.pdf, accessed 25 July 2023. 120 IRNA, CBI chief urges G24 to direct investment to employment, August 20, 2022. 121 IRNA, Envoy: New humanitarian crisis should not lead to neglecting Afghan

refugees problem, December 2, 2022.

106

MD. M. QUAMAR ET AL.

grant them limited mobility, temporary work permits and access to free education and healthcare systems.122 Besides the Afghans, there were refugees from Syria, Iraq and other countries. The United Nations High Commission for Refugees officer-in-charge in Iran praised its efforts in hosting foreign refugees despite sanctions and economic pressures.123 External Sector Iran could not fully benefit from the windfall gains from the high international oil prices during the year due to US sanctions and other structural bottlenecks. Nevertheless, petroleum exports increased to about US$25.31 billion in 2022 (Table 3.2). The total exports of goods and services were US$97.30 billion in 2022 against US$86.0 billion in 2021. The total imports of goods and services were about US$81.50 billion in 2022. The current account surplus was about US$16.70 billion in 2022, comprising about 8.7 per cent of GDP. The EU also imposed targeted sanctions in retaliation to Iran’s military supplies to Russia and brutal crackdown on the civilian protest. China remained the only major market for the Iranian oil. However, Russia competed with Iran in the Chinese energy market and forced Iran to offer deeper discounts. The tanker tracking data suggested that average supplies to China were about 850,000 to 1.1 mbpd in 2022.124 Due to Table 3.2 Iran’s select current account indicators, 2019–2022 (US$ million)

Petroleum exportsa Total exports of goods and services Total imports of goods and services Current account balance

2019

2020

2021

2022b

60,519 48,821 59,718 –

19,402 54,100 54,800 −700

7,914 86,000 75,500 11,100

25,313 97,300 81,500 16,700

Note Figures for exports and imports vary widely from OPEC sources and may not indicate the actual change between 2021 and 2022 Sources a OPEC, Annual Statistical Bulletin 2022; b IMF

122 ACAPS, “Iran”, https://www.acaps.org/en/countries/iran#, accessed 18 July

2023. 123 IRNA, UNHCR appreciates Iran for hosting foreign refugees, November 12, 2022. 124 EIU, Iran Country Report, February 2023, p. 25.

3

IRAN

107

its limited ability to trade internationally, Iran’s imports primarily come from countries with financial and logistic arrangements, like the UAE, Türkiye and China. Several companies based in the UAE, China and Singapore and individuals, including Turkish business persons, were sanctioned by the US for facilitating the sale and shipment of Iranian oil and petrochemicals.125 The top destinations of Iran’s exports in 2022 were China, Türkiye, Taiwan, Afghanistan and Pakistan (Table 3.3). The top five export items were plastics, copper and its articles, organic chemicals, aluminium, iron and steel. Propane, methanol, liquid butane and ethylene were the main product exported to China, Iraq, UAE, Türkiye and India.126 Due to its high rank in science and technology, it is also beginning to export technological services to other countries. For example, it dispatched a telesurgical robot to Indonesia during the year.127 The top five sources of Iran’s imports in 2022 were China, UAE, Türkiye, Russia and India. The top five import items were mechanical machinery, cereals, vehicles and parts, electrical machinery, oil seeds and fruits. Being internationally isolated, Iran was focused on building relations with Asian countries and Russia. It signed a deal with Russia to finance Rasht-Astara railway lines to connect the Russian ports in the Baltic Sea Table 3.3 Iran’s direction of trade, 2022 (US$ million)

Top five import sources

Top five export destinations

China (6,543.71) UAE (3,667.86) Türkiye (2,197.50) Russia (1,661.37) India (1617.61)

China (6,007.14) Türkiye (3,163.90) Taiwan (1,095.97) Afghanistan (1,065.67) Pakistan (697.19)

Source IMF, Direction of Trade, Islamic Republic of Iran, https://data.imf.org/?sk=9d6028d4-f14a-464c-a2f2-59b2cd 424b85&sid=1514498277103

125 USIP, The Iran Primer, “U.S. Sanctions Firms Helping Iran Smuggle Oil”,

1 August 2022, https://iranprimer.usip.org/blog/2022/aug/01/us-sanctions-firms-hel ping-iran-smuggle-oil, accessed 18 July 2023. 126 IRNA, Iran foreign trade experience 10 percent growth in 7 months, November 9,

2022. 127 IRNA, Iran foreign trade experience 10 percent growth in 7 months, November 9,

2022.

108

MD. M. QUAMAR ET AL.

to the Iranian ports in the Persian Gulf and Gulf of Oman.128 These would form part of the International North-South Transport Corridor (INSTC). A series of cooperation proposals announced in July, especially in the oil and gas sector, are unlikely to translate into economic gains due to the competing nature of their economies.129 Iran also focused on building economic relations with neighbouring GCC countries like Qatar and Oman. During President Raisi’s visit to Qatar in February, several commercial cooperation deals were signed. In April, aviation deals were signed to boost travel and tourism during the FIFA World Cup 2022 hosted by Qatar. In June, an Iranian delegation led by the energy minister Ali Akbar Mehrabian visited Doha to attend the 8th Qatar-Iran Joint Economic Commission meeting. A Joint Business Council was established during the visit, and permission was given for the Iranian Trade Centre in Doha. Similarly, Iran was in talks with Oman to jointly develop the shared Hengam offshore oil field in the Strait of Hormuz. Iran envisions positioning itself as the global and regional transit hub.130 Besides benefiting from connectivity projects, its application to BRICs is motivated by the club’s push to develop an alternative global banking system to counter the US-dominated payment system, SWIFT.131 Iran has called for national currencies to play a larger role in global trade. However, its own currency has complicated three-tier exchange rates. The subsidised exchange rate of IRR42,000: US$1 for the import of essential commodities was faced out in May. There are two other exchange rates, the NIMA rate used by many importers and exporters and the parallel free market rate. Energy and Environment According to OPEC, Iran’s proven crude oil reserves in 2021 were 208.60 billion barrels and the average oil production between 2000 and

128 Olesya Astakhova and Parisa Hafezi, “Russia and Iran sign rail deal for corridor intended to rival Suez Canal”, Reuters, 17 May 2023, https://www.reuters.com/world/ russias-putin-irans-raisi-oversee-railway-deal-signing-2023-05-17/, accessed 18 July 2023. 129 EIU, Iran Country Report, February 2023, p. 7. 130 EIU, Iran Country Report, July 2022, p. 29. 131 Ibid.

3

IRAN

109

2019 was 3.48 mbpd.132 In 2022, the average oil production was about 2.5 mbpd and export volumes was about 1 mbpd (Table 3.4). By midyear, Iran’s refining capacity was close to 2.3 mbpd. The government is advancing two greenfield refinery projects with a combined capacity of 600,000 per day. Iran also aims to build 3.5 mbpd of refining capacity by 2025–2026.133 However, the projects are likely to be constrained by Iran’s restricted access to material and technology. Net gasoline exports have been threatened by record-level domestic consumption. The Islamic Republic in March approved a US$11 billion integrated refinery and petrochemical complex at Bandar Abbas named after Qasim Suleimani, who was killed in a US attack in January 2021.134 Shahid Qasim refinery would process heavy crude oil. The refinery is planned at Jask, Iran’s only export terminal outside the Strait of Hormuz. Upgrades to the centuryold Abadan refinery were close to completion, and Iran’s first super heavy refinery at Qeshm with 35,000 bpd capacity was also inaugurated during the year.135 Iran has the second largest proven gas reserves in the world, and according to British Petroleum, it was the third largest producer of natural gas in 2021.136 About 90 per cent of natural gas production is consumed domestically. Iran is the second largest supplier of gas to Türkiye after Russia and exports about nine bcf of piped gas to its neighbour.137 Natural gas exports to Türkiye and Iraq are a key source of scarce foreign exchange. The government is focused on the fullest development of the 132 IMF, Regional Economic Outlook Middle East and Central Asia 2023. 133 Yesar Al-Maleki, “Iran targets 3.5 mn b/d refining capacity”, MEES, 28

January 2022, https://www.mees.com/2022/1/28/refining-petrochemicals/iran-targets35mn-bd-refining-capacity/3e0233f0-804b-11ec-9dd0-7563f2f0974c, accessed 25 July 2023. 134 Ener Data, “Iran signs financing agreements to build two refineries totalling 0.6 mb/d”, 4 August 2022, https://www.enerdata.net/publications/daily-energy-news/iransigns-financing-agreements-build-two-refineries-totaling-06-mbd.html, accessed 25 July 2023. 135 Yesar Al-Maleki, “Iran’s first super heavy refinery opens at Qeshm”, MEES, 21 January 2022, https://www.mees.com/2022/1/21/refining-petrochemicals/irans-firstsuper-heavy-refinery-opens-at-qeshm/8065f8b0-7ac5-11ec-a8e4-fbbc4cb770fe, accessed 25 July 2023. 136 Financial Tribune, “Iran gas output ranks 3rd in 2021”, 2 July 2022, https://fin ancialtribune.com/articles/energy/114191/iran-gas-output-ranks-3rd-in-2021, accessed 25 July 2023. 137

110

MD. M. QUAMAR ET AL.

Table 3.4 Iran’s energy statistics, 2018–2022

Oil production (mbpd) Oil, condensates and NGL production (mbpd) Oil consumption (mbpd) Crude oil exports (mbpd) Petroleum products exports (mbpd) Refining throughput (mbpd) Refining capacity (mbpd) Natural gas marketed production (bcm) Natural gas flaring (bcm) Natural gas consumption (bcm) Piped gas exports (bcm) Carbon dioxide Emission from Energy (million tons) Renewable energy generation (TWH)

2018

2019

2020

2021

2022a

– 4.61 1.73 1.85 0.27 2.09 2.33 233.1 18.1 212.6 – 606.1

– 3.40 1.78 0.65 0.28 2.10 2.50 241.7 14.6 218.4 – 628.1

2.02 3.08 1.67 0.40 0.28 2.19 2.48 249.6 14.2 234.3 – 645.4

2.48 3.62 1.69 0.76 0.33 2.34 2.51 257.1 18.5 241.1 17.3 660.5

2.58 – – 1.0 – – – – – – – –

1.0

1.2

1.8

1.8

–

Source BP, World Review of Energy Statistics 2022; a IMF, Regional Economic Outlook Middle East and Central Asia 2023; OPEC, Annual Bulletin 2022

South Pars gas field, contributing 70 per cent of domestic production. The final phase of development scheduled to be completed during 2022 would take Iran’s total natural gas production to over 300 mcm per day.138 Despite the sanctions-induced techno-fiscal constraints, Iran was able to execute major upstream projects, although with some delays and revisions. The development of the 47 tcf North Pars offshore gas field is also delayed. In July, Russia’s Gazprom signed a US$40 billion investment agreement with NIOC to develop North Pars and Kish gas fields and complete LNG infrastructure.139 Years of international sanctions have stifled investments in the upstream gas sector, and Iran faces seasonal shortages during winter. Due to large

Selcan Hacaoglu, “Iran cuts gas exports to Turkey by 70% citing fault, Turkey says”, Bloomberg, 7 January 2023, https://www.bloomberg.com/news/articles/2023-01-07/ iran-cuts-gas-exports-to-turkey-by-70-citing-fault-turkey-says#xj4y7vzkg, accessed 25 July 2023. 138 EIU, Iran Country Report, October 2022, p. 36. 139 Reuters, “Iran and Russia’s Gazprom sign primary deal for energy cooperation”, 19

July 2022, https://www.reuters.com/business/energy/iran-russias-gazprom-sign-primarydeal-energy-cooperation-2022-07-19/, accessed 18 July 2023.

3

IRAN

111

subsidies, domestic natural gas consumption has increased phenomenally, and supplies have struggled to keep pace. During the year, the average domestic natural gas consumption was about 900 mcm per day, an increase of 60 mcm per day over the previous year.140 The government instructed energy-intensive industries like cement and petrochemicals to reduce energy usage with a consequential impact on production. Natural gas supplies were rationed to the industry to meet peak household demands. Power cuts triggered massive protests in 2021, and therefore, the government, already confronting widespread hijab protests, did not want to reduce politically sensitive subsidies or ration household consumption. Some of the power stations switched to liquid fuel with consequent environmental costs. Three-fourths of petrochemical industry production is based on natural gas and were targeted for substitution by liquid feedstock and fuel. According to the British Petroleum, the decadal growth rate (2011–2021) of per capita primary energy consumption was 1.6 per cent (Table 3.4). Iran tries to generate renewable energy and contribute to climate change goals. In September, the 12th International Exhibition of Renewable Energy, Productivity and Energy Saving was held in Tehran. About 97 domestic and foreign companies participated in the four-day event.141 Iran hosted the 20th International Exhibition of Iran Environment in Tehran in November. Earlier in July, it hosted a regional ministerial meeting on environmental cooperation for a better future in Tehran, attended by 11 Middle Eastern countries. President Raisi, in his address, urged all possible diplomatic and political cooperation towards addressing challenges of dust and sandstorms and other regional environment issues.142 Iran, besides the UAE, is the only country that generates nuclear power in the Middle East and generated about 52 billion KWH of energy and

140 EIU, Iran country report February 20 23, p. 24. 141 IRNA, “International renewable energy Expo

kicks off in Tehran”, 12 September 2022, https://en.irna.ir/news/84885219/Int-l-renewable-energy-expo-kicksoff-in-Tehran, accessed 23 July 2023. 142 IRNA, UAE, Iran to bolster coop. to combat dust storms, 11 July 2022, https:// en.irna.ir/news/84818027/UAE-Iran-to-bolster-coop-to-combat-dust-storms, accessed 25 July 2023.

112

MD. M. QUAMAR ET AL.

has facilitated decline in oil consumption.143 The total renewable energy generation capacity in the Islamic Republic was 1.8 TWH in 2020 and 2021 (Table 3.4). Iran is one of the few countries that has not ratified the Paris agreement on climate change and made the ratification conditional on the lifting of sanctions.144 Therefore, the Islamic Republic has not submitted the NDC but has put in place the National Smart Emission Inventory System and a preliminary version of the National Climate Finance Strategy.145 The natural gas flaring has increased from 14.2 bcm in 2020 to 18.5 bcm in 2021 (Table 3.4). Carbon dioxide emission from the energy sector has been increasing significantly over the years. Society Iranian society has faced multiple problems due to the continued political challenges and economic grievances. Like other regional countries, Iran suffers from the trapping of a homogenising tendency disregarding the internal social, ethnic and religious diversity.146 This has created serious challenges for the minorities and a sense of unrest among the younger generation. Mixed with a centralising tendency of the regime and the lack of freedom, the social situation in the country can be considered explosive. For long, many ethnic and religious minorities, including Kurds, Azeris, Balochs and Arabs and Sunnis, Bahais, and other religious minorities, have felt stifled. Besides, women and gender minorities face serious socio-political problems. This has led to a constant flight of younger generations for greener pastures in the West.147 The poor human

143 Mohammad Eslami, “AEOI to expand available technology to prevent preserve environment”, IRNA, 22 November 2022, https://en.irna.ir/news/84950670/AEOIto-expand-available-technologies-to-preserve-environment, accessed 23 July 2023. 144 Matt McGrath, “Climate change: Iran says lift sanctions and we’ll ratify Paris agreement”, BBC, 11 November 2021, https://www.bbc.com/news/science-environment-592 42986, accessed 18 July 2023. 145 UNDP,

“Iran”, https://climatepromise.undp.org/what-we-do/where-we-work/ iran, accessed 25 July 2023. 146 Human Rights Watch (HRW), “Iran: Events of 2022”, https://www.hrw.org/ world-report/2023/country-chapters/iran, accessed 18 July 2023. 147 Maysam Bisaer, “Escalating emigration and the “drought” in Iran’s IT industry”, Middle East Institute, 13 July 2022, https://www.mei.edu/publications/escalating-emi gration-and-drought-irans-it-industry, accessed 18 July 2023.

3

IRAN

113

rights and freedoms record adds to challenges facing the younger generation. The eruption of protests over Amini’s death was symbolic of Iran’s economic and political malaise and the social unrest they have generated. Iran has one of the poorest human rights records in the world. Unlike its regional neighbours, the Iranian regime believes in stifling dissent and does not allow any free expression on social, economic or political issues.148 Unlike the GCC countries that have, over the years, become more inclined towards bringing social and economic reforms, Iran has insisted on sticking to the ideals of the Islamic revolution and has sidelined any voices that might call for the accommodation of the aspirations of the young. On multiple occasions, the Iranian Supreme Leader has lashed out at the Westernising or modernising tendencies of the Iranian youth149 and has expressed regressive anti-woman and homophobic sentiments.150 Iranians have also faced serious threats to life due to political and social activism. Besides the mounting economic challenges due to the international sanctions and the continued focus of the regime on shoring up defence and security capabilities and expanding footprints in the region while ignoring issues at home have angered a section of the society. Women and minorities have faced the brunt of the socio-economic and political challenges. Besides strict dress codes and hijab laws, women have faced the problem of exclusion from public life, especially in politics, and their representation in the workforce is also low. Adultery laws are skewed against women and might attract public flogging or even a death sentence.151 Transgender and sexual minorities face serious social and legal problems. Women face domestic violence and restriction are imposed on access to reproductive health and population control.152 148 Human Rights Watch (HRW), “Iran: Events of 2022”, https://www.hrw.org/ world-report/2023/country-chapters/iran, accessed 18 July 2023. 149 Erin Cunningham, “Iran’s supreme leader in tweetstorm: Western countries lead women to ‘deviant lifestyle’”, The Washington Post, 8 March 2018, https://www.washin gtonpost.com/news/worldviews/wp/2018/03/08/irans-leader-finds-another-western-thr eat-the-activist-energy-of-international-womens-day/, accessed 18 July 2023. 150 Reuters, “Iran’s Khamenei says homosexuality example of West’s immorality”,

1 March 2022, https://www.reuters.com/world/irans-khamenei-says-homosexuality-exa mple-wests-immorality-2022-03-01/, accessed 18 July 2023. 151 HRW, “Iran: Events of 2022”, https://www.hrw.org/world-report/2023/countrychapters/iran, accessed 18 July 2023. 152 HRW, “Iran: Population law violates women’s rights”, https://www.hrw.org/news/ 2021/11/10/iran-population-law-violates-womens-rights, accessed 18 July 2023.

114

MD. M. QUAMAR ET AL.

Minorities have faced challenges, and the protests after Amini’s death were spearheaded by Kurdish activists, given her ethnicity. This attracted serious repercussions for the community accused of collaborating with Iran’s enemies, especially Israel, the US and Saudi Arabia, to destabilise the country and overthrow the regime.153 As of 2021, Iran has a HDI 0.774 and ranks 76 globally. The HDI score has witnessed a drop over the past few years, as it stood at 0.789 in 2016. The GDI score was 0.880 below the global average of 0.958, while the GII score was 0.459, close to the world average of 0.465. Iran’s inequality-adjusted HDI value was lower at 0.686.154

Bilateral Relations Iran is one of the most important countries in the Persian Gulf and the Middle East, with which India has been seeking close political, diplomatic, strategic and commercial ties. Although bilateral relations have hit rough waters due to exogenous factors, the desire on both sides to seek greater cooperation remains steadfast. India views Iran as a major power in the Gulf region and significant for its energy security, connectivity and relations with Afghanistan and Central Asia. These largely shaped India’s approach to the country over the past three decades. At the same time, there are serious questions about this approach, especially as India diversifies its energy basket and sources of oil imports. The prospects for commercial and trade relations in Central Asia remain a potential that is yet to be realised. Even in Afghanistan, the Iranian approach does not necessarily reflect India’s concerns, which are mostly focused on the impact of serious instability in Afghanistan and on Kashmir where Iran has been at times critical of the Indian approach and policies.155

153 Golnaz Esfandiari, “‘A Nightmare’: Iran intensifies deadly crackdown in Kurdistan region as protests rage”, RFERL, 21 November 2022. https://www.rferl.org/a/iran-kur distan-crackdown-intensifies-protests/32141529.html, accessed 18 July 2023. 154 UNDP, Human Development Reports, “Islamic Republic of Iran”, https://hdr. undp.org/data-center/specific-country-data#/countries/IRN, accessed 18 July 2023. 155 Fatemeh Aman, “Iran issues rare criticism of India over Kashmir”, Atlantic Council, 30 August 2019, https://www.atlanticcouncil.org/blogs/iransource/iran-issues-rare-critic ism-of-india-over-kashmir/, accessed 25 July 2023.

3

IRAN

115

Politics and Security India and Iran have increased political and security engagements since 2020 after a brief hiatus mainly due to former’s concerns over the nuclear issue and Iran’s trouble with the US, Israel and Saudi Arabia. Since 2020, there have been several political and security engagements with the exchange of visits and meetings between foreign ministers, defence ministers and NSAs. In June 2022, Iranian Foreign Minister Hossein Amir-Abdollahian visited India and met with his Indian counterpart and called on Prime Minister Modi.156 The bilateral talk between the two sides focused on improving political, cultural and economic relations.157 India appreciated Iran for facilitating Indian assistance to Afghanistan, including vaccines for Afghan nationals residing in Iran and providing connectivity between India and Afghanistan and Central Asia through the Chabahar Port. They further discussed the humanitarian situation in Afghanistan, emphasising the need for a “peaceful, secure and stable Afghanistan” and the problems related to the Ukraine conflict and its repercussions on international politics, economy and food security.158 The Iranian FM also held a meeting with NSA Ajit Doval. During a meeting with the Prime Minister, the Iranian Foreign Minister conveyed President Raisi’s invitation to Modi to visit Iran while the Indian leader, in return, invited President Raisi to visit India early.159 The visit was significant as the controversy over Nupur Sharma’s statement that led to a major diplomatic uproar in the Gulf and Middle East was still fresh, and Iran also took exception to the statement. Nonetheless, the Foreign Minister’s visit underlined that the diplomatic uproar had been managed by the MEA and the response of the Government of 156 GoI, MEA, “Foreign Minister of the Islamic Republic of Iran calls on Prime

Minister”, 8 June 2022, https://mea.gov.in/press-releases.htm?dtl/35401/Foreign_M inister_of_the_Islamic_Republic_of_Iran_calls_on_Prime_Minister; Krishn Kaushik, “Iran Foreign Minister meets Modi, Jaishankar on maiden tour”, The Indian Express, 9 June 2022, https://indianexpress.com/article/india/iran-foreign-minister-meets-modi-jai shankar-on-maiden-tour-7959693/, accessed 18 July 2023. 157 GoI, MEA, “Visit of H. E. Dr. Hossein Amir Abdollahian, Foreign Minister of the

Islamic Republic of Iran to India (June 08–10, 2022)”, 8 June 2022, https://mea.gov. in/press-releases.htm?dtl/35402/, accessed 18 July 2023. 158 Ibid. 159 Tehran Times, “Indian PM meets Iranian FM, invites Raisi to New Delhi”, 10

June 2022, https://www.tehrantimes.com/news/473483/Indian-PM-meets-Iranian-FMinvites-Raisi-to-New-Delhi, accessed 18 July 2023.

116

MD. M. QUAMAR ET AL.

India and the Bharatiya Janata Party (BJP) had succeeded in mitigating the damage. The Iranian foreign ministry said that the minister’s “visit to India is aimed at expanding ties between the two countries and holding strategic consultations over cooperation regarding regional issues and international developments.”160 During the visit, a mutual legal assistance treaty (MLAT) on civil and commercial matters was signed.161 In August, Minister of Ports, Shipping and Waterways Sarbananda Sonowal visited Iran, during which the MoU on Recognition of Certificates of Competency in Unlimited Voyages between Iran and India was signed.162 In September 2022, Prime Minister Modi met with President Raisi on the sidelines of the SCO summit in Uzbekistan. This was the first meeting between the two leaders after Raisi came to power. The two leaders discussed bilateral and regional issues and reaffirmed their commitment to improving trade and commercial ties.163 Issues such as the situation in Afghanistan and the status of JCPOA talks were also discussed. In November, both countries held a foreign office consultation (FOC) in New Delhi. The meeting was part of the institutionalised mechanism for bilateral discussions on important matters. The meeting was significant, especially since the two countries have committed themselves to improving trade and commercial relations after overcoming the disruptions caused by the Covid-19 pandemic. The Iranian delegation was led by Deputy Foreign Minister for Political Affairs Ali Bagheri Kani while Foreign Secretary Vinay Mohan Kwatra headed the Indian side.164 Both sides agreed to develop closer political ties and exchange delegation-level 160 Business Standard, “Iranian Foreign Minister arrives in India to boost bilateral ties: MEA”, 8 June 2022, https://www.business-standard.com/article/current-affairs/ iranian-foreign-minister-arrives-in-india-to-boost-bilateral-ties-mea-122060800196_1.html, accessed 18 July 2023. 161 Embassy of India in Tehran, “India-Iran relations”, 7 April 2023, https://www.ind ianembassytehran.gov.in/eoithr_pages/MTY, accessed 18 July 2023. 162 Ibid. 163 Narendra Modi, “PM Modi holds bilateral talks with President Raisi of Iran in

Samarkand, Uzbekistan”, 16 September 2022, https://www.narendramodi.in/prime-min ister-narendra-modi-holds-bilateral-talks-with-president-raisi-of-iran-in-samarkand-uzbeki stan-564439, accessed 18 July 2023. 164 Tehran Times, “Iran, India hold political consultations”, 25 November 2022, https://www.tehrantimes.com/news/479041/Iran-India-hold-political-consultations, accessed 18 July 2023.

3

IRAN

117

visits, trade and commercial relations, functioning of the Chabahar Port and India’s upcoming presidency of SCO.165 Earlier in May, a meeting was held to discuss the prevention of narcotics smuggling, which has become a major problem in recent years.166 The Narcotics Control Bureau of India and the Anti-Narcotics Police of Iran met in New Delhi and discussed creating communication channels for anti-narcotics actions.167 Both countries also have strong maritime cooperation. In December, Indian media reported that Iran offered India a China-style 25-year bilateral strategic cooperation agreement for trade and investments.168 India strongly condemned the terrorist attack on Shah-e-Cheragh shrine in Shiraz in October, underlining that the “heinous attack is another reminder that terrorism continues to pose one of the biggest and critical threats to international peace and security and the need of the hour is for countries of the world to unite and combat terrorism in all its forms and manifestations.”169 Trade and Commerce Bilateral economic relations continued to reel under the shadows of the US sanctions, and the Islamic Republic was not among India’s top 25 trading partners in 2022. The trade marginally increased from US$1.91 billion in 2021–2022 to US$2.33 billion in 2022–2023 (Table 3.5). Iran’s share in India’s total bilateral trade also marginally increased from 0.18 per cent to 0.20 per cent during the period. India’s exports to Iran were about US$1.66 billion, and imports from the country were about US$672.12 million in 2022 (Table 3.5). According to the International 165 Ibid. 166 Rahul Tripathi, “India raises Afghan heroin route via Iran ports in talks”, The

Economic Times, 12 May 2022, https://economictimes.indiatimes.com/news/india/ india-raises-afghan-heroin-route-via-iran-ports-in-talks/articleshow/91501384.cms?fro m=mdr, accessed 25 July 2023. 167 Embassy of India in Tehran, “India-Iran relations”, 7 April 2023, https://www.ind ianembassytehran.gov.in/eoithr_pages/MTY, accessed 18 July 2023. 168 Shashank Mattoo, “Iran offers China-style strategic deal for India”, Livemint, 1 8 December 2022, https://www.livemint.com/news/india/iran-offers-china-style-strategicdeal-for-india-11671381480204.html, accessed 18 July 2023. 169 GoI, MEA, “India strongly condemns the terror attack in Shiraz, Iran”, 29 October 2022, https://mea.gov.in/press-releases.htm?dtl/35839/India_strongly_con demns_the_terror_attack_in_Shiraz_Iran, accessed 18 July 2023.

118

MD. M. QUAMAR ET AL.

Trade Centre, India was Iran’s 6th largest source of import and 7th largest export destination in 2021. The top five exports from India to Iran in 2022 were cereals, organic chemicals, tea, coffee and spices, sugar and confectionaries, fruits and nuts (Fig. 3.1). Basmati rice accounts for 60 per cent of Iran’s imports from India. Iran has been among the largest buyers of basmati rice. It was also the fourth largest buyer of Indian tea, with about US$68 million in FY 2022. The top five imports from Iran were organic chemicals, mineral fuels, distillates, fruits and nuts, miscellaneous chemicals and construction material (Fig. 3.2). Due to sanctions, India was not accepting hard currency payments for its exports to Iran. The exporters have been using third-party currency mechanisms (allowed by RBI) to get their payments but have faced several challenges.170 The Rupee-Rial payment mechanism was first implemented in 2012 to facilitate bilateral trade after the imposition of the US and Eurozone sanctions on the Islamic Republic.171 The mechanism was not much in use after the JCPOA nuclear deal 2015. After the reimposition of the US sanctions on Iran in 2018, there had been talks of reviving the RupeeRial mechanism, but soon the rupee account maintained in the UCO bank to pay for Indian exports by Iran dried as India stopped importing oil from Iran from mid-2019. There were discussions throughout the year on the need to reactivate the Rupee-Rial payment mechanism. However, for the first time, an Indian company Tibalaji Petrochem Pvt Ltd, was sanctioned by the US Department of Treasury for purchasing millions of dollars worth of petrochemical products from Iran for onward trade

170 Richa Mishra and Shobha Roy, “Third-party currency payments for Iran fraught with delays, additional costs”, The Hindu, https://www.thehindubusinessline.com/ money-and-banking/third-party-currency-payments-for-iran-fraught-with-delays-additi onal-costs/article65475747.ece, accessed 18 July 2023. 171 The Economic Times, “New Rial-Rupee mechanism to settle India-Iran payment issues”, 16 May 2012, https://economictimes.indiatimes.com/news/economy/foreigntrade/new-rial-rupee-mechanism-to-settle-india-iran-payment-issues/articleshow/131 69411.cms?from=mdr, accessed 18 July 2023.

2,652.37 11.46 0.87 11,111.52 5.76 2.39 13,763.89 6.81 1.79 −8,459.16

2017–2018 3,511.01 32. 37 1.06 13,525.64 10.42 2.63 17,036.65 23.18 2.02 −10,014.63

2018–2019 3,373.62 −3.91 1.08 1,397.33 −89.67 0.29 4,770.95 −72.00 0.61 1,976.29

2019–2020 1,774.69 −47.40 0.61 331.48 −76.28 0.08 2,106.17 −55.85 0.31 1,443.20

2020–2021

Source Compiled Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India

2,379.61 −14.45 0.86 10,506.51 67.33 2.73 12,886.12 42.22 1.96 −8,126.89

2016–2017

India’s trade with Iran, 2016–2022 (US$ million)

Exports Growth rate (%) Share in India’s total exports (%) Imports Growth rate (%) Share in India’s total imports (%) Total bilateral trade Growth rate (%) Share in India’s total trade (%) Trade balance

Table 3.5

1,451.09 −18.23 0.34 463.38 39.79 0.08 1,914.47 −9.10 0.18 987.70

2021–2022

1,659.12 14.34 0.37 672.12 45.05 0.09 2,331.24 21.77 0.20 987.01

2022–2023

3 IRAN

119

120

MD. M. QUAMAR ET AL.

Fig. 3.1 India’s top five export items to Iran, 2022–2023 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India)

Fig. 3.2 India’s top five import items from Iran, 2022–2023 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India)

3

IRAN

121

to China.172 The deal has been brokered by Trilliance, a Hong Kongbased Iranian petrochemical broker with branches in Iran, China, UAE and Germany. There were a few measures to boost bilateral trade. The Iranian custom administration announced that it would shortly operationalise the first hybrid international transportation under an electronics TIR system between India and Iran.173 Iran introduced a paperless electronic multiple entry visa issuance system for Indians to boost the exchange of business, tourists and students. Towards the end of the year, it was reported that Iran offered India a strategic cooperation pact on the lines of its 25 years agreement with China.174 The deal was offered to attract Indian investments in its energy and transport infrastructure development and was reportedly flagged during the visit of Iranian Deputy Foreign Minister Ali Bagheri Kani to India in November.175 India is also cooperating with Iran in the INSTC launched in 2000. A 7,200-km road, rail and sea transport corridor would link India with Europe. A smaller version has already taken off when India-Russia Railways, after passing through Kazakhstan and Turkmenistan, entered Iran’s Sarakhs, Khorasan and Razavi stations in July.176 This constituted the eastern path of the North-South Corridor that is 3,800 km long from Moscow to Sarakhs. The trains reportedly carried construction materials to be transported to Bandar Abbas port in 60–70 hours (travelling 1600 km) for further transmission to India by sea. Later two trains

172 The Economic Times, “Why has US imposed Iran-related sanctions on Indian company?”, 2 October 2022, https://economictimes.indiatimes.com/news/internati onal/us/why-has-us-imposed-iran-related-sanctions-on-indian-company/articleshow/945 90832.cms, accessed 18 July 2023. 173 IRNA, “Iran to launch digital TIR with India for customs”, 14 September 2022, https://en.irna.ir/news/84887646/Iran-to-launch-digital-TIR-with-India-for-cus toms, accessed 23 July 2023. 174 Shashank Mattoo, “Iran offers China-style strategic deal for India”, Livemint, 18

December 2022, https://www.livemint.com/news/india/iran-offers-china-style-strategicdeal-for-india-11671381480204.html, accessed 18 July 2023. 175 Ibid. 176 IRNA, “Iran-Russia Railway activated through Sarakhs, Khurasan Razavi”, 13

July 2022, https://en.irna.ir/news/84819596/India-Russia-railway-activated-through-Sar akhs-Khorasan-Razavi, accessed 18 July 2023.

122

MD. M. QUAMAR ET AL.

containing one million tons of potash fertiliser transited the corridor.177 India’s fertiliser imports from Russia and Iran had been disrupted due to the Ukraine war and sanctions and Islamic Republic of Iran Shipping Lines (IRISL) facilitated the multi-sided transit of goods from Russia to India. Both countries were also working on India-Armenia-Iran trilateral grouping in which goods could flow from India to Chabahar and then through Iran and Armenia to Europe.178 However, despite the enormous potential of the Chabahar port in boosting India’s trade connectivity to Central Asia and Europe, the investments are deterred by the existing short-term agreement.179 Iranian Minister of Roads and Urban Development, Rostam Ghasemi, hosted the Indian delegation led by Minister of Port Shipping and Waterways Sarbananda Sonowal in August and said that India has an important role to play in the development of INSTC. He also announced the Iranian government’s readiness to sign a longterm contract with India to expand Indian investment in the Chabahar port.180 The Shahid Beheshti Terminal built in partnership with India handled 255 vessels, 16,250 TEUs (Twenty Foot Equivalent Units) and five million tons of bulk and general cargo from various countries.181 Iran has reiterated its transit facilitation for India’s aid of food, medicines and others essential to Afghanistan.182

177 IRNA, “Russia’s third consignment to India reaches Southern Iranian port”, 5 October 2022, https://en.irna.ir/news/84904581/Russia-s-3rd-consignment-to-Indiareaches-southern-Iranian-port, accessed 18 July 2023. 178 Dipanjan Roy Chaudhury, “India-Iran-Armenia launch trilateral to create corridor to Russia & Europe”, The Economic Times, 22 April 2023, https://economictimes.indiat imes.com/news/international/world-news/india-iran-armenia-launch-trilateral-to-createcorridor-to-russia-europe/articleshow/99676474.cms, accessed 25 July 2023. 179 Dipanjan Roy Chaudhury, “Setting sail for stronger ties: Chabahar Port testament to India-Iran partnership”, The Economic Times, 7 March 2023, https://economict imes.indiatimes.com/news/india/setting-sail-for-stronger-ties-chabahar-port-testament-toindia-iran-partnership/articleshow/98463977.cms, accessed 25 July 2023. 180 Iranian Labour News Agency, “Iran ready to ink long term contract India on

developing Chabahar port”, 21 August 2022, https://www.ilna.ir/Section-economy-4/ 1268874-iran-ready-to-ink-long-term-contract-with-india-on-developing-chabahar-port, accessed 25 July 2023. 181 MEA, India, Annual Report 2021-22, https://mea.gov.in/Uploads/PublicationD ocs/36286_MEA_Annual_Report_2022_English_web.pdf, accessed 23 July 2023. 182 Ibid.

3

IRAN

123

During his visit to India, IRNA reported that Iranian Foreign Minister Abdollahian addressed a meeting in Hyderabad, “promising steps ahead in developing trade opportunities between Iran and India.” He said that both countries have agreed to increase the investments in Chabahar port, which can provide North-South and East-West transit routes to India.183 Both countries’ foreign ministers have agreed to set up working groups to speed up economic cooperation. In a telephonic conversation in September with EAM S. Jaishankar, he expressed Iran’s readiness to host new rounds of Iran-India Joint Economic Cooperation Commission.184 Social and Cultural India and Iran have strong social and cultural bonds beyond the diplomatic, political, security and economic relations. Their cultural and civilisational ties are historical. The people-to-people relations have a long history, and Indians and Iranians have been trading and meeting each other since ages.185 This has continued in modern times, with many Indians living in Iran while many Iranians visit India for education and tourism. Indians also visit Iran for religious education and pilgrimage while Iranian food, culture and films are appreciated among Indians. Many Iranian students have chosen to come to India to attain higher education. The linguistic impact of Sanskrit and Persian in Iran and India, respectively, is a major part of their cultural connections. Indian food items, especially rice and tea, remain popular in Iran. In February, India supplied medical assistance consisting of anti-Tuberculosis drugs as part of the ongoing humanitarian assistance to Iran.186

183 Outlook, “India, Iran hold wide-ranging talks: Ink agreement on mutual legal assistance”, 9 June 2022, https://www.outlookindia.com/national/india-iran-hold-wide-ran ging-talks-ink-agreement-on-mutual-legal-assistance-news-201242, accessed 25 July 2023. 184 IRNA, “FM: Iran ready to host new rounds of economic commission with India”, 5 September 2022, https://en.irna.ir/news/84878173/FM-Iran-ready-to-host-new-roundof-economic-commission-with, accessed 25 July 2023. 185 Embassy of India, Tehran, “India Iran historical links”, 7 April 2023, https://www. indianembassytehran.gov.in/eoithr_pages/MTc, accessed 18 July 2023. 186 GoI, MEA, “India supplies medical assistance to Iran as part of our ongoing humanitarian assistance”, 12 February 2022, https://mea.gov.in/press-releases.htm?dtl/ 34862/India_supplies_medical_assistance_to_Iran_as_part_of_our_ongoing_humanitarian_ assistance, accessed 18 July 2023.

124

MD. M. QUAMAR ET AL.

Challenges and Opportunities Simmering socio-economic discontent escalated into widespread protests against enforcement of mandatory hijab in public in the wake of killing of Mahsa Amini, a young Kurdish woman, in September 2022. The securitised response to the social problem underlined the faultlines facing Iranian polity and society. Prolonged Western sanctions, Covid19 pandemic, political instability and security uncertainty, continue to dampen the attractiveness of Iranian market to international investors. Iran’s insistence on pursuing its nuclear programme and its inability to overcome economic challenges have also reduced its attraction for partners such as Russia and China, and neighbours in South and Central Asia. Tehran’s strategy of following a securitised foreign policy while reaching out to American adversaries across the world has partly helped it overcome regional and international isolation but has aggravated its socio-economic challenges. Iran’s internal situation and its foreign policy course remain the most important challenge facing Indo-Iranian relations. Although since 2021, especially in the wake of the return of Taliban in Kabul, India has increased its strategic engagements with Iran, the possibilities of reviving the economic and energy ties remain limited due to the uncertainty over its nuclear programme and the ongoing international sanctions. However, India can build upon the ventures of transit and transport corridors and increase Iranian appetite for investments in the hinterland of Chabahar port. Newer areas like technology and research and development collaboration could be considered for mutual benefits.

CHAPTER 4

Iraq

Key Information Political System: Republic; Ruling Party: Multi-party coalition; President: Abdul Latif Rashid (since 17 October 2022); Prime Minister: Mohammed Shia’ al-Sudani (since 27 October 2022); National Day: 14 July; Parliament: 329-member Majlis al-Nuwwab or Council of Representatives; Last Parliamentary Election: 10 October 2021; Major Group in Parliament: Independent and Others (76); National Carrier: Iraqi Airways. Socio-Economic Indicators Area: 438,317 sq. km; Population: 41.266 million; Native: NA; Expats: NA; Religious Groups: 95–98% Muslim (Shia 61–64%, Sunni 29–34%), Christian 1%, Other 1–4%; Age Structure: 0–14 Years 35.24%, 15–64 Years 61.17%, 65 years and above 3.59%; Population Growth Rate: 2.06%; Life Expectancy at Birth: 73.45 years; Major Population Groups: Arab 75–80%, Kurd 15–20%, Other (Turkmen, Yezidi, Shabak, Kaka’i, Bedouin, Romani, Assyrian, Circassian, SabaeanMandaean, Persian) 5%; Adult Literacy Rate (Ages 15 and older): 85.6%; National Currency: Iraqi Dinar (IQD); GDP (Current): US$207.89 billion; Foreign Trade (Current): Exports US$131.77 billion, Imports: US$78.23 billion; Military Expenditure: 3.7% of GDP; Sovereign Wealth Fund: Development Fund for Iraq, Value of Assets 0; National © Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_4

125

126

MD. M. QUAMAR ET AL.

Debt: US$25.26 billion; GNI Per Capita (PPP Current International): $9,750; GDP Per Capita (PPP Current International): $9,846; Oil Reserves: 145.0 billion barrels (5th largest); Gas Reserves: 124.6 tcf (12th largest); Human Development Index: 0.686; HDI Rank: 121 out of 191; Infant Mortality Rate (deaths per 1,000 live births): 19.17; Maternal Mortality Ratio (deaths per 100,000 live births): 76; UN Education Index: 0.557; Gender Inequality Index: 0.558; Labour Force: 11.184 million; Employment to Population Ratio (Ages 15 and older): 33%; Unemployment Rate: 14.19%; Urban Population: 71.6%; Rate of Urbanisation: 2.91%; Last National Census: 1997; World Press Freedom Index: Rank 167 out of 180, Score 32.94; Corruption Perception Index: Rank 157 out of 180, Score 22; Foreign Direct Investment (Inflows): -US$2.64 billion; Individuals Using Internet (per cent of population): 49.4%; Net Migration Rate (per 1,000 people): -0.98; Forest Area (per cent of total Land Area): 1.9%; Carbon Dioxide Emissions (metric tons per capita): 4.2; Gender Development Index: 0.803; Global Peace Index: Rank 157 out of 163, Score 3.157; Fintech Index: Not Ranked; Global Innovation Index: Not Ranked; Global Cybersecurity Index: Rank 165 out of 194, Score 6.49. India Related Indian Cultural Centre: None; Number of Indians: 18,007; Currency Exchange Rate: 1 IQD = INR 0.063; Number of Non-Muslim Places of Worship for Indians: None; Indian Schools: None; Indian Banks: None; Last Visit to Indian by Ruler: Prime Minister Nouri al-Maliki (August 2013); Last Indian Prime Minister to Visit Iraq: Indira Gandhi (January 1975). Sources: CIA World Factbook 2023; UN Development Programme 2023; World Bank 2023; World Intellectual Property Organisation 2023; Vision of Humanity, 2023; UNCTAD World Investment Report 2023, Transparency International 2023; Reporters without Borders 2023; U.S. EIA 2023; Embassy of India, Iraq, 2023. ∗ ∗ ∗ The political stalemate in Iraq continued for most of 2022. The October 2021 parliamentary election had given a hung verdict, with Muqtada alSadr’s Sadrist movement (Sairoon) coming on top, bagging 10 per cent

4

IRAQ

127

of votes and 73 seats in the 329-member house, followed by Sunni politician Mohamed al-Halbousi’s Progress Party (Taqaddum) gaining nearly 7 per cent votes and 37 seats. Among the Kurdish parties, the Kurdistan Democratic Party (KDP) of Masoud Barzani had come on top with 8 per cent votes and 31 seats. When negotiations on government formation started, Sairoon, Taqaddum and KDP came together to form “Save the Homeland” alliance and on several occasions were on the verge of forming the government. However, eventually, they were outmanoeuvred by the Iran-backed Coordination Framework composed of Nouri al-Maliki’s State of Law, which secured third place with 5.6 per cent votes and 33 seats, Hadi al-Amiri’s Fateh Alliance that received 5.2 per cent votes and 17 seats, Patriotic Union of Kurdistan (PUK) led by Bafel Talabani which got 4.2 per cent votes and 17 seats and smaller Shiite groups. Finally, nearly a year after the elections, in October 2022, Mohammed Shia’ al-Sudani, a Shia politician and an ally of Nouri al-Maliki, formed the government in Iraq after prolonged deadlock, protests and street violence. As a result of the political instability, Indo-Iraqi relations have remained confined mainly to the oil trade and Indian workers travelling to Iraq to work in different sectors. New Delhi’s diversification efforts have been hampered by the Covid-19 pandemic and intermittent violence and domestic political instability in Iraq.

Domestic Developments Iraq’s struggle for peace and stability continues during 2022 as the country remains divided along sectarian, ideological and class lines. After defeating the Islamic State (ISIS) with the support of the US and Iran in 2017, different Shia, Sunni and Kurdish factions in Iraq have indulged in partisan politics and have been unable to put the house in order. The tenure of Mustafa al-Kadhimi between May 2020 and October 2022 was relatively successful in bringing the focus back to governance and the need for political stability. Kadhimi also focused on reviving Iraq’s role as a regional actor by hosting several meetings of Arab countries, Iran and Türkiye through the Baghdad Conference and holding or hosting many secret meetings with officials of these countries.1 They were aimed at projecting stability and diverting attention to external issues with the 1 Md. Muddassir Quamar, “Kadhimi’s bid to revive Iraqi fortunes”, Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA), 5 October 2021, https://www. idsa.in/idsacomments/kadhimis-bid-to-revive-iraqi-fortunes-mmquamar-051021, accessed 19 June 2023.

128

MD. M. QUAMAR ET AL.

hope of ensuring economic revival, gaining international support and shoring up domestic support for his leadership claims.2 These moves, however, were not sufficient for the ambitious and squabbling Iraqi politicians who remained non-committal to Kadhimi’s efforts and, in October 2022, replaced him with Al-Sudani, who is more in tune with the militant Shiite political bloc and their Iranian supporters in terms of the agenda for Iraq’s future.3 Politics The formal parliamentary deliberations to elect a new government started in January 2022, nearly three months after the October 2021 elections.4 The run-up to the first parliamentary session was tense with accusations of electoral fraud, threats of boycott and intense negotiations among various parties and factions on government formation. The Sadrist Movement aggressively staked claims buoyed by its strong electoral performance and was aided by like-minded parties, including the Sunni Progress Party and Kurdish KDP and hoped to gain the support of the new parties led by young activists and protestors who had done exceedingly well in some constituencies.5 The tripartite coalition gained initial success after Mohamed al-Halbousi was re-elected parliament speaker on 9 January.6 The initial success of the Sadr-led alliance indicated the possibility of a change of course in Iraqi politics, and this also underlined the possibility 2 Prabhat Jawla, “Iraq under Mustafa Al-Kadhimi: Turning over a New Leaf”, MPIDSA, 7 December 2020, https://www.idsa.in/issuebrief/iraq-under-mustafa-al-kadhimipjawla-071220, accessed 19 June 2023. 3 Reuters, “Iraqi parliament approves new government headed by Mohammed Shia al-Sudani”, 28 October 2022, https://www.reuters.com/world/middle-east/iraq-lawmak ers-approve-government-prime-minister-designate-sudani-2022-10-27/, accessed 21 June 2023. 4 Shawn Yuan, “Iraq’s new parliament meets for the first time amid uncertainty”, AlJazeera, 8 January 2022, https://www.aljazeera.com/news/2022/1/8/iraqi-new-parlia ment-to-meet-for-the-first-time-amid-uncertainty, accessed 19 June 2023. 5 Hassan Al-Saeed, “Iraq’s speaker re-elected with backing of Muqtada al-Sadr”, AlMonitor, 10 January 2022, https://www.al-monitor.com/originals/2022/01/iraqs-spe aker-re-elected-backing-muqtada-al-sadr, accessed 19 June 2023. 6 Sinan Mahmoud, “Sunni politician Mohammed Al Halbousi re-elected as Iraq Parliament Speaker”, The National News, 9 January 2022, https://www.thenationalnews. com/mena/iraq/2022/01/09/iraqs-new-parliament-set-for-inauguration-as-tension-runshigh-among-rivals/, accessed 19 June 2023.

4

IRAQ

129

of a reduction in Iranian influence and an increase in Saudi influence, given the backing the components of the tripartite coalition had received from Riyadh.7 Resultantly, Sadr formed the “Save the Homeland” alliance in March and staked claims to lead the next Iraqi government.8 Sadr’s attempts to exclude the established Shiite politicians from the new government caused a backlash from Nouri al-Maliki, Haider alAbadi, Hadi al-Amiri, Qais al-Khazali and other smaller pro-Iranian Shia groups such as Asaib Ahl al-Haq, Ammar al-Hakim’s Hikma and Kataib Hezbollah’s Huqooq movements.9 Hence, Maliki’s State of Law and Amiri’s Fateh Alliance joined hands with other Shiite groups to form the Shia Coordination Framework and outmanoeuvred all attempts by Sadr to form a government and they used popular protests and legal hurdles to contest the election result and negotiations on forming a government.10 In March, the Federal Supreme Court of Iraq ruled that a super-majority would be required for the presidential election and that the speaker does not have the power to re-open the registration for the presidential election.11 The decision forced Sadr to open negotiations with Hadi al-Amiri and Fateh to split the Coordination Framework and bring some of its members into a “majority” government.12 Finally, at the end of March, after several defeats in parliament, Sadr recognised his inability to outmanoeuvre the system and deliver a majority government. He temporarily

7 Italian Institute for International Political Studies, “The Sadrist Gamble: A make-orbreak moment for Iraq?” 4 August 2022, https://www.ispionline.it/en/publication/sad rist-gamble-make-or-break-moment-iraq-35944, accessed 19 June 2023. 8 Kurdiu, “Announcement of the alliance to save the homeland”, 23 March 2022, https://www.kurdiu.org/en/b/510326, accessed 19 June 2023. 9 Toby Dodge, “Muqtada al-Sadr’s evolving post-election strategy and the battle for Iraq’s political system”, LSE Blogs, 29 April 2022, https://blogs.lse.ac.uk/mec/2022/ 04/29/muqtada-al-sadrs-evolving-post-election-strategy-and-the-battle-for-iraqs-politicalsystem/, accessed 19 June 2023. 10 Ibid. 11 Dilan Sirwan, “Iraqi top court rules re-opening of presidential nominations ‘uncon-

stitutional’”, RUDAW, 1 March 2022, https://www.rudaw.net/english/middleeast/iraq/ 01032022, accessed 19 June 2023. 12 Shafaq, “Al-Sadr and Co to convene with the coordination framework in Baghdad soon; source says”, 31 January 2022, https://shafaq.com/en/Iraq-News/Al-Sadr-andCo-to-convene-with-the-Coordination-Framework-in-Baghdad-soon-source-says, accessed 19 June 2023.

130

MD. M. QUAMAR ET AL.

stepped aside and offered the opposition a chance to form a government that further split Sadr’s coalition.13 The intra-Kurdish rivalry over the presidency between the KDP, an ally of Sadr, and the PUK, which has sided with the Coordination Framework, prevented Sadr from forming a majority government. Likewise, attempts by the Coordination Framework to form a government during April and May failed mainly because the coalition could not muster the numbers in the parliament.14 Sadr’s ability to exert influence among the independent members of the parliament and a non-flexible attitude towards negotiations ensured that Maliki’s attempt to gain control of the Iraqi government failed. After several unsuccessful attempts to get a new president elected and continued stalemate, on 12 June, the members of parliament of the Sadrist bloc resigned after calls to do so from their leader.15 Sadr had directed his representatives to withdraw from the Council of Representatives after having failed to form a government, saying he did not want to participate in a government, or any future elections, in which “corrupters,” a reference to the Coordination Framework, are participating.16 Under Iraqi law, the vacated seats are offered to candidates who came second in each constituency. The resignation of the Sadrist MPs meant that the Shia Coordination Framework became the largest group in parliament with 130 members.17 The State of Law increased its tally from 33 to 37, while the Fateh’s seats increased from 17 to 29. Similarly, the National Power of the State bloc, led by former Prime Minister Haider

13 Toby Dodge, “Muqtada al-Sadr’s evolving post-election strategy and the battle for Iraq’s political system”, 29 April 2022, https://blogs.lse.ac.uk/mec/2022/04/29/ muqtada-al-sadrs-evolving-post-election-strategy-and-the-battle-for-iraqs-political-system/, accessed 19 June 2023. 14 Al-Jazeera, “Iraq MPs fail for third time to elect new president”, 30 March 2022, https://www.aljazeera.com/news/2022/3/30/iraq-mps-fail-for-third-timeto-elect-new-president, accessed 19 June 2023. 15 Ahmed Rasheed, “Iraqi Shi’ite Sadrist lawmakers resign from parliament”, Reuters, 13 June 2022, https://www.reuters.com/world/middle-east/iraqi-shiite-cleric-sadr-askshis-partys-lawmakers-resign-parliament-statement-2022-06-12/, accessed 19 June 2023. 16 Ibid. 17 Yerevan

Saeed, “Inscrutable ambitions: Sadr’s exit from Iraq’s parliament strengthens rivals”, The Arab Gulf States Institute in Washington (AGSIW), 6 July 2022, https://agsiw.org/inscrutable-ambitions-sadrs-exit-from-iraqs-parliament-str engthens-rivals/, accessed 19 June 2023.

4

IRAQ

131

al-Abadi and Wisdom Movement leader Ammar al-Hakim, increased its tally from 4 to 11.18 This paved the way for the Coordination Framework to stake a stronger claim to form a government and even break the “Save the Homeland” alliance. However, the political deadlock with intermittent violence and chaotic protests continued for another three months. Finally, on 25 July, after weeks of deliberations, the Coordination Framework nominated Al-Sudani for prime minister.19 Given his close association with Maliki and Iran, the Sadrist supporters immediately protested, occupied Baghdad’s high-security zone and marched on to the parliament building.20 This led to two chaotic months interspersed with protests, counter-protests and intermittent violence. Protesters again entered the parliament building in August after Sadr called for other political movements to join the protest.21 The continued stalemate and Sadr’s political somersaults suggested that he intends to continue to wield influence from outside the parliament. He has no intention of letting the Coordination Framework form a government. However, supporters of the Coordination Framework launched their own Baghdad sit-in to protest the occupation of the legislature by Sadrist supporters.22 These protests and counter-protests often turned violent, although the security agencies did not allow the situation in Baghdad to go out of control. The heightened tensions led the UN to call for a “de-escalation.”23 On 10 August, Sadr called for dissolution of

18 Ibid. 19 Al-Monitor, “Mohammed Shia al-Sudani nominated for Iraqi premiership”, 25

July 2022, https://www.al-monitor.com/originals/2022/07/mohammed-shia-al-sudaninominated-iraqi-premiership, accessed 19 June 2023. 20 Sinan Mahmoud, “Iraqi PM Mustafa Al Kadhimi pleads for dialogue after protesters

storm parliament again”, The National News, 30 July 2022, https://www.thenation alnews.com/mena/2022/07/30/iraqi-protesters-break-down-barriers-around-baghdadsgreen-zone/, accessed 19 June 2023. 21 Mina Aldroubi, “Iraqi protesters leave parliament building after storming Baghdad’s fortified Green Zone”, The National News, 28 July 2022, https://www.thenationalnews. com/mena/iraq/2022/07/28/iraqi-protesters-leave-parliament-building-after-stormingbaghdads-fortified-green-zone/, accessed 19 June 2023. 22 Al-Jazeera, “Rival Shia groups square off over Iraq leadership vacuum”, 12 August 2022, https://www.aljazeera.com/news/2022/8/12/rival-shia-groups-at-logger heads-over-elections, accessed 19 June 2023. 23 UN News, “Iraq protests: ‘De-escalate’ urges UN chief, rise above differences”, 31 July 2022, https://news.un.org/en/story/2022/07/1123682, accessed 19 June 2023.

132

MD. M. QUAMAR ET AL.

the parliament and fresh elections.24 His call also received some support among fringe Shia and Sunni politicians, but did not gain any support among the mainstream parties, including those who were part of the “Save the Homeland” coalition.25 Those who supported the call for the dissolution of the parliament and re-election did it with the condition that electoral laws should be reformed. On the other hand, the Supreme Judicial Council of Iraq refused Sadr’s demands for dissolving the parliament underlining that it has no authority to do so under the Iraqi constitution and laws.26 Amidst continued protests, chaos and inability to get his way, on 29 August, Sadr announced that he would quit politics altogether.27 The announcement on Twitter led to an immediate outpouring of protests by the supporters of the mercurial Shia cleric who marched in Baghdad’s high-security Green Zone and stormed the parliament building in scenes similar to the January 2021 Capitol Hill riots in the US.28 Street violence also erupted in the process leading to the death of 20 civilians while more than 300 were injured.29 The continued stalemate and escalation in protests and violence prompted the UN to call for Iraqi political actors to reduce tensions. The UN Assistance Mission in Iraq warned that the

24 Al-Jazeera, “Iraq’s al-Sadr demands dissolution of parliament, early elections”, 3 August 2022, https://twitter.com/Mu_AlSadr/status/1557359204645707776/pho to/1, accessed 19 June 2023. 25 Al-Monitor,

“Iraq’s Sadr calls on judiciary to dissolve parliament”, 10 August 2022, https://www.al-monitor.com/originals/2022/08/iraqs-sadr-calls-judiciarydissolve-parliament, accessed 19 June 2023. 26 Al-Jazeera, “‘No authority’: Iraq judiciary says it cannot dissolve parliament”,

14 August 2022, https://www.aljazeera.com/news/2022/8/14/iraqi-judiciary-says-ithas-no-powers-to-dissolve-parliament, accessed 19 June 2023. 27 Al-Arabiya, “Iraq’s al-Sadr announces resignation from political life”, 29 August 2022, https://english.alarabiya.net/News/gulf/2022/08/29/Iraq-s-Sadr-announces-res ignation-from-political-life, accessed 19 June 2023. 28 Al-Jazeera, “Iraq chaos as al-Sadr supporters storm Green Zone after he quits”, 29 August 2022, https://www.aljazeera.com/news/2022/8/29/al-sadr-withdraws-fromiraqi-politics-after-months-of-tensions, accessed 21 June 2023. 29 Chiara Torelli, “20 people killed and 300 injured in armed clashes outside Iraq’s Republican Palace, 29-30 Aug”, Relief Web, 1 September 2022, https://reliefweb.int/report/iraq/20-people-killed-and-300-injured-armed-clashesoutside-iraqs-republican-palace-29-30-aug, accessed 19 June 2023.

4

IRAQ

133

state’s survival might be “at stake” if further violence between communities occurs.30 The political situation remained unstable and chaotic in September, with protests and clashes in Baghdad. In September and October, there were rocket attacks in the Green Zone, and some rockets landed close to the parliament.31 On 26 September, Halbousi, the speaker of the parliament, submitted his resignation, but two days later, the parliament convened among rocket fires in the Green Zone to reject his resignation leading to his continuation as the speaker.32 Finally, on 13 October, the parliament convened amidst rocket fires to elect a president and the compromise candidate Abdul Lateef Rasheed who gained last-minute support from the KDP, defeated the incumbent Barham Salih of the PUK by a margin of 156to-99 votes.33 This was the first indication of an end to the political deadlock and the possibility of restoration of political normalcy. However, three relatively new political groups, Emtidad, Israqat Kanoun and New Generation, boycotted the presidential election. Nonetheless, the president’s election after three failed attempts paved the way to government formation as, according to the Iraqi constitution, the president invites the leader of the majority party in the newly convened parliament to form a government. The new president invited Sudani, the nominated leader of the Coordination Framework, which became the largest group in the parliament after the resignation of Sairoon MPs, to form a government, and on 27 October, the Iraqi parliament approved the government headed by Prime

30 UN News, “‘Very survival’ of Iraqi State at risk, UN mission warns, as Guterres calls

for calm and restraint”, 29 August 2022, https://news.un.org/en/story/2022/08/112 5742, accessed 19 June 2023. 31 Rudaw, “Three rockets hit Baghdad’s Green Zone injuring at least seven”, 28 September 2022, https://www.rudaw.net/english/middleeast/iraq/280920222, accessed 19 June 2023. 32 The Arab Weekly, “Iraqi parliament rejects Halbousi’s resignation amid Sadrist protests, rocket strike”, 28 September 2022, https://thearabweekly.com/iraqi-parliamentrejects-halbousis-resignation-amid-sadrist-protests-rocket-strike, accessed 19 June 2023. 33 Sinan Mahmoud, “Blasts heard in Baghdad’s Green Zone as Iraqi MPs meet to elect new president”, The National News, 13 October 2022, https://www.thenation alnews.com/mena/iraq/2022/10/13/iraqi-mps-meet-to-elect-new-president-after-yearlong-deadlock/, accessed 19 June 2023.

134

MD. M. QUAMAR ET AL.

Minister Sudani ending the year-long political deadlock.34 Although the parliament approved the cabinet of Prime Minister Sudani quickly, there was stiff contestation for cabinet positions.35 Except for two nominations, 21 ministers were approved by the parliament; construction and housing ministry positions and environment ministry remained undecided, but given that most of the nominees were approved, Iraq finally had a new government, almost a year after the parliament elections.36 Most cabinet members are well-known Shia politicians from the State of Law, its coalition partners or technocrats with a proven track record. There are three women ministers in Sudani’s cabinet (Table 4.1). With the end of the political deadlock, the focus shifted to governance and alleviating the growing anger among common Iraqis over the continued stalemate in government formation and poor services. In addition to committing to improving governance, the Sudani government promised early elections after reviewing and reforming electoral laws as a sign of compromise with the Sadrist movement.37 Amidst accusations of the previous government’s failure and the intelligence agencies’ failure to prevent violence in the run-up to the parliamentary session,38 Sudani decided to dismiss the intelligence chief and take over

34 Reuters, “Iraqi parliament approves new government headed by Mohammed Shia

al-Sudani”, 28 October 2022, https://www.reuters.com/world/middle-east/iraq-lawmak ers-approve-government-prime-minister-designate-sudani-2022-10-27/, accessed 19 June 2023. 35 Mustafa Saadoon, “Inside story: Contests for ministries threaten Iraq’s next government”, 27 October 2022, Amwaj, https://amwaj.media/article/inside-story-contests-forministries-threaten-iraq-s-next-government, accessed 19 June 2023. 36 The Arab Weekly, “Sudani cabinet seeks to placate Sadrists with early elections vow”, 28 October 2022, https://thearabweekly.com/sudani-cabinet-seeks-placate-sadrists-earlyelections-vow, accessed 19 June 2023. 37 Nour H, Ayoub, “Iraq’s new government outlines priorities”, Al-Monitor, 31 October 2022, https://www.al-monitor.com/originals/2022/10/iraqs-new-governmentoutlines-priorities, accessed 19 June 2023. 38 Al-Monitor, “Sudani removes head of Iraqi intelligence, other officials”, 1 November 2022, https://www.al-monitor.com/originals/2022/11/sudani-removes-head-iraqi-intell igence-other-officials, accessed 21 June 2023.

4

IRAQ

135

Table 4.1 Iraqi Cabinet, October 2022 Name

Position

Background

Prime Minister Interior Minister Finance Minister Foreign Minister Defence Minister

Mohamed Shia’ al-Sudani Abdul Amir al-Shammari Taif Sami Mohammed Fuad Hussein Thabet Muhammad Saeed al-Absi Hayan Abdul Ghani Abdul-Zahra Abbas Jabr Obada Aoun Diab Abdullah Ahmad Fakkak Ahmad Bangen Rekani

Independent Military Woman—Bureaucrat KDP Azem Alliance

Ziyad Ali Fadhil Ibrahim Namis Yassin Khaled Shwani Saleh Mahdi Mutalib Naim Abdul Aboudi

Technocrat Azem Alliance KDP Technocrat Fateh Alliance

Khalid Najim

Azem Alliance

Nisar Mohammed Saeed Amidi Ahmed Jassem Saber al-Asadi

PUK Fateh Alliance

Evan Faeq Yakkob Muhammad Ali Tamim Atheer Daoud Salman Razak Muhaibis Hiam Abboud Kazem Ahmed Muhammad Hussein al-Mubarqa

Woman—Minority Progress Party Azem Alliance Fateh Alliance Woman—Fateh Alliance State of Law

Oil Minister Agriculture Minister Water Resources Minister Culture Minister Housing and Reconstruction Minister Electricity Minister Education Minister Justice Minister Health Minister Higher Education and Technology Minister Industry and Minerals Minister Environment Minister Labour and Social Affairs Minister Migration Minister Planning Minister Trade Minister Transport Minister Communication Minister Youth and Sport Minister

State of Law State of Law Technocrat Progress Party KDP

Source “Iraq’s parliament approves new government,” Al-Jazeera, 27 October 2022, https://www. aljazeera.com/news/2022/10/27/iraq-lawmakers-approve-govt-of-prime-minister-designate-sudani

the role himself.39 It was also reported that all governors appointed by the previous government would be reviewed and replaced.40 39 Ibid. 40 Shafaq, “Al-Sudani to replace incumbent governors after a systemic assessment”,

19 November 2022, https://shafaq.com/en/Iraq-News/Al-Sudani-to-replace-incumbentgovernors-after-a-systemic-assessment, accessed 19 June 2023.

136

MD. M. QUAMAR ET AL.

Foreign Policy and Security Amidst political turmoil, the security situation in the country was fragile for most of 2022. In January, several Iran-backed militias attacked the US and Iraqi civilian and military installations in the country, including drone and rocket attacks which targeted the US Embassy.41 Rockets were also fired towards Al-Asad Airbase in April, while the militias targeted other military and civilian areas in the Kurdish autonomous region.42 Some reports suggested targeting of US bases in Iraqi Kurdistan by Iran’s Quds Force.43 Besides the violence by the Iran-backed militias, ISIS has also been trying to revive its operations in the country. In a January attack in Diyala, ISIS wiped out an entire Iraqi army post.44 In February, US officials warned of the continued threat from ISIS and underlined the effort of the terrorist group to regain some of the lost ground.45 Prime Minister Sudani in December committed to strengthening the government and military efforts to destroy the ISIS.46 Military activities in the Kurdish autonomous region by Türkiye and Iran increased in 2022, undermining Iraqi sovereignty and northern Iraq’s security. The Turkish military has been camping in the Kurdistan region of Iraq to carry out targeted strikes against the Kurdistan Workers’

41 Al-Arabiya, “Rockets target US Embassy in Baghdad, Iraqi woman, girl injured: Officials”, 14 January 2022, https://english.alarabiya.net/News/middle-east/2022/01/ 13/At-least-four-rockets-target-US-Embassy-in-Baghdad-Iraqi-officials, accessed 19 June 2023. 42 Rudaw, “Rocket attack targets US-led coalition in western Iraq”, 30 April 2022, https://www.rudaw.net/english/middleeast/iraq/300420222, accessed 19 June 2023. 43 Reuters, “Iran targets U.S. forces”, 8 January 2020, https://www.reuters.com/gra phics/IRAQ-SECURITY/0100B4VR2Q5/index.html, accessed 21 June 2023. 44 Shelly Kittleson, “Islamic State wipes out entire army outpost in Iraq’s Diyala”, Al-Monitor, 21 January 2022, https://www.al-monitor.com/originals/2022/01/islamicstate-wipes-out-entire-army-outpost-iraqs-diyala#ixzz7rV7JdIk6, accessed 19 June 2023. 45 Department of Defence Office of Inspector General, “Lead Inspector General for Operation Inherent Resolve I Quarterly Report to the United States Congress I October 1, 2021–December 31, 2021”, 4 February 2022, https://www.dodig.mil/Reports/ Lead-Inspector-General-Reports/Article/2926830/lead-inspector-general-for-operationinherent-resolve-i-quarterly-report-to-the/, accessed 19 June 2023. 46 Rudaw, “Suspected ISIS attack kills eight in Diyala”, 20 December 2022, https:// www.rudaw.net/english/middleeast/iraq/20122022, accessed 21 June 2023.

4

IRAQ

137

Party (PKK).47 On the other hand, Iran has been alarmed by the growing Turkish military incursions in the area. Iran also targeted the offices of the Iranian Kurdish opposition groups based in Iraqi Kurdistan after Tehran accused them of fuelling disturbance in the wake of the Mahsa Amini protests in Iran since September.48 The Kurdish Regional Government (KRG) led by KDP has developed close relations with Türkiye, especially in the hydrocarbon sector and has allowed the Turkish military to remain stationed in the region to target the PKK. On the other hand, the PUK, which has developed close cooperation with Iran over the years, continues to oppose a free hand to Ankara in the KRG region.49 This is also viewed in Baghdad and Tehran as a violation of Iraqi sovereignty.50 Like other regional countries, Iraq was affected by the Russia-Ukraine war, especially as food prices increased due to supply shortages. Some Iraqi students were stranded in Ukraine, and although the government in Baghdad remained muted, mercurial cleric Sadr called the war “absolutely useless.”51 Notwithstanding the internal turmoil and the Ukraine crisis, Iraq has continued to balance its relations with the US, Russia and China on the one hand and Iran on the other. In July, Prime Minister Kadhimi visited the US and met President Joe Biden. One of the key problems complicating the internal political and security situation in Iraq is the continued presence of US combat forces in the country and

47 Reuters, “Turkey’s military operations in Iraq and Syria”, 21 November 2022, https://www.reuters.com/world/middle-east/turkeys-military-operations-iraq-syria-202211-21/, accessed 21 June 2023. 48 Al-Monitor, “Iran says attacks on Iraqi Kurdistan will continue”, 16 November

2022, https://www.al-monitor.com/originals/2022/11/iran-says-attacks-iraqi-kurdistanwill-continue, accessed 19 June 2023. 49 The Arab Weekly, “Kurdistan’s PUK forges alliance with pro-Iran factions in Iraq ahead of election”, 8 June 2021, https://thearabweekly.com/kurdistans-puk-forges-all iance-pro-iran-factions-iraq-ahead-election, accessed 21 June 2023. 50 Amwaj, “Iraqi Kurdistan emerges as arena for Iranian, Turkish drones”, 25 October 2022, https://amwaj.media/article/iraqi-kurdistan-emerges-as-arena-for-iranianturkish-drones, accessed 19 June 2023. 51 Shelly Kittleson, “Iraqi populist cleric Muqtada al-Sadr calls Russia-Ukraine war ‘absolutely useless’”, Al-Monitor, 26 February 2022, https://www.al-monitor.com/ori ginals/2022/02/iraqi-populist-cleric-muqtada-al-sadr-calls-russia-ukraine-war-absolutelyuseless#ixzz7rHgQpaXC, accessed 19 June 2023.

138

MD. M. QUAMAR ET AL.

this was discussed during the bilateral strategic dialogue.52 With Russia, the cooperation has been mostly confined to trade and commerce. With China, the relations have expanded rapidly in the economic and strategic domains.53 In December, the Iraqi prime minister attended the ChinaArab summit in Riyadh during the visit of President Xi Jinping and called for improved relations with Beijing.54 In addition, the Kurdistan region of Iraq increased its hydrocarbon supplies to European countries via Türkiye amidst the ongoing war in Ukraine and sanctions on Russian oil supplies.55 Iraq continued to develop a multifaceted engagement with all regional powers, including Saudi Arabia, Iran, Egypt and Türkiye, and others. In August, the Iraqi prime minister attended a summit meeting in Egypt where leaders of Egypt, the UAE, Bahrain, Jordan and Iraq were present.56 In addition, under Kadhimi, Iraq sought to be a mediator and facilitator of dialogue among regional countries through the Baghdad Conference and participated in the second round of the conference held in Amman in December 2022.57 The leaders or representatives from Iraq, Iran, Jordan, Türkiye, Egypt, Kuwait, Saudi Arabia, the UAE, Qatar,

52 The White House, “Remarks by President Biden and Prime Minister Mustafa

Al-Kadhimi of the Republic of Iraq Before Bilateral Meeting”, 26 July 2021, https:// www.whitehouse.gov/briefing-room/speeches-remarks/2021/07/26/remarks-by-presid ent-biden-and-prime-minister-mustafa-al-kadhimi-of-the-republic-of-iraq-before-bilateralmeeting/, accessed 19 June 2023. 53 Sercan Çalı¸skan, “China’s expanding influence in Iraq”, The Diplomat, 22 March 2023. https://thediplomat.com/2023/03/chinas-expanding-influence-in-iraq/, accessed 21 June 2023. 54 Shafaq, “Iraq’s PM and China’s President explore cooperation prospects in Riyadh”, 9 December 2022, https://shafaq.com/en/Iraq-News/Iraq-s-PM-and-China-s-Presidentexplore-cooperation-prospects-in-Riyadh, accessed 19 June 2023. 55 Maha El Dahan and Riham Alkousaa, “Iraqi Kurdistan has energy capacity to help Europe, says Iraqi Kurdish PM”, Reuters, 28 March 2022, https://www.reuters.com/ world/middle-east/iraqi-kurdistan-has-energy-capacity-help-europe-says-iraqi-kurdish-pm2022-03-28/, accessed 21 June 2023. 56 Hamza Hendawi, “Leaders of UAE, Egypt, Bahrain, Jordan and Iraq meet in mini Arab summit”, The National News, 23 August 2022, https://www.thenationalnews.com/ mena/2022/08/23/leaders-of-uae-egypt-bahrain-jordan-and-iraq-meet-in-mini-arab-sum mit/, accessed 19 June 2023. 57 Al-Monitor, “Iraqi PM stresses need for regional reconciliation at summit in Jordan”, 20 December 2022, https://www.al-monitor.com/originals/2022/12/iraqi-pm-stressesneed-regional-reconciliation-summit-jordan, accessed 19 June 2023.

4

IRAQ

139

Oman, Bahrain, Iran and France attended the conference. Prime Minister Sudani stressed that Iraq was willing to sponsor communication and dialogue in the region “to calm the atmosphere and bring the views of the parties closer.” He noted that Baghdad “has strengthened its diplomatic efforts to defuse regional crises.”58 Iraq has continued to balance relations with Iran and Saudi Arabia, and in June Prime Minister visited Riyadh and Tehran to hold discussions. However, external and regional engagements remained muted amidst the internal political stalemate. Saudi Arabia also stopped the informal engagement with Iran hosted by Baghdad amidst political uncertainty and the growing frustration over Iran reasserting itself in Iraqi politics after two years of a relatively balanced approach under Kadhimi.59 During his visit to Riyadh in December, the new Iraqi Prime Minister Shia’ alSudani met with the Saudi Crown Prince and emphasised the continued neutrality of his government in relations with regional actors. However, the Saudis remained sceptical of the new government.60 Iraq also continued to engage with other regional countries, including Türkiye, Egypt, Jordan and the UAE, and signed several deals on economic and commercial cooperations, especially relating to electricity and oil supplies, transit, agriculture and food security.61 Political and security consultations with Egypt and Jordan also took place, but they remained tentative due to domestic political situation.62 Economy Iraq is an undiversified economy relying heavily on oil production and exports. In 2022, it received windfall oil revenues that drove economic

58 Ibid. 59 Nour Ayoub, “Exclusive: Saudi Arabia halts talks with Iran through ‘special chan-

nels’”, 8 November 2022, https://amwaj.media/article/exclusive-saudi-arabia-halts-talkswith-iran-through-special-channels, Amwaj, accessed 19 June 2023. 60 Shafaq News, “Al-Sudani meets with Saudi crown prince in Riyadh”, 10 December

2022, https://shafaq.com/en/Iraq-News/Al-Sudani-Meets-with-Saudi-Crown-Prince-inRiyadh, accessed 19 June 2023. 61 Zeidon Alkinani, “The Egypt-Iraq-Jordan partnership: Interests over regional rivalry”, Gulf International Forum, https://gulfif.org/the-egypt-iraq-jordan-partnershipinterests-over-regional-rivalry/, accessed 21 June 2023. 62 Ibid.

140

MD. M. QUAMAR ET AL.

recovery that also contributed to non-oil sectors. The GDP at current prices increased from US$207.89 billion in 2021 to US$270.31 billion in 2022 (Table 4.2). Real GDP growth leapfrogged from −15.7 per cent in 2020 to 7.7 and 8.1 per cent in 2021 and 2022, respectively. Oil accounts for two-thirds of the GDP and is the driver of economic growth. The non-oil growth rates remained muted due to limited investments and reforms. There had been inconsistent attempts towards structural reforms. The business environment for the private sector has been unfavourable in the face of institutional weakness and deeply entrenched interests in the public sector. Privatisation has been resisted by the politicians who benefited from state involvement in the economy. Thus, the private sector suffers from a high degree of informality. In October 2022, the new government unveiled a plan that prioritised social protection, tackling corruption and strengthening service delivery. The economy suffers from multiple intertwined structural weaknesses such as high oil dependence, low labour productivity, lack of employment opportunities, especially among females, financial sector imbalances, poor delivery of services and security risks. Besides, risks from slowing global growth, escalating geo-political tensions and climate change weighed heavily on economic growth prospects. The transport and communication sectors led the non-oil economic activities. Real non-oil growth rates turned from −20.2 per cent in 2020 to 2.1 and 3.2 per cent in 2021 and 2022, respectively (Table 4.2). The per capita income surpassed pre-Covid-19 levels, reaching about Table 4.2 Iraq’s economic growth, 2019–2023 2019 GDP at current prices (US$ million) GDP growth (annual per cent) Real GDP growth (annual per cent) Real non-oil GDP growth (annual per cent)a GDP per capita (US$)

2020

2021

2022

2023b

233,636.0 180,898.8 207,889.3 270,313.5 293,122.9 5.5

−11.7

3.2

7.9

2.8

5.5

−15.7

7.7

8.1

3.7

–

−20.2

2.1

3.2

2.8

5,048.4

6,410.8

6,789.8

5,943.5

4,497.5

Source World Bank, Macro Poverty Outlook (MPO) Washington, D.C., World Bank Group; a IMF, Regional Economic Outlook, Middle East, Central Asia, Statistical Appendix, 2023. b 2023 figures are estimated

4

IRAQ

141

US$6,410.8 and US$6,789.8 in 2021 and 2022, respectively. However, according to the World Bank, the national poverty rate is 22.5 per cent, and the Gini index of inequality was 29.5 in 2022.63 Economic growth in Iraq has been subjected to wide fluctuations emanating from the fragility of a predominantly oil-based economy and conflict-ridden polity. Violent demonstrations in Basra and Baghdad in August caused operational disruptions to the business. Oil infrastructure was the flashpoint in the multiple conflicts, especially in its Kurdish region. Besides, monetary policy has limited scope as a tool of economic growth as the banking sector is weak and there is a large informal sector. The transactions in the formal economy are overwhelmingly in cash. During the year, there was intense political wrangling over the Iraqi Dinar’s exchange rate due to the weakening currency’s inflationary impact. In late 2022, the exchange rate differential in the parallel currency market diverged over 10 per cent (from the average differential of 2 per cent) from the official exchange rate.64 The economy is also plagued by rampant corruption, and there was a startling revelation by the new Oil Minister Ishan Ismail of a US$2.5 billion scandal dubbed “theft of the century.” These withdrawals were from a state bank over a year as rebates to five local companies. The withdrawal raised questions, especially when the Supreme Court limited the caretaker government’s spending and in the absence of a sanctioned budget with limited recourse to the emergency funds authorised in June.65 Prime Minister Shia al-Sudani, in his inaugural speech to the Iraqi parliament on 27 October, stated that his government would prioritise anti-corruption efforts to provide better governance. However, the institutional capabilities to tackle corruption have been eroded by years of civil conflict and a deeply entrenched patronage network.66

63 World Bank, macro poverty Outlook, (MPO) Washington, D.C., World Bank group. 64 EIU, Country report, Iraq, February 2023, p. 23. 65 MEES, vol. 65, no. 42, 21 October 2022, p. 9. 66

Reva Dhingra and Marsin Alshamary, “Corruption is the forgotten legacy of the Iraq invasion”, Brookings, 3 April 2023, https://www.brookings.edu/blog/order-fromchaos/2023/04/03/corruption-is-the-forgotten-legacy-of-the-iraq-invasion/, accessed 21 June 2023.

142

MD. M. QUAMAR ET AL.

Fiscal Situation and Inflation The political impasse over the formation of the government for much of the year did not allow the annual budget to be passed in 2022. Hence, windfall oil revenues could not be legally spent without due authorisation. Thus, a US$17 billion emergency financing bill was passed for public expenditure on projects, wage payments and repayment of debts to Iran.67 Rival Shia factions in the parliament could not resolve their sharp differences over revenue sharing and have diverted attention from key issues of infrastructure spending and job creation.68 During the year, the estimated US$80.7 billion in public spending remained unused due to the lack of legal permissions. The government expenditure as a per cent of GDP declined from 41.4 per cent in 2020 to 32.2 per cent in 2021. The public spending was more towards current expenditure, leaving limited fiscal stimulus or investments for the non-oil sector. The public wage bill and the transfers (including subsidies) increased from about 50 per cent of the total spending in 2020 to 64 per cent in 2022.69 Oil revenues were about US$106.2 billion, comprising about 95.3 per cent of the total government revenues in 2022.70 However, the non-oil revenues decreased from US$13.1 billion in 2021 to US$7.7 billion in 2022.71 As a result, government revenues as a per cent of GDP increased from 36.2 per cent in 2021 to 41.3 per cent in 2022. The fiscal deficit of −11 per cent of GDP turned into a surplus equivalent to 4 per cent of GDP in 2021 and further increased to about 10.3 per cent in 2022.72 The external debt as a per cent of GDP declined from 40 per cent in 2020 to 28.5 per cent in 2021. Gross official reserves reached a record amount of US$97 billion by the end of 2022.

67 MEES, vol. 66, no. 4, 27 January 2023, p. 12; The New Arab, “Iraq approves $17 billion to pay Iran gas debt and buy grain”, 8 June 2022, https://www.newarab.com/ news/iraq-approves-17-billion-pay-iran-gas-debt-and-buy-grain, accessed 19 June 2023. 68 Hannan Hussain, “Economic costs of Iraq’s intra-Shia power struggle”, Carnegie Endowment for International Peace, 8 September 2022, https://carnegieendowment.org/ sada/87875, accessed 19 June 2023. 69 Ibid. 70 MEES, vol. 66, no. 12, 24 March 2023, p. 17. 71 MEES, vol. 66, no. 12, 24 March 2023, p. 17. 72 EIU, Country report, Iraq, February 2023.

4

IRAQ

143

The Kurdistan Regional Government (KRG) has a 12.67 per cent share of the federal budget but has to allow deductions for audited oil revenues and contribution to the budget. In 2022, it had a record oil revenue of US$12.4 billion thanks to the higher oil prices, but after payments to the IOCs and other deductions, net revenues were only about US$5.7 billion.73 The KRG government has been cash-strapped, and its oil sold at a discount of US$10 per barrel to the Iraqi crude oil74 has strained its finances further. In addition, there had been concern over the emergency funds authorised in June that excluded the KRG and the possible impact on its share in the regular budget.75 The inflation rate increased from 0.6 per cent in 2020 to 6 per cent in 2021 but moderated to about 5.3 per cent in 2022. Food prices have been facing upward pressure due to frequent droughts, chronic water shortages for agriculture and the global rise in food prices. Iraq has a large public distribution system through which the government sells subsidised wheat to the people and is plagued with rampant corruption. However, Iraq was removed from FAO’s list of countries needing food assistance during the year.76 In May, the government announced higher purchase prices for domestically grown wheat to encourage the farmers to sell them to the government.77 The country is almost import-dependent for its food requirements, and the prices have nearly doubled due to the Ukraine war.78 Emergency funds for food security partially muted the higher global food prices. The Iraqi agriculture and manufacturing sectors 73 MEES, vol 66, no. 12, 24 March 2023, p. 11. 74 MEES, vol. 66, no. 10, 10 March 2023, p. 13. 75 Chenar Chalak, “New Iraqi funding initiative detrimental to the Kurdistan Region”,

30 March 2022, https://www.rudaw.net/english/middleeast/iraq/300320224, accessed 19 June 2023. 76 Shafaq News, “Iraq removed from list of countries in need of external assistance for food”, 9 October 2022, https://shafaq.com/en/Economy/Iraq-removed-from-listof-countries-in-need-of-external-assistance-for-food, accessed 21 June 2023. 77 US Department of Agriculture, “Iraq passes new measures to ensure food security amidst tight wheat supply”, 6 July 2022, https://apps.fas.usda.gov/newgainapi/api/Rep ort/DownloadReportByFileName?fileName=Iraq%20Passes%20New%20Measures%20to% 20Ensure%20Food%20Security%20Amidst%20Tight%20Wheat%20Supply%20_Baghdad_I raq_IZ2022-0002.pdf, accessed 19 June 2023. 78 The New Arab, “The Iraq Report: Ukraine turmoil triggers food crisis in Iraq”, 16 March 2022, https://www.newarab.com/analysis/iraq-report-ukraine-turmoil-triggersfood-crisis, accessed 21 June 2023.

144

MD. M. QUAMAR ET AL.

are very small, and the imports expose the country to volatility in global prices of food and commodities. Employment and Expatriates Iraq’s grave challenge is the high population growth rate and youth unemployment. About 400,000 job seekers are estimated to join the labour force annually. According to the World Bank, the unemployment rate surged from 11.7 per cent in 2019 to 16 per cent in 2021. It was estimated to decline to 4.9 per cent in 2022. The government employs about 4 million Iraqis, constituting 30 per cent of the labour force.79 Private sector employment is mostly in the informal sector. The generation of more jobs will depend on labour reforms which is unlikely in the short to medium term. About one-third of its youth are neither in employment nor in any training. Agriculture employs 20 per cent of the labour force, but its bleak prospects imply limited gainful job opportunities.80 Iraqi women are lagging far behind their counterparts in the MENA region. The female labour participation rate was about 10.9 per cent in 2021, as against the average of 18.2 per cent for the region.81 The female labour force participation rate has declined from 12.1 per cent in 2010.82 The fertility rates in 2020 are much higher—3.5 as against the regional average of 2.66.83 They also have a higher adolescent fertility rate and maternal mortality ratio. The enduring conflicts have regressive effects on the development of Iraqi women.84

79 Lahib Higel, “Why Iraq cannot afford a stronger dinar”, Amwaj, 11 March 2022, https://amwaj.media/article/devaluation-dinar-iraq-political-elites, accessed 19 June 2023. 80 The World Bank, “Employment in agriculture (% of total employment) (modelled ILO estimate)—Iraq”, https://data.worldbank.org/indicator/SL.AGR.EMPL.ZS?locati ons=IQ, accessed 23 June 2023. 81 Iraq Gender Landscape (English), Country Gender Landscape Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/099103007012273 561/IDU0a3080879042db046d60ac5a05023175aac31, accessed 19 June 2023. 82 Ibid. 83 Ibid. 84 Priyanka Boghani, “How conflict in Iraq has made women and girls more vulnerable”, PBS Frontline, 12 November 2019, https://www.pbs.org/wgbh/frontline/article/ how-conflict-in-iraq-has-made-women-and-girls-more-vulnerable/, accessed 23 June 2023.

4

IRAQ

145

Over the decades, hundreds of thousands of foreign workers from South Asia have returned to Iraq to seek economic opportunities. More recently, there has been an influx of workers from regional countries like Iran, Türkiye, Syria, Lebanon, etc. to escape the economic downturns at home.85 The private sector prefers to employ foreign workers as they are ready to work longer hours, accept lower salaries and prefer to stay overnight at workplaces to avoid accommodation costs. Many foreign workers, especially from neighbouring countries, enter Iraq through smuggling networks to avoid licence fees. Employment offices allow companies and investors to have 50 per cent foreign workers in the required workforce for their projects on investment licence.86 External Sector Oil constituted about 85 per cent of the total Iraqi exports in 2021. Oil revenues for 2022 were about US$106 billion, surpassing the previous record of US$94 billion in 2012.87 Iraq faced increasing competition from Russian crude in its key export market, like India but also found new markets in Europe. The average price for Iraqi oil in 2022 was about US$70 per barrel.88 The export slate is dominated by sour variety, which becomes costly to refine if the oil prices are high and thus faces limited market potential. Iraq was forced to heavily discount its two primary export grades—Basra medium and Basra heavy—to win the European market.89 It exported about 1 mbpd of oil to Europe during the year.90

85 Ali Kareem Ozheb, “Iraq’s unemployment crisis puts spotlight on foreign workers”, Amwaj, 27 October 2022, https://amwaj.media/article/foreign-labor-adds-to-iraq-s-une mployment-struggles, accessed 19 June 2023. 86 Shafaq News, “Foreign labour: A ticking bomb threatening Iraq’s security and economy”, 19 July 2022, https://shafaq.com/en/Report/Foreign-labor-a-ticking-bomb-thr eatening-Iraq-s-security-and-economy, accessed 19 June 2023. 87 MEES, vol. 65, no. 48, 2 December 2022, p. 17. 88 MEES, vol. 66, no. 12, 24 March 2023, p. 17. 89 MEES, vol. 66, no. 10, 10 March 2023, p. 3. 90 Salam Zidane, “Russian invasion of Ukraine has sharp impact on Iraq’s economy”,

Al-Monitor, 29 March 2022, https://www.al-monitor.com/originals/2022/03/russianinvasion-ukraine-has-sharp-impact-iraqs-economy, accessed 19 June 2023.

146

MD. M. QUAMAR ET AL.

Fuel oil production is a major refinery output and has been encouraged for exports but faced international scrutiny due to severe contamination.91 The contamination prevented Iraq from supplying fuel oil in its swap deal with Lebanon. In 2021, Iraq agreed to supply one million tons of fuel oil to Lebanon for its power sector, and the deal was extended for another year in 2022. Iraq also entered the LNG market by exporting its first shipment through Umm Qasr Port during the year.92 The total goods and services exports increased from US$94 billion in 2021 to US$140.7 billion in 2022 (Table 4.3). Total imports of goods and services increased from US$72.8 billion to US$105.4 billion. The current account deficit as a percentage of GDP was 4.0 per cent in 2020 but turned into a surplus of 12 per cent and an estimated 12.5 per cent in 2021 and 2022, respectively. Table 4.4 gives Iraq’s direction of trade in 2022. The top five exporters to Iraq in 2022 were China, Türkiye, India, Saudi Arabia and South Korea. The top five export destinations for Iraq were China, India, the US, South Korea and Greece. China was the largest trading partner, with a total bilateral trade of about US$51.95 billion in 2022 as against US$37 billion in 2021. According to the International Trade Centre, the main import items in 2021 were mineral fuels (13.29 per cent), electrical machinery (11.97 per cent), mechanical machinery (9.55 per cent), vehicles and parts thereof Table 4.3 Iraq’s select current account indicators, 2019–2022 (US$ million)

Exports of goods and services Petroleum exports Imports of goods and services Current account balance Foreign investment

2019

2020

2021

2022

64,000 80,027 58,138 13,666.5 6,094.06

54,000 44,128 69,000 –18,400 1,402.07

94,000 79,788 72,800 16,000 1,472.41

140,700 106,000 105,400 31,400 6,024.89

Source World Bank, macro poverty outlook for Iraq: 20 April 2023 data set, macro poverty Outlook, (MPO) Washington; Central Bank of Iraq; IMF, Regional economic outlook Middle East and Central Asia statistical appendix 2023, OPEC, annual statistical bulletin 2022

91 MEES, vol. 65, no. 38, 23 September 2022, p. 17. 92 Shafaq News, “Iraq enters the LNG global market’, 21 June 2022, https://shafaq.

com/en/Economy/Iraq-enters-the-LNG-global-market, accessed 19 June 2023.

4

Table 4.4 Iraq’s direction of trade, 2022 (US$ million)

IRAQ

147

Top five export destinations

Top five import sources

China (37,057.61) India (36,986.98) US (9,486.80) South Korea (8,947.15) Greece (6,725.32)

China (14,889.34) Türkiye (14,575.3) India (2,605.25) Saudi Arabia (1,598.85) South Korea (1,219.93)

Source IMF Data, International Trade

(6.1 per cent) and plastic and articles thereof (4.03 per cent). Iraq imports significantly from the neighbouring countries and heavily relies on imports from Türkiye, which also has significant agricultural, manufacturing and energy investments in the country.93 Iran, which was also among the top five sources of imports in 2021, lost to Saudi Arabia in 2022. To quell the smuggling of hard currencies into Iran, the US Federal Reserve compelled the central bank of Iraq to implement compliance rules on the outflow of dollars starting from November 2022.94 The Central Bank of Iraq banned dollar transactions in four banks for their suspected role in dollar smuggling and money laundering.95 Iraqis have been buying dollars wherever possible, and with an ill-prepared banking sector, the Iraqi Dinar has faced downward pressure. In October, Iraq signed an agreement with Jordan to establish a joint industrial zone along their shared border and connect the electricity grid by mid-2023. However, economic relations between the two countries have been slow and subject to frequent disruptions. There is also some Russian investment in Iraq, estimated to be US$10 billion, mostly in the oil sector. Because of the Western sanctions on Russia, the Iraqi Central Bank and financial Institutions were wary of dealing with Russian companies. The total foreign investment in 2022 was US$6,024.89 million. Net foreign direct investment (FDI) as a per cent of GDP was 1.7 per cent in 2020 but declined to an estimated 1.3 per cent in 2022.96 93 EIU, Country report, Iraq, September 2023, p. 23. 94 MEES, vol. 66, no. 4, 27 January 2023, p. 12. 95 MEES, vol. 66, no. 4, 27 January 2023, p. 12. 96 The World Bank, “Foreign direct investment, net inflows (% of GDP)—Iraq”,

https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?locations=IQ, accessed 23 June 2023.

148

MD. M. QUAMAR ET AL.

Energy and Environment Iraq is the second largest OPEC producer. Oil production has almost doubled since 2010 to about 4.15 mbpd, constituting about 4 per cent of the global supply in 2021.97 During the year, the Ministry of Oil lowered the production target to 6 mbpd by 2027 from 7 mbpd, which appears an uphill target to achieve.98 The growth in the oil sector is challenged by ageing infrastructure which has suffered extensive damage during the years of civil strife. Developing new oil exploration blocks faced several challenges, including unfavourable terms of technical service contracts that have led to an exodus of several big IOCs from Iraq over the last decade. For the IOCs, the fixed per barrel remuneration is too tight, and the development cost repayment has been much delayed due to bureaucratic hurdles. The reimbursement of development costs does not incentivise the IOCs to improve efficiency. Fragile security situations with enduring risk of sabotage, volatile federal politics and widespread corruption have dragged investments and delayed deals. During the year, a few attacks occurred on the oil infrastructure in the autonomous Kurdish region. The ageing infrastructure leads to frequent technical faults and consequent shutting down of the oil fields. During the year, major oil fields, including West Qurna 2 and Rumaila, with a combined production of 1.6 mbpd were intermittently shut down.99 Its export terminals are in dilapidated conditions and suffer from frequent outages. The shutting of 1.8 mbpd offshore Basra oil terminal in September nearly knocked off one mbpd of oil exports.100 The vulnerability of its key export terminal, which exports about 96 per cent of its crude oil, has hampered Iraq’s efforts to increase crude oil production in line with easing OPEC production. Besides, the oil industry is plagued with theft and smuggling. In November, the Iraqi National Security Service (INSS) revealed that it busted one of Iraq’s largest oil smuggling rackets that diverted oil from export pipelines via “buried

97 Ali Ahmed, Thai Thant Bui, Mohammed Qaradaghi and Wael Mansoor, a tale of two transitions: Iraq’s energy sector and macroeconomic stability in a climate constrained world, World Bank group, 2023. 98 EIU, Country report, Iraq, December 2023, p. 7. 99 EIU, Country report, Iraq, September 2023, p. 25. 100 MEES, vol. 65, no. 38, 23 September 2022, p. 2.

4

IRAQ

149

pipelines.”101 The INSS estimated that about 12,000 bpd of crude oil were smuggled from the southern fields but gave no details about who ran the smuggling rackets. The domestic demand for gasoline and diesel has been increasing, and its refinery has been unable to meet the demand (Table 4.5). Its refinery output had been 835,000 bpd in 2022, of which 46 per cent comprised low-value fuel oil.102 Iraq’s fuel imports amounted to a record US$5.3 billion in 2022.103 It imports about 16 million litres of gasoline daily, and the government pays about US$4 million per day as subsidies for domestic consumption.104 During the year, the price of imported gasoline escalated with a consequent increase in payment of subsidies. An upcoming 140,000 bpd greenfield Karbala refinery (expected to be online in 2023), costing US$6 billion would reduce reliance on petroleum product imports. Its first phase of about 84,000 bpd was commissioned in September 2022. It is the only refinery in the operational phase, among several planned ones. Despite abundant oil reserves and increasing deficits in the supply of key petroleum products, foreign investors did not find it profitable to invest in Iraqi refineries due to tightly controlled and heavily subsidised domestic markets. The 2007 legislation gives the refiner the right to establish and operate their own oil products retail outlets. However, the competition from state entities that offer highly subsidised products and the priority given to the Ministry of Oil to purchase its required products without any specified limits have deterred the investors. Besides, the proposed refinery projects are situated away from the export terminals making them more suitable for domestic consumption.105 Oil production in the Kurdistan region has faced several difficulties. The oil price collapse in 2014 stalled many oil exploration and development projects. The federal government attempted to reclaim control over

101 MEES, vol. 65, no. 44, 4, November 2022, p. 21. 102 MEES, vol. 66, no. 10, 10 March 2023, p. 16. 103 MEES, vol. 66, no. 14, 7 April 2023, p. 17. 104 Salam Zidane, “Russian invasion of Ukraine has sharp impact on Iraq’s economy”,

Al-Monitor, 29 March 2022, https://www.al-monitor.com/originals/2022/03/russianinvasion-ukraine-has-sharp-impact-iraqs-economy, accessed 19 June 2023. 105 Daily Sabah, “Iraq launches new oil refinery to reduce imports”, 2 April 2023, https://www.dailysabah.com/business/energy/iraq-launches-new-oil-refinery-to-reduceimports, accessed 23 June 2023.

150

MD. M. QUAMAR ET AL.

Table 4.5 Iraq’s energy statistics, 2018–2022

Oil production (mbpd) Oil consumption (Thousand bpd) Crude oil exports (mbpd) Refining throughput (Thousand bpd) Refining capacity (Thousand bpd) Petroleum products exports (mbpd) Natural gas production (bcm) Natural gas flaring (bcm) Natural gas consumption (bcm) Carbon dioxide emission from energy (million tons) Renewable energy generation (TWH)

2018

2019

2020

2021

2022

4.63 547 2.50 596 849 0.05 10.6 17.6 14.6 156.2

4.78 720 2.50 633 919 0.11 11.0 17.7 19.5 145.4

4.12 629 3.43 536 919 0.15 7.0 17.2 18.5 130.0

4.10 722 3.44 616 919 0.16 9.4 17.7 17.1 141.0

4.44 – 3.65 835 – – – – – –

0.4

0.4

0.4

0.4

–

Source BP; OPEC, Annual Statistical Bulletin, 2022

Kurdish oil fields after KRG’s controversial 2017 referendum for independence, and the standoff between Baghdad and the KRG led to a loss of about 200 bpd of oil production.106 Due to the disruption during Covid19, the oil production in 2022 was about 468,000 bpd.107 In February, the Federal Supreme Court ruled that the Kurdish oil sector was unconstitutional. All the oil firms, service providers and buyers were pressured to stop dealing with Erbil failing which they might be blacklisted. Consequently, it led to the departure of many IOCs operating in KRG, and consumers also switched to a comparable grade of Russian Ural grade until the EU embargo came into effect from 5 December 2022. However, by mid-year, the KRG government submitted a proposal to Baghdad to resolve the crisis, which seemed to be compatible with several demands the Iraqi oil ministry made over the past few months.108 In 2022, about 500,000 bpd of oil was exported from the Kurdish region via pipeline to Ceyhan (Türkiye), of which about 100,000 bpd were federal crude oil from the Kirkuk oilfield.109 There has been an ongoing dispute at the International Chamber of Commerce (ICC) in 106 MEES, vol. 66, no. 13, 31 107 MEES, vol. 66, no. 13, 31 108 MEES, vol. 65, no. 25, 24 109 MEES, vol. 66, no. 13, 31

March 2023, p. 3. March 2023, p. 3. June 2022, p. 11. March 2023, p. 3.

4

IRAQ

151

Paris since 2014 over the legality of KRG’s oil export through Türkiye. The Iraqi government claims that by facilitating oil export through the pipeline, Türkiye has violated the terms of an intergovernmental treaty signed in 1973 that governs the utilisation of the Iraq-Türkiye pipeline, even though the Federal government is also utilising the pipeline after an agreement with the KRG for the transit of about 300,000 bpd of Kirkuk oil.110 KRG has been resisting the handing over of marketing rights to Iraq’s oil marketing firm Somo. The Kurdish oil is also sold at heavy discounts due to political risks causing huge losses to the KRG.111 Iraq has been facing crippling gas shortages but has failed to conclude contracts awarded in the 5th licensing round in 2018.112 Due to a lack of necessary processing facilities, it continues to flare 50 per cent of its 3 bcfpd gas output and consequently has to rely on Iran for imports.113 There are a plethora of challenges for developing gas in its western fields. Some non-associated gas fields in the region were devastated by ISIS, and the IOCs still cite security concerns. Besides, the long distance of the gas fields from the gas consumption grid necessitates significant midstream investments. However, by the end of 2022, Basra gas company was set to add more than 200 mmscf/d of gas processing capacity. In KRG, Khor Mor, the largest producing non-associated gas field, was frequently attacked during the year with rockets allegedly launched by Iran and its militias.114 Due to recurrent attacks, a key gas expansion project had been paused. The gas field is in Sulaymaniyah Province, the stronghold of the PUK political party that oppose the export of gas to Türkiye.115 The country has been facing severe power shortages, and in August, Iraqis took to the streets to protest over nearly 18 hours of power failure in three oil provinces of Basra, Dahi Qar and Mayson.116 The

110 MEES, vol. 66, no. 5, 3 February, 2023, p. 10. 111 Daily Sabah, “Iraq’s northern oil exports show few signs of restarting after stop-

page”, 25 April 2023, https://www.dailysabah.com/business/energy/iraqs-northern-oilexports-show-few-signs-of-restarting-after-stoppage, accessed 23 June 2023. 112 MEES, vol. 66, no. 8, 24 February 2023, p. 2. 113 MEES, vol. 66, no. 13, 31 March 2023, p. 2. 114 MEES, vol. 65, no. 28, 24 June 2022, p. 17. 115 MEES, vol. 65, no. 26, 1 July 2022, p. 8. 116 MEES, vol. 65, no. 32, 12 August 2022, p. 11.

152

MD. M. QUAMAR ET AL.

power sector entered a state of emergency in that month (as temperatures crossed 50 °C), nearly falling short of one-third of the total demand. About 70 per cent of 35 GW of installed power generation capacity is driven by gas turbines, thus making Iraq dependent on Iran for the supply of gas and electricity. During the year, Iran had been pressing Iraq to pay its outstanding dues before it could further maintain supplies during the summer. Iraq paid about US$2.74 billion for gas imports in the last two years.117 In July 2022, Iraq signed an executive protocol with Saudi Arabia to establish a direct interconnection to enable about 1 GW of power exports.118 In the same month, it signed a “detailed agreement,” considered a final step towards integrating Iraq’s southern electricity grid with that of the GCCIA. About 1.8 GW GCC interconnection link to Iraq is under development. After both agreements, the total GCC power export to Iraq would be almost double the Iranian exports.119 One of the critical issues facing the power sector has been the region’s highest subsidies and unbilled electricity. This has prompted high rates of consumption that outpaced the power supply pushing Iraqis to rely on expensive and polluting diesel generators. Iraq has one of the highest per capita generator usage rates in the world. During the year, it burnt record volumes of crude and fuel oil at about 360,000 bpd to produce electricity.120 Based on 2019 data, Iraq has one of the highest carbon emissions per GDP, and the rate of emissions growth has outpaced that of economic growth. About three-fourth of the country’s total carbon emissions were from the energy sector.121 Society Iraqi society struggles with multiple political, economic, sectarian and security problems. The vulnerable sections of the society, including people 117 Reuters, “Iraq to pay $2.76 billion in gas and electricity debt to Iran”, 10 June 2023, https://www.reuters.com/world/middle-east/iraq-pay-276-bln-gas-electr icity-debt-iran-2023-06-10/, accessed 23 June 2023. 118 MEES, vol. 65, no. 49, 9 December 2022, p. 10. 119 MEES, vol. 65, no. 49, 9 December 2022, p. 10. 120 MEES, vol. 66, no. 10, 10 March 2023, p. 16. 121 Hannah Ritchie and Max Roser, “Iraq: CO country profile”, Our World in Data, 2

https://ourworldindata.org/co2/country/iraq, accessed 23 June 2023.

4

IRAQ

153

of minority faith such as Yazidis and Christians, as well as women, continue to face the brunt of the prevailing situation.122 The continued lack of governance and sectarian and ideological violence have eroded the government’s legitimacy among the people. Iraq has been facing the brunt of food and water scarcity. Besides, climate change’s impact on people’s general well-being has been immense.123 Iraq is considering a mandatory conscription bill since 2021 but due to internal opposition, the plan was scrapped in November 2022.124 Iraq has also been considering establishing an inter-faith centre in the city of Ur—visited by Pope Francis in March 2021 to overcome the challenges of sectarianism and communalism.125 One of the key issues facing Iraq is gender-based violence. According to some estimates, nearly 1.3 million Iraqis comprising about 3.25 per cent of the population are at risk of gender-based violence, and an overwhelming 75 per cent are women and girls.126 Notably, “77 per cent of reported incidences are linked to domestic violence; although, Iraqi experts say many cases go unreported largely because the perpetrators are unlikely to be punished.”127 Iraq has also reported numerous cases of honour killing. It remains extremely low regarding female representation in education, work and politics, with only about 80 per cent literacy rate, 12 per cent workforce participation and a low political representation, especially at the grassroots level. As of January 2022, the Iraqi parliament has 95 women MPs out of 329, comprising about 28 per cent. At the 122 Mustafa Saadoun, “Iraq’s Sadr takes aim at LGBTQ community”, Al-Monitor, 6 December 2022, https://www.al-monitor.com/originals/2022/12/iraqs-sadr-takes-aimlgbtq-community, accessed 19 June 2023. 123 Shafaq News, “Iraq’s Garden of Eden now ‘like a desert’”, 15 August 2022, https://shafaq.com/en/Report/Iraq-s-Garden-of-Eden-now-like-a-desert, accessed 19 June 2023. 124 Shafaq News, “Cabinet withdraws conscription bill from consideration: PM”, 15 November 2022, https://shafaq.com/en/Iraq-News/Cabinet-withdraws-conscriptionbill-from-consideration-PM, accessed 19 June 2023. 125 Asia News, “Ur launches centre for interreligious dialogue, open to all faiths”, 15

July 2022, https://www.asianews.it/news-en/Ur-launches-centre-for-interreligious-dialog ue,-open-to-all-faiths-56267.html, accessed 19 June 2023. 126 Geneive Abdo, “Violence against women permeates all aspects of life in Iraq”, Wilson Center, 29 November 2022, https://www.wilsoncenter.org/blog-post/violenceagainst-women-permeates-all-aspects-life-iraq, accessed 19 June 2023. 127 Ibid.

154

MD. M. QUAMAR ET AL.

national level, women’s activism and political participation have improved over the past years.128 As of 2021, Iraq has an HDI score of 0.686 and is ranked 121 out of 191 countries. It had a GDI value of 0.958 and a GII value of 0.558. The inequality-adjusted HDI value is 0.554.129

Bilateral Relations The Indo-Iraqi relations have remained stagnated due to several issues, primarily due to the domestic problems in Iraq. India has been trying to improve relations with the regional countries in MENA and has robust relations with Iraq in energy supplies, but other aspects of relations, including political and diplomatic consultations, security cooperation and trade, commerce and investments, have remained sluggish. The flow of Indians to Iraq to work in the construction, ICT, supply chain and logistics continues despite the Covid-19-induced slowdown and the intermittent threat of eruption of violence in that country. Politics and Security Over the years, India has maintained contacts in Baghdad and Erbil. There have been several political and diplomatic exchanges. In April 2022, Haval Abubaker, the governor of Sulaymaniyah Province in Kurdistan, visited India under the Indian Council of Cultural Relations’ Distinguished Visitors programme. In February, External Affairs Minister Dr. S. Jaishankar met with KRG President Nechirvan Barzani on the sidelines of the Munich Security Conference.130 The EAM also had two meetings with his Iraqi counterpart Fuad Hussein in 2021 on the sidelines of the UN General Assembly in September in New York and the Bani Yas Forum in October in Abu Dhabi.131 There have also been several visits of the

128 Safwa Salim and Isa Mohammed, Iraqi women in numbers: Analysing the current status and identifying the way forward, Baghdad: KAPITA Business Hub, June 2022. 129 UNDP, Human Development Reports, “Iraq”, https://hdr.undp.org/data-center/

specific-country-data#/countries/IRQ, accessed 19 June 2023. 130 The Presidency of the Kurdistan Region-Iraq, “President Nechirvan Barzani meets with Foreign Minister of India”, 19 February 2022, https://presidency.gov.krd/en/pre sident-nechirvan-barzani-meets-with-foreign-minister-of-india/, accessed 23 June 2023. 131 GoI, MEA, “India-Iraq Bilateral Brief”, February 2022, https://mea.gov.in/Por tal/ForeignRelation/India-Iraq_2022.pdf, accessed 23 June 2023.

4

IRAQ

155

Iraqi parliamentary delegation, and India has provided training to Iraqi diplomats.132 Security cooperation to eliminate the threats from ISIS has also been discussed at the bilateral level.133 Trade and Commerce Iraq was India’s 7th largest trading partner in 2022–2023. The total bilateral trade peaked at US$37.08 billion (Fig. 4.1). During the year, despite challenges from Russian oil, Iraq maintained its lead as a crude oil supplier and India’s total imports from Iraq increased from US$31.92 billion in 2021–2022 to US$34.39 billion in 2022–2023. India’s total export to Iraq increased from US$2.41 billion to US$2.70 during the period. In 2021, India was the fifth largest exporting country to Iraq, but its rank increased to third in 2022 (Table 4.4). Its share in Iraq’s total imports was about 3.3 per cent. It was the second largest export destination for Iraq at 30.4 per cent in 2022. In 2022–2023, the main items of India’s imports from Iraq were petroleum crude and petroleum products (Fig. 4.2). During the year, the top five items of India’s exports to Iraq were petroleum products, basmati rice, sugar, meat and drug formulation (Fig. 4.3). India’s trade and investment ties with Iraq remain far below their potential. However, both sides have had considerable interest and efforts to rejuvenate trade and commercial ties by organising various trade fairs and business meets. In November, the Agro Park Iraq 2022 exhibition was held at Erbil International Fairground, in which about 18 Indian exhibitors participated showcasing their full range of Agro Food products.134 In the same month, about 50 Indian companies participated in the 46th Baghdad International Trade Fair after a gap of four years.135 The Embassy of

132 Ibid. 133 Ibid. 134 India in Erbil, Twitter, “Agro Pack Iraq 2022 exhibition held at Erbil International Fairground from 22–24 November 2022. For the first time, 18 Indian exhibitors participated, showcasing their full range of Agrofood products”, 8:47 PM, 24 November 2022, https://twitter.com/IndiaInErbil/status/1595798833065246721, accessed 19 June 2023. 135 India in Iraq, Twitter, “India’s participation in Baghdad International Trade Fair after a gap of 4 years”, 12:29 AM, 15 November 2022, https://twitter.com/EI_Bag hdad/status/1592230751776702465, accessed 19 June 2023.

156

MD. M. QUAMAR ET AL.

Fig. 4.1 India’s trade with Iraq, 2016–2022 (Source Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India, https://dashboard.commerce.gov.in/commercedashboard.aspx)

Fig. 4.2 India’s top five import items from Iraq, 2022–2023 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India, https://dashboard.commerce.gov.in/commerced ashboard.aspx)

4

IRAQ

157

India also organised a B2B meeting for a visiting trade delegation to meet business persons at the Baghdad Chamber of Commerce and the Iraqi Industry Association.136 India forges development partnership with Iraq through multifaceted capacity building programmes. A 20-member Iraqi Government team received training on cybersecurity at CDAC Mohali under the ITEC programme from 17 October to 11 November 2022.137 For 2022–2023, 200 slots were allotted to Iraqis under the ITEC programme.138 It is estimated that more than 20,000 Indians are working on various projects in Iraq.139 Despite a small presence, Indians in Iraq have achieved significant social recognition. In November, Azzaman, a widely circulated Arabic daily newspaper in Iraq, lauded the success of six open heart surgeries performed by Indian doctors in Maysan.140 A special postage stamp of IQD 1,000 was brought to celebrate 75 years of India’s Independence. A bust of Mahatma Gandhi was unveiled at Sulaymaniyah, the largest public park in the country. The Indian Embassy in Baghdad launched yoga programmes. Many Iraqi yoga enthusiasts often came together to

136 Embassy of India in Baghdad (Iraq), “The Embassy of India organized a BSM/B2B meeting on November 3, 2022, for the visiting Indian trade delegation and various Iraqi businesses, viz., Baghdad Chamber of Commerce, Iraqi Industry Association and IndiaIraq Economic Cooperation Foundation and other stakeholders with a view to promote exports from India to Iraq”, 3 November 2022, https://www.eoibaghdad.gov.in/news_d etail/?newsid=259, accessed 19 June 2023. 137 India in Iraq, Twitter, “A 20-member Iraqi Government team has undergone a training programme on cyber security at CDAC Mohali under the Indian Government’s flagship programme of ITEC from 17 October to 11 November 2022. During their stay, Iraqi contingent also visited the Golden Temple, Amritsar”, 7:40 PM, 16 November 2022, https://twitter.com/EI_Baghdad/status/1592882886340116481, accessed 19 June 2023. 138 GoI, MEA, Annual Report 2022, https://mea.gov.in/Uploads/PublicationDocs/ 36286_MEA_Annual_Report_2022_English_web.pdf, accessed 23 June 2023. 139 Ibid. 140 India in Iraq, Twitter, “Indian doctors perform six open heart surgeries in Maysan,

Iraq”, 11:43 PM, 16 November 2022, https://twitter.com/EI_Baghdad/status/159294 3841174519808, accessed 19 June 2023.

158

MD. M. QUAMAR ET AL.

Fig. 4.3 India’s top five export items to Iraq, 2022–2023 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India, https://dashboard.commerce.gov.in/commerced ashboard.aspx)

Indian festivals and national celebrations. The Indian Malayali community organised the first-ever Onam Festival in Erbil, that many Kurds joined.141 Energy Ties Iraq was India’s leading supplier of crude oil in 2022–2023 and the latter was the second largest supplier of petroleum products to Iraq after Russia. Iraq exported about US$33.60 billion worth of crude oil and had a share of 20.71 per cent of India’s total crude oil imports (Table 4.6). Its share in India’s total mineral fuel imports has decreased from 16.17 per cent in 2021–2022 to 13.14 per cent in 2022–2023. Iraq’s market share in 141 India in Erbil, Twitter, “The Indian Malayali community organized the first ever Onam Festival in Erbil. Consul General Subhash Kain along with members of @Indiainerbil, members of the Indian diaspora, and Kurdish friends of India joined the celebration with great joy and gaiety”, 7:32 PM, 30 September 2022, https://twitter. com/IndiaInErbil/status/1575848535266054150, accessed 19 June 2023.

4

IRAQ

159

Table 4.6 India’s energy trade with Iraq, 2019–2022 2019–2020

2020–2021

2021–2022

2022–2023

22,764.55 (22.16) Petroleum products imports (HS 686.93 2710) (8.73) Hydrocarbon gases imports (HS 14.92 2711) (0.09) Total mineral fuel imports from 23,674.07 Iraq (HS 27) (15.41) Mineral fuel imports as per cent 99.72 of total imports from Iraq Petroleum products exports 657.42 (1.61) Per cent share of petroleum 35.0 products in India’s total exports to Iraq

12,873.45 (21.64) 1,182.32 (20.46) –

33,599.57 (20.71) 540.00 (5.0) –

14,162.16 (14.20) 99.13

30,342.10 (24.78) 1,118.95 (11.20) 6.74 (0.03) 31,517.05 (16.17) 98.72

44.31 (0.1) 2.96

166.68 (1.15) 31.90

878.88 (0.91) 32.59

Crude oil imports (HS2709)

34,278.85 (13.14) 99.67

Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://tradestat.commerce.gov.in/eidb/default.asp Figures in the bracket are per cent of India’s total imports/exports of that commodity

India had been squeezed by the Russian crude that came with greater discounts.142 Iraq exported about 1 mbpd to India, which fell to 800,000 bpd.143 India also exports petroleum products to Iraq, which increased from US$166.68 million in 2021–2022 to US$878.88 million in 2022– 2023. Given the shortage of refining products in Iraq, India has lucrative opportunities for increasing its exports. Iraq has large carbon footprint and energy sector emissions but is yet to join the India-led International Solar Alliance. India can extend its developmental partnership in renewable energy projects and personnel training. Social and Cultural India is one of the most attractive destinations for Iraqis in medical tourism. Many Iraqi families and individuals looking for state-of-the-art

142 The Times of India, “Iraqi oil to India gets cheaper as competition from Russia bites”, 11 April 2023, https://timesofindia.indiatimes.com/business/india-business/iraqioil-to-india-gets-cheaper-as-competition-from-russia-bites/articleshow/99394776.cms, accessed 23 June 2023. 143 MEES, vol. 66, no. 10, 10 March 2023, p. 6.

160

MD. M. QUAMAR ET AL.

medical facilities with affordable costs choose to come to India for medical care. India provided help to Iraq to fight Covid-19.144 Iraqi students have been provided scholarships by ICCR for studies, while many Iraqis have come to India on student visas at their own expense, especially to enrol in ICT and other such programmes in Indian HEIs.145 Indians continue to go to Iraq to find work and for religious education and pilgrimage, especially during Arbaeen, the most important religious pilgrimage of the Shias the world over.146 Indian workers are mainly employed in the petroleum, construction and ICT sectors, and many Indian companies also work in Iraq. Indian films and television series are widely popular in Iraq.147

Challenges and Opportunities The sectarian infighting hampered prospects of Iraqi political stability. For nearly a year after the October 2021 elections, the Council of Representatives could not agree on government formation. The new president was elected on 17 October 2022 who appointed a prime minister on 27 October and government formation was completed after weeks of negotiations. This was made possible only after Moqtada al-Sadr withdrew the members of Sairoon Alliance from the parliament leading to other Shiite parties coming together. The sidelining of Sadr might have worked for government formation but its stability rests on Prime Minister Shia al-Sudani’s ability to provide solutions to public grievances, including shortage of power and water supplies and act against corruption and cronyism.

144 GoI, MEA, “India-Iraq Bilateral Brief”, February 2022, https://mea.gov.in/Por tal/ForeignRelation/India-Iraq_2022.pdf, accessed 23 June 2023. 145 Ibid. 146 Asif Rizvi, “Hundreds from Mumbai reach Iraq to mark Arbaeen of Imam

Hussain”, Mid-Day, 16 September, 2022, https://www.mid-day.com/mumbai/mumbainews/article/hundreds-from-mumbai-reach-iraq-to-mark-arbaeen-of-imam-hussain-232 46094, accessed 23 June 2023. 147 Dhiman Sarkar, “Bollywood in their heart, war-torn Iraq aim heroic show in FIFA U-17 World Cup”, Hindustan Times, 7 October 2017, https:// www.hindustantimes.com/fifa-u17-world-cup-2017/fifa-u-17-world-cup-bollywood-intheir-hearts-iraq-look-to-a-heroic-performance/story-5W9GyD3gdSRokb9lJyCrBN.html, accessed 23 June 2023.

4

IRAQ

161

India’s engagements with Iraq remain constrained by the internal problems in that country. Iraq has been a lead supplier of oil to India and has been increasingly importing petroleum products. Iraq has a growing need for refineries and other oil infrastructure upgrades and these can be commercial opportunities for Indian oil companies. Indian diplomatic presence in the KRG region has increased but India has to be watchful of the region’s fluid relations with Baghdad. The Indian investments in Iraq remain limited and trade is mainly confined to oil sector. There have been some movement towards increasing developmental engagements, including scholarship to Iraqi students and training for diplomats and public officials. However, more commercial engagement especially with private players in the education and training in service sectors can be examined. Moreover, India is a major destination for Iraqis looking for better healthcare and medical facilities. There are potentials in other areas, including infrastructure development, industrial modernisation, defence and security cooperation, capacity building and combating the impact of climate change, but these remain subject to internal stability in Iraq.

CHAPTER 5

Kuwait

Key Information Political System: Constitutional Monarchy; Ruling Family: Al-Sabah; Ruler: Emir Nawaf al-Ahmad al-Jaber al-Sabah (since 30 September 2020); Crown Prince: Mishal al-Ahmad al-Jaber al-Sabah (since 8 October 2020); National Day: 25 February; Parliament: 65-member (50 elected, 15 ex-officio cabinet) National Assembly (Majlis al-Umma); Last Parliamentary Election: 29 September 2022; Major Group in Parliament: Islamists and Shiites; National Carrier: Kuwait Airways. Socio-Economic Indicators Area: 17,818 sq. km; Population: 4.25 million; Native: 30.4%; Expats: 69.6%; Religious Groups: Citizens: 100% Muslims (70% Sunnis and 30% Shias); Residents: 74.6% Muslims, 18.2% Christians and 7.2% others; Age Structure: 0–14 Years 23.32% 15–64 Years 73.28% 65 years and above 3.4%; Population Growth Rate: −2.6%; Life Expectancy at Birth: 79.35 years; Major Population Groups: Kuwaiti 30.4%, other Arabs 27.4%, Asians 40.3%, Africans 1%, others 0.9% (including Europeans, North and South Americans and Australians) (2018 Est.); Adult Literacy Rate (Ages 15 and older): 96.5%; National Currency: Kuwaiti Dinar (KWD); GDP (US$ Current): US$105.9 billion; Foreign Trade: Exports—US$68.42 billion, Total Imports—US$27.87 billion; Military

© Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_5

163

164

MD. M. QUAMAR ET AL.

Expenditure: 6.8% of GDP; Sovereign Wealth Fund: Kuwait Investment Authority; Value of Assets: US$750 billion; National Debt: 11.71% of GDP; GNI Per Capita (PPP Current International): $54,328; GDP Per Capita (PPP Current International): US$24,300; Oil Reserves: 101.5 billion barrels (6th Rank); Gas Reserves: 63Tcf (19th Rank); Human Development Index: 0.831; HDI Rank: 50; Infant Mortality Rate (deaths per 1,000 live births): 7.27; Maternal Mortality Ratio (deaths per 100,000 live births): 7; UN Education Index: 0.638; Gender Development Index: 1.009; Gender Inequality Index: 0.242; Labour Force: 2.38 million; Unemployment Rate: 2.5%; Employment to Population Ratio (ages 15 and older): 71.9%; Urban Population: 100%; Rate of Urbanisation: 1.35% (2020–2025 Estimates); Last National Census: 2005; World Press Freedom Index: Rank 158 out of 180, Score 37.87; Corruption Perception Index: Rank 77 out of 180, Score 42; Foreign Direct Investment (Inflows): US$-272 million; Individuals Using Internet (per cent of population): 100%; Net Migration Rate (per 1,000 people): 9.8; Forest Area (per cent of Land Area): 0.4%; Carbon Dioxide Emissions (metric tons per capita): 20.9; Global Peace Index: Rank 36 out of 161, Score 1.688; Fintech Index: Not Ranked; Global Innovation Index: Rank 62 out of 132; Global Cybersecurity Index: Rank 65 out of 194; Score 75.07. India Related Indian Cultural Centre: India Study Centre (Faculty of Social Sciences, Kuwait University); Number of Indians: 1,029,861; Currency Exchange Rate: 1 KWD = INR 266.93; Number of Non-Muslim Places of Worship for Indians: 30 Churches; Indian Schools: 23; Indian Banks: State Bank of India, Indian Overseas Bank and HDFC Bank; Last Visit to India by the Ruler: Emir Sheikh Sabah al-Ahmad al-Jaber al-Sabah (June 2006); Last Indian Prime Minister to Visit Kuwait: Indira Gandhi (May 1981). Sources: CIA World Factbook 2023; UN Development Programme 2023; World Bank 2023; World Intellectual Property Organisation 2023; Vision of Humanity, 2023; UNCTAD World Investment Report 2023, Transparency International 2023; Reporters without Borders 2023; U.S. EIA 2023; Embassy of India, Kuwait, 2023. ∗ ∗ ∗

5

KUWAIT

165

Kuwait’s tryst with political uncertainty continued in 2022 following the standoff between the opposition members in the National Assembly and the government, which forced the resignation of the Cabinet of Prime Minister Sabah al-Khaled al-Sabah. Ahmad Nawaf al-Ahmad alSabah, the eldest son of Emir Nawaf al-Ahmad al-Jaber al-Sabah, was appointed the prime minister, but this did not break the stalemate leading to the dissolution of the Assembly on 2 August 2022 by an Emiri decree midway through its four-year term. Continuous political bickering has hampered Kuwait’s ability to focus on economic reforms and diversification and delayed the resolution of lingering socio-economic and developmental challenges. Consequently, supporters of the ruling Al-Sabah family advocate curtailing political rights and reigning in the Islamist opposition. Under these circumstances, the Indo-Kuwaiti relations remained subdued. Unlike the other Gulf Cooperation Council (GCC) States, in recent years, Indian engagements with Kuwait have been limited to visits by Sushma Swaraj (2018) and S. Jaishankar (2021) and a few other ministerial exchanges. The anticipated visit of Prime Minister Narendra Modi did not materialise in 2022 as Kuwait remains on the margins of India’s growing engagements with the Gulf.

Domestic Developments Kuwait’s economic recovery out of Covid-19 was on track in 2022 despite the political standoff between the government and opposition law-makers. After months of bickering, the parliament was dissolved in August, and snap elections were held in September. A new cabinet under a 66-year-old Prime Minister Ahmad al-Sabah took over in October. With an ailing 85-year-old Emir1 and an 82-year-old Crown Prince and Deputy Emir in charge of running the affairs of the state, Kuwait’s ageing leadership has not been able to inspire the young and aspirational population.2 Multiple lingering problems, including a large stateless population

1 The Economic Times, “Kuwait says its ruling emir flew to America for medical checks”, 4 March 2021, https://economictimes.indiatimes.com/news/international/ uae/kuwait-says-its-ruling-emir-flew-to-america-for-medical-checks/articleshow/813293 06.cms, accessed 16 June 2023. 2 Shafeeq Ghabra, “Kuwait: At the crossroads of change or political stagnation”, Middle East Institute, 20 May 2014, https://www.mei.edu/publications/kuwait-crossroads-cha nge-or-political-stagnation, accessed 16 June 2023.

166

MD. M. QUAMAR ET AL.

(Bidoon), estimated at over 100,000,3 and a pool of educated unemployed youth, have caused serious tensions in the society and polity. Governance remains paralysed due to poor government-opposition relations and the inability of the stakeholders—ruling Al-Sabah family, tribal sheikhs, Sunni Islamists and Shia minority—to forge a consensus on political, economic and societal issues, and this has harmed Kuwait’s developmental prospects. Politics Among the members of the GCC, Kuwait is the only functional (or rather dysfunctional) constitutional monarchy. Majlis al-Ummah or National Assembly—the 50-member elected parliament—holds powers to question the government and cabinet and can bring a motion of no-confidence against the cabinet.4 On the other hand, the Emir has the power to dissolve the Majlis al-Ummah before its term is complete. Given that the parliamentary elections in Kuwait have been relatively fair, the Sunni Islamist opposition has often gained the upper hand in the Majlis, and have been demanding greater transparency and accountability on the government’s functioning, especially on financial matters but without much success. Resultantly, they have frequently threatened a no-confidence against the appointed government and the cabinet. To counter the opposition, the Emir has resorted to dissolving the Majlis to prevent no-confidence against the royal-appointed government. Thus, over the years, the standoffs between the appointed-government and the elected-opposition members in the Majlis have hampered the functioning and stability of the government.5 Since 1992, when the first elections were held after liberation from Iraq, the Majlis has completed its term

3 American for Democracy & Human Rights in Bahrain, “Challenges of being Bidoon in Kuwait”, 16 May 2022, https://www.adhrb.org/2022/05/challenges-of-being-bid oon-in-kuwait/, accessed 16 June 2023. 4 Constitute project, “Kuwait’s constitution of 1962 reinstated in 1992”, https://www. constituteproject.org/constitution/Kuwait_1992.pdf, accessed 16 June 2023. 5 Ghanim Al-Najjar, “Contextualising Kuwait’s political crises”, Gulf International Forum, 14 June 2022, https://gulfif.org/contextualising-kuwaits-political-crises/, accessed 16 June 2023.

5

KUWAIT

167

only thrice in 1992, 1999 and 2016.6 During the three decades Kuwait has held 13 parliamentary elections, and six of these have been held in the decade since the 2011 Arab uprisings.7 In May 2022, the cabinet of Prime Minister Sabah al-Khaled alSabah resigned before facing an anticipated no-confidence motion.8 It was reported that 26 members of the Majlis were in favour of the noconfidence motion.9 Nonetheless, Prime Minister Sabah continued to lead a caretaker government until the appointment of Ahmad al-Sabah as the new prime minister in July, and he formed a new government in August. As noted, Ahmad is the eldest son of Emir Nawaf, and the move to make him the prime minister could be aimed at moderating the rash political behaviour of the opposition as well as projecting him as the eventual successor of the Emir. However, this is a risky move because if he fails, this can hamper his chances of elevation as Crown Prince and eventually as the Emir. Notwithstanding, as most of the ministers of the previous government retained their place in Prime Minister Ahmad’s Cabinet,10 the opposition raised the issue of incompetence and impropriety again, and the cabinet was forced to resign within a month. Subsequently, the Crown Prince and Deputy Emir Mishal al-Ahmad alJaber al-Sabah, acting on behalf of the Emir, dissolved the Majlis and called for fresh elections.11

6 Inter-Parliamentary Union, “Kuwait: National Assembly”, https://data.ipu.org/ node/90/elections?chamber_id=13442&election_id=79257, accessed 16 June 2023. 7 They were held in: February 2012, December 2012, 2013, 2016, 2020 and 2022. 8 B Iszak, “Govt resignation accepted, will stay in caretaker role”, Kuwait Times,

10 May 2022, https://www.kuwaittimes.com/govt-resignation-accepted-will-stay-in-car etaker-role/, accessed 16 June 2023. 9 Arab Times, “Twenty-six in no-confidence against the Prime Minister”, 4 April 2022, http://www.arabtimesonline.com/news/twenty-six-in-no-confidence-againstthe-prime-minister/, accessed 16 June 2023. 10 B Iszak, “Kuwait PM forms new cabinet with old faces”, Kuwait Times, 1 August 2022, https://www.kuwaittimes.com/kuwait-pm-forms-new-cabinet-with-oldfaces/, accessed 16 June 2023. 11 Reuters, “Kuwait formally dissolves parliament, delays budget approval until after elections”, 25 October 2022, https://www.reuters.com/world/middle-east/kuwait-for mally-dissolves-parliament-state-news-agency-2022-08-02/, accessed 16 June 2023.

168

MD. M. QUAMAR ET AL.

Snap elections were held on 29 September 2022, contested by 305 candidates, including 22 women, for the 50 seats.12 Of the total population of 1.5 million citizens, 795,911 eligible voters had registered, a notable increase from 567,694 for the 2020 elections.13 According to media reports, the steep rise in the number of eligible voters was due to the passage of the emergency election decrees that allowed using civil identity cards to identify voters and added new electoral districts in four constituencies that were earlier excluded from voting.14 The turnout was significantly higher compared to 2020 in terms of the number of voters exercising their franchise; it was 503,811 compared to 394,131 in 2020; but in terms of share to registered voters, there was a drop from 2020 when the turnout was 69.4 per cent, while in 2022 it was 63.3 per cent.15 Unlike in 2020, when none of the female candidates could win, two women—Jenan Bushehri and Alia al-Khaled—were elected in 2022,16 and 15 of the 50 members are first-time parliamentarians. While 23 from the previous Majlis retained their seats, 12 returned to the Majlis after a hiatus.17 According to estimates, nearly 60 per cent of the newly elected members are from opposition groups, including the Muslim Brotherhood-linked Hadas or Islamic Constitutional Movement.18 In addition, Ahmad al-Saadoun, a known opposition figure who had not participated in the elections since 2012, contested and won and was

12 Inter-Parliamentary Union, “Kuwait: National Assembly”, https://data.ipu.org/ node/90/elections?chamber_id=13442&election_id=79257, accessed 16 June 2023. 13 Sameena Hameed et al., Persian Gulf 2021–22: India’s relations with the region, Singapore: Palgrave Macmillan, 2022, pp. 214–15. 14 B Iszak, “National Assembly approves emergency election decrees”, Kuwait Times, 30 November 2022, https://www.kuwaittimes.com/national-assembly-approves-emerge ncy-election-decrees/, accessed 16 June 2023. 15 Inter-Parliamentary Union, “Kuwait: National Assembly”, https://data.ipu.org/ node/90/elections?chamber_id=13442&election_id=79257, accessed 16 June 2023. 16 The National, “Women return to Kuwait parliament for first time since 2020”, 30 September 2022, https://www.thenationalnews.com/gulf-news/2022/09/30/womenreturn-to-kuwait-parliament-for-first-time-since-2020/, accessed 16 June 2023. 17 Abdullah Al-Mudhaf, “Profiles of election winners”, Kuwait Times, 1 October 2022, https://www.kuwaittimes.com/profiles-of-election-winners/, accessed 16 June 2023. 18 Ahmad Hagagy, “Kuwaiti opposition wins big in election, standoff with government to endure”, Reuters, 25 October 2022, https://www.reuters.com/world/middle-east/ kuwaiti-opposition-wins-big-election-standoff-with-government-endure-2022-09-30/, accessed 16 June 2023.

5

KUWAIT

169

elected the speaker on 18 October during the first sitting of the newly elected Majlis. A large number of opposition members and the choice of the speaker underline the possibility of a continuing standoff between the government and the opposition, not an ideal outcome for the political stability in Kuwait. On 1 October 2022, the Kuwaiti cabinet tendered its resignation19 and within a week, Ahmad al-Sabah was reappointed prime minister and formed a new 15-member cabinet that included 11 new ministers.20 Two elected members of the Majlis were also inducted into the cabinet. The choice of new ministers suggests an attempt towards reconciliation by the royal family, the Crown Prince and the prime minister. Those who lost out on a seat in the new cabinet were Foreign Minister Nasser al-Sabah, Minister of Petroleum Mohammed al-Fares and Minister of State for Municipality Rana al-Fares. The important ministers who were retained are Interior Minister Talal al-Khaled al-Sabah, Information Minister Abdulrahman al-Mutairi and Finance Minister Abdul Wahab alRushaid.21 The attempt to give a fresh look to the cabinet (Table 5.1) was to overcome the political stalemate over the reappointment of many of the ministers earlier.22 The cabinet members who were not law-makers also become ex-officio members of the Majlis with voting rights except during a vote of no-confidence against the cabinet. This effectively raised the strength of the Majlis to 64, with four women members.23 One of the first issues taken up in the Majlis was a bill on nationality to resolve the contentious matter, including that of the Bidoon,

19 B Iszak, “Amir accepts Cabinet resignation, issues assembly meeting decree”, Kuwait Times, 2 October 2022, https://www.kuwaittimes.com/amir-accepts-cabinet-resignationissues-assembly-meeting-decree/, accessed 16 June 2023. 20 B Iszak, “New Cabinet formed with 11 new faces, two MPs”, Kuwait Times, 16 October 2022, https://www.kuwaittimes.com/new-cabinet-formed-with-11new-faces-two-mps/, accessed 16 June 2023. 21 Kuwait Times, “Kuwait Deputy Amir approves Cabinet reshuffle decree”, 16 October 2022, https://www.kuwaittimes.com/kuwait-deputy-amir-approves-cabinet-res huffle-decree/, accessed 16 June 2023. 22 Ibid. 23 Inter-Parliamentary Union, “Kuwait—National Assembly”, https://data.ipu.org/

node/90/elections?chamber_id=13442&election_id=79257, accessed 16 June 2023.

170

MD. M. QUAMAR ET AL.

Table 5.1 Council of Ministers of Kuwait, October 2022 Name

Designation

Ahmad Nawaf al-Jaber al-Sabah Talal Khaled al-Ahmad al-Sabah

Prime Minister First Deputy Prime Minister and Interior Minister Deputy Prime Minister and Minister of State for Cabinet Affairs Deputy Prime Minister and Oil Minister Minister of Public works and Minister of Electricity, Water and Renewable Energy Minister of Information and Minister of State for Youth Affairs Minister of Finance and Minister of State for Economic and Investment Affairs Minister of Health Minister of Foreign Affairs Minister of State of National Assembly Affairs and Minister of State for Housing and Urban Development Minister of Defence Minister of State for Municipal Affairs Minister of Commerce and Industry and Minister of State for Communication and Information Technology Minister of Education and Minister of Higher Education and Scientific Research Minister of Justice and Minister of Endowments and Islamic Affairs and Minister of State for Nazaha Enhancement Minister of Social Affairs and Societal Development and Minister of State for Women and Childhood Affairs

Barrak Ali al-Shaitan Bader Hamed al-Mullah Amani Suleiman Bu Qamaz Abdulrahman Bedah al-Mutairi Abdulwahab Mohammad al-Rushaid Ahmad Abdulwahab al-Awadhi Salem Abdullah al-Jaber al-Sabah Ammar al-Ajmi

Abdullah Ali Abdullah al-Salem al-Sabah Abdulaziz Waleed al-Mujil Mazen Saad al-Nahidh

Hamad Abdulwahab al-Adwani Abdulaziz Majed al-Majed

Mai Jassim al-Baghli

Source Kuwait Times, “Kuwait Deputy Amir Approved Cabinet Reshuffle Decree,” 16 October 2022, https://www.kuwaittimes.com/kuwait-deputy-amir-approves-cabinet-reshuffle-decree/, accessed 3 March 2023.

in a phased manner.24 When the bill was presented in the Majlis on 13 November, it was stipulated that within one year of its passage, the

24 Arab Times, “Al-Saadoun submits bill on nationality”, 13 November 2022, http://www.arabtimesonline.com/news/al-saadoun-submits-bill-on-nationality/, accessed 16 June 2023.

5

KUWAIT

171

Interior Ministry should finalise verification and identification of all residents living in Kuwait since 1965 or earlier. All those who fall in the category have to be issued civil identification cards pending a decision on their naturalisation application. If passed and implemented, this can partly resolve the contentious nationality issue that has kept the Kuwaiti polity on the boil for decades and have led to accusation of human rights violations over the status of the stateless Bidoon population. The other priority area for the Majlis is the Kuwaitisation of the job market and the reduction of the number of expatriates who form nearly two-thirds of the Kuwaiti resident population. Foreign Policy and Security A small country surrounded by big regional powers makes Kuwait take its security seriously. The experience of the Iraqi invasion and annexation, and eventual liberation by the US-led forces in 1991, underscores its security and foreign policy. It is a member of the GCC and views its unity as paramount for regional security and stability. This led to Emir Sabah al-Ahmad al-Jaber al-Sabah making efforts to end the Qatar crisis (2017–2021) despite his poor health.25 Though his efforts were unsuccessful, Kuwait (and also Oman) did not give up on GCC unity and continued to work behind the scenes for better coordination. The Kuwaiti trust in GCC unity is based on the conviction that smaller and less influential GCC states will need the support of the bigger, richer and more influential members for their comprehensive security, including financial, economic and regime security. Kuwait (and also Oman) is one of the advocates within the GCC for better diplomatic relations with Iran to reduce regional tensions. Accordingly, Kuwait maintains good relations with all the “brotherly” GCC countries as well as with Iran and Iraq. In addition, it strives to have good relations with other regional countries and balance relations with global powers, including the important Asian economies. Among the GCC countries, Kuwait maintains strong and cordial relations with Saudi Arabia and has long maintained a degree of alignment on foreign policy and strategic issues with the latter. However, in recent years, 25 Giorgio Cafiero and Theodore Karasik, “Kuwait, Oman, and the Qatar crisis”, Middle East Institute, 22 June 2017, https://www.mei.edu/publications/kuwait-oman-and-qatarcrisis, accessed 16 June 2023.

172

MD. M. QUAMAR ET AL.

developments in Yemen and the Qatar crisis have underlined a nuanced divergence between the two. Kuwait initially supported and joined the Saudi-led military intervention in Yemen but has gradually aligned with Oman to seek a political solution instead of a military one.26 SaudiKuwait variance became more open during the Qatar crisis as Kuwait chose not to follow Saudi Arabia, Bahrain and the UAE (and Egypt) to boycott Qatar and instead took diplomatic steps to end the crisis. Nonetheless, Saudi-Kuwait relations have remained cordial, and Kuwait has supported Saudi moves on tension with Iran. Hence, it also withdrew its envoy from Iran in 2016 after the Saudi consulate in Mashhad was attacked by Iranian protestors. In July 2022, Crown Prince Mishal represented Kuwait at the Jeddah Security and Development Summit, which was attended by the heads of state or their representatives and US President Joe Biden who was on his maiden visit to the Middle East.27 The Crown Prince again met with the Saudi Crown Prince Mohammed bin Salman in Sharm alSheikh during the UN Climate Summit, COP 27.28 In the meantime, in September, Prime Minister Ahmad al-Sabah visited Saudi Arabia for bilateral talks on important regional and economic issues. In December 2022, Crown Prince Mishal visited the Kingdom again for the GCC summit.29 During the meeting, as per the precedence the Kuwaiti national and the incumbent GCC Secretary-General Nayef al-Hajraf was reappointed for another term.30 Relations with other GCC members have remained

26 Giorgio Cafiero, “Kuwait’s Yemen foreign policy”, Middle East Institute, 12 August 2020, https://www.mei.edu/publications/kuwaits-yemen-foreign-policy, accessed 16 June 2023. 27 Arab Times, “Kuwait Amir’s Rep. in Saudi Arabia for Jeddah Summit”, 16 July 2022, http://www.arabtimesonline.com/news/kuwait-amirs-rep-in-saudi-arabia-forjeddah-summit/, accessed 16 June 2023. 28 Kuwait Times, “Kuwait Crown Prince meets Saudi counterpart, US official, Tunisia PM”, 7 November 2022, https://www.kuwaittimes.com/kuwait-crown-princemeets-saudi-counterpart-us-official-tunisia-pm/, accessed 16 June 2023. 29 Kuwait Times, “Kuwait Amir representative addresses GCC summit: GCC is a constant necessity”, 10 December 2022, https://www.kuwaittimes.com/kuwait-amir-rep resentative-addresses-gcc-summit-gcc-is-a-constant-necessity/, accessed 16 June 2023. 30 Ramadan Al Sherbini, “GCC agrees Kuwait to nominate new secretary general”, Gulf News, 10 December 2022, https://gulfnews.com/world/gulf/kuwait/gcc-agrees-kuwaitto-nominate-new-secretary-general-1.92620514, accessed 16 June 2023.

5

KUWAIT

173

cordial. Kuwait congratulated Qatar on successfully hosting the FIFA World Cup in November–December 2022.31 Despite taking the Saudi side in the direct problems between the two Gulf giants, Kuwait has been cautious not to antagonise Iran. It has advocated diplomatic and political negotiations with Iran to avoid direct tensions with the Persian Gulf neighbour.32 After Saudi Arabia and Iran began Iraq-mediated negotiations to ease tensions, other regional countries, especially the UAE and Kuwait, have moved to renew diplomatic contacts with Iran. Kuwait appointed a new ambassador to Iran in August 2022 after a gap of six years.33 Besides, Kuwait has been working to improve political and trade relations with Iran and seeks cooperation in combating shared environmental and climate issues. In July, the Kuwaiti Environment Public Authority signed an agreement with Iran’s Department of Environment for cooperation in combating sand and dust storms that have become more frequent in the region and disrupt the normal functioning of power stations, industries and other sectors.34 However, Kuwait has remained concerned about Iran’s nuclear programme and regional militarisation.35 With Iraq, Kuwait has kept the political and diplomatic contacts open and has been trying to improve trade and developmental cooperation. Kuwait is also one of the advocates of finding a political settlement in Syria without compromising the rights of the Syrian people. At a UNGA meeting in July 2022, Kuwait reiterated the need to find a way to make the UNSC more effective in tackling regional and

31 The Peninsula, “Kuwaiti Cabinet congratulates Qatar on the success of the World Cup Opening Ceremony”, 21 November 2022, https://thepeninsulaqatar.com/article/ 21/11/2022/kuwaiti-cabinet-congratulates-qatar-on-the-success-of-the-world-cup-ope ning-ceremony, accessed 16 June 2023. 32 Cinzia Bianco, “The GCC monarchies: Perceptions of the Iranian threat amid shifting geopolitics”, The International Spectator, 2020, vol. 55, no. 2, pp. 92–107. 33 Reuters, “Kuwait names first ambassador to Iran in over six years”, 14 August 2022, https://www.reuters.com/world/middle-east/kuwait-names-first-ambassador-iranover-six-years-2022-08-14/, accessed 16 June 2023. 34 Kuwait Times, “Kuwait, Iran sign agreement to combat sandstorms”, 5 July 2022, https://www.kuwaittimes.com/kuwait-iran-sign-agreement-to-combat-sand-sto rms/, accessed 16 June 2023. 35 Arab Times, “New Iran nuke reactor plan concerns Kuwait”, 28 July 2022, http://www.arabtimesonline.com/news/new-iran-nuke-reactor-plan-concerns-kuw ait/, accessed 16 June 2023.

174

MD. M. QUAMAR ET AL.

international disputes, which is often impeded by the veto power in the UNSC.36 Kuwait’s relations with other regional countries have also been cordial. Kuwait and Egypt have been working to improve political and economic relations. President Abdel Fattah El-Sisi visited Kuwait in February 2022 and held talks on important bilateral and regional issues.37 Nonetheless, the two sides have faced problems due to the Kuwaitisation policy, which affects the Egyptian expatriate workers. In July, Kuwait decided to suspend fresh issuance of work visas to Egyptians.38 The matter spiralled in October when Egypt decided to impose a fee of US$30 on Kuwaitis entering Egypt, to which Kuwait responded by imposing an equivalent fee amounting to KWD 9.39 The issue remained unresolved until the end of 2022. Kuwait has maintained cordial ties with Türkiye, and the Speaker of the outgoing Majlis, Marzouq al-Ghanim, met with Turkish President Recep Tayyip Erdo˘gan in Mecca while the latter was there for Umrah during Ramadan 2022.40 On Israel, Kuwait continues to move against the regional tide and remains a champion of the Palestinian cause and does not favour normalisation with Israel. Domestic political dynamics are a major reason, given the troubled political situation and the presence of Shia and Islamist political societies firmly opposed to contacts with Israel.41 At the Arab League 36 Kuwait Times, “Kuwait restates political settlement in Syria”, 22 July 2022, https://www.kuwaittimes.com/kuwait-restates-political-settlement-in-syria/, accessed 16 June 2023. 37 Arab Times, “Amir discusses ties with Egyptian president”, 22 February 2022,

http://www.arabtimesonline.com/news/amir-discusses-ties-with-egyptian-president/, accessed 16 June 2023. 38 Arab Times, “Suspension of work visa for Egyptians”, 7 December 2022, http://

www.arabtimesonline.com/news/suspension-of-work-visa-for-egyptians/, accessed 16 June 2023. 39 Tawfiq Nasrallah, “Kuwait imposes KD9 fee for Egyptians entering the country”, Gulf News, 23 October 2022, https://gulfnews.com/world/gulf/kuwait/kuwaitimposes-kd9-fee-for-egyptians-entering-the-country-1.91451706, accessed 16 June 2023. 40 Arab Times, “Erdogan extends wishes for Kuwait prosperity in greeting”, 30 April 2022, http://www.arabtimesonline.com/news/erdogan-extends-wishes-for-kuwait-prospe rity-in-greeting/, accessed 16 June 2023. 41 Middle East Monitor, “Kuwait renews position on ending Israel’s occupation of all Palestine lands”, 15 October 2022, https://www.middleeastmonitor.com/20221015-kuw ait-renews-position-on-ending-israels-occupation-of-all-palestine-lands/, accessed 16 June 2023.

5

KUWAIT

175

summit in Algiers in November 2022, Crown Prince Mishal called for the resumption of the Middle East peace process and a just solution based on the Arab Peace Initiative.42 Earlier in May, the Kuwaiti Majlis passed a resolution condemning the killing of Palestinian-American journalist Shireen Abu Aqleh in Jenin while she was covering a raid by the Israel Defence Forces on suspected militant hideouts.43 The Kuwait Ministry of Education, despite the Kuwaitisation policy, has been recruiting Palestinian and Jordanian teachers for Kuwaiti schools to fill the vacancy for which qualified and experienced Kuwaiti nationals are not available.44 Kuwaiti efforts were also instrumental in ending the diplomatic tiff between some of the GCC countries and Lebanon. In April, Kuwait, Saudi Arabia and Yemen decided to return their ambassadors to Lebanon who had been recalled after a diplomatic row had erupted in October 2021 over an adversarial remark by Lebanon’s Minister of Information George Kordahi against Saudi Arabia.45 On international issues, Kuwait condemned the Russian invasion of Ukraine. Although other GCC countries were also critical of the Russian move, the Kuwaiti reaction was based on the normative understanding of opposing any military moves that undermine state sovereignty, a reflection of its experience of the Iraqi invasion, occupation and annexation.46 Hence, among the GCC countries, Kuwait was most emphatic in

42 Kuwait Times, “Kuwait reiterates commitment to lasting peace that guarantees Palestinians’ rights”, 2 November 2022, https://www.kuwaittimes.com/kuwait-reiterates-com mitment-to-lasting-peace-that-guarantees-palestinians-rights/, accessed 16 June 2023. 43 Arab Times, “Kuwait Parliament condemns assassination of Al-Jazeera correspondent”, 11 May 2022, http://www.arabtimesonline.com/news/kuwait-parliament-con demns-assassination-of-al-jazeera-correspondent/, accessed 16 June 2023. 44 Arab Times, “800 Male, female teachers needed; Palestinian and Jordanian teachers to be recruited”, 14 July 2022, http://www.arabtimesonline.com/news/800-male-fem ale-teachers-needed-palestinian-and-jordanian-teachers-to-be-recruited/, accessed 16 June 2023. 45 Amr Mostafa, “Saudi Arabia and Kuwait to reinstate their ambassadors to Lebanon”, The National, 7 April 2022, https://www.thenationalnews.com/gulf-news/saudi-ara bia/2022/04/07/saudi-arabia-to-reinstate-its-ambassador-to-lebanon/, accessed 16 June 2023. 46 Arab Times, “Kuwait concerned over developments of Russia-Ukraine crisis”, 3 October 2022, https://www.arabtimesonline.com/news/kuwait-concerned-over-develo pments-of-russia-ukraine-crisis/, accessed 16 June 2023.

176

MD. M. QUAMAR ET AL.

condemning the Russian invasion and calling for immediate Russian withdrawal and ceasefire.47 Like other regional countries, Kuwait has been hit economically by the crisis due to rise in food prices and the consequent impact on different sectors of the economy.48 At the same time, Kuwait has been keen on engaging and maintaining political and diplomatic relations with Russia. In May, a Russian Foreign Ministry stated that the two sides were keen to continue “traditional and friendly relations” in all sectors.49 In October, Kuwaiti envoy in Moscow Mansour alOtaibi met with Anton Kobyakov, an advisor to President Vladimir Putin, and discussed “expanding trade, economic, and investment cooperation between the two countries.”50 Kuwait’s relations with the US remains strongly rooted in strategic and military partnership. In January 2022, the two foreign ministers met in Washington, D.C. for the fifth bilateral strategic dialogue and affirmed their shared commitment to promoting regional security and stability.51 The bilateral security cooperation which was critical for the liberation of Kuwait in 1991, gradually acquired a more strategic component as the US adjusts its foreign policy to other geo-political priorities. Kuwait’s strategic location assumes importance in US’s Gulf policy.52 In May, the 14th edition of the bilateral joint military commission took place at

47 Giorgio Cafiero, “Analysis: Gulf states cautiously navigate war on Ukraine”, Aljazeera, 4 March 2022, https://www.aljazeera.com/news/2022/3/4/analysis-gulf-sta tes-cautiously-navigate-war-on-ukraine, accessed 16 June 2023. 48 Zawya, “Russia-Ukraine war hits construction industry hard in Kuwait”, 10 June 2022, https://www.zawya.com/en/projects/construction/russia-ukraine-war-hitsconstruction-industry-hard-in-kuwait-y0brpbjd, accessed 16 June 2023. 49 Kuwait Times, “Russia firm on boosting ties with Kuwait”, 29 May 2022, https:// www.kuwaittimes.com/russia-firm-on-boosting-ties-with-kuwait/, accessed 16 June 2023. 50 Roscongress, “Officials discuss bilateral Russian-Kuwaiti Cooperation in Moscow”, 18 October 2022, https://roscongress.org/en/news/v-moskve-obsudili-razvitie-dvusto ronnego-rossijsko-kuvejtskogo-sotrudnichestva/, accessed 16 June 2023. 51 US Embassy in Kuwait, “Joint Statement of the fifth United States-Kuwait strategic dialogue”, 28 January 2022, https://kw.usembassy.gov/joint-statement-of-the-fifth-uni ted-states-kuwait-strategic-dialogue/, accessed 16 June 2023. 52 Bilal Y. Saab, “Beyond post-desert storm: How to elevate the US-Kuwait security partnership”, Middle East Institute, 14 September 2022, https://www.mei.edu/public ations/beyond-post-desert-storm-how-elevate-us-kuwait-security-partnership#pt5, accessed 16 June 2023.

5

KUWAIT

177

Pentagon and covered important bilateral military issues.53 In August, the US embassy in Kuwait reaffirmed the status of Kuwait as a major non-NATO ally of the US, and the State Department approved the sale of weapons worth US$400 million to Kuwait.54 In December, the two sides organised Kuwait’s bilateral defence cooperation week. Kuwait has also strengthened diplomatic, political and economic relations with China. In January, the Kuwaiti foreign minister was on a five-day visit to China along with the foreign ministers of Saudi Arabia, Oman and Bahrain, as well as the Secretary-General of the GCC.55 The visit acquired importance given the diplomatic offensive by China in the Global South to generate support for the Winter Olympic Games, which some Western countries boycotted. In December, during the visit of the Chinese President Xi Jinping to Riyadh, the Kuwaiti crown prince attended the China-GCC and China-Arab summits underlining the growing political contacts. A bilateral meeting also took place between the two leaders.56 The focus of the bilateral engagements is trade, business, economy, energy and investments. During the meeting, the two sides discussed greater cooperation in the digital economy, the 5G network and aligning the developmental priorities under Vision 2035 and the Belt and Road Initiative (BRI). China has emerged as a major investor in the Kuwaiti efforts to rejuvenate its urban, road and transport infrastructure, including the Silk City construction.57 Following Western sanctions on using the SWIFT international transfer system for transactions with

53 US Department of Defence, “Readout of 14th U.S.-Kuwait Joint Military Commis-

sion, May 10–12, 2022”, 13 May 2022, https://www.defense.gov/News/Releases/Rel ease/Article/3030661/readout-of-14th-us-kuwait-joint-military-commission-may-10-122022/, accessed 16 June 2023. 54 Arab Times, “US envoy affirms Kuwait strategic non-NATO ally”, 4 August 2022, http://www.arabtimesonline.com/news/us-envoy-affirms-kuwait-strategicnon-nato-ally/, accessed 16 June 2023. 55 Aljazeera, “Gulf ministers visit China to discuss strengthening energy ties”, 10 January 2022, https://www.aljazeera.com/news/2022/1/10/gulf-ministers-visit-chinaexpected-to-strenghten-energy-ties, accessed 16 June 2023. 56 Ministry of Foreign Affairs of the People’s Republic of China (FMPRC), https:// www.fmprc.gov.cn/mfa_eng/topics_665678/xjpcxfh/202212/t20221211_10988816. html, accessed 16 June 2023. 57 Zawya, “Kuwait, China in deal to build $82bln Silk City project”, 19 February 2019, https://www.zawya.com/en/business/kuwait-china-in-deal-to-build82bln-silk-city-project-nqj653oq, accessed 16 June 2023.

178

MD. M. QUAMAR ET AL.

Russian entities in the wake of the Ukraine crisis, Kuwaiti businesses adopted the alternative Chinese wire transfer mediums for businesses with Russia.58 Kuwait has good relations with Pakistan, and the two sides have regular political, diplomatic and security contacts. A notable expatriate Pakistani community resides in the Emirate and contributes to strong trade and business relations between the two countries.59 Economy Kuwait weathered the Covid-19 outbreak fairly well and trod on the path of economic recovery aided by an increase in oil prices since the latter half of 2021. Its GDP (at current prices) exceeded pre-Covid-19 levels and was about US$136.643 billion in 2021 and US$181.978 billion in 2022 (Table 5.2). It experienced one of the highest growth rates in the region, facilitated by increased hydrocarbon production and dynamic non-oil GDP growth. The real non-oil GDP growth was robust at 3.6 per cent and 4 per cent in 2021 and 2022, respectively (Table 5.2). The combined effect of high oil revenues and non-oil GDP growth resulted in an estimated real GDP growth of about 8 per cent in 2022. However, due to the global economic slowdown, its real GDP growth is projected to moderate at 2.6 per cent in 2023. Table 5.2 Kuwait’s economic growth rate, 2019–2023

GDP at current prices (million US$) GDP at constant prices (million US$) Real GDP growth (annual per cent) Real non-oil GDP growth (annual per cent)

2019

2020

2021

2022

2023

134,620 128,783 −0.6 −0.1

105,960 117,379 −8.9 −6.5

136,643 118,915 1.3 3.6

181,978 – 8.0a 4.0

– – 2.6a –

Source OPEC, Annual Statistical Bulletin 2023; IMF, International Financial Statistics, Countrywise Database; IMF, Economic Prospects and Policy Challenges for the GCC Countries, 2022; a IMF estimates

58 Arab Times, “Kuwait detours ‘Swift’ in China”, 7 April 2022, http://www.arabti mesonline.com/news/companies-in-kuwait-settles-russian-payments-by-first-transferringit-to-china/, accessed 16 June 2023. 59 Pakistanis in Kuwait, https://www.pakistanisinkuwait.com/, accessed 16 June 2023.

5

KUWAIT

179

With economic recovery, there was increase in commercial returns. Travel and tourism offices in Kuwait reported an increase of 75 per cent in their revenues in 2022 over the previous year to about KD308.18 million (US$1 billion). During the first three quarters of 2022, the consumer spending of citizens and residents increased by 25 per cent over the same period in the previous year.60 Economic diversification remained sluggish for want of consistent reforms and investments, and the Emirate continued to be heavily dependent on hydrocarbon production. Project delays impair capital expenditures due to political deadlock. However, postal and the fibre network are close to being privatised as the necessary technical conditions are being completed and the study report would be submitted to the Council of Ministers for further action. The path towards economic diversification would have to be combined with sustainable frameworks and, in this respect, the Emirate is way behind its peers in the region. The policy posturing and initiatives are incipient, they could be impeded by continuing political flux. Kuwait has made significant progress in digital transformation and e-governance. The digitalisation of financial systems is active in the research stage, and a digital road map is part of its Vision 2035 with an increased focus on the Internet of Things (IoTs). Kuwait introduced fintech regulatory sandboxes in 2020 that would facilitate it to balance the risk to financial stability from innovative fintech models. Fiscal Situation and Inflation Kuwait has been continuously incurring budgetary deficits since 2013– 2014. In 2022, oil prices rose steadily and crossed US$100 per barrel in five months.61 With the consequent surge in oil revenues, the Ministry of Finance reported that Kuwait’s budgetary deficit was the lowest since the last surplus in 2013–2014. The government expenditure is extremely lopsided, with 88 per cent of the total spending in current expenditure, making the breakeven oil price about US$77–80 per barrel. Amidst constant political wrangling, the Majlis could not pass the debt law to

60 Indians in Kuwait, “Spending by citizens and residents increases to 30.9 billion dinars in the first nine months of this year”, 2 November 2022, https://www.indiansinkuwait.com/news/Spending-by-citizens-and-residents-increa ses-to-30-9-billion-dinars-in-the-first-nine-months-of-this-year/, accessed 16 June 2023. 61 MEES, vol. 65, no. 47, 25 November 2022, p. 16.

180

MD. M. QUAMAR ET AL.

raise more funds to cover its expenditure and had to tap into General Reserve Fund, which has depleted by about US$65 billion.62 In March, Fitch Ratings downgraded its long-term rating for Kuwait from AA to AA- due to the political constraints on decision-making to address structural issues such as excessive oil dependence, a large public sector and an overstretched welfare state. Besides, large-scale corruption keeps impairing economic activities. A report by the Minister of State for Municipal Affairs and Minister of State for Communications and Information Technology revealed major and shocking violations in the appointments, allowances and expenditures, causing huge losses to the state exchequer.63 Several bills were introduced during the budget discussion to strengthen protection in the management of pension funds and for the dismissal of the Kuwaiti Chamber of Commerce and Industry representatives from the Board of Directors (BoD) managing the fund and from the BoD of Kuwait Investment Authority (KIA).64 The Emirate’s direct exposure to the Ukraine war was minor, as only 0.1 per cent of its grain imports came from the warring countries. However, the global rise in commodity and food prices affected the residents. Food comprised 15 per cent of the total imports and about 15–16 per cent of the household budget, implying significant unease at national and household levels.65 The authorities reportedly added more countries to its list of primary suppliers and are looking to increase frozen food items’ validity period (from 90 to 120 days).66

62 MEES, vol. 65, no. 47, 25 November 2022, p. 16. 63 Arab Times, “Massive corruption revealed”, 24 August 2022, http://www.arabtimes

online.com/news/massive-corruption-revealed/, accessed 16 June 2023. 64 Arab Times, “Budgets to dominate Assembly session; Bill to protect retirees”, 24 October 2022, http://www.arabtimesonline.com/news/budgets-to-dominate-assemblysession-bill-to-protect-retirees/, accessed 16 June 2023. 65 Knoema, “Kuwait—Food imports as a share of merchandise imports”, https://kno ema.com/atlas/Kuwait/Food-imports, accessed 17 June 2023. 66 Indians in Kuwait, “New plans to enhance the food security in the country”, 13 November 2022, https://myiik.indiansinkuwait.com/news/New-plans-to-enh ance-the-food-security-in-the-country/, accessed 17 June 2023.

5

KUWAIT

181

Inflation rose to its highest level in nearly a decade, reaching 4.4 per cent in 2022.67 Before Covid-19, Kuwaiti inflation rates in 2019 were lower than in Bahrain and Oman but became one of the highest among the Gulf countries in 2022. It became a serious political issue, and members of the Majlis called on the government for wage hikes of government staff in proportion to the inflation rate. To insulate the effect of the global rise in prices of food, construction materials and other commodities on the citizens, the government’s subsidy bill during the first nine months of 2022 was about KD224.2 million (US$731 million), more than 55 per cent YoY increase.68 About one-third of per capita income is generally spent on housing. A law was passed to establish companies to build new cities and residential areas in collaboration with strategic foreign partners who could operate without needing a local agent.69 The real estate sector suffers from monopolies, and most Kuwaitis have to wait for an average of 15 years to get a house amid escalating prices. The prices of the main building materials in Kuwait have been the lowest in the region, yet costs have been going up due to delays in permit and licence approvals. There are policy initiatives to facilitate the licensing and approvals in the construction sector and import building materials to cool the housing prices.70 Employment and Expatriates The population in Kuwait increased by 1.8 per cent to reach 4.46 million in the first half of 2022, of which nationals were 1.5 million. Though the expatriate workers were returning following economic recovery, their numbers were down by 11.4 per cent from their pre-Covid-19 level, with an estimated drop of 382,000, according to the National Bank of 67 Arab Times, “Kuwait witnesses huge rise in inflation”, 13 June 2022, http://www. arabtimesonline.com/news/kuwait-witnesses-huge-rise-in-inflation/; B Izzak, “Assembly passes deficit budget as inflation hits 4.2%”, Kuwait Times, 1 November 2022, https:// www.kuwaittimes.com/assembly-passes-deficit-budget-as-inflation-hits-4-2/, accessed 16 June 2023. 68 Arab Times, “Govt spends KD 224.2m on food, construction material subsidies”,

1 December 2022, http://www.arabtimesonline.com/news/govt-spends-kd-224-2m-onfood-construction-material-subsidies/, accessed 16 June 2023. 69 B Izaak, “Assembly passes law to resolve housing problem”, Kuwait Times, 21 December 2022, https://www.kuwaittimes.com/assembly-passes-law-to-resolve-housingproblem/, accessed 16 June 2023. 70 Ibid.

182

MD. M. QUAMAR ET AL.

Kuwait.71 Kuwait state employment agency, the Civil Service Commission (CSC), has stepped up its efforts to create jobs for the nationals in government bodies. It updates itself with the job required in various government agencies and nominates from among the prospective Kuwaiti applicants.72 A bill to amend Civil Service Law of 1979 making recruitment of public sector workers only through nomination by the CSC was introduced in the Majlis in December.73 About 10,000 male and female citizens were employed in ministries and state-affiliated companies and institutions in the first half of 2022.74 Ministries of electricity and water, education and the banking sectors are the major employers of nationals. The banking sector emerged as the largest employer of the Kuwaiti national workforce.75 Finance Minister Abdul Wahab al-Rushaid reportedly instructed to Kuwaitise advisory jobs in the ministry and called for replacing all foreign employees. The employment of Kuwaiti nationals registered the strongest growth rate since 2011.76 The Public Authority for Manpower (PAM) and CSC are collaborating to implement a plan to boost the employment of Kuwaitis in the private sector. They seek approval for perks to ensure pay parity for Kuwaiti nationals working in the private sector with their compatriots in the public sector. To enhance job security, they are studying proposals to make

71 Indians in Kuwait, “382,000 expats left Kuwait since the beginning of “Corona” pandemic”, 26 October 2022, https://www.indiansinkuwait.com/news/382-000-expatsleft-Kuwait-since-the-beginning-of-Corona-pandemic/, accessed 16 June 2023. 72 Ramadan Al Sherbini, “Government jobs designated for over 3400 Kuwaitis”, Gulf News, 27 October 2022, https://gulfnews.com/world/gulf/kuwait/government-jobs-des ignated-for-over-3400-kuwaitis-1.91540353, accessed 16 June 2023. 73 Arab Times, “Bill aims to weed ‘wasta’ out of hiring”, 11 December 2022, http:// www.arabtimesonline.com/news/bill-aims-to-weed-wasta-out-of-hiring/, accessed 16 June 2023. 74 Arab Times, “10,000 Kuwaitis join govt service in 6 months”, 8 October 2022, http://www.arabtimesonline.com/news/10000-kuwaitis-join-govt-servicein-6-months/, accessed 16 June 2023. 75 Arab Times, “‘Bank sector largest employer of Kuwait national workforce’”, 1 September 2022, http://www.arabtimesonline.com/news/bank-sector-largest-employerof-kuwait-national-workforce/, accessed 16 June 2023. 76 Arab Times, “Lowest ‘unemployment’ among Kuwaitis since 2016”, 27 October 2022, http://www.arabtimesonline.com/news/lowest-unemployment-amongkuwaitis-since-2016/, accessed 16 June 2023.

5

KUWAIT

183

private sector jobs attractive to citizens.77 Only about 72,200 Kuwaitis are employed among the 1.434 million workforce in the private sector.78 As of September 2022, the share of Kuwaitis in the labour market, including both public and private sectors, rose to 22.2 per cent, with 483,803 Kuwaitis (253,850 females and 184,953 males), excluding the domestic sector.79 The domestic workers comprise about a quarter of the total expatriate workers in Kuwait, and by the end of the second quarter of 2022, their numbers were about 655,000 (315,000 males and 339,000 females). About 46.2 per cent of the total domestic workers were Indians, followed by Filipinos (24.7 per cent); most Indians are male, while the Filipinos top the female domestic workers.80 Domestic workers are reportedly entering the delivery services on a part-time basis, undercutting the delivery companies.81 To strengthen the rights of domestic workers, noteworthy initiatives were taken, specifying the duration of annual leaves, the transfer of domestic workers to another employer, penalties for late payment of wages and regulations and payments for overtime work.82 The expatriate workers in the public sector have been majorly employed in education, health and power ministries. These sectors have been specifically targeted for replacing the expatriate workforce with 77 Ramadan Al Sherbini, “Kuwait mulls lucrative perks for private sector workers”, Gulf News, 27 November 2022, https://gulfnews.com/world/gulf/kuwait/kuwait-mulls-luc rative-perks-for-private-sector-workers-1.92305665, accessed 16 June 2023. 78 Arab Times, “Govt to motivate Kuwaitis to work in private sector”, 26 April 2022, http://www.arabtimesonline.com/news/govt-to-motivate-kuwaitis-to-workin-private-Sector/, accessed 16 June 2023. 79 Indians in Kuwait, “Percentage of Kuwaiti nationals in the labour market reached 22.2 percent”, 28 January 2023, https://www.indiansinkuwait.com/news/Percentage-ofKuwaiti-nationals-in-the-labor-market-reached-22-2-percent/, accessed 16 June 2023. 80 Indians in Kuwait, “382,000 expats left Kuwait since the beginning of “Corona” pandemic”, 26 October 2022, https://www.indiansinkuwait.com/news/382-000-expatsleft-Kuwait-since-the-beginning-of-Corona-pandemic/, accessed 16 June 2023. 81 Arab Times, “‘Entry of domestic workers in delivery market a threat’—Part-timers snatch 50% requests”, 27 November 2022, http://www.arabtimesonline.com/news/ entry-of-domestic-workers-in-delivery-market-a-threat-part-timers-snatch-50-requests/, accessed 16 June 2023. 82 Arab Times, “Kuwait Human Rights issues report about status of migrant workers in the State of Kuwait”, 26 May 2022, https://www.arabtimesonline.com/news/kuw ait-human-rights-issues-report-about-status-of-migrant-workers-in-the-state-of-kuwait/, accessed 16 June 2023.

184

MD. M. QUAMAR ET AL.

Kuwaiti nationals, with a consequent drop in the number of expatriate workers in the government sector in 2022.83 A three-phased plan took off in September, which aimed to phase out expatriates doing municipality jobs and replace them with nationals. In the first phase, 33 per cent of the non-Kuwaiti jobs in the sector would be terminated.84 The specialised international team was close to establishing procedures to set up a quota system for recruiting expatriate workers, limiting their numbers without negatively affecting the market and prices. The fishing sector has been facing huge labour shortages pending the approval of new work permits. The members of the Kuwaiti Union of Fishermen have appealed that the sector involves hardships and hazards and cannot be run on the local workforce and requested to open entry visas to the expatriates so that the local market could be adequately supplied.85 Some kind of recalibration was also visible in the recruitment of more Arabs. The Ministry of Education sought to fill around 800 vacancies of male and female teachers across various disciplines with Palestinian and Jordanian applicants.86 The head of the delegation from the Ministry of Education to the Gaza Strip and West Bank to facilitate recruitment revealed that it was the fourth batch of Palestinian teachers that the ministry has contracted since 2017.87 Sudanese are preferred to Asians in the domestic sector, especially as drivers.88 Even Bidoons, considered 83

Ramadan Al Sherbini, “Kuwait: Significant drop in expat workers at government sector in 2022”, Gulf News, 30 December 2022, https://gulfnews.com/world/gulf/kuw ait/kuwait-significant-drop-in-expat-workers-at-government-sector-in-2022-1.92946397, accessed 16 June 2023. 84 Ibid. 85 Indians in Kuwait, “Kuwaiti Union of Fishermen appeal government to open entry

visas for expatriate fishermen”, 29 January 2023, https://www.indiansinkuwait.com/ news/Kuwaiti-Union-of-Fishermen-appeal-government-to-open-entry-visas-for-expatriatefishermen/, accessed 16 June 2023. 86 Arab Times, “800 Male, female teachers needed; Palestinian and Jordanian teachers to be recruited”, 14 July 2022, http://www.arabtimesonline.com/news/800-male-fem ale-teachers-needed-palestinian-and-jordanian-teachers-to-be-recruited/, accessed 16 June 2023. 87 Arab Times, “Ministry of Education signs contract with about 400 Palestinian teachers”, 11 September 2022, http://www.arabtimesonline.com/news/ministry-of-educationsigns-contract-with-about-400-palestinian-teachers/, accessed 16 June 2023. 88 Arab Times, “Sudanese replace Asian workers in Kuwait”, 10 May 2022, http:// www.arabtimesonline.com/news/sudanese-replace-asian-workers-in-kuwait/, accessed 16

5

KUWAIT

185

illegal residents within country, are being eyed to replace expatriates; an institutional arrangement through the Taysser platform is in the pipeline for their recruitment.89 The suspension of issuing work permits to Egyptian workers continued against the backdrop of the condition imposed by Cairo related to the minimum salary for its expatriate workers. Issuance of work permits for Egyptian workers was stopped in September 2021.90 An entry fee of KD9 (about US$35) was imposed on visiting Egyptians, but those with valid residency permits were exempted.91 Initiatives were also taken to curb visa and residency permit trading in recruiting expatriate workers. About 30,000 expatriates were reportedly deported in 202292 and the number of illegal foreign residents dropped to 136,000.93 The majority of the expatriates who were deported were Indians (6,400), Bangladeshis (3,500), Egyptians (3,000) and Filipinos (3,000). 94 Further tightening of residency permits included regulations which came into force in February 2023; expatriates staying outside Kuwait for more than six months were to lose their residency. There was an initiative for the issue of electronic civil work permits. Fees for various services availed by the expatriates were being hiked. There is also a call to

June 2023. 89 Minority Rights, “Kuwait: Bidoon”, https://minorityrights.org/minorities/bidoon/, accessed 16 June 2023. 90 Arab Times, “Suspension of work visa for Egyptians”, 7 December 2012, http:// www.arabtimesonline.com/news/suspension-of-work-visa-for-egyptians/, accessed 16 June 2023. 91 Tawfiq Nasrallah, “Kuwait imposes KD9 fee for Egyptians entering the country”, Gulf News, 23 October 2022, https://gulfnews.com/world/gulf/kuwait/kuwaitimposes-kd9-fee-for-egyptians-entering-the-country-1.91451706, accessed 16 June 2023. 92 Gulf News, “Over 30,000 expats deported from Kuwait over past year”, 3 January 2023, https://gulfnews.com/world/gulf/kuwait/over-30000-expats-deported-from-kuw ait-over-past-year-1.93005767, accessed 16 June 2023. 93 Ramadan Al Sherbini, “Number of illegals in Kuwait drops to 136,000”, Gulf News, 24 November 2022, https://gulfnews.com/world/gulf/kuwait/number-of-illegalsin-kuwait-drops-to-136000-1.92238107, accessed 16 June 2023. 94 Indians in Kuwait, “Kuwait deported 30,000 expatriates in 2022”, 2 January 2023, https://www.indiansinkuwait.com/news/Kuwait-deported-30-000-expatr iates-in-2022/, accessed 16 June 2023.

186

MD. M. QUAMAR ET AL.

hike electricity and water tariffs by 50–100 per cent for expatriates from the next financial year.95 An additional fee ranging KD5–10 (US$16–32)96 was levied on residents with health insurance effective 18 December 2022 for accessing medicines and emergency services at public clinics and hospitals.97 It was reported that the decision was to prevent the squandering of medicines in public clinics and hospitals. There have been reports of shortages of many vital medicines prescribed to a wide category of patients daily.98 Within days, the number of expatriates visiting public clinics and hospitals reportedly decreased (except for diabetes and accident-related care) by more than half; some reported patients registering for medical examination without getting the prescribed medicines.99 However, as the confusion over the order subsided, the per cent drop in expatriate visits to public health centres was about 20–25 per cent.100 Advisor to the National Human Rights Bureau (NHRB) Humdan al-Nimshan pointed out that the decision to levy additional health fees would force the expatriate workers with limited income to endure pain and illness.101 He further emphasised that it contradicts the law on human 95 Indians in Kuwait, “Call to hike electricity and water tariffs for expatriates”, 6 November 2022, https://www.indiansinkuwait.com/news/Call-to-hike-electricity-andwater-tariffs-for-expatriates/, accessed 16 June 2023. 96 Indian in Q8, “5 KD and 10 KD is medicine fee for expats in Kuwait, Ministry of Health”, 18 December 2022, https://indianinq8.com/5-kd-and-10-kd-is-medicine-feefor-expats-in-kuwait-ministry-of-health/, accessed 16 June 2023. 97 Arab Times, “Kuwait ups medicine fees for expats”, 18 December 2022, http://

www.arabtimesonline.com/news/kuwait-ups-medicine-fees-for-expats/, accessed 16 June 2023. 98 Indians in Kuwait, “New medicine shipments arrived Kuwait”, 13 December

2022, https://www.indiansinkuwait.com/news/New-medicine-shipments-arrived-Kuw ait/, accessed 16 June 2023. 99 Arab Times, “60% dip in expats visiting clinics—New fees leave expats in disarray”, 21 December 2022, http://www.arabtimesonline.com/news/60-dip-in-expats-visiting-cli nics-new-fees-leaves-expats-in-disarray/, accessed 16 June 2023. 100 Indians in Kuwait, “20 to 25 percent decrease in expatriates at clinics after implementing medicine fee”, 16 February 2023, https://www.indiansinkuwait.com/news/20to-25-percent-decrease-in-expatriates-at-clinics-after-implementing-medicine-fee/, accessed 16 June 2023. 101 Indians in Kuwait, “Expats can’t pay increased medical charges—Hamdan AlNimshan”, 20 December 2022, https://www.indiansinkuwait.com/news/Expats-can-tpay-increased-medical-charges-Hamdan-AlNimshan/, accessed 16 June 2023.

5

KUWAIT

187

rights and must be repealed, especially since Kuwait has been declared an international humanitarian centre. To ease pressure on health infrastructure, law-maker Osama al-Shaheen asked for the speedy operationalisation of the health insurance hospital company (Dhaman), established in 2014 to provide healthcare exclusively for expatriates. In 2022, Dhaman completed the construction of its first hospital with 330-bed capacity, 21 intensive care units and 14 surgical operating norms.102 Despite difficulties, some normalcy returned in the lives of the expatriates. After almost three years due to Covid-19, some Kuwaiti banks restarted lending to expatriates. In the first nine months of 2022, expatriate workers remitted KD4.27 billion (US$13.9 billion), an increase of 3.6 per cent over the same period in the previous year.103 Lulu exchange belonging to Lulu Financial Group has been the leading payment provider for cross-border transactions and currency exchange services, with 31 branches across the Emirate.104 External Sector Oil remained the dominant export commodity with more than 90 per cent share. Table 5.3 shows the current account balance in the Emirate. Kuwait exported about US$110.37 billion worth of goods and services in 2022 as against US$76.18 billion in 2021; an increase of more than 44 per cent. The non-oil exports were about US$5.2 billion in 2021.105 As economic activity resumed, imports also increased, from US$44 billion in 2021 to US$55.27 billion, an increase of more than 20 per cent. However, its current account surplus reduced in 2022 to about US$17.10 billion. 102 Indians in Kuwait, “MP ask for the speedy activation of health assurance hospitals

for expatriates”, 19 December 2022, https://www.indiansinkuwait.com/news/MP-askfor-the-speedy-activation-of-Health-Assurance-Hospitals-for-expatriates/, accessed 16 June 2023. 103 Indians in Kuwait, “Expatriates from Kuwait sent home KD 4.27 billion in 9 months”, 4 January 2023, https://www.indiansinkuwait.com/news/Expatriates-fromKuwait-sent-home-KD-4-27-billion-in-9-months/, accessed 16 June 2023. 104 Outlook, “HDFC Bank, LuLu exchange ink deal to enhance cross-border payments between India-Gulf region”, 22 February 2023, https://www.outlookindia.com/bus iness/hdfc-bank-lulu-exchange-ink-deal-to-enhance-cross-border-payments-between-indiagulf-region-news-264334, accessed 16 June 2023. 105 Central Bureau of Statistics, Kuwait, “Foreign Trade Statistics, 2021”, https:// www.csb.gov.kw/Pages/Statistics_en?ID=38&ParentCatID=4, accessed 16 June 2023.

188

MD. M. QUAMAR ET AL.

Table 5.3 Kuwait’s current account select indicators, 2019–2022 (US$ million)

Exports of goods and services Petroleum exports Imports of goods and services Current account balance

2019

2020

2021

2022

72,580 52,433 61,135 13,287

49,982 35,228 40,671 −999

76,177 61,703 44,001 32,574

110,370 95,352 55,271 17,101

Source OPEC, Annual Statistical Bulletin, 2023

Most of the oil exports go to Asian countries (Table 5.4) but refined products head to more diverse markets. Kuwait exported record volumes of refined products to Europe in August. Kuwait is better placed than its regional peer to export refined petroleum products as its international marketing arm KPI owns several Q8 branded fuel stations in Europe, especially Italy. Its LNG imports were majorly from Qatar, followed by the US. It also imported LNG from Russia for the first time since 2018 and imported two cargos of 73,000 tons each in May and June.106 Table 5.4 Kuwait’s direction of trade, 2022 (US$ million)

Top five export destinations

Top five import sources

Top five energy export destinations

UAE (1282.42)

China (mainland) (5030.30) UAE (2741.88)

China (25598.97)

China (1020.38) Saudi Arabia (1004.75) India (923.48) Iraq (489.69)

US (1815.58) Saudi Arabia (1501.19) Japan (1448.83)

South Korea (12340.05) India (11674.18) Japan (10029.89) Taipei (6862.59)

Source IMF, Direction of trade Database; International Trade Centre

106 MEES, vol. 65, no. 40, 7 October 2022, p. 12.

5

KUWAIT

189

In March, Saudi Arabia and Kuwait signed a document on the joint development of the Dorra gas field in the neutral zone shared by the two countries. On 11 December, they signed an MoU to jointly develop the Dorra gas field, estimated to produce 1 billion cf/d of dry gas and 84,000 barrels per day of condensates to be split equally.107 In the previous years, the development of the gas field could not take off due to the disagreement between the two countries and Iran’s claims that the gas field extends to its territorial waters, where it is called Arash.108 The Dorra/ Arash dispute arose between Kuwait and Iran during the 1960s. The Iranians awarded offshore rights to British Petroleum and the Kuwaitis to Shell; the two overlapped in the northern segment of the field. The maritime boundary between Kuwait and Iran had not been fully demarcated and has been the bone of contention between the two generally cordial neighbours over the years. In March, Iran’s foreign ministry spokesman slammed the Kuwaiti plans to develop Dorra field as illegal, stating that “maritime boundaries have yet to be defined” and adding, “Iran stands ready to enter into talk.”109 Iran also announced its plans to drill at the field soon. Despite the Iranian objections, Kuwait and Saudi Arabia reiterated their plans to proceed with the US$7 billion development of the Dorra gas field. It was stated that the two have unsuccessfully invited Iran for the delimitation of the eastern boundary of the neutral zone and both jointly renewed their invitation to Iran to negotiate on the delineation of maritime boundaries.110 Table 5.4 shows the direction of Kuwait’s trade, which is majorly towards Asian countries. The UAE, Saudi Arabia and Iraq were the major export destinations within the region. Exports to the GCC countries in 2021 were about US$2 billion, predominantly re-exports. China was its second, and India was the fourth largest export destination in 2022. Similarly, major sources of imports were in Asia, with China in the lead. Imports from the GCC countries were about US$6.2 billion in 2021.

107 MEES, vol. 65, no. 12, 25 March 2022, p. 4. 108 MEES, vol. 65, no. 50, 16 December 2022, p. 5. 109 MEES, vol. 65, no. 13, 1 April 2022, p. 19. 110 Khaleej Times, “Kuwait, Saudi Arabia invite Iran to hold talks on gas-rich offshore

zone”, 13 April 2022, https://www.khaleejtimes.com/energy/kuwait-saudi-arabia-inviteiran-to-hold-talks-on-gas-rich-offshore-zone, accessed 16 June 2023.

190

MD. M. QUAMAR ET AL.

Energy and Environment Kuwait is one of the world’s largest crude oil exporting countries, with the world’s second largest oil field, the Greater Burgan field. It exported about 2.59 mbpd of crude oil and petroleum products in 2022 (Table 5.5), mainly to Asian countries. Since Kuwait’s OPEC+ petroleum production quota for 2023 is set as 2.68 mbpd, its increasing middle distillate production would reduce the crude oil exports to as little as 1.26 mbpd.111 It exported the first cargo of low sulphur fuel oil (LSFO) in November 2022. It faces high costs in maintaining production capacity from its ageing oil fields. Its upstream cost has increased by 90 per cent over the decade from US$4.87 in 2012 to about US$8.52 in 2021.112 The Emirate witnessed three years of consecutive production capacity decline and sought to reverse it with a US$40 billion planned borrowing by Kuwait Petroleum Corporation (KPC) over the next five years. Japan, its third largest crude oil importer, would facilitate a loan of US$1 billion to KPC.113 Table 5.5 Kuwait’s energy statistics, 2018–2022

Oil production (mbpd)a Oil consumption (mbpd) Crude oil and petroleum products exports (mbpd) Refining capacity (Thousand bpd) Petroleum products exports (mbpd) Natural gas production (bcm) Natural gas marketed production (Billion standard cubic meter) Natural gas flaring (bcm) Natural gas consumption (bcm) LNG imports (bcm) Carbon dioxide emission from energy (million tons)

2018

2019

2020

2021

2022

2.74 0.42 2.68

2.68 0.46 2.62

2.44 0.46 2.35

2.41 0.48 2.34

2.71 – 2.59

736 0.63 16.9 17.7

736 0.64 18.2 14.0

800 0.53 16.5 12.9

1430 0.60 17.4 12.7

– 0.71 – 13.9

1.0 21.2 4.3 101.9

0.8 23.3 5.1 103.7

0.9 22.1 5.7 95.9

1.0 25.1 7.7 103.1

– – – –

Source OPEC, Annual Statistical Bulletin, 2023; British Petroleum, Statistical Review of World Energy, 2022; a Includes production from the neutral zone

111 MEES, vol. 65, no. 40, 7 October 2022, p. 12. 112 MEES, vol. 65, no. 29, 22 July 2022, p. 2. 113 MEES, vol. 65, no. 13, 1 April 2022, p. 5.

5

KUWAIT

191

Investment in refinery upgrades began to yield results as middle distillate production significantly ramped up. Its refining throughput increased from 800,000 bpd in 2020 to 1,430,000 bpd in 2021 (Table 5.5). Its US$15.6 billion clean fuel project (CFP) has increased the total refining capacity from its Mina al-Ahmadi, and Mina Abdullah refineries from 736,000 to 801,000 bpd and has facilitated the export of low sulphur petroleum products. With a capacity of 205,000 bpd, the first crude oil distillation unit (CDU) of the Al-Zohra refinery started its commercial operation at the end of 2022.114 Kuwait National Petroleum Corporation (KNPC) aims to increase its refining capacity to 1.6 mbpd by 2025. Its current and in-pipeline refining capacity adds up to 1.46 mbpd.115 International consultants have been asked to prepare a feasibility study on constructing a new oil products terminal at Mina Al-Ahmadi.116 An increase in refining capacity came at an opportune time when refining margins were high as the global market for petroleum products had been tight. The KNPC posted its highest annual net profit in nine years in 2021–2022 to about US$1.12 billion.117 Kuwait’s domestic oil consumption has increased from 0.42 mbpd in 2018 to 0.48 mbpd in 2021 (Table 5.5). The share of oil and gas in the primary energy consumption of Kuwait is almost in the ratio 49:50. Over the previous decade, its per capita primary energy consumption decreased in 2017 but increased in the last few years. Between 2011 and 2021, the decadal growth rate of per capita primary energy consumption had decreased by 1.3 per cent in favour of secondary energy consumption like electricity. Kuwait has been importing LNG to meet the domestic gas shortages. The decadal growth rate of LNG imports during 2011–2021 was 9.8 per cent. With economic recovery, it imported 7.7 bcm of LNG in 2021 as against 5.7 bcm in 2020 (Table 5.5). Natural gas supply has been important for its power plants, which witnessed record power demand and generation during 2022. With peak electricity demand as temperatures raced past 50 °C, the power generation was close to its full capacity,

114 MEES, vol. 65, no. 51/52, 23 December 2022, p. 10. 115 MEES, vol. 65, no. 37, 16 September 2022, p. 13. 116 MEES, vol. 65, no. 41, 14 October 2022, p. 21. 117 MEES, vol. 65, no. 19, 13 May 2012, p. 15.

192

MD. M. QUAMAR ET AL.

and the buffer capacity dropped to below 1 GW.118 Due to political wrangling, key infrastructure projects have been held up, and no new power plant is scheduled to become functional by 2025. The upgraded refinery is pumping low sulphur fuel oil for the Kuwaiti power plants, which would relieve domestic gas shortages. The new 11.2 million tons per year Al-Zour LNG import terminal has been operational for over a year. An increase in domestic production of low sulphur fuel oil implies that the US$3 billion import LNG terminal would be operating at 25 per cent capacity in the near future.119 Its LNG imports reduced in 2022 to about 60 per cent of the volumes of the previous year.120 The decadal growth rate of CO2 emissions from energy was 1.5 per cent during 2011–2021. Kuwait has committed to reducing its CO2 emissions by 7.5 per cent by 2035 from its 2015 levels. It was the first in the region to initiate one of the largest programmes on solar energy in the 1970s that lost steam in the 1990s due to low oil prices and devastations from the 1990–1991 war. It now lags its regional peers in the development of renewable power. A beginning is made towards generating about 0.1 TWH of solar energy.121 The total installed renewable energy capacity is just about 70 MW (60 MW solar and 10 MW wind) at Shagaya.122 The Shagaya Energy Park is the Persian Gulf’s first to combine different renewables—solar, wind and solar thermal, but soon it got entangled with a legal issue with the sale of power and faces an uncertain future.123 There are fast-increasing solar rooftop projects for car parking, schools, residential complexes, etc.124 There are plans for developing the Al-Dabdaba project through Kuwait Authority for Partnership Projects (KAPP), which is interested in a 3-GW solar facility. Environment Public Authority and Environment Protection Fund had installed a reverse vending machine 118 MEES, vol. 65, no. 40, 7 October 2022, p. 12. 119 MEES, vol. 65, no. 50, 16 December 2022, p. 11. 120 MEES, vol. 65, no. 40, 7 October 2022, p. 12. 121 British Petroleum, Statistical Review of World Energy, 2022, https://www.bp.com/

en/global/corporate/energy-economics/statistical-review-of-world-energy.html, 18 June 2023.

accessed

122 MEES, vol. 65, no. 5, 4 February 2022, p. 17. 123 Outlook, “Kuwait, among world’s hottest places, lags on climate action”, 21

March 2022, https://www.outlookindia.com/business/kuwait-among-world-s-hottest-pla ces-lags-on-climate-action-news-187827, accessed 16 June 2023. 124 Ibid.

5

KUWAIT

193

that collects glass, plastic and metal waste for recycling; the depositor gets points that could be exchanged for vouchers.125 In December, the Kuwait Public Transport Company and Al-Qurain Automatic Trading Company launched their first electric mass transit bus, manufactured by China-based Kinglong.126 Society The impact of Covid-19 was deeply felt in Kuwait, like in different parts of the world. Healthcare, education, domestic affairs, expatriates, women and children were more affected, not to mention the effects of economic problems caused by the Covid-19 disruptions. Being a welfare and rentier state, the pressure on Kuwait’s finances to fulfil its responsibilities towards its citizens was a challenge. In 2022, however, the problems and challenges related to Covid-19 began to ease as the number of cases decreased and pandemic waves reduced. Kuwait witnessed a surge in the Omicron variant of Covid-19 towards late 2021, and the caseload increased in January 2022, with the single-day infection touching 6,913 on 29 January, which was also the highest single-day case in Kuwait.127 This led to the re-imposition of some public restrictions. Gradually, the second wave began to weaken, and by April-end, the situation had returned to normalcy. Given that the Omicron variant was not as lethal, Covid-19-related casualties were limited to 103 in 2022, even though the number of infections was nearly 250,000.128 Most of these cases were reported between January and February. The situation plateaued during April–May, with a minor increase in July–August and returning to complete normalcy towards the last quarter.

125 Indians in Kuwait, “Dispose your waste and get vouchers! EPA install reverse vending machines for plastic waste collection”, 1 December 2022, https://www.indiansin kuwait.com/news/EPA-reverse-vending-machines-for-plastic-waste-collection/, accessed 16 June 2023. 126 Indians in Kuwait, “KPTC received first electric bus in Kuwait”, 25 December 2022, https://www.indiansinkuwait.com/news/KPTC-received-first-electricbus-in-Kuwait/, accessed 16 June 2023. 127 John Hopkins University & Medicine, “Kuwait: Overview”, 10 March 2023, https://coronavirus.jhu.edu/region/kuwait, accessed 16 June 2023. 128 Ibid.

194

MD. M. QUAMAR ET AL.

The lingering Covid-19 pandemic did create certain social challenges, with women and children suffering the most and education and healthcare sectors witnessing serious interruptions. Cases of domestic violence against women increased while the shift to online teaching created extra challenges for children and women, schools and teachers.129 Besides the impact of Covid-19, Kuwaiti women have faced many challenges due to cultural restrictions and customary laws that limit their rights. Kuwaiti women continue to struggle to get equal legal rights concerning marriage, divorce, inheritance, custody of children and passage of nationality.130 In terms of economic participation, certain changes have become visible over the years and women are now allowed to work in sectors that were previously considered taboo.131 There are also issues of human rights, freedom of expression, rights of migrant workers and minority populations and the lingering issue of the Bidoon—stateless—population. Discrimination against weaker and vulnerable sections is prevalent. Social stratification and culture means people with limited family network and no access to elite networks continue to live on the margins. The expatriate population, especially those working in the unorganised and domestic sector, find themselves at the receiving end of the social structure that is vertically stratified based on descent and wealth. Any expression of a divergence from the established gender norms attracts societal and political retribution, and hence, the rights of the LGBTQ community are hardly recognised, and any expression of their rights attracts retribution.132 Kuwait has also faced challenges because of the increase in drug-abuse cases, especially among the youth. This has forced the authorities to take preventive and remedial measures

129 Maha Meshari Al-Sejari and Hend Batel Al-Ma’seb, “Aggression and violence during the lockdown caused by the COVID-19 pandemic in Kuwait”, Journal of Effective Disorder Reports, December 2022, vol. 10, pp. 1–8. 130 Human Rights Watch, “Kuwait: Events of 2021”, https://www.hrw.org/world-rep

ort/2022/country-chapters/kuwait, accessed 16 June 2023. 131 Arab Times, “Kuwaiti women set to be allowed to work in places earlier declared ‘no go’ areas”, 27 September 2022, http://www.arabtimesonline.com/news/kuwaiti-womenset-to-be-allowed-to-work-in-places-earlier-declared-no-go-areas/, accessed 16 June 2023. 132 Arab Times, “Gay slogans banned in Kuwait”, 28 June 2022, http://www.arabti mesonline.com/news/gay-slogans-banned-in-kuwait/, accessed 16 June 2023.

5

KUWAIT

195

and to create social awareness against drug abuse.133 Kuwait has a high Human Development Index (HDI) score of 0.831 as of 2021. In addition, it had a Gender Development Index (GDI) value of 1.009 and a Gender Inequality Index (GII) score of 0.305 in 2021.134

Bilateral Relations India and Kuwait enjoy cordial relations. They cooperated during Covid19 to overcome the challenges posed by the global pandemic. India helped Kuwait by sending healthcare professionals and vaccine supplies, while Kuwait came forward with emergency medical oxygen supplies when India faced the devastating second wave in mid-2021. However, the political, economic and strategic relations have remained muted compared to other Gulf countries. Kuwait remains the only GCC country that Prime Minister Modi has not visited since coming to power in May 2014. The high-level political engagements remained limited to two visits by Indian EAMs—Sushma Swaraj in October 2018 and S. Jaishankar in June 2021. Energy and expatriates continue to be the most important pillars in bilateral relations, and unlike the other GCC countries, this has not expanded to other areas. Politics and Security India and Kuwait have been gradually expanding their political and security engagements. In January 2022, EAM Jaishankar telephoned his Kuwaiti counterpart Ahmad Nasser al-Sabah and discussed bilateral issues.135 In recent years, many other ministerial exchanges have taken place to develop bilateral ties, including in the energy and petrochemical sectors. Media reports suggested that Prime Minister Modi might

133 Arab Times, “Awqaf Ministry intensifies efforts against drugs evil”, 20 December 2022, http://www.arabtimesonline.com/news/awqaf-ministry-intensifies-eff orts-against-drugs-evil/, accessed 16 June 2023. 134 Human Development Report, “Kuwait”, https://hdr.undp.org/data-center/spe cific-country-data#/countries/KWT, accessed 16 June 2023. 135 Arab Times, “Kuwait’s FM, ‘Indian’ counterpart discuss bilateral ties in phone call”, 22 January 2022, http://www.arabtimesonline.com/news/kuwaits-fm-indian-counterpartdiscuss-bilateral-ties-in-phone-call/, accessed 16 June 2023.

196

MD. M. QUAMAR ET AL.

travel to Kuwait in 2022136 but the visit did not materialise and both sides have not publicly discussed the issue. However, the prime minister extended warm wishes to Ahmed al-Sabah on his appointment as the prime minister of Kuwait in July.137 Bilateral security cooperation has been mostly confined to the maritime domain. In July and October, Indian Naval Ships visited Kuwait for port calls and training exchange, respectively. INS Teg visited Kuwait in July. INS Tir and INS Sujata, along with Indian Coast Guard Ship Sarathi, visited Kuwait for training exchanges in October.138 In June 2022, a diplomatic row erupted over derogatory remarks by Nupur Sharma, an official spokesperson of the ruling Bharatiya Janata Party (BJP) against Prophet Muhammad and led to some backlash against India in Kuwait, both at the government and civil society levels. Kuwait issued a statement critical of the remark and summoned the Indian ambassador to its Ministry of Foreign Affairs to protest against the “controversial” statement.139 Media reports suggested some campaigns in Kuwait to withdraw Indian goods from supermarkets.140 After reports of some expatriates protesting the remarks by gathering in a public place and holding placards, Kuwait decided to deport many, as public protests are

136 Dipanjan Roy Chaudhury, “PM Narendra Modi plans Kuwait visit in January”, The Economic Times, 15 December 2021, https://economictimes.indiatimes.com/ news/india/pm-modi-plans-kuwait-visit-in-january/articleshow/88285002.cms, accessed 17 June 2023. 137 Outlook, “Prime minister Modi congratulates Kuwait’s new prime minister”, 25 July 2022, https://www.outlookindia.com/international/prime-minister-modi-congratul ates-kuwait-s-new-prime-minister-news-211923, accessed 16 June 2023. 138 Arab Times, “India’s INS Tir, INS Sujata, ICGS Sarathi dock at Port Shuwaikh”, http://www.arabtimesonline.com/news/indias-ins-tir-ins-sujata-icgs-sar athi-dock-at-port-shuwaikh/, accessed 16 June 2023. 139 Ibid. 140 The Economic Times, “Kuwait supermarket pulls Indian products as row grows

over BJP spokesperson’s Prophet remarks”, 7 June 2022, https://economictimes.indiat imes.com/news/international/business/kuwait-supermarket-pulls-indian-products-as-rowgrows-over-prophet-remarks/articleshow/92043129.cms, accessed 16 June 2023.

5

KUWAIT

197

not allowed in the Emirate.141 With clarification from both the Government of India142 and the Indian Embassy in Kuwait that the statement was by an individual and did not reflect the views of the GoI or the ruling party,143 the row gradually weathered down. Trade and Commerce India was Kuwait’s fourth largest trading partner in 2021. In 2022, it was the fourth largest destination for its exports and third largest for its energy exports (Table 5.5). For India, Kuwait was the 17th largest source of imports, with a share of 1.72 per cent in the total imports during 2022–2023. Due to the escalation of oil prices, India’s imports from Kuwait increased from US$11 billion in 2021–2022 to US$12.3 billion in 2022–2023. Figure 5.1 shows the trajectory of India’s trade with Kuwait. Total bilateral trade increased from US$12.25 billion in 2021–2022 to US$13.81 billion in 2022–2023, mostly due to increased oil imports. The main categories of imports from Kuwait in 2022–2023 were petroleum crude and products; organic chemicals; aircraft, spacecraft and parts; and plastic raw material (Fig. 5.2). The imports that have witnessed high growth rates during 2020–2022 were petroleum crude and products; organic chemicals, electrical and mechanical equipment; metals and products, among others. Imports in the category of aircraft spacecraft and parts thereof were insignificant in 2021–2022 but increased to US$64 million in 2022–2023. The main items exported to Kuwait in 2022–2023 comprised basmati rice; organic chemicals; ceramic products, motor vehicle, gold and precious metals (Fig. 5.3). The exports that witnessed high growth rates between 2020 and 2022 were organic chemicals, electrical machinery, precious and semi-precious stones, iron and steel, among others. India

141 The Indian Express, “Kuwait government to deport expats who protested over remarks against Prophet at illegal demonstration”, 14 June 2022, https://indianexpress. com/article/world/kuwait-government-to-deport-expats-who-protested-over-remarks-aga inst-prophet-at-illegal-demonstration-7967079/, accessed 16 June 2023. 142 Sounak Mukhopadhyay, “Nupur Sharma statement: Kuwait summons India’s envoy, issues an official letter of complaint”, Livemint, 5 June 2022, https://www.livemint. com/news/india/nupur-sharma-statement-kuwait-summons-india-s-envoy-issues-an-off icial-letter-of-complaint-11654442603060.html, accessed 17 June 2023. 143 Ibid.

198

MD. M. QUAMAR ET AL.

Fig. 5.1 India’s trade with Kuwait, 2016–2022 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

Fig. 5.2 India’s top five import items from Kuwait, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedash board.aspx)

5

KUWAIT

199

Fig. 5.3 India’s top five export items to Kuwait, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

needs to focus on more diversified high-value items like pharmaceuticals and building material, for which there is a growing market in Kuwait. The Federation of Indian Chamber of Commerce and Industry (FICCI) mobilised an Indian delegation from the food and beverage sector to visit Kuwait in July 2022. The Federation of Indian Export Organizations (FIEO) took a delegation comprising wide-ranging sectors to Kuwait during 16–19 October 2022. Al-Muzaini Exchange Company, the leading money exchanger in Kuwait, announced that expatriates could pay their bills in India conveniently and safely through its Bharat Bill Payment Service (BBPS).144 There is no branch of Kuwaiti banks operating in India though it had a share of 2.4 per cent in India’s total inward remittances for 2020–2021.145 Indian workers are in higher demand across all sectors due to their ability to speak English and the lower minimum amount required for approving their contracts, which is KD100 per month.146

144 Indians in Kuwait, “Al Muzaini Exchange announces Bharat Bill Pay service to pay your bills in India”, 11 December 2022, https://www.indiansinkuwait.com/news/AlMuzaini-Exchange-announces-Bharat-Bill-Pay-service-to-pay-your-bills-in-India/, accessed 16 June 2023. 145 Reserve Bank of India, “Headwinds of COVID-19 and India’s inward remittances”, 16 July 2022, https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=21141, accessed 16 June 2023. 146 Arab Times, “Minimum wages set for ‘expat’ workers”, 2 February 2022, http://www.arabtimesonline.com/news/minimum-wages-set-for-expat-workers/, accessed

200

MD. M. QUAMAR ET AL.

Kuwaiti investments in India have been largely indirect or institutional portfolios and have been estimated to be about US$5 billion.147 The direct investments have been insignificant, and the cumulative FDI from Kuwait in India between April 2000 and December 2022 was about US$89.38 million.148 In 2022, the Kuwaiti FDI was just US$2.89 million. The KIA plans to double its investment in India and seeks collaboration for investments in third countries.149 Notably, KIA has been active in overseas FDI but has very few direct investments in India. However, there were reports that KIA reduced its investment in Indian stocks by 25 per cent (and in Chinese stocks by 22 per cent) during the year.150 Energy Kuwait was the sixth largest crude oil supplier to India,151 and its share in India’s crude oil imports increased from 4.71 per cent in 2019–2020 to 6.49 per cent in 2021–2022 but declined to 4.95 per cent in 2022–2023 (Table 5.6). Its importance is also growing as a supplier of LPG to India. The share of liquefied and other gaseous hydrocarbons increased from 4.71 per cent in 2019–2020 to 7.25 per cent in 2022–2023. The total energy imports from Kuwait have almost doubled from US$5.88 billion

16 June 2023. 147 Dipanjan Roy Chaudhury, “Oil-rich Kuwait plans to double investments in India; eyes joint projects in third nation”, The Economic Times, 6 February 2019, https://eco nomictimes.indiatimes.com/news/economy/foreign-trade/oil-rich-kuwait-plans-to-dou ble-investments-in-india-eyes-joint-projects-in-third-nation/articleshow/67870178.cms, accessed 16 June 2023. 148 Department for Promotion of Industry and Internal Trade, “Quarterly fact sheet fact sheet on foreign direct investment (FDI) inflow from April, 2000 to December, 2022” December 2022, https://dpiit.gov.in/sites/default/files/FDI%20Fact sheet%203rd%20quarter%202022-23.pdf, accessed 16 June 2023. 149 Dipanjan Roy Chaudhury, “Oil-rich Kuwait plans to double investments in India; eyes joint projects in third nation”, 6 February 2019, https://economictimes.indiatimes. com/news/economy/foreign-trade/oil-rich-kuwait-plans-to-double-investments-in-indiaeyes-joint-projects-in-third-nation/articleshow/67870178.cms, accessed 16 June 2023. 150 Zawya, “Kuwait investment authority 6th largest gov’t investor worldwide”, 3 January 2023, https://www.zawya.com/en/world/middle-east/kuwait-investment-author ity-6th-largest-govt-investor-worldwide-uw11le0f, accessed 16 June 2023. 151 Department of Commerce, Ministry of Commerce and Industry, India.

5

KUWAIT

201

Table 5.6 India’s energy imports from Kuwait, 2019–2022 (US$ million)

Crude oil (HS Code 2709) Petroleum products (HS Code 2710) Petroleum and other gaseous hydrocarbons (HS Code 2711) Total mineral fuels. mineral oils and distillates (HS Code 27)

2019–2020

2020–2021

2021–2022

2022–2023

4840.35 (4.71) 171.07 (2.17) 823.41 (4.71) 5879.57 (3.83)

3126.93 (5.26) 66.25 (1.15) 902.99 (5.77) 4141.61 ( 4.15 )

7943.04 (6.49) 238.22 (2.38) 1648.01 (6.24) 9923.08 ( 5.09 )

8024.61 (4.95) 170 (1.57) 2312.05 (7.25) 10642.40 (4.08)

Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry, India https://tradestat.commerce.gov.in/eidb/Default.asp

in 2019–2020 to US$10.64 billion in 2022–2023 with corresponding increase in its share from 3.83 per cent to 4.08 per cent. India-Kuwait Solar Forum was launched in 2021 to explore the full potential of partnership as the two countries marked 60 years of diplomatic relations. Kuwait is yet to join the International Solar Alliance (ISA) spearheaded by India. It is keen to achieve its targets of supplying 15 per cent of its peak power demand by renewable energy and discussions were under way in the India-Kuwait Solar Forum to collaborate with the renewable energy organisations and private players. Social and Cultural India-Kuwait cultural relations mainly revolve around the large Indian expatriates estimated at close to a million, the largest expatriate community in Kuwait.152 The Indian community is vibrant and conducts several annual competitions, exhibitions and shows. A well-known Indian engineer Ahmad Ismail (from Kerala), with 60 years of experience in Kuwait, released his autobiography of his stellar achievements in the Emirate and leaders from various engineering industries in Kuwait attended the book launch. The number of expatriates flowing to Kuwait rose again in 2022 after two Covid-19-affected years. During the first seven months of 152 India, MEA, “Question no. 583 Indian workers in gulf countries”, 9 December 2022, https://mea.gov.in/lok-sabha.htm?dtl/35979/question+no+583+indian+workers+ in+gulf+countries; Arab Times, “Indians lead workforce in Kuwait”, 24 October 2022, http://www.arabtimesonline.com/news/indians-lead-workforce-in-kuwait/, accessed 16 June 2023.

202

MD. M. QUAMAR ET AL.

2022, according to the Indian government, 33,631 emigration clearances were issued for Indians to travel to Kuwait.153 There are plans to hire Indian nurses and cleaners for employment in private healthcare centres in Kuwait.154 Indian expatriates have, at times, faced problems due to local laws and regulations. In November 2022, it was reported that some Indian engineers faced problems due to the non-recognition of their college/ university degrees.155 In Rajya Sabha, the MEA clarified that the Indian embassy in Kuwait has been taking up the issue with the authorities to clarify that registration with the National Board of Accreditation is not yet mandatory in India and hence many engineers working in Kuwait who seek renewal of their visa have passed out of colleges that are not registered with NBA, and those who have gained their degrees before 2012 are not from an NBA-accredited college as the body was established only in 2012.156 To avoid its recurrence, a solution must be found in consultation with the Kuwaiti Society of Engineers, the body responsible for certifying the authenticity of all engineers working in Kuwait industries.

Challenges and Opportunities In recent years, Kuwait has remained on the margins of India’s growing engagements with the Persian Gulf region. Several domestic, bilateral and international factors have contributed to the slowing of relations. Firstly, the political instability in Kuwait has kept the ruling family and

153 India, MEA, “Question No. 2257 Registered Indian Workers”, 29 July 2022, https://mea.gov.in/lok-sabha.htm?dtl/35575/question+no2257+registered+indian+wor kers, accessed 16 June 2023. 154 Ramadan Al Sherbini, “2,000 Indian nurses expected in Kuwait soon”, Gulf News, 15 July 2022, https://gulfnews.com/world/gulf/kuwait/2000-indian-nurses-expectedin-kuwait-soon-1.89271788, accessed 16 June 2023. 155 The Economic Times, “Indian engineers in Kuwait again face trouble in visa renewal”, 17 November 2022, https://economictimes.indiatimes.com/nri/migrate/ indian-engineers-in-kuwait-again-face-trouble-in-visa-renewal-says-pattali-makkal-katchi/ articleshow/95578431.cms?utm_source=contentofinterest&utm_medium=text&utm_cam paign=cppst, accessed 16 June 2023. 156 India, MEA, “Question no-1024 NBA issue faced by Indian engineers working in Kuwait”, 15 December 2022, https://mea.gov.in/rajya-sabha.htm?dtl/36005/ question+no1024+nba+issue+faced+by+indian+engineers+working+in+kuwait, accessed 16 June 2023.

5

KUWAIT

203

government preoccupied in local issues hampering their ability to focus on international affairs. As other regional countries have been reaching out to India through political, diplomatic and economic means, Kuwait is losing out due to the less political and diplomatic contacts. The Emirates imports almost all its needs ranging from machineries, consumer durables, food, medicines, etc. but its imports from India undiversified. Kuwait has displayed larger appetite for outward FDI, though its inflow into India is miniscule. An integrated trade and investment approach would be in sync with Kuwait’s aim of emerging as regional investment and re-export hub. The uncertainty and volatility of the international energy market following the Ukraine crisis prompted India to diversify its sources of energy procurement and limit its dependence on the GCC countries. However, Kuwait is gaining importance in the supply of LPG, an important domestic cooking fuel whose share has increased and is likely to grow in future. Thus, cultivating interdependent energy relations through joint ventures in renewable energy, energy conservation, waste to energy, carbon capture, electric vehicles, etc. would be mutually beneficial. Commercial opportunities in the service sectors would be easier to pursue in a politically embattled decision-making. Further, the continuous flow of Indian workers underlines the potential in bilateral ties in the labour and human resource cooperation. Despite post-Covid-19 emphasis on Kuwaitisation, the cooperation could focus on more skilling and training by private Indian entities and enterprises. India and Kuwait can also explore enhancing security, defence and military ties, especially in the Western Indian Ocean.

CHAPTER 6

Oman

Key Information Political System: Hereditary Sultanate; Ruling Family: Al-Said; Ruler: Sultan Haitham bin Tariq al-Said (since 11 January 2020); Crown Prince: Theyazin bin Haitham al-Said (since 13 January 2021); National Day: 18 November; Parliament: Bicameral Council; Upper House/Council of State (Majlis al-Dawla) has 83 members (including Chairman), all nominated; Lower House/Consultative Assembly (Majlis al-Shura) has 86 elected members; Last Parliamentary Election: 27 October 2019; Major Group in Parliament: Political organisation is prohibited; National Carrier: Oman Air. Socio-Economic Indicators Area: 309,500 sq. km; Population: 4.52 million; Native: 54%; Expats: 46%; Religious Groups: Muslims 85.9%, Christians 6.4%, Hindus 5.7% and others 2%; Citizens: Ibadis 45%, Sunnis 45%, Shias, 5% and Christians, Hindus and Buddhists 5%; Age Structure: 0–14 Years 29.88%, 15–64 Years 66.17%, 65 Years and above 3.95%; Population Growth Rate: −0.5%; Life Expectancy at Birth: 73 years; Major Population Groups: Arabs, Baluchi, South Asians and Africans; Adult Literacy Rate (Age 15 and older): 95.7%; National Currency: Omani Rial (OMR); GDP (US$ Current): US$88.19 billion; Foreign Trade: Exports— US$46.324 billion, Imports—US$36.502 billion; Military Expenditure: © Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_6

205

206

MD. M. QUAMAR ET AL.

5.5% of GDP; Sovereign Wealth Fund: Oman Investment Authority, Value of Assets: US$17 billion; National Debt: 81.16% of GDP; GNI Per Capita (PPP, current international): $35,120; GDP Per Capita (PPP, current international): $19,509; Oil Reserves: 5.3 billion barrels (22nd Rank); Gas Reserves: 23 tcf (28th Rank); Human Development Index: 0.816; HDI Rank: 54 out of 189; Infant Mortality Rate (deaths per 1,000 live births): 14.16; Maternal Mortality Ratio (deaths per 100,000 live births): 17; UN Education Index: 0.718; Gender Development Index: 0.900; Gender Inequality Index: 0.300; Labour Force: 2.259 million; Employment to Population Ratio (Ages 15 and older): 70.4%; Unemployment Rate: 3.12%; Urban Population: 88.4%; Rate of Urbanisation: 2.32% (2020–2025 Estimates); Last National Census: 2010; World Press Freedom Index Rank: Rank 163 out of 180, Score 35.99; Corruption Perception Index: Rank 69 out of 180, Score 44; Foreign Direct Investment (Inflows): US$4.02 billion; Individuals Using Internet (per cent of population): 95.2%; Net Migration Rate (per 1,000 people): 0; Forest Area (per cent of total Land Area): 0.0; Carbon Dioxide Emissions (metric tons per capita): 16.5; Global Peace Index: Rank 73 out of 161, Score 1.982; Fintech Index: Not Ranked; Global Innovation Index: Rank 79 out of 132; Global Cybersecurity Index: Rank 21 out of 194, Score 96.04. India Related Indian Cultural Centre: None; Number of Indians: 781,141; Currency Exchange Rate: 1 OMR = INR 193.21; Number of NonMuslim Places of Worship for Indians: 3 Temples, 5 Gurudwaras and 7 Churches; Indian Schools: 21; Indian Banks: State Bank of India (1) and Bank of Baroda (4); Last Visit to Indian by the ruler: Sultan Qaboos bin Said al-Said (April 1997); Last Indian Prime Minister to Visit Oman: Narendra Modi (February 2018). Sources: CIA World Factbook 2023; UN Development Programme 2023; World Bank 2023; World Intellectual Property Organisation 2023; Vision of Humanity, 2023; UNCTAD World Investment Report 2023, Transparency International 2023; Reporters without Borders 2023; U.S. EIA 2023; Embassy of India, Oman, 2023. ∗ ∗ ∗

6

OMAN

207

As Sultan Haitham bin Tariq celebrated two years of accession in January 2022, the Sultanate of Oman has been facing several political, economic and societal challenges. The Covid-19 pandemic exacerbated them as depleting hydrocarbon resources mandated faster economic reforms aimed at political stability. The Sultan has managed these challenges without losing the fundamentals of Oman’s regional role and stature. On the anniversary of his accession, the Sultan promulgated a new “fundamental law” by establishing primogeniture as the law of succession. This cleared the way for his eldest son Theyazin bin Haitham al-Said, although he is yet to be formally appointed Crown Prince. India and Oman are important strategic partners, and New Delhi places special emphasis on maintaining strong relations with Muscat. The historical relations encompass political, economic, diplomatic, military and defence and people-to-people contacts. In recent years, the two sides have taken proactive diplomatic and political measures to strengthen these ties further, focusing on areas including trade ties, two-way flow of investments and defence and security cooperation. A key development in 2022 was the visit of Oman’s new Foreign Minister Badr al-Busaidi to India, culminating in several bilateral meetings.

Domestic Developments Oman started 2022 by celebrating the second anniversary of the accession of Sultan Haitham. The first-anniversary commemoration was muted due to the Covid-19 pandemic, which made the second anniversary important. In his address to the citizens on 11 January, the Sultan emphasised his government’s steps to tackle the developmental challenges facing Oman. He underlined the “volume of challenges” the Sultanate faced, which have been managed with “tact and patience.”1 The Sultan further stressed the implementation of “social and economic plans and programmes, guided by Oman Vision 2040.” Undoubtedly, Sultan Haitham has tackled the problems with a steady hand bringing a sense

1 Foreign Ministry of Oman, “His majesty delivers speech on 11th of January anniversary”, 11 January 2022, https://fm.gov.om/his-majesty-delivers-royal-speech-on-11th-ofjanuary-anniversary/, accessed 30 May 2023.

208

MD. M. QUAMAR ET AL.

of political continuity and stability and has prioritised economic transformation with a futuristic approach to tide the challenges emanating from energy transition, climate change and youth unrest.2 Politics The domestic political situation in Oman remained stable in 2022. The Sultanate had witnessed protests over subsidy cuts and price rises the previous year, but this was quelled by the authorities. It led to jobcreating measures through Omanisation and economic diversification. In January 2022, the Sultan promised improvement in the economic situation and emphasised local investments and greater economic diversification. Besides the socio-economic and developmental challenges, the Sultanate was also challenged by the Covid-19 pandemic. With improved vaccination in 2021, Oman managed the pandemic, but the country witnessed a surge in cases between January and March 2022, with the number reaching an average of over 2,000 per day in February.3 Until December 2022, Oman had 399,449 confirmed cases and 4,628 deaths, and nearly 95,000 cases and 145 deaths were reported in 2022.4 The vaccination rate was lower than in other Gulf Cooperation Council (GCC) countries, with only 63.79 per cent of residents getting at least one vaccination dose.5 In June 2022, Sultan Haitham announced a cabinet reshuffle. The most notable change was the replacement of long-serving oil minister Mohammed al-Rumhi with Salim al-Awfi.6 Rumhi had served as oil minister for over two decades. Awfi, the new Minister of Energy and Minerals, had served as undersecretary in the same ministry for nearly two years. The royal decree also announced Mohammed al-Maamari as the new Minister of Awqaf and Religious Affairs and Hilal al-Sabti as the 2 Economic Intelligence accessed 30 May 2023.

Unit

(EIU),

“Oman”,

https://country.eiu.com/oman,

3 John Hopkins University & Medicine, “Oman”, https://coronavirus.jhu.edu/region/ oman, accessed 30 May 2023. 4 Ibid. 5 Ibid. 6 Muscat Daily, “HM reshuffles cabinet, three new ministers appointed”, 16 June 2022, https://www.muscatdaily.com/2022/06/16/hm-reshuffles-cabinet-three-new-min isters-appointed/, accessed 30 May 2023.

6

OMAN

209

Minister of Health. A royal decree established a Supreme Judicial Council (SJC) replacing the Ministry of Justice and Legal Affairs and merging the offices of “Secretariat General of the Council of Administrative Affairs of the Judiciary, the Administrative Court, and the Public Prosecution.”7 A new position of Deputy Chairman of the Supreme Judicial Council was created, and Muhammad bin Sultan al-Busaidi was appointed to it with the rank of minister.8 Sultan Haitham, as the Chairman of the SJC, continues to be the final legal authority in the country. On 25 December, Oman conducted country-wide municipal elections. A total of 731,769 eligible voters had registered to vote, while 727 candidates, including 27 women, were contesting for the 126 seats in the Municipal Council representing 63 districts from 11 governorates.9 This was the first fully digitised municipal elections, with the citizens registering themselves on the Antakhib mobile application and casting their votes through it. However, despite the digital convenience, only 288,469 Omani voters exercised their franchise, marking a low voter turnout of 39.42 per cent.10 Following the municipal elections, the authorities announced that the Consultative Council elections due in October 2023 would also be fully digitised with the Antakhib app for registering and casting votes. Oman has a bicameral Council with the 85member Council of State that is fully nominated by the Sultan, while the 86-member Consultative Council is directly elected.

7 “Royal decree 35/2022 regarding the governance of the administration of judicial affairs”, Decree, 16 June 2022, https://decree.om/2022/rd20220035/, accessed 30 May 2023. 8 Muscat Daily, “HM reshuffles cabinet, three new ministers appointed”, 16 June 2022, https://www.muscatdaily.com/2022/06/16/hm-reshuffles-cabinet-three-new-min isters-appointed/, accessed 30 May 2023. 9 Bahrain News Agency, “Municipal elections held in Oman”, 25 December 2022, https://www.bna.bh/en/MunicipalelectionsheldinOman.aspx?cms=q8FmFJgiscL2 fwIsON1%2BDvmmiLia6D%2F%2FbWTLcArtiLk%3D, accessed 30 May 2023. 10 Giorgio Cafiero, “A fully digitised Omani election makes history”, Gulf International Forum, https://gulfif.org/a-fully-digitised-omani-election-makes-history/, accessed 30 May 2023.

210

MD. M. QUAMAR ET AL.

Foreign Policy and Security Oman’s regional status lies in it following an independent foreign policy. Sultan Haitham has continued the path of his predecessor Sultan Qaboos, following an independent foreign policy intertwined with security policy. The United Kingdom (UK) is Oman’s foremost security and foreign policy partner. In January 2022, as a follow-up of Sultan Haitham’s visit to London the previous December, the two countries signed Sovereign Investment Partnership (SIP) agreement.11 In March, Muscat secured the release of two UK citizens, Nazanin Zaghari Ratcliffe and Anoosheh Ashoori, from an Iranian prison.12 Furthermore, in October, Oman’s first satellite, Aman, a CubeSat “for environmental surveillance,” was launched from Cornwall in the UK.13 Oman also has strong bilateral security relations with the United States (US), its largest weapon supplier, with which it has an ongoing supply contract worth US$2.7 billion. In March 2022, the US-Oman joint military commission met to discuss regional security issues, including maritime security threats in the Gulf and Arabian Sea and the situation in Yemen and Iran’s regional activities.14 Oman has also considered buying “48 Raytheon AGM-154C Joint Stand-Off Weapons (JSOW) for US$385 million” from the US to manage security threats on its coast.15 Besides the UK and the US, Oman has maintained friendly relations with Russia and China. However, Oman refrained from overtly criticising the Russian invasion of Ukraine and confined itself to expressing “concerns” and called for “diplomatic efforts to overcome this crisis in 11 Foreign Ministry of Oman, “Oman and United Kingdom sign partnership to boost bilateral investments”, 12 January 2022, https://fm.gov.om/ijej2/, accessed 30 May 2023. 12 Times of Oman, “Oman helps negotiate release of two UK nationals from Iran”, 16 March 2022, https://timesofoman.com/article/114417-oman-helps-negotiate-release-oftwo-uk-nationals-from-iran, accessed 30 May 2023. 13 Gillian Duncan, “Oman’s first satellite ready for launch from UK spaceport”, The National, 6 October 2022, https://www.thenationalnews.com/world/uk-news/2022/ 10/06/omans-first-satellite-ready-for-launch-from-uk-spaceport/, accessed 30 May 2023. 14 U.S. Department of Defence, “Readout of U.S.-Oman Joint Military Commission”, 24 March 2022, https://www.defense.gov/News/Releases/Release/Article/297 7374/readout-of-us-oman-joint-military-commission/, accessed 30 May 2023. 15 Congressional Research Service, “Oman: Politics, security, and U.S. Policy”, 2 March 2023, https://www.everycrsreport.com/files/2023-03-02_RS21534_ce5e7f4e9d 9bed1bde8cb01ad2e567622c86efb8.pdf, accessed 30 May 2023.

6

OMAN

211

accordance with the principles of international law and human values.”16 In May, Oman hosted Russian Foreign Minister Sergei Lavrov, who was on a tour of the region to articulate the Kremlin’s positions on the Ukraine crisis. Lavrov met with Sultan Haitham, Deputy Prime Minister Fahd bin Mahmoud al-Said and Foreign Minister Busiadi. During his meeting with Lavrov, the Sultan reportedly “stressed the need to adhere to rules of international law and to intensify efforts to reach political and diplomatic solutions through dialogue to prevent bloodshed.”17 China-Oman political, economic and security relations have improved in recent years and China has emerged as Oman’s most important international economic partner, with an increasing bilateral trade and a two-way flow of investments. The political and diplomatic ties have witnessed improvement with regular visits. In January 2022, the Foreign Minister of Oman visited China and held talks with his Chinese counterpart which focused on enhancing economic, investment and cultural relations.18 In April, Oman hosted Chinese Defence Minister Wei Fenghe and both sides explored enhancing security and defence relations and “cooperation in joint drills, military technology, logistics support, and personnel training.”19 In December, China hosted Oman’s Deputy Prime Minister Fahd al-Said, along with other GCC leaders. During the visit, Fahd called on President Xi Jinping and participated in the China-GCC and ChinaArab summits. Talks were held on improving bilateral relations at various levels.20 16 Times of Oman, “Oman issues statement on Ukraine, expresses concern”, 25 January 2022, https://timesofoman.com/article/112388-oman-issues-statement-on-ukr aine-expresses-concern, accessed 30 May 2023. 17 Foreign Ministry of Oman, “His majesty receives Russian Foreign Minister”, 11 May 2022, https://fm.gov.om/his-majesty-receives-russian-foreign-minister/, accessed 30 May 2023. 18 Foreign Ministry of Oman, “Oman’s Foreign Minister holds talks with Chinese Foreign Minister”, 14 January 2022, https://fm.gov.om/%d9%85%d8%a8%d8%a7%d8% ad%d8%ab%d8%a7%d8%aa-%d8%b3%d9%8a%d8%a7%d8%b3%d9%8a%d8%a9-%d8%a8%d9% 8a%d9%86-%d9%85%d8%b9%d8%a7%d9%84%d9%8a-%d8%a7%d9%84%d8%b3%d9%8a%d8% af-%d9%88%d8%b2%d9%8a%d8%b1-%d8%a7%d9%84-2/, accessed 30 May 2023. 19 The State Council, People’s Republic of China, “China, Oman vow to promote strategic partnership, military cooperation”, 29 April 2022, https://english.www.gov. cn/statecouncil/weifenghe/202204/29/content_WS626b1ee9c6d02e533532a100.html, accessed 30 May 2023. 20 Ministry of Foreign Affairs, People’s Republic of China, “Xi Jinping Meets with Omani Deputy Prime Minister for the Council of Ministers Sayyid Fahd bin Mahmoud Al

212

MD. M. QUAMAR ET AL.

Oman maintains strong ties with all GCC countries and refrains from taking a confrontationist approach towards fellow members. This was reflected during the Qatar crisis (2017–2021), during which Muscat tried to mediate between the quartet (Bahrain, Egypt, Saudi Arabia and UAE) and Qatar to bury their hatchet and resolve differences peacefully. While politically neutral, Oman has worked towards improving economic relations with Saudi Arabia and the UAE to manage domestic economic challenges. Saudi Arabia is Oman’s foremost economic partner and has also committed financial support to overcome economic and political challenges. The exchange of bilateral visits in 2021 by Sultan Haitham and Crown Prince Mohammed bin Salman further strengthened the ties.21 The Omani relations with the UAE have improved in recent years. Ruler of Abu Dhabi and President of UAE, Mohammed bin Zayed visited Oman in September 2022.22 The visit led to the signing of 16 bilateral agreements for cooperation in energy, transport and logistics, maritime transport, industry, culture and youth, agriculture, fisheries and water resources, higher education, scientific research, innovation and vocational training, news and information exchange, preventing terror finance, money laundering and financial crimes, information technology, railways and stock exchange and securities market.23 In addition, Etihad Rail and Oman Rail signed an agreement to “jointly establish an equally-owned company, Oman-Etihad Rail Company,” that would invest US$3 billion “to design, develop and operate a railway network connecting Sohar Port to the UAE National Rail Network.”24 These developments underline an increased commitment towards greater intra-GCC connectivity to boost regional trade and business.

Said”, 10 December 2012, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/202212/ t20221211_10988772.html, accessed 30 May 2023. 21 Sameena Hameed, Md. Muddassir Quamar, P. R. Kumaraswamy, Persian Gulf 202122: India’s relations with the region, Singapore: Palgrave Macmillan, 2022, pp. 262–64. 22 Khitam Al Amir, “UAE president concludes state visit to Oman”, Gulf News, 28 September 2022, https://gulfnews.com/uae/government/uae-president-concludes-statevisit-to-oman-1.90902742, accessed 30 May 2023. 23 Foreign Ministry of Oman, “Oman and UAE sign 16 agreements”, 28 September 2022, https://fm.gov.om/oman-and-uae-sign-16-agreements/, accessed 30 May 2023. 24 Emirate News Agency (WAM), “Etihad Rail, Oman Rail to build US$3 billion Oman-Etihad Rail Company”, 28 September 2022, https://wam.ae/en/details/139530 3087634, accessed 30 May 2023.

6

OMAN

213

Oman maintains strong bilateral ties with other GCC countries, including Qatar, Bahrain and Kuwait. Continuing with his tour of the GCC countries since taking over the reign, Sultan Haitham visited Bahrain in October 2022. He had earlier visited Kuwait (October 2020), Saudi Arabia (July 2021) and Qatar (November 2021). During the visit to Bahrain, bilateral agreements were signed for security, finance and energy cooperation.25 The two countries also agreed to establish a joint Bahrain-Oman Investment Company to strengthen bilateral investments. Notwithstanding relations with fellow GCC members, Oman has maintained friendly ties with Iran without endorsing the latter’s regional policy and behaviour. Several important bilateral visits took place in 2022. President Ebrahim Raisi visited Oman in May and held talks with Sultan Haitham on important bilateral, regional and international issues.26 During the visit, an important agreement related to jointly developing an offshore oil field in the Persian Gulf and exchanging petroleum products was signed.27 Earlier Iranian foreign minister visited Oman in January, followed by the Omani foreign minister’s visit to Iran in February. The Omani foreign minister again visited Iran in November. These visits acquire importance not only in the context of the bilateral relations but also in reiterating Oman’s role as a regional mediator, a role it played for decades under Sultan Qaboos and Sultan Haitham’s desire to inherit that mental. Oman has been playing an active role in reducing tensions in Yemen and maintaining the fragile ceasefire. The UN special representative for Yemen Hans Grundberg has acknowledged Oman’s role. In January 2022, the Houthi rebels proposed Oman as the venue for talks with

25 Mina Aldroubi, “Bahrain and Oman sign deals on security and finance during Sultan Haitham’s visit”, The National News, 25 October 2022, https://www.thenationalnews. com/gulf-news/bahrain/2022/10/25/bahrain-and-oman-sign-deals-on-security-and-fin ance-during-sultan-haithams-visit/, accessed 30 May 2023. 26 Foreign Ministry of Oman, “His Majesty the Sultan and Iranian President hold talks”, 23 May 2022, https://fm.gov.om/his-majesty-the-sultan-and-iranian-presidenthold-official-talks/, accessed 30 May 2023. 27 Adam Lucente, “Iran, Oman to jointly develop oil field”, Al-Monitor, 23 May 2022, https://www.al-monitor.com/originals/2022/05/iran-oman-jointly-developoil-field, accessed 30 May 2023.

214

MD. M. QUAMAR ET AL.

the Yemeni government.28 Oman also secured the release of numerous foreign nationals, including Indians, taken hostage by Yemeni insurgents and militants in April.29 Oman participated in the five-nation meeting on Yemen in July to discuss the peace efforts in the beleaguered country. Furthermore, Oman has taken a proactive interest in the return of Syria into the Arab fold. In January 2022, Omani foreign minister visited Syria and called on President Bashar al-Assad.30 Foreign Minister Busaidi also held talks with his Syrian counterpart, Faisal Mekdad. During the talks, both sides emphasised the need for peaceful resolution of domestic and regional problems concerning Syria.31 Furthermore, in May, Oman hosted the Syrian culture minister, and in October, Muscat and Damascus signed an agreement to train Syrian diplomats in Oman.32 Oman has been working to improve relations with other regional countries, including Egypt, Jordan and Israel. In January 2022, Egyptian Foreign Minister Sameh Shoukry visited Oman and held talks with his Omani counterpart and discussed trade, business, investments,33 security and defence issues. As a result, bilateral agreements, MoUs and executive programmes were signed in political consultation, housing and urban development, media, tourism, legal and judicial cooperation and

28 Middle East Monitor (MEMO), “Houthis propose holding talks with Yemen gov’t in Oman”, 31 January 2022, https://www.middleeastmonitor.com/20220131-houthis-pro pose-holding-talks-with-yemen-govt-in-oman/, accessed 30 May 2023. 29 Foreign Ministry of Oman, “Oman helps in the release of various nationals detained in Yemen”, 24 April 2022, https://fm.gov.om/oman-helps-in-the-release-of-various-nat ionals-detained-in-yemen/, accessed 30 May 2023. 30 Foreign Ministry of Oman, “Syrian President receives Foreign Minister of Oman”, 31 January 2022, https://fm.gov.om/syrian-president-receives-foreign-ministerof-oman/, accessed 30 May 2023. 31 Foreign Ministry of Oman, “Political talks between Oman and Syria”, 31 January 2022, https://fm.gov.om/political-talks-between-oman-and-syria/, accessed 30 May 2023. 32 Foreign Ministry of Oman, “Oman and Syria sign diplomatic training agreement”, 16 October 2022, https://fm.gov.om/oman-and-syria-sign-diplomatic-training-agreement/, accessed 30 May 2023. 33 Foreign Ministry of Oman, “Omani Egyptian Business Council meeting held in Muscat”, 22 January 2022, https://fm.gov.om/omani-egyptian-business-council-meetingheld-in-muscat/, accessed 30 May 2023.

6

OMAN

215

education.34 In July, President Fattah el-Sisi made his maiden visit to Oman, underlining the growing commitment of the two countries to improve relations.35 In October, Oman hosted King Abdullah II of Jordan and both leaders discussed various bilateral, regional and international issues.36 Despite speculations of Oman joining the Abraham Accords, Muscat has refrained from normalising relations with Israel and did not go beyond overt ties with the Jewish state. Oman has been critical of Israel’s settlement expansion in the Occupied Territories and has called for an “effective international role to end the Israeli occupation.”37 Oman and Pakistan continued to maintain strong relations. Many dignitaries from Oman’s foreign ministry led by Khalifa al-Harthy, the undersecretary for diplomatic affairs, attended the military parade in Islamabad to commemorate the latter’s 75th Independence Day anniversary on 22 March 2022.38

34 Foreign Ministry of Oman, “Joint statement of the Sultanate of Oman and the Arab Republic of Egypt”, 23 January 2022, https://fm.gov.om/joint-statement-of-the-sultan ate-of-oman-and-the-arab-republic-of-egypt/, accessed 30 May 2023. 35 Foreign Ministry of Oman, “Joint Statement between the Sultanate of Oman and the Arab Republic of Egypt on the occasion of the visit of H.E. President Abdul Fattah El Sisi, President of the Arab Republic of Egypt, to the Sultanate of Oman”, 28 June 2022, https://fm.gov.om/the-sultanate-of-oman-and-the-arab-republic-of-egyptissue-joint-statement/, accessed 30 May 2023. 36 Foreign Ministry of Oman, “Oman and Jordan issue joint statement affirming determination to boost investment”, 5 October 2022, https://fm.gov.om/oman-and-jor dan-issue-joint-statement-affirming-determination-to-boost-investment/, accessed 30 May 2023. 37 Foreign Ministry of Oman, “Oman condemns Israel’s illegal activities in Palestinian territories”, 15 April 2022, https://fm.gov.om/oman-condemns-israels-illegal-activitiesin-palestinian-territories/; Foreign Ministry of Oman, “Oman calls for effective international role to end Israeli occupation of Palestine”, 27 April 2022, https://fm.gov.om/ oman-calls-for-effective-international-role-to-end-israeli-occupation-of-palestine/, accessed 30 May 2023. 38 Foreign Ministry of Oman, “Oman attends military parade marking Pakistan Independence Day”, 23 March 2022, https://fm.gov.om/oman-attends-military-parade-mar king-pakistan-independence-day/, accessed 30 May 2023.

216

MD. M. QUAMAR ET AL.

Economy Robust Covid-19 policy and an effective vaccination drive facilitated the easing of social restrictions and economic recovery during 2022. As a result, the real GDP growth rate rebounded from negative 3.2 per cent in 2020 to about 3 per cent in 2021 and was further estimated to be 4.3 per cent in 2022 (Table 6.1). The GDP (current) also increased significantly from US$85.87 billion in 2021 to US$108.97 billion in 2022. Oil constituted one-third of GDP in 2021; the surge in oil activities by 61 per cent was the main driver of GDP growth in 2022.39 The non-oil economic activities also contributed to economic growth since the onset of recovery in 2021. The real non-oil GDP growth was 2.54 per cent during the year (Table 6.1). Strategies for economic growth have been diversification, investment in infrastructure and human capital, and promoting trade and investment through liberalisation and regional integration. The focus of non-oil sector development had been tourism, logistics and manufacturing. The Oman tourism development company signed a deal for the first phase of the Yiti sustainable tourism project. As part of the deal, a joint venture Sustainable Development Investment Company was established to implement the US$900 million phase I of multiple-use projects. The government aims to promote Omani industries and develop a national Table 6.1 Oman’s economic growth, 2019–2023

GDP at current prices (US$ million) Real GDP growth (annual per cent) Real non-oil GDP growth (annual per cent)

2019

2020

2021

2022a

2023a

8,8061

73,971 −3.2 (−3.4) −4.49

108,969 (114,632) 4.3

110,792

−1.1

85,869 (88,165) 3.0 (3.1) 1.80 (2.6)

2.54

2.61

−0.32

4.1

Source IMF, National Centre for Statistics and Information, Oman; Central Bank of Oman, Annual Report 2021 a IMF estimates; Figures in the bracket are Oman’s official statistics

39 Hassan Jivraj, “Oman’s economy surges with higher oil prices, fiscal reform”, AlMonitor, 1 September 2022, https://www.al-monitor.com/originals/2022/09/omanseconomy-surges-higher-oil-prices-fiscal-reform, accessed 30 May 2023.

6

OMAN

217

policy to increase exports, reduce imports and enhance in-country value (ICV).40 Economic diversification is being sought through the integration of various industries, economic activities and big projects in the special zones operated by the Public Authority for Special Economic Zones and Free Zones (OPAZ); for example, the integration of Sohar Free Zone, Sohar Port and Sohar Industrial City has attracted investments of over Omani Rial (OMR) 11.7 billion (US$30.39 billion); Special Economic Zone at Duqm (SEZAD) has investment over OMR 3.6 billion (US$9.35 billion).41 The OPAZ manages its affiliated zones to integrate national products into the supply chain of large and transformative industries, facilitates service systems to small and marginal enterprises and provides logistics support to foreign projects. The special and economic zones have a lot of foreign projects that have links with the global market and strengthen Oman’s trade balance. The government continues implementing structural reforms under Vision 2040 to foster private sector growth that generates employment and improves productivity.42 The financial sector grown well and its reach has increased. The introduction of Islamic banking in 2013, digital transformation, regulatory sandbox for fintech start-ups in 2020 and the development of capital markets are making significant progress. The growth of Islamic banking was at 11.6 per cent (Y-o-Y) in 2021, with a compound annual growth rate of 9 per cent in 2017–2021 compared to the conventional banking sectors’ growth rate of 3.1 per cent.43 The market share of Islamic banking and Islamic windows of conventional banks increased to 15.2 per cent by the end of 2021, with total assets of US$15.3 billion. However, 40 Oman

News Agency, “Economic, free, industrial zones boom added value of governorates’ economy, SMEs”, https://omannews.gov.om/topics/en/80/show/ 112051, accessed 30 May 2023. 41 Times of Oman, “Highest number of expats employed in construction sector”, 14 May 2022, https://timesofoman.com/article/116672-highest-number-of-expats-emp loyed-in-construction-sector, accessed 30 May 2023. 42 International Monetary Fund, “Oman”, IMF Country Report No. 22/343, 15 November 2022, https://www.imf.org/en/Publications/CR/Issues/2022/11/14/ Oman-2022-Article-IV-Consultation-Press-Release-and-Staff-Report-525674, accessed 30 May 2023. 43 Fitch Ratings, “Oman’s Islamic Banking on Positive Trajectory”, 22 March 2022, https://www.fitchratings.com/research/islamic-finance/omans-islamic-banking-onpositive-trajectory-22-03-2022, accessed 30 May 2023.

218

MD. M. QUAMAR ET AL.

its share in the global total is still small at 0.7 per cent. Oman’s rank has consistently improved since 2016 in the United Nations’ E-government Development Index and ranked 50th in EGDI 2022. Fiscal Situation and Inflation Thanks to high oil and gas prices, Oman achieved a fiscal surplus in 2022, the first since 2008.44 Oil and gas revenues contributed 78 per cent to the total revenues of US$37 billion during the year. Non-hydrocarbon revenues were at a record level of US$8.36 billion.45 Fiscal consolidation under the government’s Medium Term Fiscal Plan (MTFP) had improved fiscal balance considerably. Government debts were at a high level at 81.2 per cent of GDP in 2020, which moderated to 62.9 per cent in 2021 and was estimated at 44 per cent in 2022.46 Reforms have been undertaken to increase nonhydrocarbon revenues, like the introduction of 5 per cent VAT in 2021, shifting the responsibility for financing projects from government budget to public sector entities. Due to the higher hydrocarbon revenue and accelerated implementation of structural reforms under Vision 2040, there was continued commitment towards fiscal consolidation and reforms to reinforce physical and external sustainability.47 As a result, there are multiple upgrades from credit rating agencies with improving economic prospects in the Sultanate.48 Oman Investment Authority (OIA) boosted its assets to US$41.5 billion, with predominant investments in real estate, technology and logistics.49 The assets are spread in about 40 countries, with 61 per cent in

44 MEES, volume 65 Number 51/52, 23 December 2022, p. 14. 45 Ibid. 46 Ibid. 47 Deena Kamel, “Oman’s fiscal efforts and higher oil prices to drive growth, IMF

says”, The National, 17 June 2022, https://www.thenationalnews.com/business/eco nomy/2022/06/17/omans-fiscal-efforts-and-higher-oil-prices-to-drive-growth-imf-says/, accessed 30 May 2023. 48 Al-Arabiya, “Oman starts raising $3.5 bln loan that could go up to $4 bln: Source”, 31 January 2022, https://english.alarabiya.net/business/economy/2022/01/31/Omanstarts-raising-3-5-bln-loan-that-could-go-up-to-4-bln-Source, accessed 30 May 2023. 49 Arabian Business, “Oman wealth fund boosts assets to $41.5bn”, 14 November 2022, https://www.arabianbusiness.com/gcc/oman/oman-wealth-fund-boo sts-asses-to-41-5bn, accessed 30 May 2023.

6

OMAN

219

Oman; the average annual rate of return was about 10.3 per cent. About 17 per cent of its assets are in North America, 9.3 per cent in Europe and 4.7 per cent in Asia Pacific.50 However, to manage its finances, the Sultanate had to raise a US$3.5 billion 7-year loan (to refinance a US$2.2 billion loan taken in the previous year) which was underwritten by several local and regional banks including First Abu Dhabi Bank, Mashreq Bank and the Gulf International Bank.51 To mobilise funds, Oman seeks to list about 35 state-owned companies in the Muscat Stock Exchange (MSX) in the next five years, with an initial public offering planned for one or two oil companies. Foreign trading accounts for about 45.5 per cent of the total trading in MSX, and the banking sector has a predominant share of 59 per cent.52 Foreign investment in public companies has been allowed to increase, and there are plans to have 100 per cent foreign ownership in the listed companies. The inflation in Oman is influenced by global inflation due to its fixed exchange rate and significantly higher import dependence on goods and services.53 The average inflation was 1.6 per cent in 2021, which increased to 2.8 per cent in 202254 but in the last few years, inflation in Oman has been below the average GCC rates.55 Public utilities and energy were subsidised, and basic commodities were exempted from VAT. However, the Producer Price Index (PPI) was significantly higher than the Consumer Price Index (CPI), reflecting the larger weight of hydrocarbons in the former.56 50 Ibid. 51 Al-Arabiya, “Oman starts raising $3.5 bln loan that could go up to $4 bln: Source”,

31 January 2022, https://english.alarabiya.net/business/economy/2022/01/31/Omanstarts-raising-3-5-bln-loan-that-could-go-up-to-4-bln-Source, accessed 30 May 2023. 52 Deepthi Nair, “Oman plans to list 35 state-owned companies in the next five years”, The National, 13 March 2022, https://www.thenationalnews.com/business/mar kets/2022/03/13/oman-plans-to-list-35-state-owned-companies-in-the-next-five-years/, accessed 30 May 2023. 53 Central Bank of Oman, “Annual Report”, https://cbo.gov.om/Pages/AnnualRep ort.aspx, accessed 30 May 2023. 54 Central Bank of Oman, “Monthly Statistical Bulletins”, https://cbo.gov.om/Pages/ MonthlyBulletins.aspx, accessed 30 May 2023. 55 Central Bank of Oman, Macroeconomics Stability Report, 2022, https://cbo.gov. om/sites/assets/Documents/English/Publications/MacroeconomicStability/Macroecon omic_Stability_Report_2022.pdf, accessed 30 May 2023. 56 IMF Country Report, “Oman”, IMF Country Report No. 22/343.

220

MD. M. QUAMAR ET AL.

Oman imported about 60 per cent of its total wheat from Russia and Ukraine but had sufficient stocks and tapped into new markets since the war erupted in February 2022.57 However, the leading wheat importers reported a 30 per cent surge in wheat prices; the input cost of animal feed increased by 50 per cent to 100 per cent during the year.58 With government subsidies, the impact of price hikes on consumers was muted. Oman had insignificant direct trade or financial links with Russia and was not directly affected by the war except positively through higher energy prices. Employment and Expatriates The government has pursued an Omanisation policy for the last three decades; in the previous decade, it facilitated more Omani employment in the private sector than in the public sector.59 The pandemic provided an opportunity to increase employment of the nationals. In July 2022, the Ministry of Labour (MoL) decision (No 235/2022) mandated Omanisation of 207 more professions.60 The number of expatriate workers reduced from 1,429,052 in 2020 to 1,384,833 in 2021.61 The outflow of remittances had declined from OMR 3,750 million (US$9740.70 million) in 2018 to about OMR 3,250 million (US$8441.94 million) in 2021.62 Employment opportunities contracted for expatriate workers in 2021 decreased by 1.9 per cent, while of the nationals increased by 2.8 per cent.63 The government intensified efforts for skill building and 57 Ibid. 58 Conrad Prabhu, “Oman’s food sector bottom-line hit by Ukraine war fallout

in 2022”, Oman Observer, https://www.omanobserver.om/article/1134394/business/ economy/omans-food-sector-bottom-line-hit-by-ukraine-war-fallout-in-2022, accessed 30 May 2023. 59 International Labour Organization, “Skill needs in the Oman labour market: An employer survey”, 31 October 2022, https://www.ilo.org/beirut/projects/fairway/ WCMS_862345/lang--en/index.htm, accessed 30 May 2023. 60 Ibid. 61 Sultanate of Oman, National Centre For Statistics & Information, “Labour Market”,

https://data.gov.om/byvmwhe/labour-market, accessed 30 May 2023. 62 Central Bank of Oman, “Annual Report-2021”, https://cbo.gov.om/sites/assets/ Documents/English/Publications/AnnualReports/Annual%20Report%202021%20ENG. pdf, accessed 30 May 2023. 63 Central Bank of Oman, “Annual report- 2021”, https://cbo.gov.om/Pages/Annual Report.aspx, accessed 30 May 2023.

6

OMAN

221

improving the productivity of its citizens; finding skilled Omanis (especially in technical and managerial jobs) had been a major challenge for private sector companies. According to the National Centre for Statistics and Information, women comprise a significant portion of the Omani workforce, with a share of 45 per cent. They are more likely to be employed in the public sector. The government actively pursues female employment through various policies and programmes, including education and skilling through training and vocational institutes like Omani Women’s Association, Vocational Training Centre and Women Training Institute. Omani women are predominantly (about 50 per cent) employed in midlevel occupational categories, but female unemployment remained high at 5.60 per cent in 2021.64 Since the pandemic, about 292,500 expatriates have lost their jobs.65 About 48,000 expatriates were estimated to have left the Sultanate in 2021, though the expatriate population rose from October 2021. The key element of economic diversification policies would be to ensure the right mix of skills to enable the thriving of private sector without a shortage of skilled foreign workforce needed in some industries to remain globally competitive. The five key economic activities of the private sector accounted for about 1,449,358 expatriate labour and 25 per cent of which were employed in the construction sector.66 Long-term Investor Residency cards have been given under Investor Residency Programme launched in October 2021 to attract high-value expatriates. Since then, about 75 cards have been issued, which conferred various incentives and benefits, especially property ownership for residential, commercial and industrial purposes outside integrated tourism complexes.67

64 Sultanate of Oman, National Centre for Statistics & Information, “Labour Market”, https://data.gov.om/byvmwhe/labour-market, accessed 30 May 2023. 65 Middle East Monitor, “Over 300,000 workers lost jobs in Oman due to pandemic”, 4

April 2022, https://www.middleeastmonitor.com/20220404-over-300000-workers-lostjobs-in-oman-due-to-pandemic/, accessed 30 May 2023. 66 Ibid. 67 Times of Oman, “42 investors get residence cards in Oman”, 16 January 2022

https://timesofoman.com/article/111944-42-investors-get-residence-cards-in-oman, accessed 30 May 2023.

222

MD. M. QUAMAR ET AL.

External Sector Exports revenues have increased since 2021, thanks to the surging oil and gas prices. The total exports of goods and services increased from US$35.7 billion in 2020 to US$46.31 billion in 2021 (Table 6.2). In 2022, total merchandise exports were highest at about USS$66.13 billion, almost US$10 billion higher than the previous record in 2013.68 Oil and gas constituted nearly 74 per cent of the total exports in 2022. Their export revenues were US$42.9 billion, nearly 74 per cent more than the previous year.69 The export revenues were buoyant due to the high oil prices and higher volumes. With the easing of OPEC+ production cuts, exports were at a 6-year high of about 876,000 bpd in 2022. The top items of exports were mineral fuels, plastics and articles thereof, iron and steel, vehicles and accessories, fertilisers and organic chemicals. Petrochemicals were major non-oil exports that had increased significantly due to high prices in the first half of 2022 and higher volumes due to the commissioning of the new 1.1 mtpa Liwa project in 2021. The top five export destinations during 2022 were the UAE, the US, Saudi Arabia, India and Qatar (Table 6.3). China was the leading destination of oil exports (with record volumes of 715,000 bpd), with a share of 82 per cent in 2022. Almost all of Oman’s LNG shipments were towards Asia during the year. For the first time since 2015, Oman also exported to Europe, which faced a gas supply shortage due to the Ukraine war. It majorly exported to Spain during the year.70 Omani crude is similar to the Russian Ural grade in quality Table 6.2 Oman’s select current account indicators, 2019–2021 (US$ million)

Exports of goods and services Oil and gas exports Imports of goods and services Current account balance

2019

2020

2021

43,570.8 26,500 32,559.8 −4017

35,708.4 18,200 34,010.6 −12,303.2

46,308.6 26,100 36,491.0 −4287.4

Source IMF, Central Bank of Oman, Quarterly Bulletin December 2022

68 MEES, vol. 66, no. 8, 3 February 2023, p. 15. 69 MEES, vol. 66, no. 8, 3 February 2023, p. 15. 70 MEES, vol. 66, no. 5, 24 February 2023, p. 6.

6

OMAN

223

Table 6.3 Oman’s direction of trade, 2022 (US$ million) Top five export destinations

Top five import sources Top five Oil export market

Top five destinations of LNG exports

UAE (3,127.88)

UAE (10,944.24)

US (2,359.40)

Saudi Arabia (4,873.62) India (3,398.73)

South Korea (4,661.54) China (3,912.55) Japan (1,869.21) India (1,129.85) Thailand (1,095.48)

Saudi Arabia (2,288.51) India (1,888) Qatar (1,001.12)

China (2,927.97) Qatar(2,366.84)

China (29,157.75) India (3,643.65) Taipei, Chinese (2,036.84) Japan(1,209.36) South Korea (413.45)

Source IMF data, International Trade Centre

that was banned on 5 December 2022 by European Union.71 Oman had long-term LNG deals for about 9 mtpa supply, the majority of which would expire by the end of 2024,72 including about 4.06 mtpa contract with Korea’s Kogas.73 By the year end, Oman renewed its contract with the Japanese firm, which imported 3-year high Omani LNG (about 2.53 million tons) in 2022. Besides, Shell and TotalEnergies have been given the flexibility to deliver Omani energy shipments to Europe.74 As spot market prices surged due to the disruption caused by the Russian invasion of Ukraine in February, Oman diverted some spot cargo into the European market. The LNG export revenues during the year were at a record US$7.7 billion, far exceeding the previous record of US$4.46 billion in 2018.75 Oman LNG is a joint venture between Oman investment authority (51 per cent), Shell (30 per cent) and TotalEnergies (5.54 per cent), and the remaining is held by Asian firms from Korea, Thailand and

71 MEES, vol. 66, no. 8, 3 February 72 MEES, vol. 66, no. 5, 3 February 73 MEES, vol. 66, no. 2, 13 January 74 MEES, vol. 66, no. 5, 3 February

2023, p. 15. 2023, p. 6. 2023, p. 5. 2023, p. 6.

75 MEES, vol. 66, no. 8, 3 February 2023, p. 15.

224

MD. M. QUAMAR ET AL.

Japan.76 Oman implemented an extensive debottlenecking programme which augmented its LNG exports to 11.4 mtpa.77 The main imports were mineral fuels, machinery items, vehicles and parts, iron and steel and products. During 2022, the top five import sources were the UAE, Saudi Arabia, India, China and Qatar. The Sultanate (along with the UAE) imported piped natural gas from Qatar of about 2 bcm/y. Oman is regionally integrated; its re-exports were about US$3.4 billion in 2021.78 The major destinations of re-exports were the UAE, Iran and Saudi Arabia. During the visit of Iranian President Raisi to Muscat in May 2022, both countries agreed to jointly develop gas fields along their maritime boundaries in the Persian Gulf and to exchange petrochemicals and related technical expertise.79 Earlier in February, the joint committee held its 19th meeting in Muscat, headed by the Omani Minister of Commerce Industry and Investment Promotion and the Iranian Minister of Industry Mining and Trade. Several MoUs were signed for cooperation in agriculture, livestock, fisheries and research and experience exchange. They also concurred on the importance of activating the cooperation agreement in maritime transportation and of mutual recognition of maritime competency certificates.80 The agreement to develop railway connectivity between Oman and UAE through the joint venture OmanEtihad Rail Company, signed during the Emirati ruler’s visit in September 2022, would boost regional economic integration.81

76 MEES, vol. 65, no. 50, 16 December 2022, p. 12. 77 MEES, vol. 66, no. 8, 3 February 2023, p. 15. 78 Central Bank of Oman, Quarterly Bulletin December 2022. 79 Adam Lucente, “Iran, Oman to jointly develop oil field”,

Al-Monitor, 23 May 2022, https://www.al-monitor.com/originals/2022/05/iran-oman-jointly-developoil-field, accessed 30 May 2023. 80 Foreign Ministry of Oman, “Meeting of the Omani-Iranian Joint Committee”, 9 February 2022, https://fm.gov.om/meeting-of-the-omani-iranian-joint-committee/, accessed 30 May 2023. 81 WAM, “Etihad Rail, Oman Rail to build US$3 billion Oman-Etihad Rail Company”, 28 September 2022, https://wam.ae/en/details/1395303087634, accessed 30 May 2023.

6

OMAN

225

Energy and Environment Oman has lesser reserves of oil in the region, and new oil discoveries have kept the IOCs engaged and interested in the Sultanate. The Ministry of Energy and Minerals estimated its crude oil and condensate reserves at 4.88 billion barrels and natural gas reserves at 23 tcf by the end of 2021.82 The US Occidental Petroleum is the largest foreign firm operating in the sector. During 2022, with the easing of OPEC+ production cuts, oil production was recorded high at an average of 1.064 mbpd, surpassing the previous record of 1.004 mbpd set in 2016.83 A new 5.7 million barrel oil storage facility was added at Ras Markaz, with capacity expansion planned to reach about 26.7 million barrels.84 The oil stored in the terminal would be supplied to an upcoming 230,000 bpd refinery nearby, scheduled to start in 2023 at Duqm.85 The Duqm refinery is a joint venture between OQ (50 per cent) and Kuwait Petroleum International (50 per cent); and is expected to receive feedstock from Kuwait, Oman and a third party. There are ongoing negotiations with Aramco Trading Company about the feedstock supply to the refinery. Oman aims to turn the Ras Markaz terminal into the biggest terminal for storing crude oil and an important international trading hub in the Middle East.86 Since the start of British Petroleum’s one bcfpd Khazzak tight gas project in 2017, there has been significant interest in Oman’s unconventional gas reserves. International companies like Shell, TotalEnergies and ENI are active in upstream expansion projects. Abraj, the state-owned drilling company, has plans for 49 per cent of its share to be listed on the Muscat Stock Exchange to raise about US$244 million. Oman’s largest gas project is jointly operated by British Petroleum (40 per cent), OQ (30 per cent), PTTEP (20 per cent) and Petronas (10 per cent).87 First gas production was also achieved during the year from Mabrouk North East Field’s Block 10, jointly developed by Shell (53.45 per cent), OQ and

82 Ministry of Energy and Minerals, Oman, https://mem.gov.om/en-us/, accessed 30 May 2023. 83 MEES, vol. 66, no. 8, 3 February 2023, p. 15. 84 MEES, vol. 65, no. 1, 7 January 2022, p. 14. 85 MEES, vol. 65, no. 1, 7 January 2022, p. 14. 86 MEES, vol. 65, no. 51/52, 23 December 2022, p. 11. 87 MEES, vol. 66, no. 8, 3 February 2023, p. 7.

226

MD. M. QUAMAR ET AL.

TotalEnergies, to be sent for processing to the nearby Saih Rawl gas plant. Due to a lack of outlet facilities, some gas wells were shut down. Domestic demand is set to increase with the operationalisation of a 1,000-ton per day ammonia plant at Salalah.88 The resurgent gas sector facilitated a record annual production of 49.9 bcm during the year.89 Table 6.4 shows natural gas production in Oman. Including the imports from Qatar, the total natural gas supply in Oman was about 5 bcf/d.90 Oman has tricky geology, making exploitation of unconventional resources costly. In December 2022, a new state company was established to manage the rights and obligations related to the purchase, sale, import and export of natural gas and its by-products in the Sultanate. The key motivation was to remove oil and gas expenditures from the government budget and Energy Development Oman was created as a self-funding entity.91 The 2030 Agenda for Sustainable Development is an important component of Oman 2040 vision that would be integrated across all Table 6.4 Oman’s energy statistics, 2018–2021

Oil production (mbpd) Oil consumption (mbpd) Oil exports (million barrels) Refining capacity (Thousand b/d) Natural gas production (bcm) Natural gas flaring (bcm) Natural gas consumption (bcm) Carbon dioxide emission from energy (million tons) Renewable energy generation (TWH)

2018

2019

2020

2021

0.98 0.23 289.3 304 36.3 2.6 25.0 76.2 –

0.97 0.22 310.4 304 36.7 2.6 25.0 76.1 –

0.95 0.19 287.1 304 36.9 2.5 25.9 73.1 0.3

0.97 0.21 289 304 41.8 2.6 29.5 82.1 0.4

Source British Petroleum, Statistical Review of World Energy, 2022, https://www.bp.com/en/global/ corporate/energy-economics/statistical-review-of-world-energy.html

88 MEES, vol. 66, no. 3, 20 January 2023, p. 6. 89 MEES, vol. 66, no. 8, 3 February 2023, p. 17. 90 MEES, vol. 66, no. 1, 6 January 2023, p. 7. 91 MEES, vol. 66, no. 1, 6 January 2023, p. 7.

6

OMAN

227

goals and development strategies.92 During the year, Oman announced it would achieve a net zero greenhouse emission target by 2050. The stateled Petroleum Development Oman revealed plans for its first wind farm, Riyah 1, to be commissioned by 2024.93 It had earlier operationalised a US$94 million Amin 100 MW solar photovoltaic power plant in June 2020. The current total renewable power capacity is 550 MW,94 and after the completion of seven projects in the pipeline, the total renewable capacity would reach 2.45 GW by 2026. A 500-MW Ibri solar power, the largest renewable energy facility, was inaugurated during the year.95 At about US$403 million, the project was developed through a publicprivate partnership of Oman Power and Water Procurement Company in collaboration with a group of GCC investment firms, including ACWA Power, Gulf Investment Cooperation and Alternative Energy Projects Company. Oman also focuses on green hydrogen with a targeted production of one mtpa by 2030.96 However, much of the discussions were focused on export potential until an MoU was signed in December to build a US$3 billion, 5 mtpa green steel plant in Duqm to represent the first domestic industrial use of the fuel and the first green industrial project in Oman. A green hydrogen summit was organised, and a memorandum of cooperation was signed between state-owned OQ Alternative Energy, Oman Shipping Authority, Japanese trading firms Summit Tomar and Japanese shipping company Maersk to conduct a feasibility study on the supply and bunkering of green fuel in the ports of Duqm and Salalah.97 The Minister of Energy and Minerals Salim al-Awfi unveiled the ambition of producing 8.5 mtpa green hydrogen capacity by 2050.98 A conference on “Sultanate of Oman: the future of green energy” was 92 Foreign Ministry of Oman, “Oman affirms keenness to integrate sustainable development dimensions”, 15 July 2022, https://fm.gov.om/oman-affirms-keenness-to-integr ate-sustainable-development-dimensions/?sfw=pass1679391565, accessed 30 May 2023. 93 MEES, vol 65, no. 38, 23 September 2022, p. 6. 94 MEES, vol 65, no. 27, 8 July 2022, p. 14. 95 Disha Dadlani, “Oman launches its largest renewable energy project”, Construc-

tion Week, 26 January 2022, https://www.constructionweekonline.com/projects-tenders/ oman-launches-its-largest-renewable-energy-project, accessed 30 May 2023. 96 MEES, vol. 65, no. 49, 9 December 2022, p. 13. 97 MEES, vol. 65 no. 49, 9 December 2022, p. 13. 98 MEES, vol. 65, no. 43, 28 October 2022, p. 8.

228

MD. M. QUAMAR ET AL.

hosted in Muscat in October that marked the launch of phase A, to achieve a green hydrogen production capacity of 1–1.25 by 2030. To reach its 2050 green hydrogen production goal, Oman would require an estimated cumulative investment of US$140 billion, installation of 300 million solar panels, 10,000 wind turbines and 5,200 electrolysers with 800 GW capacity.99 The Ministry of Energy and Minerals launched “Hydrom,” an independent entity fully owned by state-owned Energy Development Oman to manage the emerging green hydrogen sector and collaborate with international players on behalf of the Sultanate. Land for the projects has been allocated in Duqm and Salalah; and international bids for the projects have been opened. The international response had been strong in the last 3–4 years; several MoUs had been signed, most importantly 25 GW wind and solar power complex to produce 1.8 mtpa of green hydrogen, scalable up to 10 mtpa, through a joint venture between Hong Kong’s InterContinental Energy and the state-backed Kuwaiti energy investor EnerTech.100 Society The Omani society has grappled with various social challenges. Women and expatriates continue to face several problems. With a focus on economic transformation, there is a greater emphasis on the Omanisation of jobs, especially in the public sector and middle-level executive and managerial positions in the private sector. Resultantly, many expats have lost job opportunities. Simultaneously, high-value expatriates are welcomed with long-term and flexible visa norms. In January 2022, Oman issued 42 more long-term investor cards for foreign nationals with five- and ten-year residency provisions.101 Expatriates have also faced competition from educated Omani women who, with education and greater freedom compared to the past, have been outperforming men in

99 MEES, vol. 65, no. 43, 28 October 2022, p. 8. 100 MEES, vol. 65, no. 43, 28 October 2022, p. 9. 101 Times of Oman, “42 investors get residence cards in Oman”, 16 January 2022, https://timesofoman.com/article/111944-42-investors-get-residence-cards-in-oman, accessed 30 May 2023.

6

OMAN

229

various fields such as education and medicine. Female labour participation in Oman increased to 30 per cent in 2021.102 Greater economic and financial freedom for women has challenged the established social norms leading to an increase in divorce rates as working and independent women no longer accept being subservient to men. According to one report, the divorce rate rose to 12 per cent between 2020 and 2021, and nearly 67 per cent of these were initiated by women.103 Despite the impact of globalisation and economic changes, Omani society has mostly remained rooted in tradition regarding women’s issues. Early marriage remains prevalent, while gender equality continues to be challenging in every field.104 Women continue to endure discriminatory marriage, divorce, inheritance, nationality and child custody laws. Domestic violence has also been reported, and the authorities finally created a hotline for reporting domestic violence and child abuse in 2021.105 Challenges related to freedom of expression and the practice of non-Islamic faiths remain. The media is closely monitored and tightly controlled by the authorities, and the mildest criticism of the government or ruling family attracts harsh punishment, including prison terms. Although some non-governmental organisations are active, the scope for a vibrant civil society is limited.106 Many Omanis and expatriates have faced punitive actions for expressing views perceived as critical of the Sultanate and Islamic faith or symbols.107 As of 2021, Oman has a high HDI value of 0.861 and is ranked 54th globally. The GDI value was 0.9, and the

102 The World Bank, “Labour force participation rate, female (% of female population ages 15+ ) (modelled ILO estimate) – Oman”, https://data.worldbank.org/indicator/ SL.TLF.CACT.FE.ZS?locations=OM, accessed 30 May 2023. 103 Al-Jazeera, “Oman women demand ‘equal partnership’ as divorce rates rise”, 27 January 2022, https://www.aljazeera.com/news/2022/1/27/oman-women-demandequal-partnership-as-divorce-rates-rise, accessed 30 May 2023. 104 UN Women, “Oman”, https://data.unwomen.org/country/oman, accessed 30 May 2023. 105 Ibid. 106 Amnesty International, “Oman 2022”, https://www.amnesty.org/en/location/mid

dle-east-and-north-africa/oman/report-oman/, accessed 30 May 2023. 107 Ibid.

230

MD. M. QUAMAR ET AL.

GII value was 0.3.108 This means that the inequality-adjusted HDI score was much lower at 0.708.

Bilateral Relations Oman is an important regional partner of India in the Gulf. The IndoOmani relations are historical and have thrived in various fields in recent years. The focus of bilateral relations has been improving through political and diplomatic engagements and strengthened economic and security cooperation. The 2018 visit of Prime Minister Narendra Modi to Oman was significant in this direction. Both countries cooperated through 2020 and 2021 to manage and overcome the Covid-19 pandemic, including ensuring the safety and return of Indian expatriates during the global health crisis. Many important developments took place in 2022 to further strengthen bilateral relations. Politics and Security Foreign Minister of Oman Badr al-Busiadi visited India on 23–24 March 2022. This was his first visit to India as foreign minister, although, in his capacity as defence minister earlier, Busaidi had frequently engaged with Indian leaders and officials. During the visit, the foreign minister called on Vice-President Venkaiah Naidu and discussed improving bilateral relations in various fields.109 During the meeting with EAM S. Jaishankar, several important bilateral and regional issues of mutual concern were discussed. The joint statement issued after the meeting noted the strategic partnership between the two countries and the continued political and diplomatic engagements.110 It further noted the progress in security and defence 108 UNDP, Human Development Reports, “Oman”, https://hdr.undp.org/data-cen ter/specific-country-data#/countries/OMN, accessed 30 May 2023. 109 Foreign Ministry of Oman, “Foreign Minister meets Vice President of India”, 24 March 2022, https://fm.gov.om/foreign-minister-meets-vice-president-of-india/, accessed 30 May 2023. 110 India, MEA, “Joint Press Statement-Meeting between External Affairs Minister,

Dr. S. Jaishankar and Foreign Minister of Oman, H.E. Mr. Sayyid Badr bin Hamad bin Hamood Albusaidi”, 23 March 2022, https://mea.gov.in/bilateral-documents.htm?dtl/ 35021/joint+press+statementmeeting+between+external+affairs+minister+dr+s+jaishankar+ and+foreign+minister+of+oman+he+mr+sayyid+badr+bin+hamad+bin+hamood+albusaidi, accessed 30 May 2023.

6

OMAN

231

collaboration and economic engagement. The visiting minister also met with NSA Ajit Doval and discussed important bilateral security issues.111 Among the MoUs signed during foreign minister’s visit was a Programme of Cooperation (POC) in science and technology to boost joint innovation and knowledge exchange in emerging scientific areas.112 Accordingly, both countries would promote cooperation in “Medicinal Plants and processing, Real-time Air Quality Monitoring, Development of an electronic platform for knowledge sharing in the field of Genetic Resources, Technical expertise for SMEs in the field of sustainability (Eco-Innovate) Accelerator, Plastic Bio-fuel, and Bio-diesel Research, … Software development for Graduate Programs – Linking Industry with Academia, Blockchain and FinTech solutions, Training programmes – Big-data, coding and testing, STEM teaching and other areas of S&T cooperation” during the 2022–2025 POC cycle.113 In October, MoS External Affairs V. Muraleedharan visited Oman to review important bilateral issues concerning Indian expatriates. He called on Foreign Minister Busaidi and met with other Omani officials.114 Earlier in August, India announced the decision to invite Oman as a guest country, along with eight other countries (Bangladesh, Egypt, Mauritius, the Netherlands, Nigeria, Singapore, Spain and the UAE), for the G20 events and summit during 2023 under its presidency.115 This underlined the friendly relations between the two countries and the importance India attached to Muscat. Oman’s Minister of Commerce, Industry and Investment Promotion, Qais bin Mohammed al-Yousef, visited New Delhi in May. 111 Foreign Ministry of Oman, “Foreign Minister meets Indian National Security Adviser”, 24 March 2022, https://fm.gov.om/foreign-minister-meets-indian-national-sec urity-adviser/, accessed 30 May 2023. 112 Department of Science & Technology, “India and Oman agree upon programme of scientific and technological cooperation”, https://dst.gov.in/india-and-oman-agree-uponprogramme-scientific-and-technological-cooperation, accessed 30 May 2023. 113 Ibid. 114 India, MEA, “Visit of Minister of State for External Affairs Shri V. Muraleedharan

to the Sultanate of Oman (October 03–04, 2022)”, 1 October 2022, https://mea.gov. in/press-releases.htm?dtl/35790/visit+of+minister+of+state+for+external+affairs+shri+v+ muraleedharan+to+the+sultanate+of+oman+october+0304+2022, accessed 30 May 2023. 115 Embassy of India, Oman, “Press Release on India Invites Oman as Guest Country in G-20”, 15 August 2022, https://www.indemb-oman.gov.in/news_letter_detail/?id=241, accessed 30 May 2023.

232

MD. M. QUAMAR ET AL.

In June, Oman joined other regional countries to condemn the insulting remarks against Prophet Mohammed made by the spokeswoman of Bharatiya Janata Party (BJP), Nupur Sharma, during a domestic political debate. The undersecretary of diplomatic affairs in Oman’s foreign ministry met with the Indian ambassador in Muscat to express the displeasure of the Sultanate over the remarks.116 Emphasising the need to promote a culture of tolerance and coexistence, the Omani official welcomed the statements and steps taken by the ruling BJP against the concerned functionary for such statements. India-Oman relations have continued to grow in multiple fields. The diplomatic crisis emanating from Sharma’s remarks was diffused through proactive engagements and underscored that such individual opinions do not reflect the views of the Government of India or the ruling BJP.117 Oman was instrumental in the release of seven Indian sailors who were onboard the cargo ship Rwabee detained by the Houthis in Yemen since 2 January 2022. The Indian sailors and other crew members reached Muscat on 24 April and travelled back to India.118 In July, Prime Minister Modi sent a message of greetings and wishes on Eid al-Adha to Sultan Haitham, underscoring the spirit of sacrifice marking the occasion and highlighting the age-old relations between the people of India and Oman.119 The foreign ministry of Oman expressed condolences and sympathy after a bridge collapse in Gujarat in October that resulted in several deaths and injuries.120

116 Foreign Ministry of Oman, “Diplomatic Undersecretary meets with Indian Ambas-

sador”, 6 June 2022, https://fm.gov.om/diplomatic-undersecretary-meets-with-indianambassador/, accessed 30 May 2023. 117 The Hindu, “Remarks on the Prophet do not reflect views of government:

India”, 9 June 2022, https://www.thehindu.com/news/national/remarks-do-not-reflectviews-of-government-mea-on-controversial-comments-on-prophet/article65510900.ece, accessed 30 May 2023. 118 India, MEA„ “Release of Indian sailors on the ship Rwabee from Houthi detention”, 25 April 2022, https://mea.gov.in/press-releases.htm?dtl/35225/release+of+ind ian+sailors+on+the+ship+rwabee+from+houthi+detention, accessed 30 May 2023. 119 Embassy of India, Oman, “Prime Minister Narendra Modi extends Eid Greetings to Sultan Haitham bin Tarik and the people of Oman”, 11 July 2022, https://www.ind emb-oman.gov.in/news_letter_detail/?id=238, accessed 30 May 2023. 120 Foreign Ministry of Oman, “Foreign Ministry sends condolences to India over bridge collapse”, 31 October 2022, https://fm.gov.om/foreign-ministry-sends-condol ences-to-india-over-bridge-collapse/, accessed 30 May 2023.

6

OMAN

233

India-Oman security and defence cooperation have witnessed significant improvements. In January 2022, the 11th India-Oman Joint Cooperation Committee Meeting (JCCM) was held in New Delhi121 to discuss further strengthening of bilateral defence cooperation and enhancing exchanges between the armed forces. The Omani delegation was led by the secretary-general in Oman’s defence ministry, Mohammed Nasser al-Zaabi and included Omani Air Force and Navy chiefs.122 In addition to attending the JCCM, the delegation held meetings with military and defence leadership, including Defence Minister Rajnath Singh, and defence analysts and experts in New Delhi to discuss mutual security concerns.123 In February, Commander of the Royal Navy of Oman Rear Admiral Saif bin Nasser al-Rahbi came to India on “a goodwill visit” and held talks with Chief of Naval Staff (CNS) Admiral Hari Kumar “to explore avenues to enhance cooperation between the Navies further.”124 India-Oman maritime cooperation and engagement is an important part of bilateral defence cooperation. Oman has provided India with logistical support for its anti-piracy and maritime security efforts in the Western Indian Ocean. Oman has also provided access to berthing and maintenance facilities at the Duqm Port under a bilateral MoU. The two navies have conducted the joint bilateral exercise Naseem al-Bahr since 1993. Maritime cooperation was also discussed during the visit of Foreign Minister Busaidi

121 Times of Oman, “Oman, India hold joint military meet”, 31 January 2022, https:// timesofoman.com/article/112681-oman-india-hold-joint-military-meet, accessed 30 May 2023. 122 Sidhant Sibal, “Oman Defence Ministry Secretary-General, Air & Navy chief to visit India to strengthen ties”, DNA India, 30 January 2022, https://www.dnaindia. com/world/report-oman-defence-ministry-secretary-general-air-navy-chief-to-visit-indiato-strengthen-ties-news-alerts-2931139, accessed 30 May 2023. 123 ANI News, “Oman Defence Ministry’s Secretary General calls on Air Chief Marshal, discusses bilateral ties”, 31 January 2022, https://www.aninews.in/news/ world/asia/oman-defence-ministrys-secretary-general-calls-on-air-chief-marshal-discussesbilateral-ties20220131201406/, accessed 30 May 2023. 124 The Indian Express, “India, Oman Navy Chiefs hold talks to explore new avenues of defence cooperation”, 14 February 2022, https://indianexpress.com/article/india/ india-oman-navy-chiefs-hold-talks-explore-new-avenues-defence-cooperation-7773967/, accessed 30 May 2023.

234

MD. M. QUAMAR ET AL.

to India in March.125 India-Oman joint air exercise Eastern Bridge VI was held in Jodhpur, India, during 21–25 February “aimed at providing operational exposure and undertaking mutual exchange of best practices, towards enhancing operational capabilities of both the Air Forces.”126 Trade and Commerce India was the second largest destination for Oman’s oil exports in 2022 and the third largest destination for its non-oil exports. Its share in re-exports of Oman increased by about 2.4 per cent in 2021. The total bilateral trade increased from US$5.44 billion in 2020 to about US$12.39 billion in 2022–2023. The sharp increase in bilateral trade was due to increase in India’s oil imports and exports. India’s total exports to the Sultanate increased marginally from US$3.08 billion in 2020 to US$3.15 billion in 2021, and significantly to US$4.48 billion in 2022– 2023. India’s imports increased from US$6.8 billion in 2021–2022 to US$7.91 billion in 2022–23 (Fig. 6.1). The top five items for India’s exports were petroleum products, iron and steel and products thereof, processed minerals, ship boats and floating structures, and basmati rice (Fig. 6.2). The top five items for India’s imports were crude oil, petroleum products, fertilisers, ships, boats and floating structures and plastic raw material (Fig. 6.3). India and Oman have agreed to have a joint feasibility study on a limited number of items for a preferential deal even though India is pursuing a free trade agreement with the GCC countries.127 A high-level multisectoral delegation led by the Omani Minister of Commerce and Industry visited India in May to discuss trade and economic cooperation. 125 Dipanjan Roy Chaudhury, “Oman FM visit: Delhi, Muscat eye expansion in maritime security partnership”, The Economic Times, 22 March 2022, https://econom ictimes.indiatimes.com/news/defence/oman-fm-visit-delhi-muscat-eye-expansion-in-mar itime-security-partnership/articleshow/90366898.cms, accessed 30 May 2023. 126 The Economic Times, “India, Oman hold five-day air exercise ‘Eastern Bridge-VI’ in Jodhpur”, 26 February 2022, https://economictimes.indiatimes.com/news/defence/ india-oman-hold-five-day-air-exercise-eastern-bridge-vi-in-jodhpur/articleshow/898442 92.cms, accessed 30 May 2023. 127 Shreya Nandi, “India, Oman agree to have joint feasibility study on limited trade deal”, Business Standard, 12 May 2022, https://www.business-standard.com/article/eco nomy-policy/india-oman-agree-to-have-joint-feasibility-study-on-limited-trade-deal-122 051200020_1.html, accessed 30 May 2023.

6

OMAN

235

Fig. 6.1 India’s trade with Oman, 2016–2022 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India)

The tenth India-Oman Joint Business Council Meeting was organised in New Delhi in May, and it agreed to work on a draft agenda to boost growth in both countries.128 Oman positions itself as a strategic location to serve the GCC market. In March, an Indo-Oman business meeting on building and construction was organised by the Indian Embassy in Muscat. A delegation of 23 Indian companies led by the Federation of Indian Exports Organization shared their experiences and discussed business opportunities with their Omani counterparts. In October, the Oman Chamber of Commerce and Industry (OCCI), in collaboration

128 Press Information Bureau, “Oman to fast-track approval of Indian pharma products registered by USFDA, UKMHRA and EMA”, 11 May 2022, https://pib.gov.in/PressR eleaseIframePage.aspx?PRID=1824504, accessed 30 May 2023.

236

MD. M. QUAMAR ET AL.

Fig. 6.2 India’s top five export items to Oman, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

with the Ministry of Agriculture, Fisheries and Water Resources, organised an Oman-India business forum to discuss collaboration opportunities in food fisheries and allied sectors.

Fig. 6.3 India’s top five import items from Oman, 2002–2023 (Source Directorate GoI, General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

6

OMAN

237

In March, a round table on India-Oman tourism was organised with the participation of 40 prominent Omani and Indian tour operators. Later in August, Omani officials from the Ministry of Heritage and Tourism met the CEO of Indian tourism companies during their promotional campaign in India.129 They apprised the Indian companies of their tourism strategy and how it catered to the Indian market. The promotional campaign led to an increase in Indian tourists to Oman, which was about 167,678 between January and July 2022.130 However, the number of Omani tourists to India has declined since 2017, from about 107,217 visitors to 43,114 in 2021.131 Indian direct investment across many sectors was about US$7.5 billion, of which about US$2 billion was in the Sohar region.132 About 6,000 Indian companies operate in Oman in various sectors, including edible products, healthcare, pharmaceuticals, microchip, semiconductors and information technology and energy, including renewables like green hydrogen.133 In Duqm Special Economic Zone, many Indian companies are present, and India has investments in Sebacic Oman’s US$1.2 billion project, the largest Sebacic acid plant in the Middle East. Oman is keen on directly trading with India, and its shipping company has already started operations in India’s Nhava Sheva and Mundra ports. However, the FDI from Oman is still small; the cumulative FDI (in equity) between April 2000 and December 2022 was about US$588.47 million, with a share of 0.09 per cent of India’s cumulative FDI.134 The Oman-India Join Investment Fund (OIJIF) has raised another US$220 million for Tranche-II for 129 Oman News Agency, “Heritage Ministry Officials Meet CEOs of Indian Tourism Firms”, https://omannews.gov.om/topics/en/80/show/109785, accessed 30 May 2023. 130 Zawya, “Over 160,000 Indian tourists visit Oman this year”, 21 August 2022, https://www.zawya.com/en/business/travel-and-tourism/over-160-000-indian-touristsvisit-oman-this-year-yv6ryi2v, accessed 30 May 2023. 131 Ministry of Tourism, India, “Market Research and Statistics”, https://tourism.gov. in/market-research-and-statistics, accessed 30 May 2023. 132 Embassy of India, Oman, “India—Oman Bilateral Economic and Commercial Relations”, 6 April 2023, https://www.indemb-oman.gov.in/page/trade/, accessed 30 May 2023. 133 Oman News Agency, “Oman, India Enjoy Historical Economic Relations”, https:// omannews.gov.om/topics/en/81/show/111542, accessed 30 May 2023. 134 Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, India, “FDI Statistics”, https://dpiit.gov.in/publications/fdi-statistics, accessed 30 May 2023.

238

MD. M. QUAMAR ET AL.

its investments in India, focusing on four sectors—consumer, industrial, financial services and healthcare.135 During the visit of the MoS Muraleedharan to the Sultanate, an MoU for the acceptance of the RuPay card and UPI QR code-based mobile payment in Oman was signed.136 Using the UPI platform, the agreement would facilitate a real-time cross-border remittance flow between the two countries. Oman’s share in India’s total remittance was 1.6 per cent in 2020.137 The residents in Oman subscribed to about 2.7 per cent of Mutual Fund Companies in India.138 Energy Ties India was the second largest importer of Omani crude in 2022, with a record average of about 85,000 barrels per day.139 The imported volumes fluctuated during the year, with India taking large volumes when Chinese purchase was relatively weak.140 India’s share in Oman’s oil exports increased from 6.2 per cent in 2020 to 10 per cent in 2021.141 Oman exported about 28.9 million barrels of crude in 2022.142 Oman’s share in India’s total LNG import was 5.63 per cent in 2022–2023 (Table 6.5). India was the 4th largest destination for Oman’s LNG exports in 2022. India imported about US$963.55 million worth of LNG in 2022–2023 (Table 6.5). The energy imports from Oman increased from US$1.88 billion in 2020–2021 to US$4.71 billion in 2021–2022, with a corresponding increase in share from 1.89 per cent to 2.24 per cent in India’s

135 Embassy of India, Oman, “Oman Fact Sheet”, https://www.indemb-oman.gov.in/ page/omanfs/, accessed 30 May 2023. 136 Embassy of India, Oman, “Press Release—Milestone MOU signed for acceptance of RuPay card and UPI QR Code-based mobile payments in Oman”, 4 October 2022, https://www.indemb-oman.gov.in/news_letter_detail/?id=244, accessed 30 May 2023. 137 Reserve Bank of India, “Headwinds of COVID-19 and India’s Inward Remittances”, 16 July 2022, https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=21141, accessed 30 May 2023. 138 Reserve Bank of India, “Survey of Foreign Liabilities and Assets of Mutual Fund Companies—2021–22”, 8 August 2022, https://rbi.org.in/scripts/BS_PressReleaseDis play.aspx?prid=54168, accessed 30 May 2023. 139 MEES, vol. 66, no. 8, 3 February 2023, p.15. 140 MEES, vol. 66, no. 8, 3 February 2023, p.15. 141 Central Bank of Oman, Annual report 2021. 142 Central Bank of Oman, Quarterly Bulletin December 2022.

6

OMAN

239

total. In 2022–2023, its share reduced to about 1.75 per cent in India’s total mineral fuel imports. India participated in phase one of the green ammonia project at Duqm in Oman. India’s Acme Group and Norway’s Scatech collaborated in a joint venture to produce 100,000 tons (scalable up to 1.2 million tons) of green ammonia powered by 500 MW of solar power.143 The MoU was signed in March, and the land development agreement was signed in June. The construction would begin after commissioning the green hydrogen and green ammonia plant in India. The project would provide electricity during non-solar hours and is expected to translate into a power purchase agreement with Marafiq, Oman’s centralised utility provider, as well as have exclusive rights in Duqm’s special economic and free zone.144 Table 6.5 India’s energy trade with Oman, 2019–22

Crude oil imports from Oman Petroleum products imports from Oman LNG imports Gaseous hydrocarbon Total mineral fuel imports from Oman (HS 27) Share in India’s total mineral fuel imports (%) Mineral fuel imports as per cent of total imports from Oman Petroleum products exports to Oman Share of petroleum products in India’s total exports to Oman (%)

2019–2020

2020–2021

2021–2022

2022–2023

1,010.43 (0.98) 393.56 (5.0) 309.42 (3.20) 51.92 1,838.78

1,156.36 (1.94) 207.99 (3.60 410.66 (5.97) 62.64 1,884.24

3,600.0 (2.94) 177.61 (1.78) 674.09 (5.00) 0 4,707.86

2657.57 (1.64) 477.82 (4.40) 963.55 (5.63) 134.84 4553.64

1.2

1.89

2.24

1.75

50.11

61.02

68.82

57.56

449.5 (1.10) 19.87

464.97 (1.84) 19.74

941.28 (1.41) 29.90

2122.9 (2.20) 47.42

Note Figures in the bracket are per cent share of India’s total imports/exports of that commodity Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India

143 MEES, vol. 65, no. 26, 1 July 2022, p. 14. 144 MEES, vol. 65, no. 26, 1 July 2022, p. 14.

240

MD. M. QUAMAR ET AL.

In collaboration with the Ministry of Defence Pension Fund, Oman Investment Corporation acquired a power plant in India from Singapore Sembcorp Industries in a US$1.5 billion deal.145 Oman-India Joint Investment Fund (OIJIF) agreed to invest US$13 million in Solar Industries India Limited (SIIL) and would pick up a 4.28 per cent share.146 Oman had also joined the India-led International Solar Alliance. Expatriates India and Oman have a long history of cultural relations, and Indian expatriates are valued for their work ethics and discipline. Many were forced to return during Covid-19 lockdowns, but in 2022, most returned to find employment. Expatriates from Kerala, Andhra Pradesh, Telangana and Tamil Nadu form a majority, but increasingly the demography has become more diversified with workers from Uttar Pradesh, Bihar and Rajasthan immigrating to Oman for work.147 The expatriates have been engaged in multiple sectors, but most are engaged in the services industry. Some have faced problems due to local laws and harsh working conditions, and the Indian Embassy extends support for any expatriate Indian facing difficulties at the local level.148 Besides, the Indian Embassy has proactively promoted Indian culture and products by engaging the Indian community through sports, cultural events, festivals and other activities. The expatriate community forms an important bridge in developing and sustaining the cultural and economic cooperation between India and Oman. Indians are the second largest expatriate community in Oman after Bangladeshis, and at the end of February 2022, there were 490,114 145 Oman News Agency, “Oman Investment Corporation Announces Acquisition of Sembcorp Power Plant in India”, https://omannews.gov.om/topics/en/80/show/ 109893, accessed 30 May 2023. 146 VCCircle, “Oman India joint investment fund to invest $13 M in solar industries”, 31 July 2012, https://www.vccircle.com/oman-india-joint-investment-fund-invest13m-solar-industries, accessed 30 May 2023. 147 James Mathew, “Indian workers migrating to Gulf region dropped 21% in 2018”, Arabian Business, 15 January 2019, https://www.arabianbusiness.com/politics-econom ics/411281-indian-workers-migrating-to-gulf-region-dropped-21-in-2018, accessed 30 May 2023. 148 Embassy of India, Oman, “India—Oman bilateral relations”, June 2021, https:// www.mea.gov.in/Portal/ForeignRelation/India-Oman2021.pdf, accessed 30 May 2023.

6

OMAN

241

Indian workers and professionals in the Sultanate.149 There are also about 1,426 PIOs and 500 Indian students in Oman. Under the investment Residency Program, a 10-year investor visa was conferred to Najeeb K, the regional head of Malabar Gold and Diamonds, in a high-profile event. The 8th meeting of the Indo-Oman JWG on the workforce was held in Muscat on 28 December 2022, which resolved to take an integrated approach to promote the welfare of the workers, streamline the recruitment process and achieve a time-bound resolution of issues of mutual concern. The next meeting was agreed to be held in New Delhi in 2023.

Challenges and Opportunities India-Oman relations have progressed well but challenges remain in translating the political and diplomatic goodwill into strong economic and strategic ties. The political transition in Oman has created newer challenges and opportunities, especially as the Sultanate is looking to overcome economic downturn accentuated by the Covid-19. A degree of youth unrest due to economic problems also has created greater dependency of Oman upon its bigger neighbours. For India, Oman has always been a preferred partner in the Gulf region and the new leadership needs to be convinced of the continued Indian commitment towards strengthening partnership. Cultivating political relations with the new leadership would require consistent political and diplomatic effort. Sultan Haitham bin Tariq does not undertake much international travels and has been focusing on cultivating closer relations with Gulf leaders. This is both a challenge and opportunity for India. Prime Minister Modi visited Oman in February 2018 and since then there has been no high-level visits. Although India has invited Oman as one of the guest countries for G20 deliberations under its presidency in 2023, this may not be sufficient to break the ice. A more concentrated effort like a state visit by Sultan Haitham can help strengthen Indo-Oman relations. India’s economic relations with Oman has been among the most diversified in the region. India can leverage Oman’s strategic location and its deeper regional economic integration as a gateway to other countries. Greater cooperation in the service sectors and knowledge industries would contribute to the skilling of the Omani nationals and would be appreciated in the Sultanate. 149 Embassy of India, Oman, “Oman Fact Sheet”, https://www.indemb-oman.gov.in/ page/omanfs/, accessed 30 May 2023.

CHAPTER 7

Qatar

Key Information Political System: Constitutional Monarchy; Ruling Family: Al-Thani; Ruler: Emir Tamim bin Hamad al-Thani (since 25 June 2013); Crown Prince: Abdullah bin Hamad al-Thani (Deputy Emir) (since 11 November 2014); Prime Minister: Khalid bin Khalifa bin Abdul Aziz al-Thani (since 28 January 2020); National Day: 18 December; Parliament: 45-member Majlis al-Shura (30 elected and 15 nominated); Last Parliamentary Election: 2 October 2021; Major Group in Parliament: No major group; political organisation is prohibited; National Carrier: Qatar Airways. Socio-Economic Indicators Area: 11,586 sq.km; Population: 2.68 million; Native: 11.6%; Expats: 88.4%; Religious Groups: Citizens 90–95% Sunni Muslims and 5– 10% Shia Muslims; Residents 65.2% Muslims, 13.7% Christians, 15.9% Hindus, 3.8 Buddhists and less than 1% others; Age Structure: 0–14 Years 13.08%, 15–64 Years 85.51%, 65 Years and above 1.41%; Population Growth Rate: −2.6%; Life Expectancy at Birth: 79 years; Major Population Groups: Arabs (40%), Indians (18%), Pakistanis (18%), Iranians (10%) and others (14%, mainly Europeans); Adult Literacy Rate (Ages 15 and older): 93.5%; National Currency: Qatari Riyal (QAR); GDP (US$ Current): US$179.68 billion; Foreign Trade: Exports © Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_7

243

244

MD. M. QUAMAR ET AL.

US$115.91 billion, Imports US$74.33 billion; Military Expenditure: 5% of GDP; Sovereign Wealth Fund: Qatar Investment Authority, Value of Assets: US$475 billion; National Debt: US$104.86 billion; GNI Per Capita (PPP, current international): $100,450; GDP Per Capita (PPP, current international): $66,838.4; Oil Reserves: 25.2 billion barrels; Gas Reserves: 843 tcf; Human Development Index: 0.855; HDI Rank: 42; Infant Mortality Rate (deaths per 1,000 live births): 5.8; Maternal Mortality Ratio (deaths per 100,000 live births): 9; UN Education Index: 0.659; Gender Development Index: 1.019; Gender Inequality Index: 0.220; Labour Force: 1.977 million; Employment to Population Ratio (Ages 15 and older): 86.7%; Unemployment Rate: 0.26%; Urban Population: 99.4%; Rate of Urbanisation: 1.66% (2020– 2025 Estimates); Last National Census: 2010; World Press Freedom Index: Rank 119 out of 180, Score 49.03; Corruption Perception Index: Rank 40 out of 180, Score 58; Foreign Direct Investment (Inflows): −US$1.09 billion; Individuals Using Internet (per cent of population): 99.7%; Net Migration Rate (per 1,000 people): 0; Forest Area (per cent of total Land Area): 0.0; Carbon Dioxide Emissions (metric tons per capita): 32.8; Global Peace Index: Rank 29 out of 162, Score 1.605; Fintech Index: Not Ranked; Global Innovation Index: Rank 52 out of 132; Global Cybersecurity Index: Rank 27 out of 194, Score 94.5. India Related Indian Cultural Centre: Doha (since 1992); Number of Indians: 746,550; Currency Exchange Rate: 1 QAR = INR 22.50; Number of Non-Muslim Places of Worship for Indians: Catholic Church (opened in 2008); Indian Schools: 19; Indian Banks: State Bank of India, India Overseas Bank, ICICI Bank and HDFC Bank; Last Visit to Indian by the ruler: Emir Tamim bin Hamad al-Thani (March 2015); Last Indian Prime Minister to Visit Qatar: Narendra Modi (June 2016). Sources: CIA World Factbook 2023; UN Development Programme 2023; World Bank 2023; World Intellectual Property Organisation 2023; Vision of Humanity, 2023; UNCTAD World Investment Report 2023, Transparency International 2023; Reporters without Borders 2023; U.S. EIA 2023; Embassy of India, Qatar, 2023. ∗ ∗ ∗

7

QATAR

245

The successful conduct of the FIFA World Cup in November–December 2022, amidst several challenges in the run-up to the tournament, symbolised the rise of Qatar as a global sporting hub. A series of corruption allegations were raised since 2010 when Qatar won the bid to host the mega event. Besides, there were serious doubts about the ability of tiny Qatar to host such as large sporting extravaganza, given the lack of football infrastructure and delays in the construction of stadiums. The outbreak of the Covid-19 pandemic disrupted the preparation for the event. Legitimate concerns about the rights of migrant workers on building sites of the event attracted global criticism, and Doha was forced to take a series of corrective measures. However, as the tournament approached, supporters of the Qatari bid alleged racism and Islamophobia on the part of the detractors. This rallied sympathy across the Gulf and Arab countries in favour of Qatar. Notwithstanding, the FIFA World Cup 2022 proved to be a successful and popular event silencing some of the accusations against the host. India and Qatar have developed strong bilateral relations with energy and expatriates, forming the core of the ties. The detention in August 2022 of eight former Indian naval officers working with an Omani firm, providing services for Qatari armed forces, on undeclared charges was widely covered in Indian media and has raised a diplomatic challenge that will require careful handling.

Domestic Developments The year will be remembered for the FIFA World Cup in Qatar. The preparations for the event went to the anxious moments with the iconic Lusail stadium that hosted the final match and closing ceremony was inaugurated only in September 2022.1 Qatar hardly had any footballing infrastructure when it won the bid to host the FIFA World Cup in 2010. The only existing football stadium was Khalifa International Stadium in Al-Rayyan on the outskirts of Doha. Hence, the entire infrastructure for hosting the event, including seven new stadiums and hotels and temporary residential blocs to accommodate the 32 teams, their fans and spectators expected from across the region and other parts of the world, 1 Gulf Business, “Inaugural match at Qatar’s Lusail Stadium draws thousands of fans, venue to host World Cup Final”, 12 September 2022, https://gulfbusiness.com/inaugu ral-match-at-qatars-lusail-stadium-draws-thousands-of-fans-venue-to-host-world-cup-final/, accessed 18 June 2023.

246

MD. M. QUAMAR ET AL.

had to be built from scratch.2 The seven new stadiums built were Lusail Stadium in Lusail, Al-Bayt Stadium in Al-Khor, Al-Janoub Stadium in AlWakrah, Ahmad Bin Ali Stadium, Education City Stadium in Al-Rayyan and Stadium 974 and Al-Thumama Stadium in Doha.3 All the stadiums were built within a 55-kilometre radius of the capital, Doha. A total of 64 matches were held in eight different venues. The largest stadium was the iconic Lusail Stadium, with a capacity of 80,000. The stadium hosted the largest number of matches (10), including the final. Al-Bayt, with a capacity of 60,000, hosted the inaugural ceremony and nine matches.4 Qatar also built over 100 luxury hotels to host teams, sponsors and spectators.5 Politics The political atmosphere in Qatar remained charged throughout 2022. Speculations about the ability to pull off an extraordinary sporting event, accusations of human and labour rights violations and doubts about restrictive culture deterring global spectators kept the authorities on their toes until the final moments. The barrage of criticism forced Qatar to rally domestic and regional support by invoking Qatari, Arab and Islamic pride and underlining that football is as much an Arab sport as it is European or American.6 Many Arab and Middle Eastern commentators underlined that Qatar was singled out for criticism over its handling and management

2 Daily Mail, “The most expensive World Cup EVER! Qatar spent £3.35BILLION on

eight stadiums with state-of-the-art cooling systems for players and fans”, 18 November 2022, https://www.dailymail.co.uk/sport/sportsnews/article-11441911/World-Cuphosts-Qatar-spent-3-35BN-eight-stadiums-state-art-cooling-systems.html, accessed 19 June 2023. 3 Utathya Nag, “FIFA World Cup 2022 venues: Eight Qatar stadiums to host Middle East’s first football showpiece”, Olympics, 28 May 2023, https://olympics.com/en/news/ fifa-world-cup-2022-venues-stadiums-qatar-football, accessed 18 June 2023. 4 Ibid. 5 Ramsey Qubein, “Qatar plans 100 + new hotels for FIFA World Cup later this

year”, Forbes, 26 March 2022, https://www.forbes.com/sites/ramseyqubein/2022/03/ 26/qatar-plans-100-hotels-in-time-for-fifa-world-cup-later-this-year/?sh=25821a7576ed, accessed 18 June 2023. 6 Andrew Mills, “Qatar has faced unfair criticism over World Cup, says organiser”, Reuters, 9 September 2022, https://www.reuters.com/lifestyle/sports/qatar-has-facedunfair-criticism-over-world-cup-says-organiser-2022-09-08/, accessed 18 June 2023.

7

QATAR

247

of the World Cup preparation because of its Arab and Islamic identity.7 While delivering a speech in September, Emir Tamim bin Hamad al-Thani underlined: “Since we won the honour of hosting the World Cup, Qatar has been subjected to an unprecedented campaign that no host country has ever faced.”8 He further underlined: initially [Qatar] dealt with the matter in good faith, and even considered that some criticism was positive and useful, helping us to develop aspects of ours that need to be developed…But it soon became clear to us that the campaign continues, expands and includes fabrication and double standards, until it reached a level of ferocity that made many question, unfortunately, about the real reasons and motives behind this campaign.9

While this helped rally support from Qataris and across the region, it did not take away the fact that many of the issues raised, especially regarding the exploitation and deaths of migrant workers, human rights abuse and lack of gender representation and discrimination, were not inaccurate. Qatari authorities maintained that 400–500 worker deaths were reported on construction sites related to the FIFA event but a report by The Guardian put the number of deaths at 6,500.10 After Qatar was vehemently criticised for abusing and exploiting workers, the authorities introduced a series of reforms between 2014 and 2022, including the abolishing of kafala (sponsorship) in 2020.11 The criticism also included concerns about the rights of non-binary people, as Qatar had banned any public expression and symbols of LGBTQ groups,

7 Havvanur Fadila, “Qatar World Cup: The West’s Eurocentric and orientalist view”, Daily Sabah, 3 December 2022, https://www.dailysabah.com/opinion/op-ed/qatarworld-cup-the-wests-eurocentric-and-orientalist-view, accessed 18 June 2023. 8 Al-Jazeera, “Qatar emir slams ‘ferocious’ campaign against World Cup host”, 25 October 2022, https://www.aljazeera.com/news/2022/10/25/qatar-emir-slams-unprec edented-campaign-against-world-cup-hosts, accessed 18 June 2023. 9 Ibid. 10 Reuters, “World Cup 2022: How many migrant workers have died in Qatar?”, 15

December 2022, https://www.reuters.com/lifestyle/sports/world-cup-2022-how-manymigrant-workers-have-died-qatar-2022-11-24/, accessed 18 June 2023. 11 Human Rights Watch (HRW), “Qatar: Significant Labor and Kafala Reforms”, 24 September 2020, https://www.hrw.org/news/2020/09/24/qatar-significant-labor-andkafala-reforms, accessed 18 June 2023.

248

MD. M. QUAMAR ET AL.

including rainbow-coloured attires, bands and accessories.12 Although, after FIFA’s intervention, the ban was revoked, fans who expressed support for LGBTQ rights did face scrutiny from the security agencies.13 In early 2022, Qatar faced the third wave of Covid-19. The number of cases of the Omicron variant increased sharply in January but began to decline the following month and flattened in March. Until 31 December 2022, Qatar reported 489,428 cases of Covid-19 infections and 685 deaths since its outbreak in March 2020. In 2022, the number of Covid19 infections was 238,900, while 67 people lost their lives.14 Qatar has one of the highest vaccination rates in the world, with 98.98 per cent of its resident population receiving at least one dose of Covid-19 vaccine.15 Foreign Policy and Security Qatari foreign policy had to endure its toughest test in 2022 due to the rising international criticism of its domestic policies, laws and cultural practices as the FIFA World Cup approached. While hosting the sporting extravaganza generated unprecedented business and tourism, it also attracted unparalleled criticism and innumerable controversies. The biggest test was on managing relations with European Union (EU) countries which were at the forefront of criticising and censoring Qatar for human rights abuse and exploitation of migrant workers.16 However, after the outbreak of the Russia-Ukraine crisis, Qatar stepped up its energy supplies to fulfil the EU shortfall due to disruption from Russia and

12 Frontline, “Rainbow symbols face pushback at the World Cup despite FIFA promises”, 23 November 2022, https://frontline.thehindu.com/news/fifa-world-cup2022-rainbow-symbols-face-pushback-at-the-world-cup-despite-fifa-promises/article66173 505.ece, accessed 18 June 2023. 13 Ibid. 14 John Hopkins University & Medicine, “Qatar: Overview”, 10 March 2023, https://

coronavirus.jhu.edu/region/qatar, accessed 18 June 2023. 15 World Data, “Healthcare in Qatar”, https://www.worlddata.info/asia/qatar/hea lth.php, accessed 19 June 2023. 16 Euro Parliament, “World Cup in Qatar: FIFA should help compensate families of dead migrant workers”, 24 November 2022, https://www.europarl.europa.eu/news/ en/press-room/20221121IPR56305/world-cup-in-qatar-fifa-should-help-compensate-fam ilies-of-dead-migrant-workers, accessed 19 June 2023.

7

QATAR

249

this significantly muted the European criticism of Qatar.17 In December, however, the European Parliament passed a resolution restricting any representation from Qatar in the premises of the parliament on the accusations of Qatar trying to influence members by bribing them.18 While the relations with EU countries fluctuated, Qatar-US ties remained steadfast. In January 2022, Emir Tamim visited Washington, held wide-ranging talks with President Joe Biden and met with industry and business leaders. Subsequently, the US designated Qatar as a major non-NATO ally.19 Until now, only Israel, Egypt and Jordan in the Middle East have enjoyed this status.20 Qatar has been an ally of the US for a long time. In recent years, the two sides stepped-up efforts to establish deeper ties and Qatar play a significant role in the US withdrawal from Afghanistan by hosting talks with the Taliban in Doha and by facilitating withdrawal operations.21 The US-Qatar security and defence ties have remained robust, with Qatar hosting the US airbase at Al-Udeid and assisting in US military operations in the Gulf.22 Qatar is also a major buyer of US-made weapons and arms. In addition, several Qatari security personnel have taken part in State Department’s Anti-Terrorism Assistance training programme to ensure security during the FIFA World

17 Ali Noureddine, “Qatar takes the lead in Europe’s race for gas”, Fanack, 20 October 2022, https://fanack.com/economy-en/qatar-takes-the-lead-in-europes-race-forgas~242345/, accessed 18 June 2023. 18 Jorge Liboreiro, “Corruption scandal: MEPs vote to suspend Qatar access to EU Parliament and halt related legislation”, Euronews, 15 December 2022, https://www.euronews.com/my-europe/2022/12/15/corruption-scandal-mepsvote-to-suspend-qatar-access-to-eu-parliament-and-halt-related-leg, accessed 18 June 2023. 19 The White House, “Readout of President Biden’s Meeting with Amir Sheikh Tamim Bin Hamad Al-Thani of Qatar”, 31 January 2022, https://www.whitehouse.gov/bri efing-room/statements-releases/2022/01/31/readout-of-president-bidens-meeting-withamir-sheikh-tamim-bin-hamad-al-thani-of-qatar/, accessed 18 June 2023. 20 Congressional Research Service, “Qatar: Issues for the 118th Congress”, 10 March 2023, https://crsreports.congress.gov/product/pdf/R/R47467, accessed 18 June 2023. 21 Ibid. 22 Ibid.

250

MD. M. QUAMAR ET AL.

Cup.23 In July, Qatar signed an MoU with the US Department of Homeland Security for border and cybersecurity cooperation and an agreement related to the World Cup.24 Qatar maintains friendly relations with Russia, despite voting against the Russian invasion of Ukraine at the UN General Assembly.25 Qatar took the position that the sovereignty and border integrity of countries should be respected26 and provided US$5 million in humanitarian aid to Ukraine.27 In March 2022, Foreign Minister Mohammed bin Abdulrahman al-Thani visited Moscow and offered to mediate a peaceful resolution of the conflict with Kyiv.28 In October, Emir Tamim held a telephone conversation with President Volodymyr Zelensky and reiterated the Qatari support for the unity and integrity of Ukraine.29 In the same month, the Emir met Vladimir Putin during a Shanghai Cooperation Organisation (SCO) summit in Kazakhstan as Qatar, along with Egypt and Saudi Arabia, became a dialogue partner of the organisation.30 This underlined the Qatari policy of maintaining ties with all major powers as the world became increasingly polarised. 23 US Department of State, “Country reports on terrorism 2021: Qatar”, https://

www.state.gov/reports/country-reports-on-terrorism-2021/qatar, accessed 18 June 2023. 24 US Department of Homeland Security, “DHS to expand security cooperation with Qatar and the United Arab Emirates”, 12 July 2022, https://www.dhs.gov/news/2022/ 07/12/dhs-expand-security-cooperation-qatar-and-united-arab-emirates, accessed 18 June 2023. 25 Diana Galeeva, “The Russo-Ukrainian war and the forked path of Qatar-Russia Relations”, Gulf International Forum, https://gulfif.org/the-russo-ukrainian-war-and-the-for ked-path-of-qatar-russia-relations/, accessed 18 June 2023. 26 Asmahan Qarjouli, “Qatar renews support for ‘peaceful’ resolution in Ukraine war”, Doha News, 2 June 2022, https://dohanews.co/qatar-renews-support-for-peaceful-resolu tion-in-ukraine-war/, accessed 18 June 2023. 27 Qatar Tribune, “Qatar allocates $5 mn in aid for Ukraine refugees”, 11 April 2022, https://www.qatar-tribune.com/article/232764/FIRSTPAGE/Qatar-allocates-$5mn-in-aid-for-Ukraine-refugees, last accessed 19 June 2023. 28 Middle East Monitor (MEMO), “Qatari foreign minister to visit Moscow on Sunday, says source”, 13 March 2022, https://www.middleeastmonitor.com/20220313-qatari-for eign-minister-to-visit-moscow-on-sunday-says-source/, accessed 18 June 2023. 29 Diana Galeeva, “GCC leads the way in Ukraine war mediation efforts”, Arab News, 14 October 2022, https://www.arabnews.com/node/2181216, accessed 18 June 2023. 30 Asharq Al- Awsat, “Saudi Arabia, Egypt, Qatar to Become SCO Dialogue Partners”, 18 September 2021, https://english.aawsat.com/home/article/3195761/saudi-ara bia-egypt-qatar-become-sco-dialogue-partners, accessed 18 June 2023.

7

QATAR

251

Qatar maintains robust diplomatic, political, and economic ties with China. Chinese firms were involved in several mega infrastructure development projects during the FIFA World Cup, including constructing Lusail Stadium, which hosted the final match and closing ceremony.31 Chinese companies were involved in the construction of Hamad Port and a naval base underlying the strategic component of the ties.32 However, most bilateral ties with China hinge on energy trade and investments. In November, Qatar and China signed a mega 27-year gas supply deal.33 Emir Tamim met with President Xi Jinping in Riyadh in December during the China-Arab and China-GCC summit meetings.34 Earlier, in February 2022, Tamim had visited China to attend the inaugural ceremony of the Winter Olympics in Beijing.35 In between, many other high-level political exchanges took place between the two countries.36 Besides big powers, Qatar has maintained steady ties with regional countries. Relations with Saudi Arabia improved rapidly since the end of the boycott in January 2021,37 while relations with UAE and Bahrain have improved. Saudi Crown Prince Mohammed bin Salman attended

31 Zhu Wenqian, “World Cup venue, site of final match, built by China Railway construction”, China Daily, 22 November 2022, https://www.chinadaily.com.cn/a/202 211/22/WS637c227aa31049175432b1c9.html, accessed 18 June 2023. 32 Hamad Port Project, “Building the new port”, http://www.npp.com.qa/Construct ion.html, accessed 18 June 2023. 33 The Economic Times, “Qatar signs world’s ‘longest’ gas supply deal with China”, 21 November 2022, https://economictimes.indiatimes.com/news/international/bus iness/qatar-signs-worlds-longest-gas-supply-deal-with-china/articleshow/95669450.cms? from=mdr, accessed 18 June 2023. 34 Ministry of Foreign Affairs of the People’s Republic of China, “Xi Jinping Meets with Qatari Emir Sheikh Tamim bin Hamad Al Thani”, 9 December 2022, https://www. fmprc.gov.cn/mfa_eng/zxxx_662805/202212/t20221210_10988599.html, accessed 18 June 2023. 35 Ministry of Foreign Affairs, People’s Republic of China, “Xi Jinping Meets with Amir Sheikh Tamim bin Hamad Al Thani of Qatar”, 5 February 2022, https://www.fmprc. gov.cn/eng/topics_665678/bj2022/yswj/202202/t20220207_10639621.html, accessed 18 June 2023. 36 Embassy of People’s Republic of China in the State of Qatar, “The tree of ChinaQatar friendship will be evergreen”, 25 December 2022, http://qa.china-embassy.gov.cn/ eng/zkgx/202212/t20221225_10994873.htm, accessed 18 June 2023. 37 BBC News, “Qatar crisis: Saudi Arabia and allies restore diplomatic ties with emirate”, 5 January 2021, https://www.bbc.com/news/world-middle-east-55538792, accessed 19 June 2023.

252

MD. M. QUAMAR ET AL.

the opening ceremony of the World Cup along with Emir Tamim in a display of bonhomie between the two leaders, after a brief but bitter dispute during 2017–2021.38 The show of solidarity with Qatar by the Gulf Cooperation Council (GCC) countries against the backdrop of the international criticism of the host made a rare moment in recent history rife with infighting.39 In December, President of the UAE Mohammed bin Zayed visited Qatar for the first time since the Al-Ula declaration and held wide-ranging talks with Emir Tamim and the UAE leader also praised Qatar for the successful hosting of the World Cup.40 Qatar has maintained steadfast relations with Iran that grew closer during the GCC crisis. In 2022, Doha stepped up efforts to engage Iran to facilitate a possible breakthrough in the indirect nuclear talks between Tehran and Washington.41 Emir Tamim visited Tehran in May and held talks with Supreme Leader Ayatollah Ali Khamenei and President Ebrahim Raisi.42 Hopes of a breakthrough shattered after the June talks in Doha between Iranian, European and US representatives ended without any agreement.43 The bilateral relations with Iran have expanded rapidly amidst the broader de-escalation trend in the region.44 A major 38 Arab News, “Saudi crown prince thanks Qatari emir after attending World Cup opening ceremony”, 20 November 2022, https://www.arabnews.com/node/2203196/ saudi-arabia, accessed 18 June 2023. 39 MEMO, “GCC: Qatar hosting 2022 World Cup ‘source of pride’”, 31 October 2022, https://www.middleeastmonitor.com/20221031-gcc-qatar-hosting-2022world-cup-source-of-pride/, accessed 18 June 2023. 40 Álvaro Escalonilla, “Mohammed bin Zayed visits Qatar for first time since blockade”,

Atalayar, 5 December 2022, https://atalayar.com/en/content/mohamed-bin-zayed-vis its-qatar-first-time-blockade, accessed 18 June 2023. 41 Maziar Motamedi, “Iran reviewing US nuclear deal response as Qatar mediates”,

Al-Jazeera, 28 August 2022, https://www.aljazeera.com/news/2022/8/28/iran-review ing-us-nuclear-deal-response-as-qatar-mediates, accessed 18 June 2023. 42 Maziar Motamedi, “Qatar’s Sheikh Tamim meets top Iranian officials in Tehran”, Al-Jazeera, 12 May 2022, https://www.aljazeera.com/news/2022/5/12/qatars-sheikhtamim-meets-top-iranian-officials-in-tehran, accessed 18 June 2023. 43 Parisa Hafezi, “U.S., Iran indirect nuclear talks in Doha end without progress”, Reuters, 30 June 2022, https://www.reuters.com/world/middle-east/indirect-talks-bet ween-iran-us-ended-without-result-tasnim-news-agency-2022-06-29/, accessed 18 June 2023. 44 Anna L. Jacobs, “Qatar and Iran expand ties amid broader Gulf de-escalation”, The Arab Gulf States Institute in Washington (AGSIW), 11 March 2022, https://agsiw.org/ qatar-and-iran-expand-ties-amid-broader-gulf-de-escalation/, accessed 18 June 2023.

7

QATAR

253

controversy erupted during Iran’s inaugural match against England on 21 November when Iranian players remained silent during a rendition of the Iranian national anthem, in show of solidarity with the protests back home against mandatory hijab during much of 2022.45 Subsequently, the players and their families back home faced threats from Iranian authorities resulting in them shunning public protests during subsequent matches involving Iran. Qatar has continued to maintain strong ties with Türkiye as relations improved due to ideological convergence and the Qatari policy of making regional and international friends against security threats. Emir Tamim visited Ankara in May 2022 and held a talks with President Recep Tayyip Erdo˘gan.46 The relations have acquired greater strategic weight since 2017 after Ankara rushed economic, political and military support to Doha following the boycott of Qatar by a quartet of fellow Arab countries.47 Simultaneously, Qatar was also working towards a rapprochement with Egypt after ending the dispute with the quartet in January 2021. In June 2022, Emir Tamim visited Egypt to discuss important issues underlining the thawing of ties.48 The visit came after Qatar agreed to invest US$5 billion in Egypt, boosting the economic prospects of the North African country that has seen financial struggles in recent years.49 In September, President Sisi visited Doha in signs of further easing ties and

45 The Indian Express, “Why Iran’s football team stayed silent during national anthem

at FIFA World Cup”, 22 November 2022, https://indianexpress.com/article/explained/ explained-sports/explained-iran-fifa-world-cup-qatar-national-anthem-protests-8282709/, accessed 18 June 2023. 46 Daily Sabah, “President Erdo˘ gan, Qatari emir discuss bilateral ties in Istanbul”, 13 May 2022, https://www.dailysabah.com/politics/diplomacy/president-erdogan-qatariemir-discuss-bilateral-ties-in-istanbul, accessed 18 June 2023. 47 Daily Sabah, “‘Turkey, Qatar move toward strategic partnership’”, 15 May 2022, https://www.dailysabah.com/politics/diplomacy/turkey-qatar-move-toward-strate gic-partnership, accessed 18 June 2023. 48 The Hindu, “Qatar’s emir makes first visit to Egypt since thaw in ties with Doha”, 25 June 2022, https://www.thehindu.com/news/international/qatars-emir-first-visit-egyptthaw-in-ties-doha-ap/article65563611.ece, accessed 18 June 2023. 49 Reuters, “Egypt, Qatar sign $5 billion in investment deals”, 29 March 2022, https://www.reuters.com/world/africa/egypt-qatar-sign-5-bln-investment-deals-cabinetstatement-2022-03-29/, accessed 18 June 2023.

254

MD. M. QUAMAR ET AL.

signed several agreements related to investments and cooperation between sovereign wealth funds.50 Qatar remains proactive on the Afghanistan front and has facilitated the Taliban’s international outreach. Doha remains active as a Middle Eastern power broker and mediator in intra-regional disputes and problems. With Israel, it has continued to cooperate in providing aid to residents of the Gaza Strip but has ruled out normalisation without resolving the Palestinian conflict.51 Although Qatar did allow Israeli fans to visit the country during the World Cup and allowed direct flights from Tel Aviv, the media coverage was focused on the Israeli-Palestinian conflict.52 There were notable display of pro-Palestinian mood during the World Cap both in the show of support in the stadiums and on the streets. Qatar criticised the killing of Al-Jazeera reporter Sheerin Abu Akleh in the West Bank while covering a security operation against suspected militants and called it a “cold-blooded” murder.53 On Lebanon’s internal turmoil and financial problems, Qatar has pledged US$60 million in financial aid to help disbursal of salaries for soldiers.54 Qatar also agreed to be one of the investors in the maritime boundary agreement concluded between Israel and Lebanon in October 2022, giving it some leverage over the domestic situation in Lebanon.55

50 Arab News, “Egypt’s El-Sisi makes first visit to Qatar after four-year row”, 12 September 2022, https://www.arabnews.com/node/2161336/middle-east, accessed 18 June 2023. 51 Maya Gebeily, “Arabs shun Israeli media at Qatar World Cup, cooling hopes of

a thaw”, Reuters, https://www.reuters.com/world/middle-east/arabs-shun-israeli-mediaqatar-world-cup-dashing-hopes-warming-2022-11-21/, accessed 18 June 2023. 52 Dan Williams, “Diplomats, direct flights to ease Israel-Qatar chill at World Cup”,

Reuters, 17 November 2022, https://www.reuters.com/lifestyle/sports/israel-cautions-cit isens-qatar-world-cup-sends-low-key-consuls-2022-11-17/, accessed 18 June 2023. 53 Reuters, “Qatari official condemns killing of Al Jazeera reporter in West Bank”, 11 May 2022, https://www.reuters.com/article/palestinians-israel-qatar-idINC6N2VW00C, accessed 18 June 2023. 54 AP News, “Qatar donates $60 million to Lebanon’s army during crisis”, 30 June 2022, https://apnews.com/article/middle-east-lebanon-beirut-qatar-f8c70dad07a8 75997d109e52aae449fc, accessed 18 June 2023. 55 Lazar Berman, “Qatar to join consortium pumping gas from offshore field straddling Lebanon, Israel”, The Times of Israel, 23 November 2022, https://www.timesofisrael. com/qatar-to-join-consortium-pumping-gas-from-offshore-field-straddling-lebanon-isr ael/, accessed 18 June 2023.

7

QATAR

255

Economy In 2021, Qatar slowly recovered from the Covid-19-induced negative GDP growth rate. The economy posted a robust performance on major macroeconomic indicators during 2022, boosted by hydrocarbon exports and growth in non-oil sectors. The IMF estimated that the real GDP growth rate was 3.4 per cent, and the non-oil GDP growth rate was 4 per cent (Table 7.1). However, the growth rate was estimated to moderate in 2023 due to the risk of global economic slowdown due to the inflationary impact of the Ukraine War. Notably, the GDP benefited from a rebound in retail trade and hospitality sectors due to the World Cup. July recorded the largest number of visitors since 2017 as Qatar Tourism organised several events and festivals.56 Msheireb Downtown in Doha received a record four million visitors during the World Cup, making the city a global destination.57 The media centre provided broadcast and media facilities for 2,500 journalists from across the world and was equipped with broadcast stations, viewing stations, conference rooms, service centres and live games. In December, the number of inbound tourists increased by three folds compared to Table 7.1 Qatar’s economic growth, 2019–2023 2019

2020

2021

2022a

2023a

GDP at current price (US$ million) 176,371 144,411 179,677 221,369 234,032 Real GDP growth rate (%) 0.7 −3.6 1.6 3.4 2.4 Non-oil GDP growth rates (%) 2.19 −4.49 2.8 4.0 2.7 Source IMF, World economic Outlook October 2022; St Louis FRED Economic Data, www.fred.stl ouisfed.org; a IMF estimates

56 Qatar News Agency (QNA), Qatar tourism announces highest number of visitors in July since 2017, 31st August 2022, https://www.qna.org.qa/en/News-Area/News/ 2022-08/31/0042-qatar-tourism-announces-highest-number-of-visitors-in-july-since2017, accessed 18 June 2023. 57 QNA, Msheireb Downtown Doha receive more than 4 million visitors during World Cup, 21 December 2022, https://www.qna.org.qa/en/News-Area/Special-News/202212/22/0083-msheireb-downtown-doha-receives-more-than-4-million-visitors-during-wor ld-cup, accessed 18 June 2023.

256

MD. M. QUAMAR ET AL.

the same time in the previous year to reach 614,000.58 In December, Qatar Tourism launched the “feel more in Qatar campaign” to highlight the country’s position as a global tourist destination. The annual revenue from tourism during the year was about US$4.3 billion59 and the country’s long-term strategy is to reach about six million annual visitors by 2030.60 The World Cup also fostered economic activities in several other sectors, especially real estate, construction and logistics. Since 2011, Qatar has spent about Qatari Riyal (QAR) 730 billion (US$200.5 billion) in construction projects related to the FIFA World Cup.61 To boost the real estate sector, the government announced the establishment of the Real Estate Regulatory Authority in 2021 and several laws and regulations were introduced to encourage investment. It allowed the non-Qataris to own and benefit from the real estate properties in 25 areas, of which nine allowed 100 per cent freehold ownership.62 The new laws and regulations regarding real estate brokerage, registration and ownership facilitated robust real estate trading across various commercial and investment fields, making it an important component of GDP growth. The logistics sector was poised to reap dividends from its advanced infrastructure, integrated industrial facilities and the latest artificial intelligence tools and technology to manage logistics, warehousing and space.63 58 QNA, Qatar visitor’s number surged 317.6% Y-o-Y in December, 31 January 2023, https://www.qna.org.qa/en/News-Area/News/2023-01/31/0030-qat ar’s-visitors-number-surges-3176-yoy-in-december, accessed 18 June 2023. 59 UN World Tourism Organisation (UNWTO), “Global and regional tourism perfor-

mance”, https://www.unwto.org/tourism-data/global-and-regional-tourism-performance, accessed 18 June 2023. 60 QNA, “Qatar tourism launches feel more in Qatar campaign to solidify Qatar’s

position as premium destination”, 20 December 2022, https://www.qna.org.qa/en/ News-Area/News/2022-12/20/0031-qatar-tourisms-launches-feel-more-in-qatar-cam paign-to-solidify-qatars-position-as-premium-destination, accessed 18 June 2023. 61 QNA, “Qatar, 2022/posting World Cup stimulates real estate sector in the light of its huge investment”, 27 November 2022, https://www.qna.org.qa/en/News-Area/Spe cial-News/2022-11/27/0061-qatar-2022-hosting-world-cup-stimulates-real-estate-sectorin-light-of-its-huge-investments, accessed 18 June 2023. 62 Ibid. 63 QNA, “IPAckage logistics market growth rate exceeds that of GCC countries during

2020–2026”, 19 February 2023, https://www.qna.org.qa/en/News-Area/News/202302/19/0018-ipa-qatar’s-logistics-market-growth-rate-exceeds-that-of-gcc-countries-dur ing-2020-2026, accessed 18 June 2023.

7

QATAR

257

The sector has grown by 7 per cent in the last five years.64 Doha Metro and Lusail Tram network carried about 18.2 million passengers during the World Cup, with its 250 retail shops providing a unique shopping experience.65 Qatar Airways operated nearly 14,000 flights during the event. Hammad International Airport has been recognised as the best airport in the Middle East for the sixth year in a row since its operationalisation in 2014 and has expanded to serve over 170 worldwide destinations.66 In November, it expanded with new features dedicated to the FIFA World Cup.67 The net profit of Qatar Navigation increased by 39.9 per cent in 2022 to reach QAR 1 billion (US$0.27 billion).68 Due to the mega projects, the infrastructure and construction industry was valued at US$26 billion69 ; and the government aims to support the 3D printing industry to boost the sector. The financial services expanded robustly during the year as reflected in the financial service future activity index. QNB, one of the largest financial institutions in the Middle East, reported a net profit of US$4.4 billion in 2022, a 7 per cent increase over the previous year.70 Qatar Insurance Company collaborated with Qinvest LLC to launch a new 64 Ibid. 65 The Peninsula, “18.2 million passengers used Doha Metro & Lusail Tram network

during World Cup”, 21 December 2022, https://thepeninsulaqatar.com/article/21/12/ 2022/182-million-passengers-used-doha-metro-lusail-tram-networks-during-world-cup, accessed 18 June 2023. 66 Doha Hamad Airport, “Hamad International Airport Ranks as the World’s second-best airport at the 2023 Skytrax world airport awards”, 15 March 2023, https://dohahamadairport.com/press-releases/news/hamad-international-airportranks-worlds-second-best-airport-2023-skytrax-world, accessed 19 June 2023. 67 Qatar

Living, “Qatar’s Hamad International Airport wins another prestigious award”, https://www.qatarliving.com/forum/news/qatars-hamad-international-air port-wins-another-prestigious-award, accessed 18 June 2023. 68 QNA, “Qatar navigations net profit jumps 39.9% in 2022”, 15 February 2023, https://www.qna.org.qa/en/News-Area/News/2023-02/15/0060-qatar-navigatio n’s-net-profit-jumps-399-in-2022, accessed 18 June 2023. 69 QNA, “IPA’s study points to prominent opportunities for 3D technologies in affiliated industries in Qatar”, 8 February 2023, https://www.qna.org.qa/en/newsbulle tins/2023-02/08/0065-ipa’s-study-points-to-prominent-opportunities-for-3d-technolog ies-in-affiliated-industries-in-qatar, accessed 18 June 2023. 70 QNA, “QNB’s 2022 net profit increases by 9% records QAR 14.3 billion”, 11 January 2023, https://www.qna.org.qa/en/News-Area/News/2023-01/11/0042-qnb’s2022-net-profit-increases-by-9,-records-qar143-billion, accessed 18 June 2023.

258

MD. M. QUAMAR ET AL.

company, a Sharia-compliant entity regulated by Qatar Financial Centre Regulatory Authority. The objective is to create national entities in Islamic asset management. Qatar Financial Centre attracted several international fintech companies, and the initiatives of Qatar Fintech Hub benefited about 60 start-ups.71 The Central Bank of Qatar issued its first licence for digital payment services to iPay by Vodafone Qatar and Ooredoo Money.72 TASMU Smart Qatar facilitates cooperation across sectors in a digital transformation as a part of National Vision 2030.73 Qatar ranked 18th in the Global Competitive Index, 2022 prepared by the International Institute of Management Development, Switzerland. It ranked high in economic performance, government efficiency, business sector efficiency and infrastructure.74 There has been an equal emphasis on small-scale enterprises; they grew by 2.6 per cent during the year, and the number of operating factories was 835.75 The Emirate also ranked higher among MENA countries in the Global Knowledge Index 2022 of UNDP and Mohammed bin Rashid al Maktoum Knowledge Foundation for two categories “efficiency of labour market” and “employment rate with vocational education.”76 The index highlighted Qatar’s achievements in five education and employment indicators, including the first rating for the researcher’s share of research and development expenditure. 71 QNA, “QCB Governor: More than 60 Start-ups benefited from the initiatives of Qatar Fintech Hub”, 09 December 2022, https://www.qna.org.qa/en/News-Area/ News/2022-12/08/0076-qcb-governor-more-than-60-startups-benefited-from-initiativesof-qatar-fintech-hub, accessed 18 June 2023. 72 Reuters,

“Qatar central bank issues first license for digital payments”, 30 August 2022, https://www.reuters.com/business/finance/qatar-central-bank-issues-firstlicense-digital-payments-2022-08-30/, accessed 19 June 2023. 73 Deloitte, “TASMU Smart City Program”, https://www2.deloitte.com/content/

dam/Deloitte/xe/Documents/deloitteprivate/TASMU-Smart-City-Program.pdf, accessed 19 June 2023. 74 QNA, “Qatar ranked 18th globally in Competitive index”, 15 June 2022, https:// www.qna.org.qa/en/News-Area/News/2022-06/15/0049-qatar-ranks-18th-globally-incompetitiveness-index, accessed 18 June 2023. 75 QNA, “Qatar chamber chairman: QR 293 billion industrial investments total volume on 2022”, 1 March 2023, https://www.qna.org.qa/en/News%20Area/News/2023-03/ 01/0041-qatar-chamber-chairman%C2%A0qr%C2%A0293-billion-industrial-investmentstotal-volume-on-2022, accessed 18 June 2023. 76 Menatalla Ibrahim, “Qatar secures top place in labour market efficiency and employment rate”, Doha News, 8 March 2023, https://dohanews.co/qatar-secures-top-place-inlabour-market-efficiency-and-employment-rate/, accessed 19 June 2023.

7

QATAR

259

The Emirate had the lowest unemployment rate among higher and vocational education graduates and in the proportion of technical education and vocational training jobs.77 Fiscal Situation and Inflation Qatar achieved a budgetary surplus in the first nine months of 2022 of more than QAR 77 billion (US$21.15 billion) as against IMF estimates of QAR 45 billion (US$12.4 billion).78 The budgetary surplus during 2021 was marginal at QAR 1.6 billion (US$0.44 billion). The government continued to spend on the health and education sectors, with their respective shares of 9.8 per cent and 8.7 per cent, respectively, of the total government expenditure. The central government wages, about 9–10% of GDP, were being rationalised. Price reforms were being implemented to reduce subsidies on diesel and gasoline. Public debt as a percentage of GDP declined from 58 per cent in 2021 to about 44.5 per cent in 2022, due to economic growth and external debt repayment.79 Though declining in recent years, there has been large exposure to external debt, resulting from tightening global financial conditions and increased interest rates in 2022. The Emirate reportedly had investments equivalent to 9 per cent of its GDP in Russian companies (mostly in Rosneft and VTB),80 that faced some risk from the ongoing Ukraine war. There are also vulnerabilities stemming from external funding of Qatari banking sector; it is most

77 Ibid. 78 QNA, “Qatar budget surplus exceeds QR 77 billion in 9 months”, 15 December

2022, https://www.qna.org.qa/en/News%20Area/News/2022-12/15/0031-qatar’s-bud get-surplus-exceeds-qr-77-billion-in-9-months, accessed 18 June 2023. 79 QNA, “Minister of Finance state budget surplus fiscal year 2023 to be directed to paying public debt”, 20 December 2022, https://www.qna.org.qa/en/News%20Area/ News/2022-12/20/0063-minister-of-finance-state-budget-surplus-for-fiscal-year-2023-tobe-directed-to-paying-public-debt, accessed 18 June 2023. 80 International Monetary Fund (IMF), “GCC: Economic prospects and policy changes for the GCC countries 2022”, 29 November 2022, https://www.imf.org/en/Public a”,tions/Policy-Papers/Issues/2022/11/29/Gulf-Cooperation-Council-Economic-Pro spects-and-Policy-Challenges-for-the-GCC-Countries-525945, accessed 18 June 2023.

260

MD. M. QUAMAR ET AL.

dependent on the GCC for non-resident deposits.81 Qatar has been developing a mid-term fiscal framework that indicates revenue initiatives and spending priorities. As a result, the fiscal surplus was equivalent to 0.2 per cent of GDP in 2021.82 Oil and gas contributed more than 80 per cent to government revenues in 2022. Several state enterprises registered large net profits; the Qatar Electricity and Water Company (QEWC) registered its highest ever net profit during the year of about QAR 1.7 billion (US$0.47 billion) as against QAR 1.4 billion (US$0.38 billion) in the previous year.83 Inflation was above 4 per cent during 2022, and the impact of the Ukraine war was felt on food imports as the Emirate sourced half of its grain imports from Russia and Ukraine.84 The Consumer Price Index rose by 5.93 per cent in December over the same period in the previous year.85 Qatar persistently increased its domestic production following the Arab economic boycott and consequent impact on its food supplies. It ranked first in the Arab world in the global food index in 202186 ; Hassad food company, an investment arm of Qatar Investment Agency (QIA), has made significant progress in connection with local producers and has strengthened its international investment portfolio in several countries such as Australia, Canada, Türkiye, Oman, Saudi Arabia and Sudan.87

81 Fitch Ratings, “Qatari banks face risks from increasing external Funding”, 23 November 2021, https://www.fitchratings.com/research/banks/qatari-banks-face-risksfrom-increasing-external-funding-23-11-2021, accessed 18 June 2023. 82 MEES, vol. 65, no. 51/52, 23 December 2022, p. 9. 83 QNA, “QEWC reports highest ever net profit of QR 1.7 billion”, 19 February

2023, https://www.qna.org.qa/en/newsbulletins/2023-02/19/0053-qewc%C2%A0repo rts-highest-ever-net-profit-of-qr-17-billion, accessed 18 June 2023. 84 IMF. “GCC: Economic prospects and policy changes for the GCC countries 2022”, 29 November 2022, https://www.imf.org/en/Publications/Policy-Papers/Issues/2022/ 11/29/Gulf-Cooperation-Council-Economic-Prospects-and-Policy-Challenges-for-theGCC-Countries-525945, accessed 18 June 2023. 85 The Peninsula, “Qatar’s consumer price index rises by 5.93% in December 2022”, 16 January 2023, https://thepeninsulaqatar.com/article/17/01/2023/qatars-consumerprice-index-rises-by-593-in-dec-2022, accessed 18 June 2023. 86 Hukoomi, “Qatar ranks 1st in Arab World, 24th globally in global food security index 2021”, 27 January 2022, https://hukoomi.gov.qa/en/news/qatar-ranks-1stin-arab-world-24th-globally-in-global-food-security-index-2021, accessed 18 June 2023. 87 Hassad Food, “A glimpse of Hassad”, https://www.hassad.com/hassad-food/, accessed 19 June 2023.

7

QATAR

261

The Qatar Fund for Development is also a part of the Arab coordination group that was announced during the year to extend financial support of US$10 billion to overcome regional and international food security challenges.88 According to the Minister of State for Energy Affairs, inflationary concerns increased production costs and delayed investment decisions with consequent policy uncertainties in the oil and gas industry.89 Employment and Expatriates Qatar has the lowest unemployment rate in the MENA region.90 The government of Qatar has launched several initiatives and programmes to support employment, particularly for young Qataris. The National Vision 2030 emphasises developing a knowledge economy for job opportunities for its growing young and educated population. In cooperation with the Ministry of Labour, Qatar Chamber launched an updated version of the labour re-employment platform for the private sector to recruit from the local market. It also streamlined the transfer of labour from one company to another. Qatar attracted 71 per cent of the total investment in the Middle East during the second half of 2022, which could potentially create 6,680 jobs in 11 different projects.91 Qatar Airways hired about 10,000 personnel to handle the influx of passengers flying into Doha for the World Cup 2022, in line with its expansion plans.92 88 OPEC Fund, “Arab Coordination Group (ACG) Institutions launch food security action with initial US$10 billion package”, 20 June 2022, https://opecfund.org/ media-center/press-releases/2022/arab-coordination-group-acg-institutions-launch-foodsecurity-action-with-initial-us-10-billion-package, accessed 19 June 2023. 89 Reuters, “Qatar says inflationary pressures impacting oil and gas industry”, 26 September 2022, https://www.reuters.com/business/energy/qatar-says-inflationarypressures-impacting-oil-gas-industry-2022-09-26/, accessed 18 June 2023. 90 Reuters, “Qatar’s beIN sports picks Saudi firm as exclusive advertising partner”, 26 October 2022, https://www.reuters.com/lifestyle/sports/qatars-bein-sports-appoints-sau dis-smc-exclusive-advertising-partner-2022-10-26/, accessed 18 June 2023. 91 QNA, “Exceptional year for Qatari economy striking indicators and Giant projects”, https://www.qna.org.qa/en/News-Area/News/2022-12/31/0017-2022,-exc eptional-year-for-qatari-economy,-striking-indicators-and-giant-projects, accessed 18 June 2023. 92 Andrew Mills, “Qatar Airways to hire 10,000 staff amid World Cup preparations”, Reuters, 13 October 2022, https://www.reuters.com/business/aerospace-defense/qatarairways-hire-10000-staff-amid-world-cup-preparations-2022-10-13/, accessed 19 June 2023.

262

MD. M. QUAMAR ET AL.

The Qatar job portal was launched in Jordan to provide 20,000 jobs to those who wanted to work in the Emirate.93 Qatar faced severe international criticism over its treatment of migrant labour as the World Cup approached. Expatriates account for 85 per cent of its 2.9 million population. In recent years, it has made several reforms in its labour laws since introducing the Workers Welfare Standards in 2014. In 2022, a minimum wage of QAR 1,000 (US$275) was introduced,94 and sponsorship (kafala) for foreign workers was abolished; and the exit permit system for foreign workers is no longer required—consequently, they are allowed to change employees more freely.95 The Ministry of Labour launched new e-services that facilitated extending employee work permits. However, the critics were of the view that the enforcement of new laws was ineffective and violations of human rights, including those of LGBTs and women, were rampant.96 The Qatari officials deemed these criticisms as unfair and prejudiced painting them as orientalist or even racist.97 Amnesty International and other rights groups called on FIFA to set aside a US$440 million fund to compensate migrant workers for human rights abuses that they faced during the event preparation.98

93 QNA, “Jordan in minister of labour: Qatari job platform provided 9100 job opportunity for Jordanians”, 19 September 2022, https://www.qna.org.qa/en/NewsArea/News/2022-09/19/0052-jordanian-minister-of-labor-qatari-job-platform-provided9,100-job-opportunities-for-jordanians, accessed 19 June 2023. 94 Vani Saraswathi, “Workers in Qatar remain voiceless and invisible, despite reforms and international furore”, Migrant Rights, 3 November 2022, https://www.migrant-rig hts.org/2022/11/workers-in-qatar-remain-voiceless-and-invisible-despite-reforms-and-int ernational-furore/, accessed 19 June 2023. 95 IMF, “GCC: Economic prospects and policy changes for the GCC countries 2022”,

29 November 2022, https://www.imf.org/en/Publications/Policy-Papers/Issues/2022/ 11/29/Gulf-Cooperation-Council-Economic-Prospects-and-Policy-Challenges-for-theGCC-Countries-525945, accessed 19 June 2023. 96 Reuters, “World Cup has helped Qatar strengthen worker rights, says organiser”, 13 October 2022, https://www.reuters.com/lifestyle/sports/world-cup-has-helped-qatarstrengthen-worker-rights-says-organiser-2022-10-13/, accessed 18 June 2023. 97 Andrew Mills, “Qatar has faced unfair criticism over World Cup, says organiser”, Reuters, 9 September 2022, https://www.reuters.com/lifestyle/sports/qatar-has-facedunfair-criticism-over-world-cup-says-organiser-2022-09-08/, accessed 18 June 2023. 98 Reuters, “Rights groups urge FIFA to earmark $440mln for Qatar migrant workers”, 19 May 2022, https://www.reuters.com/lifestyle/sports/rights-groups-urge-fifa-earmark440mln-qatar-migrant-workers-2022-05-19/, accessed 18 June 2023.

7

QATAR

263

External Sector Hydrocarbons dominate Qatar’s exports with more than two-third share. Qatar is the largest exporter of LNG and 80% of its exports are longterm contracts, mostly to Asian countries.99 The mineral fuels exports increased to US$73.60 billion in 2021 as against US$42.14 billion in 2020 (Table 7.2); export revenues for 2022 were at a nine-year high at US$132 billion100 ; with record revenues for natural gas, LPG and condensate exports at about US$86.8 billion.101 The non-oil exports increased significantly from US$9.37 billion in 2020 to US$13.60 billion in 2021 (Table 7.2). The private sector exports remained robust in 2022 and were about QAR 33 billion (US$9.06 billion), 25 per cent more than the previous year.102 The main items of private sector exports comprised chemicals, petrochemicals, paraffin and industrial gases. The re-exports in 2021 were about US$2.45 billion. The imports of goods and services increased from US$58.05 billion in 2020 to US$60.27 billion in 2021 (Table 7.2). The current account balance turned around from a deficit of US$2.98 billion in 2020 to a huge surplus of US$26.32 billion in 2021 (Table 7.2), and nearly doubling to Table 7.2 Qatar’s select current account indicators, 2019–2021 (US$ million)

Exports of goods and services Mineral fuel exports Non-oil exports and re-exports Imports of goods and services Current account balance

2019

2020

2021

90,462.96 62,601.78 10,333.14 65,621.34 4,259.9

69,713.19 42,137.92 9,366.24 58,048.65 −2,985.7

104,034.51 73,602.98 13,600.31 60,272.1 26,319.2

Source IMF, database, https://data.imf.org/regular.aspx?key=61545852; International Trade Centre; Organisation of Islamic Cooperation, statistical, economic and social research and Training Centre for Islamic Countries database, OICStat

99 Wayne C. Ackerman, “Qatar and global LNG: Potential pivot from Asia to Europe?”, Middle East Institute, 22 February 2022, https://www.mei.edu/publications/qatar-andglobal-lng-potential-pivot-asia-europe, accessed 19 June 2023. 100 MEES, vol. 66, no. 7, 17 February 2023, p. 9. 101 MEES, vol. 66, no. 6, 10 February 2023, p. 18. 102 QNA, “Qatari private sector 2022 Exports QR 33 billion 25% growth”, 16

January 2023, https://www.qna.org.qa/en/newsbulletins/2023-01/16/0044-qatari-pri vate-sector-2022-exports,-qr-33-billion,-25-percent-growth, accessed 19 June 2023.

264

MD. M. QUAMAR ET AL.

US$46.87 billion in 2022. The current account balance as a percentage of GDP increased from −1.98 per cent in 2020 to 14.72 per cent in 2021. The trade surplus during 2022 was a massive US$98.6 billion,103 and foreign exchange reserves increased to QAR 223.958 billion (US$61.90 billion) by November, an increase of 6.82 per cent over the same period the previous year.104 Table 7.3 shows the direction of Qatar’s trade; the top five energy export destinations were the Asian countries in 2021. Since the Ukraine war, Qatar has signed several partnership agreements with European countries to increase natural gas supply in the medium term.105 In December 2022, China was a leading destination of exports with a share of about 21 per cent, followed by India with a share of about 11 per cent and South Korea with 10.2 per cent (Table 7.3). The US was a leading source of imports with a share of 19.7 per cent, followed Table 7.3 Qatar’s direction of trade, 2021–2022 (US$ million) Top five exports destinations December 2022

Top five sources of imports December 2022

Top five energy exports destinations 2021

Top Five export destinations for hydrocarbon gases (including LNG) 2021

China (2,265.3)

US (534.6)

China (12,306.77)

India (1,136.97) South Korea (1,051.11) Japan (729.81) Singapore (455.22)

China (389.07) Italy (244.35)

Japan (11,604.55) South Korea (10,866.83) India (9,738.96) Singapore (4,733.99)

South Korea (9,560.00) India (8,873.78) China (7,840.25)

India (149.85) Germany (207.9)

Japan (4,806.88) UK (2,765.88)

Source Qatar, Planning and Statistics Authority, Foreign Trade, psa.gov.ga; International Trade Centre

103 MEES, vol. 66, no. 6, 10 February 2023, p. 18. 104 QNA, “Exceptional year for Qatar economy striking indicators and Giant projects-

1”, 31 December 2022, https://www.qna.org.qa/en/News-Area/News/2022-12/31/ 0017-2022,-exceptional-year-for-qatari-economy,-striking-indicators-and-giant-projects, accessed 19 June 2023. 105 IMF, “GCC economic prospects and policy challenges for the GCC countries”, 29 November 2022, https://www.imf.org/en/Publications/Policy-Papers/Issues/2022/ 11/29/Gulf-Cooperation-Council-Economic-Prospects-and-Policy-Challenges-for-theGCC-Countries-525945, accessed 19 June 2023.

7

QATAR

265

by China and Italy with 14.3 per cent and 9 per cent, respectively. The leading import items were turbojets and other gas turbines; motorcars and other motor vehicles; parts of aircraft, spacecraft, etc. The top five leading destinations of LNG exports in 2021 were South Korea, India, China, Japan and the UK (Table 7.3). The top five customers for Qatar’s LNG in 2022 were China (15.7 million tons), India (10.7 million tons), South Korea (9.8 million tons), Pakistan (6.1 million tons) and Taiwan (5.5 million tons).106 Notably, China moved from third in 2021 (Table 7.3) to become the leading importer, with a 73 per cent increase in imports. Deliveries under the contracts signed with China began in January 2022, and in November, it signed a 27-year LNG supply deal,107 the longest till date, that would eventually increase the volumes under long-term contracts. China paid an average of US$14 per mbtu for Qatari supplies in 2022, which was US$6 less than the price Japan paid for similar deliveries.108 China paid about US$11.52 billion for its LNG imports during the year.109 Qatar’s LNG export to Asian countries was sold at sharply different average prices; for example, during the first half of 2022, the average price for Taiwan was US$8.77 per mbtu, South Korea paid US$13.95 per mbtu and Japan paid US$17.57 per mbtu.110 The European countries attempted to overcome their energy dependence on Russia (for 35–40% of its gas supplies) following the Ukraine war that began in February 2022. They looked towards the Middle Eastern suppliers, and in the Q2, Europe generated about 21.5 per cent of Qatar’s LNG export revenue, the highest in the last seven years.111 Qatar had signed deals to subscribe to capacity at LNG import terminals in the

106 MEES, vol. 66, no. 7, 17 February 2023, p. 9. 107 Andrew Mills and Maha El Dahan, “Qatar seals 27-year LNG deal with China as

competition heats up”, Reuters, 22 November 2022, https://www.reuters.com/business/ energy/qatarenergy-signs-27-year-lng-deal-with-chinas-sinopec-2022-11-21/, accessed 18 June 2023. 108 MEES, vol. 66, no. 7, 17 February 2023, p. 9. 109 MEES, vol. 66, no. 6, 10 February 2023, p. 18. 110 MEES, vol. 65, no. 30, 29 July 2022, p. 7. 111 MEES, vol. 65, no. 41, 14 October 2022, p. 15.

266

MD. M. QUAMAR ET AL.

UK and Belgium,112 which act as hubs for gas supplies for importers elsewhere in Europe. European companies’ keenness to partner in the North Field expansion projects suggests that European policymakers see Qatar as a key source of medium-term energy security, even though these projects would not help address the immediate energy crisis arising out of the Ukraine war and sanctions on Russia.113 Qatar brought ConocoPhillips on board for its first 15-year LNG deal for 2 mtpa supplies to Germany, marking the first long-term supply deal to Europe in over a decade.114 ConocoPhillips has stakes in Qatar gas field projects, yielding a share of 1 mtpa. The deal was interesting as there was no public representation from German officials at the signing ceremony115 ; even though there were reported negotiations between the two countries in March116 for a long-term LNG supply deal. The relations with Germany became strained when its interior minister publicly criticised Qatar’s human rights records surrounding the FIFA World Cup, and its ambassador to Qatar was summoned to respond.117 However, the German ministers have reportedly expressed satisfaction with the deal with Qatar.118 Qatar has been keen to establish itself as a reliable LNG supplier that keeps business above politics. QIA had earlier agreed to invest about US$2.39 billion for 9 per cent stakes in German power firm RWE; the decision came soon after the visit of German Chancellor Olaf Scholz to the Emirate in September. The investment would facilitate RWE to acquire the portfolios of a US firm in solar plants and wind farms to

112 Andrew Mills, “Qatar Airways to hire 10,000 staff amid World Cup preparations”, Reuters, 13 October 2022, https://www.reuters.com/business/aerospace-defense/qatarairways-hire-10000-staff-amid-world-cup-preparations-2022-10-13/, accessed 18 June 2023. 113 MEES, vol. 65, no. 39, 30 September 2022, p. 3. 114 MEES, vol. 65, no. 48, 2 December 2022, p. 10. 115 Ibid. 116 Reuters, “Germany in talks with Qatar on long-term gas supplies to reduce Russian

dependence”, 21 March 2022, https://www.reuters.com/world/middle-east/qatar-emirtalks-energy-with-german-minister-emiri-court-2022-03-20/, accessed 18 June 2023. 117 MEES, vol. 65, no. 48, 2 December 2022, p. 10. 118 Reuters, “German minister satisfied with 15-year

Qatar LNG deal”, 29 November 2022, https://www.reuters.com/business/energy/german-econ-minister-satisf ied-with-15-year-lng-deal-with-qatar-2022-11-29/, accessed 18 June 2023.

7

QATAR

267

become the second largest solar operator and fourth largest renewable energy company in the US. Unlike its neighbours, none of the GCC countries figured among Qatar’s top five export or import partners, implying its much lesser regional integration. However, Qatar continued to reach out when opportunities arose. In less than 15 months since the end of the economic boycott by Egypt, Qatar pledged an investment of US$5 billion in the North African country and announced picking up 40 per cent stakes in ExxonMobil’s Egyptian Mediterranean block, a key gas-producing area.119 Banned in Saudi Arabia, its sports broadcaster, beIN, selected a Saudi firm as its exclusive advertising partner in the MENA region in a deal estimated at US$150 million. In October, Iran’s Vice-President for Economic Affairs, Mohsin Razaei, visited Hamad Port to know about its development and future. On the philanthropic front, Qatar pledged US$60 million to support the Lebanese soldiers’ salary and signed an agreement for gas supply to the Gaza Strip’s only power plant. Qatar Fund for Development signed an agreement with Turquoise Mountain Trust under the initiative of Women in Conflict Zones to support women weavers in Afghanistan and support the latter’s carpet economy.120 Energy and Environment Qatar has planned the expansion of its natural gas production capacity from 77 million tons to 126 million tons at an estimated cost of US$29 billion. During the year, it announced joint venture projects with five of the biggest IOCs for completing the expansion projects, including American ConocoPhillips, French TotalEnergies, UK’s Shell and Italy’s ENI. In March, a gas plant that produces almost 1.4 bcfpd of methane gas was inaugurated at Ras Lafan industrial city.121 There were ongoing talks with several Asian buyers who could hold small equity participation in the expansion projects as value-added partners; Kogas, Itochu and Mitsui are

119 MEES, vol. 65, no. 44, vol. 13, 1 April, 2022. 120 QNA, “QFFD, TMT sign agreement to support female weavers in Afghanistan”, 8

December 2022, https://www.qna.org.qa/en/News-Area/News/2022-12/08/0047-qff d,-tmt-sign-agreement-to-support-female-weavers-in-afghanistan, accessed 19 June 2023. 121 QNA, “QatarEnergy: Barzan gas plant produces 1.4 billion cubic feet of methane gas per day”, 15 March 2022, https://www.qna.org.qa/en/News-Area/News/202203/15/0054-qatarenergy-barzan-gas-plant-produces-14-billion-cubic-feet-of-methane-gasper-day, accessed 19 June 2023.

268

MD. M. QUAMAR ET AL.

potential partners.122 Qatar has a 70 per cent stake in the Golden Pass LNG export project in the Sabine Pass, Texas, the US, which is scheduled to come online by the end of 2024. With the completion of Golden Pass and North Field expansion projects, Qatar LNG export facilities would nearly double to 142 mtpa by 2027.123 The liquid-rich nature of the gas is one of the most attractive elements for IOCs to participate in the expansion of the North field projects.124 Table 7.4 gives the energy statistics of Qatar and shows stagnating oil production at 1.7 mbpd. Qatar renewed its agreement (effective from 23 December 2022 for five years) with Qatar Petroleum Development Company (Japan) (QPD) for the continued development and production of Al-Karkara and A-Structures offshore oil fields (about 90 km East of Doha). These oil fields were the first to achieve zero gas flaring by reinjecting the excess sour gas.125 Table 7.4 shows that about 1.4 bcm of gas flaring occurs in Qatar due to lack of consumption/processing outlets. QatarEnergy (earlier called Qatar Petroleum) is an integrated energy company and has emerged as a world leader in LNG. Its activities Table 7.4 Qatar’s energy statistics, 2019–2021

Oil production (mbpd) Natural gas, liquid production (Thousand bpd) Oil consumption (mbpd) Refining capacity (Thousand bpd) Natural gas production (bcm) Natural gas flaring (bcm) Natural gas consumption (bcm) LNG exports (bcm) Carbon dioxide emission from energy (million tons)

2018

2019

2020

2021

1.79 471 0.35 397 175.2 1.3 40.7 104.9 119.0

1.73 470 0.37 396 177.2

1.71 432 0.30 366 174.9 1.3 38.9 106.5 107.6

1.74 436 0.31 381 177.0 1.4 40.0 106.8 115.3

41.9 105.8 124.8

Source BP

122 MEES, vol. 65, no. 44, 4 November 2022, p. 8. 123 MEES, vol. 65, no. 42, 21 October 2022, p. 13. 124 Ibid. 125 Offshore Technology, “QatarEnergy, QPD sign agreement to continue development of three oil fields”, 26 December 2022, https://www.offshore-technology.com/news/qat arenergy-qpd-development-oil-fields/, accessed 18 June 2023.

7

QATAR

269

cover the entire oil and gas value chain spectrum, including petrochemical projects. It has been taking control of upstream operations in big fields upon the expiry of existing licences, though it renewed the licence of small offshore fields with QPD. It took over the 9.9 mtpa Qatar Gas 1 facility from 1 January 2022, when the existing joint ventures with ExxonMobile, TotalEnergies, Marubeni and Mitsui expired.126 It partners TotalEnergies in several energy projects and was in talks for collaboration in Lebanon and Iraq; and together were awarded a working interest in a new Brazilian offshore exploration block.127 It is reportedly in the advanced stages of talks with Chevron Phillips for a joint venture in the US$6 billion Ras Laffan petrochemical project, expected to begin production in late 2026.128 It is centred on an ethane cracker planned to become the largest in the Middle East and among the biggest globally, with a capacity of 2.1 mtpa.129 It would be QatarEnergy’s largest investment in the petrochemical sector and the first direct investment in 12 years. The Emirate’s petrochemical production capacity would reach nearly 14 mtpa.130 It would be a significant achievement given the previous attempts at petrochemical facilities were shelved in 2014 and 2015. It is also in sync with North Field production capacity expansion, which would increase ethane production. QatarEnergy and Chevron Phillips are partnering for a US$8.5 billion golden triangle polymer plant on US’s Gulf Coast, centred around a 2.08 mtpa ethane

126 MEES, vol. 66, no. 8, 3 February 2023, p. 1. 127 QNA, “Qatar energy wins working interest in new Brazilian Offshore exploration

block”, 19 December 2022, https://www.qna.org.qa/en/News-Area/News/2022-12/ 19/0033-qatarenergy-wins-working-interest-in-new-brazilian-offshore-exploration-block, accessed 19 June 2023. 128 MEES, vol. 66, no. 2, 13 January 2023, p. 13. 129 Asmahan Qarjouli, “QatarEnergy, Chevron to build $6 billion gas-to-plastics plant”,

Doha News, https://dohanews.co/qatarenergy-chevron-to-build-6-billion-gas-to-plasticsplant/, accessed 18 June 2023. 130 MEES, vol. 66, no. 2, 13 January 2023, p. 13.

270

MD. M. QUAMAR ET AL.

cracker. It is Qatar’s second largest investment in the US,131 with the total Qatari investment reaching US$250 billion.132 Qatar held the sixth gas exporting countries forum (with 11 members)133 in February, emphasising that the forum’s mandate is not to coordinate the production of member states but to exchange best practices, information and technology and enable cooperation for developing the gas industry.134 Qatar reiterated its commitment to reducing carbon dioxide emissions and commits a 25 per cent reduction of greenhouse gas emissions by 2030.135 Carbon capture facilities are at the heart of its commitments to the emission goals; one of the largest CO2 recovery and sequestration facilities in the MENA region has been commissioned in Ras Laffan and is central to the North Field expansion projects.136 Qatar’s first solar plant at Al-Kharsaah was fully operational in October, with 800 MW of installed capacity, which would meet about one-tenth of the peak power demand from the national electricity grid.137 It is the world’s third largest solar power plant and was inaugurated a month before the FIFA World Cup and became online at a time when Qatar’s power consumption peaked at 6.35 TWH. The project was a joint venture of QatarEnergy Renewable Solutions (60 per cent), Marubeni (20.4 per cent) and TotalEnergies (19.6 per cent) at a cost of about US$476

131 QNA, “QatarEnergy, CPChem celebrate ground breaking for golden triangle polymers plant in Texas”, 8 March 2023, https://www.qna.org.qa/en/News-Area/ News/2023-03/08/0024-qatarenergy,-cpchem-celebrate-ground-breaking-for-golden-tri angle-polymers-plant-in-texas, accessed 19 June 2023. 132 QNA, “US-Qatar business council managing director to QNA: US can benefit from Qatar exceptive in organising 2026 World Cup”, 3 December 2022, https:// www.qna.org.qa/en/News-Area/Special-News/2022-12/03/0011-qatar-2022-us-qatarbusiness-council-managing-director-to-qna-us-can-benefit-from-qatar’s-expertise-in-organi sing-2026-world-cup, accessed 19 June 2023. 133 Gas Exporting Countries Forum, “6th GECF summit concludes with Doha Declaration”, 22 February 2022, https://www.gecf.org/events/6th-gecf-summit-concludes-withdoha-declaration, accessed 19 June 2023. 134 Ibid. 135 Andrew Mills, “Qatar targets 25% cut in greenhouse gas emissions by 2030

under climate plan”, Reuters, 28 October 2021, https://www.reuters.com/business/ cop/qatar-targets-25-cut-greenhouse-gas-emissions-by-2030-climate-change-plan-202110-28/, accessed 19 June 2023. 136 MEES, vol. 65, no. 35, 2 September 2022, p. 9. 137 MEES, vol. 65, no. 42, 21 October 2022, p. 13.

7

QATAR

271

million. It is an independent power project located 80 km west of Doha and contains 1.8 million solar panels; it deploys advanced technology which follows the sun’s movement and uses robots to clean the panels at night using treated water. Soon after, contracts for two new large-scale solar power plants with 875 MW capacity were awarded; the larger one being commissioned in Ras Laffan, home to Qatar’s oil and gas facilities. With the operationalisation of these three solar facilities, Qatar’s renewable capacity would reach 1.675 GW.138 Qatar hosted the World Cup as the world’s first environment-friendly football tournament.139 About 2,000 tons or about 80 per cent of the waste generated from hosting 64 matches during the event were successfully recycled.140 Introducing 900 electric buses and the use of Euro 5 diesel engines with the lowest emission rates significantly reduced more than 1,000 tons of CO2 in 16 days (between 20 November and 6 December). Besides, it made forays into alternative fuels in line with its counterparts in the region. In August, Qatar held a signing ceremony for the launch of world’s largest 1.2 mtpa blue ammonia plant, targeted to come online in 2026 with an investment of about US$1.2 billion.141 About US$1 billion EPC contract for a single train plant was awarded to a consortium of firms. However, the Emirate lags behind its neighbours, Saudi Arabia and UAE, in developing the supply chains for low-carbon fuel. Society Qatar is one of the richest countries in the world and, at the same time, remains rooted in puritanical beliefs and practices. This is reflected in the social milieu with a prosperous yet conservative lifestyle. Some issues, such as action against non-binary gender symbols, alcohol consumption and

138 MEES, vol. 65, no. 34, 26 August 2022, p. 11. 139 QNA, “Qatar 2022/1684 Tons Carbon Emissions reduced in 16 days”, 9

December 2022, https://www.qna.org.qa/en/newsbulletins/2022-12/09/0030-qatar2022-1684-tons-carbon-emissions-reduced-in-16-days, accessed 19 June 2023. 140 QNA, “Qatar 2022/approximately 80% of waste from stadiums recycled”, 27 December 2022, https://www.qna.org.qa/en/News-Area/Special-News/2022-12/ 27/0023-qatar-2022-approximately-80-of-waste-from-stadiums-recycled, accessed 18 June 2023. 141 MEES, vol. 65, no. 35, 2 September 2022, p. 9.

272

MD. M. QUAMAR ET AL.

dressing choices, emanate from the prevalent social values and norms. Unlike its fellow GCC members, especially Saudi Arabia and UAE, which have gradually adopted liberal ideals regarding the practice of faith, Qatar has been slow in bringing such reforms.142 On the other hand, Qatar has brought labour reforms to reduce the discrimination against migrant workers, especially unskilled workers from African, South Asian and Southeast Asian countries.143 To an extent, the reforms resulted from constant international pressure exerted on Qatar after it won the bid to host the FIFA World Cup 2022, and reports of human rights violations and exploitation of workers emerged in the media subsequently. Notwithstanding these changes, human and gender rights remain a contested issue in Qatar. The number of on-site deaths of workers was disputed, with Qatari authorities reporting much lower (400–500) than reports in international media.144 Qatari women continue to face discrimination due to the guardianship law, a phenomenon prevalent in other GCC countries.145 However, as Saudi Arabia has ended the law that prevented adult women to make decisions about their lives, Qatar continues to follow the system wherein women cannot decide about their education, work, travel and healthcare. Marriage, divorce, inheritance, domestic violence and child custody laws are discriminatory and Qatari judiciary prefers men’s testimony over women’s.146 Any non-binary sexual orientation remains forbidden and is considered a matter of fitna as per Sharia laws. Internal coverage by media remains highly restrictive despite Qatari Al-Jazeera having established itself as one of the credible media voices regarding regional and 142 Freedom House, “Freedom in the world 2022: Qatar”, https://freedomhouse.org/ country/qatar/freedom-world/2022, accessed 18 June 2023. 143 Amnesty International, “Qatar: Labour reform unfinished and compensation still owed as World Cup looms”, 20 October 2022, https://www.amnesty.org/en/latest/ news/2022/10/qatar-labour-reform-unfinished-and-compensation-still-owed-as-worldcup-looms/, accessed 18 June 2023. 144 Human Rights Watch, “Qatar: Events of 2022”, https://www.hrw.org/world-rep

ort/2023/country-chapters/qatar, accessed 18 June 2023. 145 Human Rights Watch, “Qatar: Male guardianship severely curtails women’s rights”, 29 March 2021, https://www.hrw.org/news/2021/03/29/qatar-male-guardianship-sev erely-curtails-womens-rights, accessed 18 June 2023. 146 Human Rights Watch, “Qatar: Events of 2022”, https://www.hrw.org/world-rep ort/2023/country-chapters/qatar, accessed 18 June 2023.

7

QATAR

273

international coverage. As of 2021, Qatar has a high HDI value of 0.855 and is ranked 42 globally. It has a GDI value of 1.019 and a GII value of 0.22.147

Bilateral Relations Indo-Qatari bilateral relations have flourished with energy, economic and trade relations and people-to-people contacts forming the bedrock. Qatar is an important energy partner of India and its largest gas supplier. India has also been Qatar’s important food security partner, and many Indian firms are involved in various sectors of the Qatari market. Besides, the two countries have stepped up political and diplomatic contacts and seek security and defence relations. Qatar’s involvement in the transition in Afghanistan makes it important for India, given the latter’s stakes in peace and stability in the South Asia. Besides, Qatar’s mediatory role in regional disputes in the Middle East, including its involvement in indirect Iran nuclear talks, underlines the significance of the tiny Gulf country in regional politics. Politics and Security India and Qatar have had several high-level engagements during 2022. External Affairs Minister S. Jaishankar visited Doha on 9 February and discussed political and security partnerships and explored new possibilities for cooperation in the field of digital economy.148 The EAM conveyed Prime Minister Narendra Modi’s invitation to Emir Tamim to visit India at a mutually agreed date. The Emir had earlier visited New Delhi in November 2015 while PM Modi visited Doha in June 2016. In May, MoS External Affairs V. Muraleedharan met several Qatari leaders and Indian

147 UNDP, Human development reports, “Qatar”, https://hdr.undp.org/data-center/ specific-country-data#/countries/QAT, accessed 18 June 2023. 148 Indian Embassy in Qatar, “Press Release”, 9 February 2022, https://www.ind ianembassyqatar.gov.in/pdf/Doha_Press%20Release_English_24022022.pdf, accessed 18 June 2023.

274

MD. M. QUAMAR ET AL.

community.149 The visit was significant for reaffirming the friendly ties and underlining the marking of 50 years of diplomatic relations. In June, Vice-President of India M. Venkaiah Naidu visited Qatar and this was the first visit to the Gulf Emirates by a serving Indian Vice-President.150 Naidu met several Qatari leaders and held wide-ranging talks on various bilateral and regional issues. However, the year also witnessed a few tense and controversial moments. Vice-President Naidu’s visit was overshadowed by the controversy that erupted due to the remarks by Nupur Sharma—a spokesperson of the ruling Bharatiya Janata Party (BJP)151 —and underlined the continuity in bilateral relations. Nonetheless, media reports speculated that a meeting between VP Naidu and Emir Tamim was cancelled due to the controversial remarks.152 The VP did meet the father of the current ruler, former Emir Hamad al-Thani. Moreover, the Nupur Sharma controversy did evoke strong reactions in the Gulf, including in Qatar, given the sensitivity attached to the personality of Prophet Muhammed and the emotional outrage any public disrespect to Islamic symbols evokes in Muslim societies. Qatar criticised the remarks, called the Indian ambassador to the foreign ministry to lodge its protest and displeasure, demanded a public apology and welcomed the suspension of the BJP leaders for the offensive remarks.153

149 GoI, MEA, “Visit of Minister of State for External Affairs, Shri V. Muraleedharan to the State of Qatar (May 08–10, 2022)”, 7 May 2022, https://mea.gov.in/press-rel eases.htm?dtl/35288/Visit_of_Minister_of_State_for_External_Affairs_Shri_V_Muraleedha ran_to_the_State_of_Qatar_May_0810_2022, accessed 18 June 2023. 150 GoI, MEA, “Visit of vice president of India to Qatar”, 5 June 2022, https://mea. gov.in/press-releases.htm?dtl/35390/Visit_of_Vice_President_of_India_to_Qatar, accessed 18 June 2023. 151 Anirban Bhaumik, “BJP leaders’ remarks against Prophet Mohammed throws spanner in Venkaiah Naidu’s visit to Qatar”, Deccan Herald, 5 June 2022, https://www. deccanherald.com/international/world-news-politics/bjp-leaders-remarks-against-prophetmohammed-throws-spanner-in-venkaiah-naidus-visit-to-qatar-1115529.html, accessed 18 June 2023. 152 Ibid. 153 Ministry of Foreign Affairs Qatar, Twitter, “The Ministry of Foreign Affairs

Summons the Indian Ambassador and Hands Him an Official Note on Qatar’s Total Rejection and Condemnation of the Remarks of an Official in the Ruling Party in India Against Prophet Mohammed”, 7:05 PM, 5 June 2022, https://twitter.com/MofaQatar_ EN/status/1533442445098336256, accessed 18 June 2023.

7

QATAR

275

There were other signs of diplomatic trouble. The news of the detention of eight former Indian naval officers working for a defence services solutions provider, Al-Dahra, in August led to frantic speculations in India regarding the allegations against them that remain undeclared until the year end.154 The MEA cautiously raised the issue with the Qatari authorities, and requested consular access and family meetings for the detained officers.155 The first consular access was granted in November and again in December. The issue remains sub-judice, and the MEA and Indian Embassy have been offering consular and legal support to the detainees.156 The presence of Zakir Naik in Doha during the World Cup and some of his public appearances raised concerns in media and civil society in India,157 although the Indian government refrained from making any public statement on the matter.158 Indian media later reported that Qatar clarified that no invitation had been extended to the controversial preacher to attend the FIFA events, who currently holds Malaysian travel documents.159 Another issue that came to the fore in September was the alleged links between the outlawed Popular Front of India (PFI) and donors in Qatar and Türkiye.160 Indian agencies probing the PFI and 154 The Indian Express, “8 ex-Navy officers detained in Qatar: Embassy making all possible efforts for their release, says MEA”, 4 November 2022, https://indianexpress. com/article/india/8-indian-navy-officers-detention-qatar-embassy-making-release-mea8248067/, accessed 19 June 2023. 155 ANI News, “Indian embassy in Doha remains in touch with families of detained naval officers in Qatar: MEA”, 6 April 2023, https://www.aninews.in/news/world/asia/ indian-embassy-in-doha-remains-in-touch-with-families-of-detained-naval-officers-in-qatarmea20230406180343/, accessed 18 June 2023. 156 Ibid. 157 Dipanjan Roy Chaudhury, “India takes note of Doha hosting Zakir Naik for FIFA

World Cup”, The Economic Times, 22 November 2022, https://economictimes.indiat imes.com/news/india/india-takes-note-of-doha-hosting-zakir-naik-for-fifa-world-cup/art icleshow/95669641.cms, accessed 18 June 2023. 158 Ibid. 159 The Indian Express, “Qatar told India no invitation was sent to Zakir Naik for FIFA

World Cup, says MEA”, 24 November 2022, https://indianexpress.com/article/india/ issue-zakir-naik-being-wanted-raised-with-qatar-mea-arindam-bagchi-8287907/, accessed 19 June 2023. 160 Devesh K. Pandey, “PFI’s alleged links in Turkey and Qatar being probed”, The Hindu, 30 September 2022, https://www.thehindu.com/news/national/pfis-allegedlinks-in-turkey-and-qatar-being-probed/article65951983.ece, accessed 18 June 2023.

276

MD. M. QUAMAR ET AL.

its alleged funding sources in Qatar underlined that the investigations, including the alleged links in Qatar, are ongoing.161 At the political level, Prime Minister Modi held a telephone conversation with Emir Tamim on 29 October to congratulate the latter for the successful organisation of the FIFA World Cup. He also thanked him for Diwali greetings and agreed to jointly organise celebratory events to commemorate the 50 years of diplomatic ties.162 Vice-President Jagdeep Dhankar represented India at the inauguration ceremony of the World Cup and he also met with Qatari leaders and prominent Indian community members, underscoring the age-old cultural and people-to-people ties.163 Trade and Commerce The FIFA World Cup in Qatar summarised the multifaceted aspects of India-Qatar economic ties. Indians were the largest purchasers of tickets (400,000) for the World Cup matches; about 70,000 spectators from India visited Qatar.164 There were about 200 direct flights per week to 13 cities in India. The Indian workforce (ranging from engineers, technicians and skilled workers to unskilled labour) contributed to World Cup development projects and infrastructure. The Ahmed Bin Ali stadium was built by a joint venture collaboration between Larsen & Toubro, an Indian construction company, and its Qatari partner Al-Balagh Trading

161 Ibid. 162 GoI, MEA, “Prime Minister speaks to HH Amir Tamim Bin Hamad Al Thani, Amir

of Qatar”, 29 October 2022, https://mea.gov.in/press-releases.htm?dtl/35841/Prime_ Minister_speaks_to_HH_Amir_Tamim_Bin_Hamad_Al_Thani_Amir_of_Qatar, accessed 18 June 2023. 163 GoI, MEA, “Visit of hon’ble vice president of India to Qatar”, 21 November 2022, https://mea.gov.in/press-releases.htm?dtl/35908/Visit_of_Honble_ Vice_President_of_India_to_Qatar, accessed 18 June 2023. 164 Neeladri Bhattacharjee, “FIFA World Cup 2022: A fan festival to cherish beyond the 64-game tournament”, Sports Star, 28 December 2022, https://sportstar.thehindu. com/football/fifa-world-cup/news/qatar-2022-fifa-world-cup-india-tourists-second-hig hest-fans-experience-online-viewers-argentina-france-final/article66313441.ece, accessed 18 June 2023.

7

QATAR

277

and Contracting.165 There had been close coordination in managing the food supplies during the tournament, despite global challenges in the supply chain.166 The deeper social connection was visible in many cultural events, such as the Bollywood show at Al-Bayt stadium before the beginning of the World Cup.167 The Indian community held a large march supporting the championship and unveiled the largest boots featured in the Guinness Book of Records.168 There were events of Indian foods and activities on the sidelines of the tournament. The Indian community has been a valued and preferred choice in Qatar for partnerships in various projects. Energy imports have dominated India’s trade with Qatar and yet India is an important destination for Qatar’s non-energy exports. India was the second most important destination for private sector exports, valued at about QAR 512.6 million (US$140.77 million), with a share of about 22.3 per cent.169 Table 7.3 shows that in 2022, it was the second most important exports destination and fourth largest source of its imports. India’s share in Qatar’s exports and imports by July 2022 was 12.8

165 The Bridge, “For the first time, an Indian company is building infrastructure for 2022 FIFA World Cup”, 2 January 2021, https://thebridge.in/football/for-thefirst-time-an-indian-company-is-building-infrastructure-for-2022-fifa-world-cup/, accessed 19 June 2023. 166 Business Standard, “West Bengal exports Haringhata brand meat to Qatar, other countries”, 4 November 2022, https://www.business-standard.com/article/economy-pol icy/west-bengal-exports-haringhata-brand-meat-to-qatar-other-countries-122110400147_ 1.html, accessed 19 June 2023. 167 The Economic Times, “Qatar World Cup opening ceremony: Myriam Fares, Nora Fatehi perform at Al Bayt Stadium. Read details”, https://economictimes.indiatimes. com/news/international/uk/qatar-world-cup-opening-ceremony-myriam-fares-nora-fat ehi-perform-at-al-bayt-stadium/articleshow/95646513.cms?from=mdr, accessed 19 June 2023. 168 Deccan Herald, “Thousands of Keralite football fans hold march in Qatar days ahead of FIFA World Cup”, 12 November 2022, https://www.deccanherald.com/spo rts/football/thousands-of-keralite-football-fans-hold-march-in-qatar-days-ahead-of-fifaworld-cup-1161604.html, accessed 19 June 2023. 169 QNA, “QC: Private sector exports continue to hit record growth”, 16 January 2022, https://www.qna.org.qa/en/News-Area/News/2022-01/16/0020-qcqatar-private-sector-exports-continue-to-hit-a-record-growth, accessed 19 June 2023.

278

MD. M. QUAMAR ET AL.

per cent and 6.2 per cent, respectively.170 The bilateral trade increased from US$15.03 billion in 2021–2022 to US$18.78 billion in 2022–2023 (Fig. 7.1), mostly driven by an increase in energy import bills consequent to the multi-year high LNG prices. India’s exports to Qatar have been growing with post-pandemic economic recovery. It increased from US$1.29 billion in 2020–2021 to US$1.84 billion in 2021–2022, and US$1.97 billion in 2022–2023

Fig. 7.1 India’s trade with Qatar, 2016–2022 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India)

170 QNA, “Qatar Street balance jump 78% Y0Y”, 28 August 2022. https://www. qna.org.qa/en/newsbulletins/2022-08/28/0026-qatar’s-trade-balance-jumps-78-yoy, accessed 19 June 2023.

7

QATAR

279

(Fig. 7.1). The top five export items to Qatar comprised petroleum products, gold and precious metals, iron products, motor cars and other vehicles and basmati rice (Fig. 7.2). The two countries were looking at alternative grains like millet, a rich source of protein, to address their food security concerns.171 India is one of the largest exporters of millet. This became relevant when the United Nations declared 2023, the International Year of Millets.172 Figure 7.3 shows the top five items of India’s imports from the Emirate: gaseous mineral fuels, crude oil, fertilisers, organic chemicals and raw plastic materials.

Fig. 7.2 India’s top five export items to Qatar, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

171 The Print, “APEDA inks MoU with Lulu Hypermarket for export promotion of millets in Gulf”, 26 February 2023, https://theprint.in/economy/apeda-inks-mou-withlulu-hypermarket-for-export-promotion-of-millets-in-gulf/1401105/, accessed 19 June 2023. 172 MyGov, “Introduction”, https://www.mygov.in/campaigns/millets/, accessed 19 June 2023.

280

MD. M. QUAMAR ET AL.

Fig. 7.3 India’s top five import items from Qatar, 2022–2023 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedash board.aspx)

Financial flows between India and Qatar are multifaceted. Qatar accounted for about 1.5 per cent of the total remittances India received in 2020. About 2.7 per cent of the units in Indian Mutual Funds were subscribed by residents in Qatar by the end of March 2022.173 However, between April 2000 and December 2023, cumulative FDI equity from Qatar was about US$496 million, constituting only about 0.1 per cent of India’s total FDI.174 QInvets, which manages about US$1.4 billion of Qatari assets in various markets, has a subsidiary in India.175 Since

173 Reserve Bank of India, “Survey of foreign liabilities and assets of Mutual fund companies—2021-22”, 8 August 2022, https://rbi.org.in/scripts/BS_PressReleaseDis play.aspx?prid=54168, accessed 18 June 2023. 174 Department for Promotion of Industry and Internal trade, FDI factsheet December

2022. 175 QNA, “Co-CEO of QInvest to QNA: Katari market to witness listing, mergers subscription soon”, 31 October 2022, https://www.qna.org.qa/en/News-Area/News/ 2022-10/31/0039-co-ceo-of-qinvest-to-qna-qatari-market-to-witness-listings,-mergers,subscriptions-soon, accessed 19 June 2023.

7

QATAR

281

2020, Qatari investment in India has increased five times but it is far below its potential.176 There are about 15,000 registered Indian companies in Qatar and Indians are among the largest investors in the Qatari market.177 QIA and BYJU’s, the Indian edutech company, signed an MoU to set up a subsidiary (to be 100 per cent owned by BYJU’s), a research and development centre in Doha, to offer its innovative and personalised learning to the students in MENA region.178 Mihuru, the travel fintech start-up from India, applied for the incubator and accelerator programmes held under the aegis of the Qatar fintech hub. To connect the start-up ecosystems in both countries, India-Qatar Start-up Bridge was launched in June during the visit of Vice-President Naidu to Qatar.179 In December, India participated in the 12th Qatar Traditional Dhow Festival, displaying its marine heritage and handicrafts.180 About 18 Indian exhibitors participated in the 18th edition of the Doha jewellery and watch exhibition; Indian participation was especially sought after, given its position in the global market for jewellery and watches.181 India’s Indigo and Qatar Airways reactivated their strategic cooperation

176 Livemint, “Qatar’s investment in India grows 5 times since Mar 2020, can be substantially increased: VP Naidu”, 5 June 2022, https://www.livemint.com/news/ india/qatar-s-investment-in-india-grows-5-times-since-mar-2020-can-be-substantially-inc reased-vp-naidu-11654435780733.html, accessed 18 June 2023. 177 Embassy of India in Qatar, https://www.indianembassyqatar.gov.in, accessed 18 June 2023. 178 QNA, “Qatar investment authority, India’s BYJU’s announce MENA focus Edtech

subsidiary in Doha”, 30 March 2022, https://www.qna.org.qa/en/News-Area/News/ 2022-03/30/0032-qatar-investment-authority,-india’s-byju’s-announce-mena-focused-edt ech-subsidiary-in-doha, accessed 19 June 2023. 179 Press Information Bureau, “Vice President lauds India-Qatar economic partnership; calls for building an enabling environment and forging more collaborations for mutual benefit”, 6 June 2022, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1831589, accessed 18 June 2023. 180 QNA, “National Day/Katara dazzles in National Day celebrations”, 18 December 2022, https://www.qna.org.qa/en/News%20Area/News/2022-12/18/0083national-day-katara-dazzles-in-national-day-celebrations, accessed 19 June 2022. 181 QNA, “Organisers and participants: Doha jewellery and watches exhibition will be a great success”, 21 April 2022.

282

MD. M. QUAMAR ET AL.

after both countries resumed international flights after the Covid-19 lockdown and both airliners offer about 340 weekly flights to 13 destinations in India.182 Energy Ties Qatar has an important role in India’s transition to clean fuels. It was a source of 43.8 per cent of India’s LNG and LPG imports. India’s total mineral fuel imports from Qatar significantly increased from US$10.88 billion in 2021–2022 to US$14.55 billion in 2022–2023 (Table 7.5). In 2022, India’s LNG import bills rose due to escalating prices, even though it imported lesser volumes of LNG as it ramped up its coal-fired power plants.183 India’s long-term contract with Qatar, signed in 2009, has to be renewed by the end of 2023, five years ahead of the expiry of the contract in 2028. During the year, India’s Petronet LNG initiated talks with Qatar to renew its long-term supply contract in a turbulent and tight international energy market already reeling under the effects of the Ukraine war and consequent sanctions on Russia. However, India was hopeful that Qatar would reduce gas prices in line with those for Bangladesh, Pakistan and China, which were linked to a slope of 10.2 per cent of the Brent crude, while India’s 25-year LNG deal with Qatar was based on a slope of about 12.67 per cent of the brand price.184 India seeks additional volumes up to 1 mtpa above the existing 8.5 mtpa in the renewed contract as its capacity of the LNG import terminal is set to increase by about 53 per cent in the coming years. Energy was the main driver of imports from the Emirate, with an 86.58 per cent share in 2022–2023 (Table 7.5).

182 QNA, “Qatar Airways, Indigo Airlines reactivate partnership within strategic cooperation”, 19 April 2022. 183 The Economic Times, “Petronet seeks more LNG under long-term Qatar deal”, 7 February 2023, https://economictimes.indiatimes.com/industry/energy/oil-gas/ petronet-seeks-more-lng-under-long-term-qatar-deal/articleshow/97681206.cms, accessed 18 June 2023. 184 Nidhi Verma, “Petronet in talks with Qatar for LNG deal renewal amid turbulent markets”, Business Standard, 12 May 2022, https://www.business-standard.com/article/ current-affairs/petronet-in-talks-with-qatar-for-lng-deal-renewal-amid-turbulent-markets122051201108_1.html, accessed 18 June 2023.

7

QATAR

283

Table 7.5 India’s energy trade with Qatar, 2019–2022 (US$ million)

Crude oil imports from Qatar LNG imports from Qatar Other gaseous hydrocarbon Total mineral fuel imports from Qatar (HS 27) Share of Qatar in India’s total mineral fuel imports (%) Share of mineral fuel imports in India’s total imports from Qatar (%) Petroleum products exports to Qatar Share of petroleum products in India’s total exports to Qatar (%)

2019–2020

2020–2021

2021–2022

2022–2023

1,365.52 (1.33) 4,446.59 (46.02) 2,379.21 8,431.8

955.73 (1.61) 3,141.23 (39.86) 2,503.72 6,789.85

981.44 (0.80) 5,906.42 (43.84) 3,675.77 10,887.22

1874.62 (1.16) 8324.95 (48.65) 4056.95 14,551.94

5.49

6.81

5.59

5.58

87.05

85.62

82.52

86.58

18.55 (0.05) 1.46

12.49 (0.05) 0.97

145.23 (0.22) 7.90

206.62 (0.21) 10.51

Note Figures in the bracket are per cent share in India’s total imports/exports of that product Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India

India’s exports of petroleum products to Qatar were a miscellaneous category of other petroleum oils and oils obtained from bituminous minerals. Petroleum products exports to Qatar grew at a high rate and became the leading items of exports, with a share that increased multiple times from 0.97 per cent in 2020–21 to 10.51 per cent in 2021–2022 (Table 7.5). A task force on energy was envisaged in 2020185 to identify projects for Qatar’s investment in India’s energy value chain. However, subsequently a task force on investment was set up that would also include looking into Qatari investments in India’s energy value chain.186 Qatar has made intensive forays into the exploitation of renewable and alternative fuels, and both countries can expand the horizon of energy

185 The Economic Times, “India, Qatar set up task force to identify projects for investment”, 11 December 2020, https://economictimes.indiatimes.com/news/intern ational/uae/india-qatar-set-up-task-force-to-identify-projects-for-investment/articleshow/ 79680639.cms?from=mdr, accessed 18 June 2023. 186 GoI, MEA, “India-Qatar Bilateral Relations”, 12 July 2021, https://www.mea.gov. in/Portal/ForeignRelation/Qatar_2021_new.pdf, accessed 18 June 2023.

284

MD. M. QUAMAR ET AL.

ties. During his visit to Qatar, the then Vice-President Naidu invited the Emirate to join India-led International Solar Alliance.187 Expatriates and Cultural Relations Qatar has been hosting a large Indian community estimated at 850,000 before Covid-19. Scores of Indians returned home during the pandemic but have gradually resumed work in Qatar. In May 2022, the seventh Joint Working Group (JWG) on labour and workforce was held in New Delhi and discussed various issues concerning employment conditions, recruitment and quick resolution of problems.188 The Qatari delegation led by a Ministry of Labour official also visited the National Skill Development Corporation and discussed “furthering cooperation in skills training and certification.”189 Indians constituted one of the largest groups of spectators during the FIFA World Cup. Both expatriates living and working in Qatar and other GCC countries and fans from India were present in the stadiums in large numbers.190 On news coverage by some Western media outlets calling the Indian fans crowding the stadiums and its surroundings as “fake,” Indian ambassador Deepak Mittal called it a matter of ignorance during an interview with a Qatari news channel.191

187 Press Information Bureau, “Vice President lauds India-Qatar economic partnership; calls for building an enabling environment and forging more collaborations for mutual benefit”, 6 June 2022, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1831589, accessed 19 June 2023. 188 GoI, MEA. “7th Joint Working Group (JWG) Meeting between India and Qatar on labour and manpower development”, 6 May 2022, https://mea.gov.in/press-releases. htm?dtl/35286/7th_Joint_Working_Group_JWG_Meeting_between_India_and_Qatar_ on_Labour_and_Manpower_Development, accessed 18 June 2023. 189 Ibid. 190 Vishnu Prasad, “FIFA World Cup 2022 | India shines with thousands of expat

volunteers, fans and tourists in Qatar”, The Hindu, 17 November 2022, https://www.the hindu.com/sport/fifa-world-cup-2022-india-shines-with-thousands-of-expat-volunteersfans-and-tourists-in-qatar/article66132335.ece, accessed 18 June 2023. 191 Embassy of India in Qatar, “Interview of H.E. Deepak Mittal, Ambassador of

India to Qatar with Al Raya News Paper, Doha, published on 15 December 2022”, 15 December 2022, https://www.indianembassyqatar.gov.in/extra?id=eyJpdiI6Inl5RFY0dz BscWZmQlQxeDBjVTV3Nnc9PSIsInZhbHVlIjoiRkptdVFzUXFmak5JZDRyT1RLeGdw QT09IiwibWFjIjoiMmRkMmU2ZmIsMzllZWE0NTBmMjFjMjg1ODliNjk4YzcxZDEzYT A5NjI4ZWUxNmVkODg0MWZhMzMyM2EwYzQ2NyJ9, accessed 18 June 2023.

7

QATAR

285

Indian film star Deepika Padukone was among the international celebrities present at the unveiling of the World Cup trophy in Doha.192 The issue of Indian labour exploitation during the construction of World Cup infrastructure was raised prominently in Indian media and civil society discussions.193 It led to several questions in both houses of the Indian Parliament, with concerns related to harsh working conditions, non-payment of dues, exploitation and enslavement, imprisonment and deaths of workers.194 The Government of India maintained that its Embassy in Doha has been proactive in taking up this issue with Qatari authorities through formal meetings and informal discussions and has been providing all possible support to the Indian community and individuals facing any problems, including legal aid and counsel, as well as help in case of any untoward incident.195

Challenges and Opportunities Indo-Qatari relations have progressed steadily with several bilateral visits, diplomatic exchanges and meetings. Trade, business and investments continue to form the core and energy trade and flow of Indian expatriates dominate the ties. In recent years, however, some irritants have come up. The controversy over Nupur Sharma’s remarks on Prophet Muhammad and the public appearances by Zakir Naik in Qatar caused some disquiet in both capitals. Further, the detention of eight Indian Navy veterans working with an Omani defence company by the Qatari security forces on undisclosed charges have raised diplomatic concerns. There was a media debate in India over the treatment, rights’ violations and rising numbers

192 The Indian Express, “Deepika Padukone to unveil FIFA World Cup trophy in Qatar”, 5 December 2022, https://indianexpress.com/article/entertainment/bollywood/ deepika-padukone-to-unveil-fifa-world-cup-trophy-in-qatar-8307485/, accessed 18 June 2023. 193 Nistula Hebbar, “Indian workers kept in ‘slave labour-like’ conditions in Qatar: Bharatiya Mazdoor Sangh”, The Hindu, 14 June 2022, https://www.thehindu.com/ news/national/indian-workers-kept-inslave-labour-like-conditions-in-qatar-bharatiya-maz door-sangh/article65526855.ece, accessed 18 June 2023. 194 GoI, MEA, “Question no-1831 labourers working in Qatar”, 22 December 2022, https://mea.gov.in/rajya-sabha.htm?dtl/36034/QUESTION_NO1831_LABOUR ERS_WORKING_IN_QATAR, accessed 18 June 2023. 195 Ibid.

286

MD. M. QUAMAR ET AL.

of deaths and suicide by Indian workers and labourers involved in several infrastructure projects for the FIFA World Cup. In terms of trade, business and investments, Indo-Qatari relations have immense possibilities, especially in clean and renewable energy sectors. The 25-year LNG supply deal ending in 2028 and the two countries to renew the contract on a mutually beneficial term. The Qatari investments in downstream petroleum and energy sector in India can be a win-win for the two countries. The Indian construction company Larsen and Toubro successfully implementing the joint Al-Rayyan stadium project and it underlines the immense possibilities in the construction and infrastructure sectors. There are opportunities in defence manufacturing and sales besides potential for cooperation in start-ups, fintech and other emerging economic sectors. AI, space and other niche areas can also be explored for business ventures between Indian and Qatari companies.

CHAPTER 8

Saudi Arabia

Key Information Political System: Hereditary Monarchy; Ruling Family: Al-Saud; Ruler: King Salman bin Abdulaziz al-Saud (since 23 January 2015); Crown Prince: Prince Mohammad bin Salman al-Saud (since 21 June 2017); National Day: 23 September; Foundation Day: 22 February; Parliament: 150-member nominated Majlis al-Shura; Last Parliamentary Election: NA; Major Parliamentary Group: NA; National Carrier: Saudia. Socio-Economic Indicators Area: 2,149,690 sq. km; Population: 35.95 million (Native: 61.7% Expats: 38.3%); Religious Groups: Citizens: 85–90% Sunni Muslims and 10–12% Shia Muslims; Age Structure: 0–14 Years 23.45%, 15–64 Years 72.36%, 65 Years and above 4.19%; Population Growth Rate: 0.1%; Life Expectancy at Birth: 77 Years; Major Population Groups: Arabs 90%; Afro-Asian 10%; Adult Literacy Rate (Ages 15 and older): 97.6%; National Currency: Saudi Rial (SAR); GDP (US$ Current): US$833.54 billion; Foreign Trade: Exports US$314.17 billion; Imports US$225.48 billion; Military Expenditure: 6% of GDP; Sovereign Wealth Fund: Public Investment Fund of Saudi Arabia, Value of Assets: US$650 billion; National Government Debt: US$227.8 billion; GNI Per Capita (current international, PPP): $46,130); GDP Per Capita © Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_8

287

288

MD. M. QUAMAR ET AL.

(PPP, current international): $23,185; Oil Reserves: 259 billion barrels (15% of world reserves and Rank 2) (End 2020 Estimates); Gas Reserves: 333 tcf (Rank 6 and 4% of world reserves); Human Development Index: 0.875; HDI Rank: 35 out of 189; Infant Mortality Rate (deaths per 1,000 live births): 11.97; Maternal Mortality Ratio (deaths per 100,000 live births): 16; UN Education Index: 0.789; Gender Development Index: 0.917; Gender Inequality Index: 0.247; Labour Force: 16.06 million; Employment to Population Ratio (Ages 15 and older): 52.6%; Unemployment: 7.36%; Urban Population: 85%; Rate of Urbanisation: 1.69% (2020–25 Estimates); Last National Census: 2016; World Press Freedom Index: Rank 166 out of 180; Score: 33.71; Corruption Perception Index: Rank 54 out of 180; Score: 51; Foreign Direct Investment (Inflows): US$19.29 billion; Individuals Using Internet (per cent of population): 100%; Net Migration Rate (per 1,000 people): 6.07; Forest Area (per cent of total Land Area): 0.5%; Carbon Dioxide Emissions (metric tons per capita): 14.6; Global Peace Index: Rank 125 out of 162; Score: 2.376; Fintech Index: Rank 65 out of 83; Global Innovation Index: Rank 51 out of 132; Global Cybersecurity Index: Rank 2 out of 194; Score: 99.54. India Related Indian Cultural Centre: None; Number of Indians: 2,594,947; Currency Exchange Rate: 1 SAR = INR 21.84; Number of NonIslamic Places of Worship for Indians: None; Indian Schools: 43; Indian Banks: None; Last Visit to India by the ruler: King Abdullah (January 2006); Crown Prince Mohammad bin Salman (February 2019); Last Visit by Indian Prime Minister: Narendra Modi (October 2019). Sources: CIA World Factbook 2023; UN Development Programme 2023; World Bank 2023; World Intellectual Property Organisation 2023; Vision of Humanity, 2023; UNCTAD World Investment Report 2023, Transparency International 2023; Reporters without Borders 2023; U.S. EIA 2023; Embassy of India, Saudi Arabia, 2023. ∗ ∗ ∗ The post-Covid-19 economic recovery was one of the major priorities in Saudi Arabia in 2022. With extraordinary reform measures in pursuance of Vision 2030 to prepare for a post-oil future, the kingdom has invested

8

SAUDI ARABIA

289

significantly in building infrastructure and introduced mega developmental projects to attract international investments and encourage private sector businesses. Consequently, Saudi Arabia was among the fastestgrowing large economies, registering an 8.7 per cent growth rate in 2022. King Salman appointed Crown Prince Mohammed bin Salman (MbS) as prime minister in September, formally handing over the charge of running the government that the latter had been doing in his capacity as First Deputy Prime Minister since 2017. This also secured MbS immunity from prosecution abroad, especially in the US, given the lingering debates over his involvement in the murder of journalist Jamal Khashoggi in October 2018. Saudi Arabia continued to promote social reforms by lifting restrictions, especially for women and upon recreational activities. These encourage a more open societal space for the youth to express themselves and simultaneously improve the business environment in the country. It does not mean that the kingdom is abandoning its role as the Custodian of the Two Holy Mosques as King Salman continued developing infrastructures around Mecca and Medina to accommodate more pilgrims from within and outside the kingdom. Indo-Saudi relations have noticeably strengthened in political and diplomatic engagements, economic and commercial exchanges, security and defence cooperation and social and cultural domains. In recent years, Saudi Arabia has emerged as one of India’s closest friends in the Middle East, while India is among the most important external partners for the kingdom as the latter strengthens cooperation with Asia. Trade, commerce, investments and energy remain the foremost areas of bilateral cooperation, but new areas, including connectivity, science and technology, defence and military cooperation, tourism, sports and strategic issues, are increasingly being discussed during bilateral engagements. New Delhi and Riyadh have consistently sought to expand their strategic partnership since the April 2016 and October 2019 visits of Prime Minister Narendra Modi to the kingdom and the February 2019 visit of Crown Prince MbS to India. These led to the formation of the Strategic Partnership Council (SPC) to enhance political, economic and strategic cooperation. The visit of External Affairs Minister S. Jaishankar to Riyadh in September 2022 was important for continued political and diplomatic engagements and in assessing the progress of the strategic partnership.

290

MD. M. QUAMAR ET AL.

Domestic Developments In 2022, the kingdom continued its march towards realising the Vision 2030 for a post-oil economy and a more open and less restrictive sociocultural environment that is business-friendly and amenable to all sections of society. Towards inculcating a Saudi national identity rooted in history, the kingdom announced the celebration of a “Founding Day” on 22 February every year to commemorate the foundation of the first Saudi state in Diriyah in 1727 by Mohammed bin Saud.1 The first Founding Day celebration was held in 2022 with much fanfare.2 Unlike the popular perception, Founding Day does not intend to replace the National Day celebrated on 23 September, marking the formation of the modern and unified Kingdom of Saudi Arabia in 1932.3 The idea of a Founding Day celebration is the brainchild of Crown Prince MbS, who wishes to start a legacy of his own, rooted in Saudi history and heritage even while distancing from the puritan religious identity rooted in the teachings of Mohammed bin Abdul Wahhab that have become synonymous with Saudi Arabia over the years.4 MbS wishes to have a more temporal Saudi national identity without necessarily abandoning the sources of religious legitimacy for the kingdom. This contrasts with the past, wherein Saudi rulers were keen on securing their legitimacy primarily through Islam.5

1 Abdullah bin Bijad al-Otaibi, “Laying the foundation for Founding Day”, Al-Arabiya, 22 February 2022. https://english.alarabiya.net/in-translation/2022/02/22/Laying-thefoundation-for-Founding-Day, accessed 12 July 2023. 2 Ayush Narayanan, “Saudi Arabia’s ‘Founding Day’ celebrations mix tradition with the future”, Al-Arabiya, 23 February 2022, https://english.alarabiya.net/News/gulf/2022/ 02/23/Saudi-Arabia-s-Founding-Day-celebrations-mix-tradition-with-the-future, accessed 12 July 2023. 3 Marco Ferrari, “Saudi Arabia celebrates first-ever ‘Founding Day’ holiday”, AlArabiya, 23 February 2022. https://english.alarabiya.net/News/gulf/2022/02/22/ Saudi-Arabia-celebrates-first-ever-Founding-Day-holiday, accessed 12 July 2023. 4 Noor Nugali, “Saudi Arabia to celebrate Founding Day on Feb. 22 every year, says decree”, Arab News, 28 January 2022, https://www.arabnews.com/node/2013241/ saudi-arabia, accessed 12 July 2023. 5 Simon Mabon, The Struggle for Supremacy in the Middle East: Saudi Arabia and Iran, Cambridge, UK: Cambridge University Press, 2023, pp. 51–75.

8

SAUDI ARABIA

291

Politics and Governance Despite the extraordinary pace of the socio-economic reforms and changes6 , Saudi Arabia has remained a closed political system wherein it has followed the tribal political structure of a family rule that divides the resources among the stakeholders while keeping firm control over the state.7 This limits the scope for a republican-style political structure wherein politics and decision-making are defined through popular participation. Despite this, the state structure in the kingdom has an inbuilt mechanism of consultation and patronage which is run under the largesse of the ruler and has been improvised based on need and demand.8 The kingdom has also developed a mechanism for incorporating modern amenities, technology and lifestyle within this closed political structure. Further, the kingdom has remained rooted in Islam as its foundation and legitimacy source. Thus, the ability of the Al-Saud to keep the political structure firmly under control while adhering to a formal process of consultation with the wider society through old and new institutions and keeping Islam at the centre of its foundation has served the kingdom well. On the other hand, the kingdom has followed a more open policy of governance wherein inputs from the society are incorporated into policy-making through formal and informal processes and talented individuals from the cross-section of citizens are co-opted in the government machinery to deliver services. This has allowed the successive Saudi rulers to focus on providing good governance and the oil wealth has enabled them to remain steadfast in this while securing the support of a wide spectrum of the society.9 It has also meant a mechanism for a smooth transition of power from one to the next ruler that remained among

6 Yasmine Farouk and Nathan J. Brown, “Saudi Arabia’s Religious Reforms Are Touching Nothing but Changing Everything”, Carnegie Endowment for International Peace, 7 June 2021, https://carnegieendowment.org/2021/06/07/saudi-arabia-s-religi ous-reforms-are-touching-nothing-but-changing-everything-pub-84650, accessed 17 July 2023. 7 Anthony H. Cordesman, Saudi Arabia Enters the Twenty-First Century: The Political,

Foreign Policy, Economic, and Energy Dimensions, Westport, CT: Praeger, 2003. 8 Joseph A. Kéchichian, Legal and Political Reforms in Saudi Arabia, New York: Routledge, 2013. 9 Bernard Haykel, Thomas Hegghammer and Stéphane Lacroix (eds.), Saudi Arabia in Transition: Insights on Social, Political, Economic and Religious Change, New York: Cambridge University Press, 2015.

292

MD. M. QUAMAR ET AL.

half-brothers since the death in 1953 of the founder King Abdulaziz bin Abdulrahman al-Saud (Table 8.1). This is, however, set to change under King Salman, who took over the reign in March 2015 after the death of King Abdullah. After taking over the mantle, King Salman has hastened the process of generational transition and has overlooked his full-and half-brothers and elder nephews to promote his son Mohammed (MbS) as the next head of the Al-Saud family and the kingdom.10 This has been, by and large, accepted by the broader family as the Salman clan emerges at the top of the hierarchy among many other claimants. Although they have taken complete control over the state, the father-son duo is mindful of accommodating the broader family by representing different branches. There are reports of dissent, especially from the King’s brother Ahmed bin Abdulaziz and nephew and former Interior Minister and Crown Prince Muhammed bin Nayef, who are reportedly under house arrest.11 The consolidation of power with MbS a the top appears complete and stable, marked by his appointment as crown prince in 2017 and prime minister in 2022. Crown Prince MbS was formally appointed prime minister on 27 September 2022 when King Salman issued a royal decree notifying a cabinet reshuffle wherein MbS was elevated to head of government, a position also held by the King until then.12 Simultaneously, Prince Khalid bin Salman, a younger full-brother of the Crown Prince, who has been serving as his deputy in the Ministry of Defence since 2019, became the full Minister of Defence. The reshuffle came at a crucial moment as King Salman, who served as prime minister since taking over the reign in 2015, has been gradually reducing his public engagements given his old age and

10 Samuel Wilner, “The Saudi Arabia of Mohammed Bin Salman: Adapting to the Changing World and Preserving the Monarchy,” Israel Journal of Foreign Affairs, 2022, vol. 16, no. 3, pp. 365–78. 11 Brookings, “The case of Saudi Arabia’s Mohammed bin Nayef”, Brookings, 12 February 2021, https://www.brookings.edu/blog/order-from-chaos/2021/02/12/thecase-of-saudi-arabias-mohammed-bin-nayef/, accessed 12 July 2023. 12 Tuqa Khalid, “Saudi Arabia’s King Salman appoints Crown Prince as Kingdom’s prime minister”, Al-Arabiya, 28 September 2022, https://english.alarabiya.net/News/ gulf/2022/09/27/Saudi-Arabia-s-Crown-Prince-to-become-Kingdom-s-Prime-MinisterRoyal-decree, accessed 12 July 2023.

Life span 1875–1953

1902–1969

1906–1975

1913–1982 1921–2005

Abdulaziz bin Abdulrahman (Ibn Saud)

Saud bin Abdulaziz

Faisal bin Abdulaziz

Khalid bin Abdulaziz

Fahd bin Abdulaziz

Kings of Saudi Arabia since 1932

Name

Table 8.1

1982–2005

1975–1982

1964–1975

1953–1964

1902–1932 and 1932–1953

Reign

(continued)

Revived the third Saudi state through an armed conquest in 1902; Unified the majority of the Arabian Peninsula under his rule and consolidated it; Founded the Kingdom of Saudi Arabia in 1932; Developed Oil-for-Security Partnership with the US Kept the kingdom intact at a fragile time; but squandered wealth; Caused tensions with step-brothers, especially Crown Prince Faisal, by appointing sons to important position Re-established family unity and made Saudi Arabia a leading regional country by using pan-Islamism and oil geopolitics Steadied hand after Faisal’s assassination; Overcame the Ka’ba Siege Ruled by a firm hand; Revived the partnership with the US; Overcame the Kuwait Crisis; Established the Majlis al-Shura

Notable contribution

8 SAUDI ARABIA

293

1924–2015

1935–

Abdullah bin Abdulaziz

Salman bin Abdulaziz

Source Compiled by Authors

Life span

(continued)

Name

Table 8.1

2015–

2005–2015

Reign

Ruled as regent/de facto since 1995; Overcame challenges posed by 9/11; Co-Opted Islamo-Liberals; Initiated notable social and legal reforms; weathered the challenge posed by Arab Spring Bringing generational change; Consolidating power in own clan; Looking over the rise of son Mohammed; Hastening of socio-economic reforms

Notable contribution

294 MD. M. QUAMAR ET AL.

8

SAUDI ARABIA

295

fragile health.13 The move ensures immunity to MbS from possible prosecution outside the kingdom as speculation over his involvement in the Khashoggi murder remains alive, especially in the US. The immunity was formally confirmed in November when the Biden administration stated in a court filing in November 2022 in its response to a lawsuit brought by the fiancée of the murdered journalist.14 The only other fresh appointment in the reshuffle was of Yousef bin Abdullah al-Bunyan as Minister of Education, replacing Hamad bin Mohammed al-Shaikh who served in the position since 2018.15 In terms of government functioning, the reshuffle and elevation of MbS as prime minister is unlikely to have any significant impact, given the Crown Prince has been the de facto leader since King Salman has allowed his son to run routine functions of the state and government. Although this has led to some speculations in the media about a rift or tussle between the King and the Crown Prince,16 no informed or independent source could confirm it and the two leaders continue to be seen together in public.17 On 23 September 2022, the kingdom celebrated National Day with the same zeal and enthusiasm as in the past to mark the 92nd-anniversary of the kingdom’s establishment in 1932.18 The celebration was important because earlier in the year; the kingdom instituted 22 February as its Founding Day, leading to assumptions that King Salman and Crown

13 Tuqa Khalid, “Saudi Arabia’s King Salman had a colonoscopy, result is fine: SPA”, Al-Arabiya, 8 May 2022, https://english.alarabiya.net/News/gulf/2022/05/08/SaudiArabia-s-King-Salman-had-a-colonoscopy-result-is-fine-SPA, accessed 12 July 2023. 14 Alex Marquardt, “US determines Saudi Crown Prince is immune in case brought by Jamal Khashoggi’s fiancée”, CNN, 18 November 2022, https://edition.cnn.com/ 2022/11/17/politics/saudi-crown-prince-immunity-state-department-jamal-khashoggi/ index.html, accessed 12 July 2023. 15 Saudi Press Agency (SPA), “A number of Royal Orders Issued 2 Riyadh”, 27 December 2018, https://sp.spa.gov.sa/viewfullstory.php?lang=en&newsid=1857857#185 7857, accessed 12 July 2023. 16 Stephanie Kirchgaessner and Nick Hopkins, “Rumours grow of rift between Saudi king and crown prince”, The Guardian, 5 March 2019, https://www.theguardian.com/ world/2019/mar/05/fears-grow-of-rift-between-saudi-king-salman-and-crown-princemohammed-bin-salman, accessed 12 July 2023. 17 Ibid. 18 Saudi Gazette, “Saudi Arabia witnessing largest ever National Day celebrations in its

history”, 20 September 2022, https://saudigazette.com.sa/article/625191, accessed 12 July 2023.

296

MD. M. QUAMAR ET AL.

Prince were moving away from the established legacy and history and wish to superimpose their own legacy.19 Undoubtedly, the announcement surprised many and there were speculations that Saudi Arabia was moving away from the legacy of Abdul Wahhab.20 The intention for the Founding Day appears to undo the anomaly of not recognising that the first Saudi state was established in 1727, and not 1744 (when the pact between Muhammed ibn Saud and Muhammed ibn Abdul Wahhab had been signed) and to inculcate a Saudi national identity rooted in its tribal and family heritage.21 In 2022, Saudi Arabia witnessed two spikes in Covid-19 cases, first in January–February and then in May–June. Although the number of cases was high, the casualties were limited and the strains were less lethal because of the widespread immunisation drive. Between January and December 2022, the kingdom recorded 217,537 cases of Covid-19 infections and 639 deaths.22 Overall, since the pandemic outbreak in 2020 and until the end of 2023, the kingdom witnessed 841,469 cases and 9,646 deaths related to Covid-19.23 Regarding vaccination rate, with 68,534,631 doses administered to citizens and residents, the kingdom was among the top countries in vaccinating the population. The end of Covid-19 was formally announced in the kingdom with the opening of public spaces by October 2021, and in May 2022, mosques in the kingdom were permitted to conduct Eid prayers with full capacity.24 Hajj 2022 was the first after two years when pilgrims from across the world 19 Hussein Ibish, “Mohammed bin Salman rewrites history to shrink Saudi Arabia’s Islamic past”, The Economic Times, 4 March 2022, https://economictimes.indiatimes. com/news/international/saudi-arabia/saudi-ruler-rewrites-history-to-shrink-islamic-past/ articleshow/89942237.cms?from=mdr, accessed 12 July 2023. 20 James Wynbrandt, A Brief History of Saudi Arabia, New York: Infobase Publishing, 2004. 21 Abdullah bin Bijad al-Otaibi, “Laying the foundation for Founding Day”, AlArabiya, 22 February 2022, https://english.alarabiya.net/in-translation/2022/02/22/ Laying-the-foundation-for-Founding-Day, accessed 12 July 2023. 22 World Health Organisation (WHO), “Saudi Arabia”, https://covid19.who.int/reg

ion/emro/country/sa, accessed 12 July 2023. 23 Ibid. 24 Tala Michel Issa, “Eid prayers resume to full capacity in Mecca for first time

since pandemic”, Al-Arabiya, 2 May 2022, https://english.alarabiya.net/News/gulf/ 2022/05/02/Eid-prayers-resume-to-full-capacity-in-Mecca-for-first-time-since-pandemic, accessed 12 July 2023.

8

SAUDI ARABIA

297

were allowed to travel to Mecca and Medina, although compared to the past, the number of pilgrims allowed was less than one million.25 In 2019, for example, nearly 2.5 million pilgrims participated in Hajj. The number had fallen drastically in 2020 and 2021 when only a few hundred and a few thousand, respectively, of the kingdom’s residents were permitted to offer Hajj prayers. Foreign Policy and Security In recent years, Saudi Arabia has adopted a more independent foreign policy orientation seeking to maximise its interests without necessarily aligning itself with one or the other global powers. Hence, its alliance with the US has become issue-based, while it has also developed strategic partnerships with China and Russia. This has sometimes created challenges to Riyadh–Washington relations, but the reduced US commitments in the Middle East and its shifting focus to Indo–Pacific theatre has allowed and even facilitated extra space for the kingdom.26 A dual tactics of adhering to strategic autonomy in foreign policy decisions while continuing strategic alignment in the security domain has helped the kingdom maintain close strategic ties with the US. It has allowed Saudi Arabia to play a greater role in the region and beyond due to its political, economic and religious influence without necessarily worrying about the US interests. Thus, on the Russian invasion of Ukraine in February 2022, Saudi Arabia took a neutral stand by urging both parties to find a solution through peaceful negotiations but did not join the sanctions imposed by the US and Western European countries against Russia.27 On the other

25 Al-Arabiya, “Saudi Arabia receives first foreign Hajj pilgrims since before pandemic”, 4 June 2022, https://english.alarabiya.net/News/gulf/2022/06/04/Saudi-Arabia-rec eives-first-foreign-Hajj-pilgrims-since-before-pandemic-, accessed 12 July 2023. 26 Md. Muddassir Quamar, “Saudi Arabia’s Strategic Partnership with the United States: Fraying at the Margins?” Strategic Analysis, 2022, vol. 46, no. 3, pp. 293–306. 27 Samuel Ramani, “A Middle Path for Saudi Arabia: How does the War in Ukraine Affect Saudi Foreign Policy?”, Gulf International Forum, https://gulfif.org/a-middlepath-for-saudi-arabia-how-does-the-war-in-ukraine-affect-saudi-foreign-policy/, accessed 12 July 2023.

298

MD. M. QUAMAR ET AL.

hand, Riyadh voted for the UN General Assembly Resolution in October 2022 that condemned Moscow for annexing Ukrainian territories.28 Before the ceasefire came into effect in Yemen on 2 April 2022, Saudi Arabia witnessed a significant spike in Houthi drone and missile attacks. Several drone strikes on Saudi oil installations and civilian areas in southern parts were reported between January and March. In January, after the Houthi drone strikes in UAE, the Saudi-led coalition intensified air strikes against the rebels in northern Yemen and Sana’a, which led to the Houthis targeting southern parts of Saudi Arabia.29 In early March, an oil plant in the Riyadh region came under attack leading to a small fire and disruption in supplies,30 while an Aramco distribution plant in Jeddah came under attack on 20 March.31 The spike in Houthi attacks led to the US reiterating its commitment to support Saudi Arabia in its fight against the Yemeni rebels.32 This was followed by the US sending Patriot missiles to the kingdom to shore up its air defence capabilities.33 However, the security cooperation did not induce a change in the Saudi-US foreign policy divergence, especially over oil politics, Russia and China.

28 Al-Arabiya, “Ukraine thanks Saudi Arabia for UN vote against Russia annex-

ations”, 17 October 2022, https://english.alarabiya.net/News/saudi-arabia/2022/10/ 13/Ukraine-thanks-Saudi-Arabia-for-UN-vote-against-Russia-annexations, accessed 12 July 2023. 29 Al-Arabiya, “Saudi Arabia’s defences intercepted, destroyed five drones targeting Kingdom”, 4 January 2022, https://english.alarabiya.net/News/gulf/2022/01/04/ Saudi-Arabia-s-defenses-intercepted-destroyed-five-drones-targeting-Kingdom, accessed 12 July 2023. 30 Ayush Narayanan, “Fire under control at Riyadh oil refinery struck by drone, no deaths reported”, Al-Arabiya, 11 March 2022, https://english.alarabiya.net/News/ gulf/2022/03/11/Fire-under-control-at-Riyadh-oil-refinery-struck-by-drone-no-deathsreported, accessed 12 July 2023. 31 Al-Arabiya, “Houthi attack on Aramco distribution plant in Jeddah causes fire: Coalition”, 21 March 2022, https://english.alarabiya.net/News/gulf/2022/03/20/Houthiattack-on-Aramco-distribution-plan-in-Jeddah-causes-fire-Coalition, accessed 12 July 2023. 32 Al-Jazeera, “Biden pledges US support against Houthi attacks to Saudi king”, 9 February 2022, https://www.aljazeera.com/news/2022/2/9/biden-pledges-us-supportagainst-houthi-attacks-to-saudi-king, accessed 12 July 2023. 33 David S. Cloud, “U.S. Sends Patriot Missiles to Saudi Arabia, Fulfilling Urgent Request”, The Wall Street Journal, 21 March 2022, https://www.wsj.com/articles/u-ssends-patriot-missiles-to-saudi-arabia-filling-an-urgent-request-11647822871, accessed 12 July 2023.

8

SAUDI ARABIA

299

President Joe Biden undertook his first official visit to the kingdom in July. The display of bonhomie with King Salman and the much-talkedabout fist bump with MbS notwithstanding; the visit did not make any dramatic change in the existing bilateral equation.34 Riyadh gave Biden a red carpet welcome and brought other regional leaders on board for a summit meeting, underlining a continuation of the past. However, it stopped short of committing anything on Ukraine and the energy market, underlining its newfound strategic autonomy. One of the major focuses of Biden’s visit was to gain a commitment to international oil pricing to prevent Russia from gaining the much-needed hard currency resources despite the Western sanctions.35 However, in October, OPEC+ announced a fresh oil production cut arrangement underlining the limited influence the Biden administration wields so far as foreign and economic policies of the kingdom are concerned.36 This did fly counter to the expectation of the Biden administration but reflected the new reality in the bilateral ties, with many in the administration and Democratic Party establishment expressing anger at Riyadh acting independently and advocating punitive actions, but it did not have any impact on Riyadh’s action.37 On the other hand, this led to serious criticism of the Biden policy vis-à-vis Saudi Arabia from the Republicans.38 In contrast with the US, Saudi-China relations have acquired greater significance in recent years with expanded economic and commercial relations. Both have committed to aligning their ambitious logistics and connectivity plans, namely, Saudi Arabia’s Vision 2030 and China’s

34 Quint Forgey and Kelly Hooper, “Biden fist bump with MBS triggers backlash”, Politico, 25 July 2022, https://www.politico.com/news/2022/07/15/a-fist-bumpat-the-palace-biden-squares-off-with-mbs-00046106, accessed 12 July 2023. 35 Joe Biden, “Why I’m going to Saudi Arabia”, The Washington Post, 9 July 2022, https://www.washingtonpost.com/opinions/2022/07/09/joe-biden-saudi-arabiaisrael-visit/, accessed 12 July 2023. 36 Hanna Ziady, “OPEC announces the biggest cut to oil production since the start of the pandemic”, CNN, 5 October 2022, https://www.cnn.com/2022/10/05/energy/ opec-production-cuts/index.html, accessed 12 July 2023. 37 Ellen R. Wald, “Why OPEC Is Cutting Oil Production (and Why There’s Not Much the U.S. Can Do About It)”, The New York Times, 24 October 2022, https://www.nyt imes.com/2022/10/24/opinion/saudi-arabia-opec-oil-cut.html, accessed 12 July 2023. 38 Politico, “A top Senate Republican is urging the Biden administration to maintain the U.S. security alliance with Saudi Arabia.”, 13 October 2022, https://www.politico. com/minutes/congress/10-12-2022/ernst/, accessed 17 July 2023.

300

MD. M. QUAMAR ET AL.

Belt and Road Initiative (BRI).39 The Saudi ties with China have also improved in other domains with regular political and diplomatic engagements. Beijing tries to balance relations with different regional countries through economic and commercial ties and inducing smaller states with massive investments in infrastructure.40 For Riyadh, the relations with China are a way of expanding commercial relations with Asian powers and a tool for strategic hedging in the fast-evolving international geopolitics.41 Thus, Saudi-China relations have improved significantly in recent years.42 In December 2022, President Xi Jinping visited Riyadh for the first time since 2016 and only his third foreign trip since the outbreak of Covid-19 in 2020.43 The visit was important for various reasons, especially given that the Biden visit in July was viewed as unsuccessful by the media.44 The visit focused on trade, business and connectivity and postCovid-19 economic recovery.45 What was additionally notable was the bonhomie on display and the degree of comfort between Xi and MbS in contrast to the tense encounter between Biden and the Saudi Crown Prince a few months earlier. Riyadh also gave a grand welcome to Xi and organised two summits—China-GCC and China-Arab—for the visiting 39 Dongmei Chen, “China’s BRI and Saudi Vision 2030: A Review to Partnership for Sustainability”, King Abdullah Petroleum Studies and Research Center, 24 October 2021, https://www.kapsarc.org/research/publications/chinas-bri-and-saudi-vis ion-2030-a-review-to-partnership-for-sustainability/, accessed 12 July 2023. 40 Ibid. 41 James M. Dorsey, “US–China Rivalry: Gulf States Struggle to Hedge Their Bets”,

Modern Diplomacy, 25 June 2020, https://moderndiplomacy.eu/2020/06/25/us-chinarivalry-gulf-states-struggle-to-hedge-their-bets/, accessed 12 July 2023. 42 Nadeem Ebrahim, “China and Saudi Arabia are getting closer. Should the US be

worried?”, CNN, 31 March 2023, https://edition.cnn.com/2023/03/31/middleeast/ saudi-china-get-closer-mime-intl/index.html, accessed 17 July 2023. 43 Al-Jazeera, “China’s Xi arrives in Saudi Arabia to ‘bolster ties’”, 6 December 2022, https://www.aljazeera.com/news/2022/12/6/chinas-xi-to-visit-saudi-arabia-fromwednesday, accessed 12 July 2023. 44 Hesham Alghannam and Mohammad Yaghi, “Biden’s Trip to Saudi Arabia: Successes and Failures”, Carnegie Endowment For International Peace, 11 August 2022, https:// carnegieendowment.org/sada/87662, accessed 17 July 2023. 45 Ministry of Foreign Affairs, People’s Republic of China, “President Xi Jinping Arrives in Riyadh to Attend the First China-Arab States Summit and the China-GCC Summit and Pay a State Visit to Saudi Arabia”, 7 December 2022, https://www.fmprc.gov.cn/eng/ zxxx_662805/202212/t20221208_10986939.html, accessed 12 July 2023.

8

SAUDI ARABIA

301

leader.46 The gesture was notable because this was the first time a foreign dignitary other than the US president was accorded a regional audience. The primary focus of Xi’s visit was economic cooperation and Riyadh and Beijing signed scores of MoUs on mutual investments worth about US$30 billion.47 The two countries also signed a comprehensive strategic partnership (CSP) agreement which was first discussed in 2016. Saudi partnership with Russia, too, witnessed some progress in 2022. The war in Ukraine notwithstanding, where Saudi Arabia took a balanced position,48 Riyadh and Moscow have been increasing their political and diplomatic engagements, especially given their strategic alignment on the international energy market, that allowed them some control through the OPEC + arrangement.49 The Saudi response to the crisis in Ukraine underlined that Riyadh is mindful of the increasing Russian importance in international and regional politics and tried to develop a consensus among the Gulf Cooperation Council (GCC) countries with a degree of success.50 Moscow appreciated the Saudi and Gulf position and viewed it as a reduction in US influence over the Arab Gulf states. This generated frantic discussions in the US and Europe on Saudi alignment with Russia and China against the West.51

46 Shishir Gupta, “President Xi rocks the Arab world, alarms QUAD and the West”, Hindustan Times, 12 December 2022, https://www.hindustantimes.com/world-news/ president-xi-rocks-the-arab-world-alarms-quad-and-the-west-101670816816949.html, accessed 12 July 2023. 47 Rawan Radwan. “Saudi Arabia, China emerge as comprehensive strategic partners

as Chinese President Xi Jinping wraps up state visit”, Arab News, 10 December 2022, https://www.arabnews.com/node/2213756/saudi-arabia, accessed 12 July 2023. 48 Abdulaziz Sager, “The Ukraine Crisis and the Gulf: A Saudi Perspective”, Institut

Montaigne, 18 October 2022, https://www.institutmontaigne.org/en/analysis/ukrainecrisis-and-gulf-saudi-perspective, accessed 12 July 2023. 49 Federica Marsi, “Is OPEC ‘aligning with Russia’ after production cuts?”, Al-Jazeera, 7 October 2022, https://www.aljazeera.com/news/2022/10/7/is-opec-aligning-withrussia-after-production-cuts, accessed 12 July 2023. 50 Mohammed Al-Sulami and Lama Al-Hamawi, “Gulf united on Russia–Ukraine war, says Saudi foreign minister”, Arab News, 1 June 2022, https://www.arabnews.com/ node/2094546/saudi-arabia, accessed 12 July 2023. 51 Martin Chulov, “Putin and the prince: fears in west as Russia and Saudi Arabia deepen ties”, The Guardian, 5 October 2022, https://www.theguardian.com/world/ 2022/oct/05/putin-mohammed-bin-salman-russia-saudi-arabia-deepen-ties, accessed 12 July 2023.

302

MD. M. QUAMAR ET AL.

Saudi Arabia continued diplomatic and political engagements with European powers, especially the United Kingdom, France and Germany, who were worried about the Gulf states’ position on the Ukraine crisis and its impact on the international energy market. There were regular exchanges of visits between Saudi and European leaders. In March, British Prime Minister Boris Johnson visited Riyadh and other Gulf capitals to lobby for oil production increase and supplies to Europe.52 MbS undertook his first visit to Europe since 2018 in July. He visited France and met with Macron.53 In addition, MbS visited Greece and met with Greek leaders who have emerged as the kingdom’s important security and defence partners in recent years.54 In South Asia, Saudi-Pakistan relations witnessed some revival, especially after some upheavals in recent years.55 Islamabad’s desperation to internationalise the Kashmir issue, especially after India revoked the special status of Jammu and Kashmir in August 2019, led to some serious differences with Riyadh. This prompted Prime Minister Imran Khan seeking the support of Türkiye and President Recep Tayyip Erdo˘gan to challenge the Saudi position and even try for a parallel Islamic Summit in Kuala Lumpur in December 201956 , leading to serious troubles in relations with Saudi Arabia.57 Though Islamabad eventually abandoned its position, this damaged the bilateral ties. After Khan lost a vote of confidence in April 2022 and was replaced by Shahbaz Sharif, there was some promise of change. Sharif’s first foreign trip took him to Riyadh

52 The Jordan Times, “British PM meets Saudi crown prince as Ukraine war roils oil prices”, 16 March 2022, https://www.jordantimes.com/news/business/british-pm-meetssaudi-crown-prince-ukraine-war-roils-oil-prices, accessed 12 July 2023. 53 Giorgio Leali, “Macron to meet Saudi crown prince MBS amid energy crisis”, Politico, 27 July 2022, https://www.politico.eu/article/saudi-prince-mohammed-bin-sal man-meet-macron-paris-energy-crisis/, accessed 12 July 2023. 54 Paul Tugwell, “Saudi Prince Holds Energy Talks With Greece’s Prime Minister”, Bloomberg, 26 July 2022, https://www.bloomberg.com/news/articles/2022-07-26/ saudi-crown-prince-visits-greece-on-first-europe-trip-since-2018, accessed 12 July 2023. 55 Yogesh Gupta, “The great game in the Middle East: Why the Pakistan-Saudi relationship is going off the rails”, The Times of India, 10 December 2020, https://tim esofindia.indiatimes.com/blogs/toi-edit-page/the-great-game-in-the-middle-east-why-thepakistan-saudi-relationship-is-going-off-the-rails/, accessed 17 July 2023. 56 Ibid. 57 Ibid.

8

SAUDI ARABIA

303

to seek financial help.58 Nonetheless, later in the year, Riyadh refused to extend an interest-free loan to Pakistan. In November, MbS deferred his proposed visit to Islamabad due to internal turmoil in the latter.59 Saudi Arabia’s regional politics has witnessed a nuanced change since 2021. As part of a gradual shift, the kingdom has undertaken efforts to break logjams with regional countries over the events emanating from the Arab Spring uprisings. A breakthrough with Türkiye was witnessed in April 2022 when President Recep Tayyip Erdo˘gan visited the kingdom. The reconciliation process started earlier and was consolidated with Erdo˘gan’s visit, who also went to the Ka’ba for the Umrah pilgrimage.60 MbS returned the visit in July, wherein he met with Erdo˘gan and the two leaders committed to strengthening bilateral political and economic relations and increasing diplomatic consultation on regional issues.61 There was some progress in Saudi consultations with Iran. The two countries engaged in official and secret talks in Baghdad and other regional capitals. The fifth round of talks was held in April.62 Subsequently, in December, the foreign ministers of the two countries met under the framework of the Baghdad Conference in Amman and reiterated their commitments to continue talks to overcome their diplomatic problems.63 In signs of easing tensions, earlier in January, Saudi Arabia

58 Shahjahan Khurram, “Saudi Arabia discusses augmenting $3bn deposit in Pakistan’s central bank”, Arab News, 2 May 2022, https://www.arabnews.com/node/2073956/ saudi-arabia, accessed 12 July 2023. 59 Dipanjan Roy Chaudhury, “Saudi Crown Prince Mohammed Bin Salman defers

Pakistan trip”, The Economic Times, 14 November 2022, https://economictimes.indiat imes.com/news/international/world-news/saudi-crown-prince-mohammed-bin-salmandefers-pakistan-trip/articleshow/95494285.cms, accessed 12 July 2023. 60 Al-Jazeera, “Erdogan meets Saudi leaders in first visit since Khashoggi murder”, 29 April 2022, https://www.aljazeera.com/news/2022/4/28/turkeys-erdogan-to-visitsaudi-arabia-relations-warm, accessed 12 July 2023. 61 Saudi Gazette, “MBS’s visit heralds new era of cooperation in Saudi–Turkish relations”, 22 June 2022, https://www.saudigazette.com.sa/article/622126, accessed 12 July 2023. 62 Iran International, “Iran, Saudi Arabia Finally Hold Fifth Round of Talks”, 23 April 2022, https://www.iranintl.com/en/202204234200, accessed 12 July 2023. 63 Adam Lucente, “Iranian, Saudi FMs meet in Jordan after months of stalled dialogue”, Al-Monitor, 21 December 2022, https://www.al-monitor.com/originals/2022/12/ iranian-saudi-fms-meet-jordan-after-months-stalled-dialogue#ixzz7wr2G3pjx, accessed 12 July 2023.

304

MD. M. QUAMAR ET AL.

allowed the reopening of the Iranian representative office at the OIC headquarters in Jeddah.64 The breakthrough in relations with Qatar in 2021 allowed the kingdom to partly soak in the glory of Doha hosting the FIFA World Cup 2022 in November–December 2022. This was even more significant as the Saudi football team “Green Falcons” made history by scoring an upset win over the fancied Argentine team, even thought the latter eventually emerged champions in the tournament.65 The euphoria it generated for the Saudis was beyond imagination as they celebrated the win over the Lionel Messi-led team. The imagery of Qatari Emir Tamim al-Thani supporting the Saudi team and waving the Saudi flag in the stadium created a symbolic impact underlining that Riyadh and Doha have left their hatchet behind, at least for the time being.66 Earlier, MbS visited Doha to attend the inaugural ceremony marking the Arab unity against the “external” tirade against Qatar due to its alleged fraudulent practices in gaining the hosting rights and its poor human rights record.67 Relations with other regional countries continued to improve in 2022. MbS visited Cairo in June and held talks with President Abdel Fattah al-Sisi, who has emerged as an important ally in regional affairs.68 In April, Riyadh announced the return of Saudi diplomats to Lebanon and

64 Middle East Political and Economic Institute, “Iran: Iranian Diplomats Arrived in Saudi Arabia to Reopen OIC Representative Office”, https://mepei.com/iran-iranian-dip lomats-arrived-in-saudi-arabia-to-reopen-oic-representative-office/, accessed 12 July 2023. 65 Marco Ferrari and Tamara Abueish, “Saudi Arabia defeats Argentina in stunning World Cup upset”, Al-Arabiya, 22 November 2022, https://english.alarabiya.net/News/ saudi-arabia/2022/11/22/Saudi-Arabia-scores-against-Argentina-in-World-Cup-opener, accessed 12 July 2023. 66 Tamara Abueish, “Qatar’s Emir waves Saudi Arabia’s flag during FIFA match against Argentina”, Al-Arabiya, 18 January 2023, https://english.alarabiya.net/News/ gulf/2022/11/22/Qatar-s-Emir-waves-Saudi-Arabia-s-flag-during-FIFA-match-againstArgentina, accessed 12 July 2023. 67 Reuters, “Saudi crown prince MbS in Qatar for World Cup opening ceremony”, 20 November 2022, https://www.reuters.com/lifestyle/sports/saudi-crown-prince-mbsattend-qatar-world-cup-sunday-2022-11-19/, accessed 12 July 2023. 68 Arab News, “Saudi Crown Prince Mohammed bin Salman in Egypt on official visit”, 21 June 2022, https://www.arabnews.com/node/2107311/saudi-arabia, accessed 12 July 2023.

8

SAUDI ARABIA

305

reiterated financial support for the country.69 In the war in Yemen, the six months truce between April and September allowed Riyadh time to rethink its policy and work on an exit plan. Subsequently, Saudi Arabia engineered a new governing arrangement with Abdrabbuh Mansur Hadi stepping down on 18 April and he was replaced by a new Presidential Council headed by Rashad al-Alimi with representation of various Yemeni factions except the Houthis.70 With this, Saudi Arabia hoped to change the approach to political talks and hasten a resolution to the seven-year-old quagmire. Although Saudi Arabia continued to hold unofficial and secret engagements with Israel, it ruled out joining the Abraham Accord framework without a just resolution for the Palestinians.71 Two important developments indicated the possibility of greater Saudi-Israeli cooperation even without normalisation. First, on 14 July 2022, Saudi Arabia opened its airspace for all airlines to and from Israel, paving the way for Israeli national career El Al to use the Saudi airspace.72 Until then only select careers, including Air India, were enjoying this benefit. And second, on 15 July, Israel lifted its objection to the transfer of the Red Sea islands, Tiran and Sanafir, from Egypt to Saudi Arabia leading to a possibility of trilateral cooperation between them with the US as an external guarantor.73 Saudi Arabia’s security preoccupation with Yemen continued in 2022 given the barrage of missile and drone strikes between January and March 69 Al-Jazeera, “Saudi announces return of ambassador to Lebanon”, 7 April 2022, https://www.aljazeera.com/news/2022/4/7/saudi-announces-return-of-ambassador-tolebanon, accessed 12 July 2023. 70 Emily Milliken and Giorgio Cafiero, “Yemen: New presidential council aims to show it represents change”, Al-Jazeera, 5 May 2022, https://www.aljazeera.com/ news/2022/5/5/yemens-new-presidential-council-gets-started-on-the-right-foot, accessed 12 July 2023. 71 Ben Samuels, “No Normalisation With Israel Until Two-state Solution Reached, Saudi FM Says”, Haaretz, 16 July 2022, https://www.haaretz.com/middle-east-news/ 2022-07-16/ty-article/.premium/no-normalisation-with-israel-until-two-state-solution-rea ched-saudi-fm-says/00000182-0614-d213-adda-17bd7b2d0000, accessed 12 July 2023. 72 Al-Jazeera, “Saudi Arabia opens up airspace to all airlines, including Israeli”, 15 July 2022, https://www.aljazeera.com/news/2022/7/15/saudi-arabia-opens-airspace-inc luding-airlines-from-israel, accessed 12 July 2023. 73 Middle East Eye, “Tiran and Sanafir: Why are the Red Sea Islands strategic for Egypt, Saudi Arabia, and Israel?”, 15 July 2022, https://www.middleeasteye.net/news/ egypt-saudi-israel-tiran-and-sanafir-red-sea-islands-strategic, accessed 12 July 2023.

306

MD. M. QUAMAR ET AL.

before the onset of the six-month truce in April. The end of the truce in September did increase the number of violent incidents inside Yemen, but the cross-border strikes remained low. To shore up its defences, Saudi Arabia has been developing local industry. In September, the Crown Prince stated that the kingdom had achieved a 15 per cent self-sufficiency in defence procurement.74 Nonetheless, Saudi dependence on defence imports remains high, and during the World Defence Expo in Riyadh in March, the kingdom signed defence procurement deals worth US$3.4 billion.75 Moreover, Saudi Arabia has been shoring up its maritime defence capabilities, and in April, it inaugurated “the first of five Avante 2200 class corvette ships” delivered by Spanish state-owned company Navantia.76 Besides, Saudi Arabia has taken strict measures to prevent money laundering and warned its citizens against donating to unauthorised individuals or organisations to avoid any leakage of funds to radical and terrorist groups.77 Saudi Arabia has also witnessed a notable increase in the smuggling of recreational drugs in recent years, and the authorities have taken several preventive measures and busted numerous modules trying to smuggle these drugs into the country.78

74 Al-Arabiya, “Saudi Crown Prince says Kingdom self-sufficiency in military industries up to 15 pct”, 28 September 2022, https://english.alarabiya.net/News/gulf/2022/09/ 28/Saudi-Crown-Prince-says-Kingdom-self-sufficiency-in-military-industries-up-to-15-pct, accessed 12 July 2023. 75 Arab News, “Saudi Ministry of Defence signs deals worth $1.8bn at World Defence Show”, 8 March 2022, https://www.arabnews.com/node/2038586/business-economy, accessed 17 July 2023. 76 Al-Arabiya, “Royal Saudi Navy Forces inaugurate first Avante 2200 Class Corvette”, 1 April 2022, https://english.alarabiya.net/News/gulf/2022/04/01/Royal-Saudi-NavyForces-inaugurate-first-Avante-2200-Class-Corvette, accessed 12 July 2023. 77 Amani Hamad, “Saudi authorities warn against donating to strangers due to terrorism financing”, 5 April 2022, https://english.alarabiya.net/News/gulf/2022/04/05/Saudiauthorities-warn-against-donating-to-strangers-due-to-terrorism-financing, accessed 12 July 2023. 78 Ayush Narayanan, “Saudi Arabia foils Captagon smuggling attempts, 2.4 million pills seized”, Al-Arabiya, 11 February 2022, https://english.alarabiya.net/News/gulf/2022/ 02/11/Saudi-Arabia-foils-Captagon-smuggling-attempts-2-4-million-pills-seised, accessed 12 July 2023.

8

SAUDI ARABIA

307

Economy The Saudi economy is the largest in the Middle East and predominantly oil based, with a long-term diversification plan called Vision 2030. Propelled by the buoyant oil revenues, the economy crossed the US$1 trillion mark in 2022 (Table 8.2). During the year, it was among the fastest-growing economies in the world, with an annual GDP growth rate of 27.6 per cent and a real GDP growth rate of about 8.7 per cent. The non-oil sector’s real growth rate was also significant, at 7.2 per cent and 5.4 per cent in 2021 and 2022, respectively. The purchasing managers’ index has remained above the benchmark of 50 throughout 2022, indicative of positive sentiments in the private sector. However, with the global economic slowdown, the real GDP growth rate was expected to lower to about 3.1 per cent in 2023. The Saudi private sector comprises about 40 per cent of the GDP. The Small and Marginal Enterprises (SMEs) and start-ups play a minor role. The private sector is envisaged to play a pivotal role in Vision 2030. The kingdom aims to become an attractive business destination among its regional peers. A new company law was promulgated in June 2022 to be effective from 19 January 2023 and it introduces a new company structure and simpler management rules. The joint stock company can have a single shareholder with no minimum capital requirement. Other changes included dispute resolution, mergers, dissolution and legal treatment of shareholders’ agreements and family charters. These reforms are designed to bring the kingdom’s historically weak legal and business regulatory structures in line with international standards. The reforms aim to attract Table 8.2 Saudi Arabia’s economic growth, 2019–2023

GDP at Current Prices (US$ million) GDP Growth (Annual %) Real GDP Growth (Annual %) Real Non-oil GDP Growth (Annual %)

2019

2020

2021

2022a

2023b

849,048

743,450

879,443

1,122,001

1,061,900

−0.9 0.8

−12.4 −4.3

18.3 3.9

27.6 8.7

– 3.1

4.1

−3.7

7.2

5.4

4.9

Source General Authority for Statistics (GaStat), Annual Gross Domestic Product, 2022; a provisional; b IMF estimates

308

MD. M. QUAMAR ET AL.

foreign and domestic private sector investments by meeting the interests of the entrepreneur, private equity and venture capital. There were also attempts to develop the local capital market so that the private sector has better access to finance. Limited Liability Companies (LLC) were recently allowed to issue bonds and debt instruments, and the joint stock companies were permitted to issue different classes of shares with varying rights to raise funds. The Public Investment Fund (PIF), the Saudi sovereign welfare fund, aims to invest about US$40 billion in domestic investment and economic diversification.79 Saudi Arabia’s Vision 2030 also envisages the localisation of supply chains to promote economic diversification and job generation. The government negotiated the development of three major steel plants at a combined cost of about US$9.3 billion. At present, the kingdom imports steel for its industrial needs and had increased tariffs on imported semifinished and finished iron and steel products two years ago to support domestic steel production.80 With several projects for economic diversification underway, the demand for steel is expected to increase. King Salman International Complex for Maritime Industries and Services, planned at Ras al Khair, is a key element for economic diversification to boost local content.81 During the year, Ras al Khair was also identified as the site for a planned (earlier in Yanbu) oil-to-chemical facility due to its proximity to major Saudi oil fields and Asian consumers. In December, Saudi Arabia and TotalEnergies took the final investment decision (FID) in the much-delayed US$11 billion Amiral petrochemical complex.82 The government promotes tourism as a central pillar of its economic diversification strategy and job generation. The kingdom wants to diversify towards non-religious tourism by monetising its cultural and environmental assets. In November, MbS announced plans to develop tourism

79 Economist Intelligence Unit (EIU), Saudi Arabia Country Report, February 2023,

p. 6. 80 Sona Nambair, “Saudi steel duty affects Gulf players”, 20 October 2022, https:// www.zawya.com/en/projects/industry/saudi-steel-duty-affects-gulf-players-u1hb4nkm, accessed 17 July 2023. 81 MEES, vol. 65, no. 47, 25 November 2022, p. 13. 82 Indian Chemical News, “Aramco and TotalEnergies to build US$11 billion

petrochemical complex in Jubail”, 15 December 2022, https://www.indianchemicalnews. com/petro-chemical/aramco-and-totalenergies-to-build-us11-billion-petrochemical-com plex-in-jubail-15759, accessed 17 July 2023.

8

SAUDI ARABIA

309

on Tarout Island in the Eastern Province, which has massive mangroves. Launched in 2017 ambitious Diriyah Gate project, estimated at US$50 billion, is under construction near Riyadh and the kingdom hopes to commercialise the cultural heritage of its original capital, also designated as a UNESCO World Heritage site.83 The progress on the Neon City project is incremental. The massive expansion plans for Riyadh Airport to quadruple annual passenger capacity to 120 million align with efforts to boost the aviation, logistics and tourism sectors. The new tourism law and liberal visa regime aim to increase the share of tourism to 10 per cent of GDP by 2030.84 The kingdom introduced a special multiple-entry visa during the Qatar World Cup 2022. During the first six months of the year, the kingdom attracted 6.1 million foreign tourists.85 The PIF redoubled its efforts to invest oil revenues in 2022 to build tourism infrastructure. However, the expected global economic slowdown with the attendant fall in oil revenues would likely delay progress on these ambitious projects. Saudi Arabia’s flagship Future Investment Conference in Riyadh between October 25 and 27 was shadowed by concerns about a global recession.86 The kingdom aims to transform into a regional hub for concerts, art shows and cultural and entertainment opportunities.87 The entertainment sector has been promoted under Vision 2030. The Red Sea International Film Festival in Jeddah has showcased the Saudi film industry and international filmmakers from 2019. Since the opening of cinemas in the kingdom, people’s spending on movies has increased from US$2 million

83 Arab News, “Saudi crown prince adds $50bn Diriyah project to PIF’s portfolio”, 9

January 2023, https://www.arabnews.com/node/2229256/business-economy, accessed 17 July 2023. 84 Divsha Bhat, “From ancient history to modern luxury, Saudi Arabia’s tourism offer-

ings continue to expand”, Gulf Business, 3 March 2023, https://gulfbusiness.com/saudiarabias-tourism-offerings-to-expand/, accessed 17 July 2023. 85 Stephen Kalin, “Saudi Arabia is betting $1 trillion it can become the next tourist hotspot”, Livemint, 9 September 2022, https://www.livemint.com/politics/news/saudiarabia-is-betting-1-trillion-it-can-become-the-next-tourist-hotspot-11662644120734.html, accessed 17 July 2023. 86 Bloomberg, “Top Wall Street Bankers Warn of US, Europe Recession: FII Update”, 25 October 2022, https://www.bloomberg.com/news/articles/2022-10-25/saudi-pifchief-kicks-off-flagship-investment-summit-fii-update#xj4y7vzkg, accessed 17 July 2023. 87 Sakina Fatima, “Saudi Arabia to include music in educational curriculum”, The Siasat Daily, 11 September 2022, https://www.siasat.com/saudi-arabia-to-include-music-in-edu cational-curriculum-2410472/, accessed 12 July 2023.

310

MD. M. QUAMAR ET AL.

in 2018 to US$54.8 million in 2021.88 There are more than 54 cinemas in the kingdom and provide jobs to more than 4,400 Saudis. The Saudi Music Commission was established in 2020 to contribute to the local economy and establish the Saudi cultural and musical identity regionally and globally. Music is now being added to the educational curriculum in the kingdom.89 Fiscal Situation and Inflation The oil sector accounted for 68.2 per cent of the total government revenues in 2022, as against 58.2 per cent in 2021. The total estimated revenues increased from US$257.5 billion in 2021 to US$343.29 billion in 2022.90 The non-oil revenues as a per cent of non-oil GDP have increased from an average of 10.1 per cent in 2000–19 to 18.1 per cent in 2022.91 Taxes in Saudi Arabia are higher in the region, with VAT at 15 per cent and corporate tax at 20 per cent. The total government expenditure also increased from US$277.0 billion to US$301.9 billion during the period.92 The government’s spending was 18 per cent higher than budgeted in 2022 in priority areas to support citizens from the escalating cost of living. There was an estimated US$27 billion fiscal surplus in 2022, about 2.5 per cent of GDP, 93 the first in nine years. Unlike the previous fiscal surplus, which was spent on short-term expenditure, the government is using them to rebuild financial buffers and to transfer to PIF for investments for economic diversification and long-term growth. The non-oil fiscal balance continued to be negative. Due to increasing revenues, the

88 Marco Ferrari, “Saudi cinema revenue rose by 2,605 pct since theatres opened:

Report”, Al-Arabiya, 24 August 2022, https://english.alarabiya.net/life-style/entert ainment/2022/08/24/Saudi-cinema-revenue-rose-by-2-605-pct-since-theaters-openedReport, accessed 12 July 2023. 89 Sakina Fatima, “Saudi Arabia to include music in educational curriculum”, The Siasat Daily, https://www.siasat.com/saudi-arabia-to-include-music-in-educational-curric ulum-2410472/, accessed 17 July 2023. 90 MEES, vol. 65, no. 49, 9 December, 2022, p. 14. 91 IMF, Regional Economic Outlook Middle East and Central Asia 2023. 92 MEES, vol. 65, no. 49, 9 December, 2022, p. 14. 93 MEES, vol. 65, no. 49, 9 December, 2022, p. 14.

8

SAUDI ARABIA

311

total gross government debt reduced from 31 per cent of GDP in 2020 to 22 per cent in 2022.94 The PIF is the main implementing agency of Vision 2030 and has assets worth US$613 billion (Q1 2022), with targets to reach US$1 trillion by 2025. 95 In February, MbS announced the transfer of 4 per cent stakes in the Saudi oil company Aramco to PIF. Saudi Aramco is the economic engine of the kingdom, and its vast profits drive investments for Vision 2030. The chairman of Saudi Aramco is also the governor of PIF and Aramco is mandated to earmark funds to facilitate the transition away from oil and gas through Vision 2030. The PIF sold its first international bond with a maturity period of 100 years through auction for US$3 billion. It was also the fund’s first “green” issue, and despite scepticism over its compliance with sustainability criteria, it was substantially oversubscribed. 96 The fund wants to set a track record in the international financial markets. The supply chain bottlenecks and increasing international commodity prices exerted steady upward inflationary pressures during 2022, with the annual consumer price index (CPI) peaking in December (highest since June 2021).97 The average inflation rate increased from 4.6 per cent in 2021 to 4.9 per cent in 2022.98 Housing, which has the largest weightage in CPI (about 25.5 per cent), increased by 5.9 per cent due to a surge in demand for accommodation during the FIFA World Cup 2022 hosted in Qatar. The Saudi Central Bank increased interest rates in tandem with the US Federal Reserve to maintain the dollar peg and thus prevented further heating of the housing sector. To some extent, the cap on domestic fuel prices muted the rising transport costs, which are the second largest category in the CPI. Employment and Expatriates The average unemployment rate among Saudis was about 8 per cent by the end of 2022, with 4 per cent among males and 15 per cent 94 IMF, Regional Economic Outlook Middle East and Central Asia 2023. 95 MEES, vol. 66, no. 16, 20 April 2023, p. 13. 96 EIU, Saudi Arabian country report, November 2022, p. 37. 97 EIU, Saudi Arabia Country Report, February 2023, p. 21. 98 IMF, Regional Economic Outlook Middle East and Central Asia 2023.

312

MD. M. QUAMAR ET AL.

among females.99 The economic diversification under Vision 2030 prioritises generating more job opportunities for nationals, especially in the private sector. About 53.1 per cent of Saudis were employed in the government sector. The wages constituted about 41 per cent of the government revenue in 2022.100 However, 60.8 per cent of Saudi females were employed in the private sector. According to GaStat, a labour market survey indicated that about 94 per cent of Saudis were willing to accept jobs in the private sector.101 The Shareek (Partner) initiative aims to bring in US$1.3 trillion in investments by some of the largest companies in the kingdom by 2030. However, the target is unlikely to be met, given the logistical hurdles and the forecasted slowdown in oil revenues in the next few years. 102 Covid19 has brought new focus to the Saudization of the job market. While the expatriate worker levy on employees has been frozen since 2020, the imposition of Saudisation up to 100 per cent was implemented in new sectors. The human capacity development programme was launched in 2021 to align educational skills with labour market requirements. It aims to place Saudis in 40 per cent of the high-skill jobs by 2025, which appears unrealistic. According to GaStat data, the educational breakdown of the Saudi national labour force by the end of 2022 was 32.5 per cent with upper secondary education, 28.1 per cent with Bachelor’s or equivalent, and only 3.4 per cent with a Master’s or above. It illustrated the limited professional skills among the Saudis. Another challenge to the nationalisation target would be the significant cost escalation to the private sector. There is a significant wage disparity in hiring Saudis and non-Saudis. According to GaStat, the average wage of a Saudi national with primary education was SAR5,168 (US$1,395.36) against SAR2,030 (US$548.1) for the non-Saudi in the fourth quarter of 2022. The average wage of skilled Saudi professionals with an education level doctoral or equivalent was SAR17,583 (US$4,747.41) as against SAR9,702 (US$2,624.4) for non-Saudis.103

99 GaStat, Labour Market Statistics Q4 2022. 100 EIU, Saudi Arabia Country Report, February 2023, p. 21. 101 GaStat, Labour Market Statistics Q4 2022. 102 EIU, Saudi Arabia Country Report, February 2023. 103 GaStat, Labour Market Statistics Q4 2022.

8

SAUDI ARABIA

313

There was also a significant wage disparity between Saudi male and female employees. The average wage of Saudi males was SAR10,497 (US$2,834.19) against SAR7,712 (US$2,082.24) for Saudi females. There was wage disparity among male and female expatriate workers, ranging from about SAR1,000–4,000 (US$270–1,080). Notably, male– female wage disparity increased with educational qualifications among Saudis and expatriates. However, there has been a notable increase in female participation in the labour force, from 26 per cent by the end of 2019 to 36 per cent by the end of 2022.104 During the year, a Saudi airline completed its first all-female crew flight between Riyadh and Jeddah, marking an important milestone in women’s economic participation. Four Saudi women were on the Forbes list of the 50 most powerful businesswomen for 2022, namely Sarah al-Suhaimi (first Saudi woman to chair the Saudi stock exchange, Tadawul); Hutham Olayan (Chairwoman of Olayan Group), Basmah al-Mayman (Regional Director of Middle East at United Nations World Tourism Organisation) and Lubna Olayan (CEO of Olayan Finance and Chairwoman of Saudi British bank).105 External Sector The export revenues set a new annual record of US$441 billion in 2022 (Table 8.3), surpassing the previous high of US$387.4 billion in 2012. The oil export revenues increased by 60 per cent over the previous year, but the non-oil exports were also robust. The share of oil in total exports was 87.1 per cent in 2012, which decreased significantly to 79.9 per cent in 2022106 , implying a gradual process of economic diversification. According to GaStat, the non-oil exports increased from US$62.50 billion in 2021 to US$71.73 billion in 2022. The main exports in 2022 were mineral fuels (79 per cent), chemicals (7.34 per cent), plastics and articles (5.80 per cent), base metals and articles thereof (1.89 per cent) and machinery and mechanical appliances (1.23 per cent).

104 Ibid. 105 Tala Michel Issa, “Four Saudi women listed in Forbes top 50 most powerful

businesswomen”, Al-Arabiya, 9 February 2022, https://english.alarabiya.net/News/ gulf/2022/02/09/Four-Saudi-women-listed-in-Forbes-top-50-most-powerful-businessw omen, accessed 17 July 2023. 106 MEES, vol. 66, no. 9, 3 March 2023, p. 12.

314

MD. M. QUAMAR ET AL.

Petroleum exports increased from US$204.69 billion in 2021 to US$331.10 billion in 2022 (Table 8.3). The re-routing of global oil trade due to the Ukraine War resulted in the share of Europe in Saudi Arabia’s petroleum export revenues jumping from 10 per cent in March 2022 to 20 per cent in June.107 Compared to its Gulf peers, the kingdom could easily export to Europe because its oil fields in the East could supply to Red Sea export terminals at Yanbu through the 1,200 km East– West pipeline. The crude oil could then be loaded onto the tankers for Egypt’s Ain Sukhna terminal and piped to the Mediterranean port of Siddi Kerir (Sumed port in Egypt). Saudi Aramco has a 15 per cent stake in Sumed.108 The top five categories of imports in 2022 were machines and mechanical appliances (19.42 per cent), transport equipment and parts thereof (14.46 per cent), chemicals (9.99 per cent), mineral products (7.83 per cent) and plant products (6.42 per cent). Table 8.4 gives Saudi Arabia’s direction of trade in 2022. China was the largest trading partner, with bilateral trade of about US$107.78 billion. Besides being its largest oil importer, Saudi Arabia considers China, a vital technology partner in its drive for economic diversification. During the year, Saudi Aramco made a US$10 billion investment in a refinery and Table 8.3 Saudi Arabia’s select current account indicators, 2019–2022 (US$ million)

Total Exports (merchandise) Petroleum Exports Total Exports of Goods and Services Imports (merchandise) Total Imports of Goods and Services Current Account Balance

2019

2020

2021

2022

264,873.34

176,027.03

279,631.33

441,632

202,994 –

120,852 182,800

204,693 286,500

331,095 441,300

155,077.6 –

139,722.5 182,200

154,760 213,000

192,250.3 252,700

–

−22,800

44,300

152,800

Source General Authority for Statistics (GaStat), Annual Gross Domestic Product, 2022; and IMF, Regional Economic Outlook Middle East and Central Asia 2023

107 MEES, vol. 65, no. 39, 30 September, 2022, p. 12. 108 MEES, vol. 65, no. 36, 9 September 2022, p. 16.

8

SAUDI ARABIA

315

Table 8.4 Saudi Arabia’s direction of trade, 2022 (US$ million) Top five export destinations

Top five non-oil export destinations

Top five import sources

China (67,480.09) India (42,440.58) Japan (41,280.34) South Korea (38,382.98) US (23,521.58)

UAE (11,826.32) China (10,089.37) India (8,243.44) Singapore (3,799.89) Türkiye (3,667.76)

China (40,297.97) US (17,550.6) UAE (12,177.94) India (10,667.55) Germany (8,100.11)

Source General Authority for Statistics (GaStat), Annual Gross Domestic Product, 2022

petrochemical complex in China’s North East region.109 In 2022, more than 54 per cent of Saudi exports went to Asian countries, 11 per cent to the European Union and 6 per cent to North America. About 8.78 per cent of its exports went to the GCC countries. In the same year, more than 38 per cent of the imports were from Asian countries, 10.91 per cent were from the GCC, 19.12 per cent from the EU and 9.8 per cent from North America. Saudi Arabia is also trying to increase its economic footprint in the African continent. It signed a US$15 billion deal covering a range of sectors during the visit of South African President Cyril Ramaphosa to the kingdom in mid-October. Investment in clean energy is the primary vector for expanding its international investments and gaining strategic economic influence in key regions. Its private company ACWA Power has a presence in 12 countries with assets worth US$78.2 billion, generating more than 50 GW of power capacity.110 It signed an MoU to build a 10 GW wind farm in Egypt, the largest in the world.111 On the regional front, there were notable developments. The kingdom announced opening its airspace to and from flights from Israel, shortening the flight distance between Asian countries and Israel. With Türkiye, economic relations improved as both countries lifted restrictions on

109 Nadeen Ebrahim, “5 key takeaways from Xi’s trip to Saudi Arabia”, CNN, 14 December 2022, https://edition.cnn.com/2022/12/10/middleeast/xi-china-saudiarabia-visit-five-takeaways-mime-intl/index.html, accessed 12 July 2023. 110 ACWA Power, accessed 12 July 2023.

“Assets”,

https://www.acwapower.com/en/projects/assets/,

111 MEES, vol. 65, no. 44, 04 November, 2022, p. 18.

316

MD. M. QUAMAR ET AL.

flights, trade and media.112 Saudi Arabia uses investments to help countries in the region to stabilise their economies. It is the largest investor in Jordan. Saudi Jordan Joint Investment Fund (established in 2017) awarded its first contract to build a University Hospital in Jordan. PIF and Jordanian banks have stakes in the joint investment fund with 90 per cent and 10 per cent shares, respectively.113 Saudi Arabia has also secured US$566.4 million for its planned power interconnection with Egypt114 and in June, it signed deals worth US$7.7 billion, including US$1.5 billion for the power plant.115 Similarly, it has set up companies in Oman, Sudan, Bahrain and Iraq with billions of dollars in investments.116 The kingdom was at the forefront of aiding countries to manage food security and health challenges. It, along with France, had announced the establishment of a joint fund of about US$76 million as humanitarian assistance to stabilise Lebanon, which had slipped into a deep economic crisis with the currency losing 90 per cent of its value.117 The fund would support food, health, education, energy, water and interior security projects. Saudi Arabia has been the largest provider of official development assistance (ODA) in the Persian Gulf region and provided US$6 billion in 2022, slightly less than the previous year in value and as a per cent of Gross National Income.118 112 Daily Sabah, “Saudi crown prince visits Turkey to discuss normalisation in ties”, 22 June 2022, https://www.dailysabah.com/politics/diplomacy/saudi-crown-prince-visits-tur key-to-discuss-normalisation-in-ties, accessed 12 July 2023. 113 Reuters, “Saudi sovereign fund expands footprint with Jordan investment firm”, 28 March 2017, https://www.reuters.com/article/saudi-jordan-fund-idINL5N1H52YX, accessed 17 July 2023. 114 MEES, vol. 65, no. 43, 28 October, 2022, p. 11. 115 Yousef Saba and Maha El Dahan, “Davos 2023: Saudi Arabia changing no-

strings aid, minister says”, Zawya, 18 January 2023, https://www.zawya.com/en/ economy/gcc/davos-2023-saudi-arabia-changing-no-strings-aid-finance-minister-says-rl4 vfq69, accessed 12 July 2023. 116 Brinda Darasha, “Saudi PIF starts investments firms in Jordan, Bahrain, Sudan, Iraq and Oman”, Zawya, 26 October 2022, https://www.zawya.com/en/business/saudi-pifstarts-investments-firms-in-jordan-bahrain-sudan-iraq-and-oman-i0f9xe1z, accessed 17 July 2023. 117 Najia Houssari, “Saudi Arabia, France pledge $76 m for Lebanon aid, development”, Arab News, 27 April 2022, https://www.arabnews.com/node/2071421/saudiarabia, accessed 12 July 2023. 118 OECD library, “Saudi Arabia”, https://www.oecd-ilibrary.org/sites/b2156c99-en/ index.html?itemId=/content/component/b2156c99-en, accessed 12 July 2023.

8

SAUDI ARABIA

317

Energy and Environment According to OPEC, Saudi Arabia has 267,192 billion barrels of proven crude oil reserves which comprise 17 per cent of the global total. The kingdom had proven natural gas reserves of about 8,507 bcm in 2021. During the year, some unconventional gas discoveries and production were made in the Eastern region. Saudi Aramco aims to increase gas production by 50–70 per cent by 2030 to end oil burns. Development of the vast Jafura shale gas field is underway and scheduled to be completed by 2027.119 According to GaStat, oil contributed about 38.93 per cent of GDP in 2022. Oil production was 10.57 mbpd in 2022, against 9.12 mbpd in 2021 (Table 8.5). The crude oil exports increased from 6.23 mbpd to 7.58 mbpd in the same period. Due to the expected slowing of the global economy in the last quarter of 2022, OPEC+ agreed to lower oil production in November. The kingdom’s deepest production cut of about 500,000 bpd would last until 2023.120 Saudi Arabia was the largest exporter of crude oil to China at about 1.75 mbpd, with Russia trailing behind at 1.72 mbpd in 2022.121 Saudi Arabia leveraged its stakes in the Chinese refineries to maintain the lead. Since 2007, it had a 25 per cent stake in SINOPIC-operated Fujian refinery in China. Besides, Saudi Aramco has been keen on building integrated complexes to quadruple its liquid-to-chemical business capacity to 4 mbpd by 2030. Huajin Aramco Petrochemical Company was launched when MbS visited Beijing in 2019. Domestic diesel consumption was at a six-year high in 2022 due to post-Covid-19 economic recovery and industrial activity. 122 With sufficient refining capabilities, the kingdom could export diesel to European countries and benefit from high fuel margins. According to GaStat, petroleum refining nearly doubled from $35.81 billion in 2021 to 119 Nishant Ugal, “Saudi Aramco confirms phased development plan for vast $100 billion gas project”, Upstream, 16 August 2022, https://www.upstreamonline.com/fielddevelopment/saudi-aramco-confirms-phased-development-plan-for-vast-100-billion-gasproject/2-1-1278205, accessed 17 July 2023. 120 Reuters, “Saudi to extend its 500,000 barrel-per-day voluntary oil cut until the end of 2024”, 4 June 2023, https://www.reuters.com/business/energy/saudi-extend-its-500 000-bpd-voluntary-cut-until-end-2024-2023-06-04/, accessed 17 July 2023. 121 MEES, vol. 66, no. 13, 31 March 2023, p. 10. 122 MEES, vol. 65, no. 42, 21 October, 2022, p. 14.

318

MD. M. QUAMAR ET AL.

Table 8.5 Saudi Arabia’s energy statistics, 2018–2022 2018 Oil Production (mbpd) Oil Consumption (mbpd) Crude Oil Exports (mbpd) Petroleum Products Exports (mbpd) Refining Throughput (mbpd) Refining Capacity (mbpd) Natural Gas Marketed Production (bcm) Natural Gas Flaring (bcm) Natural Gas Consumption (bcm) Carbon dioxide Emission from Energy (million tons) Renewable Energy Generation (TWH)

2019

2020

2021

2022a

10.32 3.16 7.37 1.97

9.81 3.69 7.04 1.30

9.21 3.55 6.66 1.02

9.12 3.60 6.23 1.34

10.57 – 7.58 –

2.82 2.84 118.0

2.59 2.91 117.0

2.18 2.91 119.0

2.55 2.91 120.5

– – –

2.9 112.1 604.5

2.6 111.2 582.2

2.8 113.1 569.2

2.8 117.3 575.3

– – –

0.2

0.2

0.2

0.8

–

Sources General Authority for Statistics (GaStat), Annual Gross Domestic Product, 2022; British Petroleum, Statistical Review of World Energy, 2022; a IMF, Regional Economic Outlook Middle East and Central Asia 2023

US$67.81 billion in 2022. In 2022, Saudi Aramco’s net profit of US$161 billion increased by 47 per cent YoY and was more than the combined profit of Shell, BP, Chevron, Exon Mobil and TotalEnergies.123 During the year, it had US$37.6 billion in capital expenditure (Capex), the highest on record. It was primarily focused on expanding its downstream investments in key consumer countries, which have been shelved since 2020. In March, it took FID to construct a 300,000 bpd Panjim refinery in China. In January, it purchased its maiden stakes in the European refining sector in the Baltic Port City (Poland). Saudi Aramco’s total domestic refining capacity was 3.33 mbpd, and its overseas refining capacity was 3.73 mbpd.124 It has stakes in American, Korean, Japanese, Chinese and Malaysian refineries. During the year, Saudi Arabia had record fuel oil burns in its power plants. It increasingly imported discounted fuel oil from Russia.125 It

123 MEES, vol. 66, no. 11, 17 March 2023, p. 6. 124 MEES, vol. 65, no. 51/52, 23 December, 2022, p. 4. 125 MEES, vol. 66, no. 15, 14 April 2023, p. 10.

8

SAUDI ARABIA

319

uses about 1 mbpd of oil in its power and water utilities. Cleaning its power generation system is a mid-term priority for the kingdom, and no new power plant is planned without carbon capture facilities. Two power plants were re-tendered in December into combined cycle power projects with provision for carbon capture and sequestration (CCS). The kingdom emphasised CCS’s role in its updated Nationally Determined Contribution (NDC) in 2021 and reiterated it during COP27 talks in Egypt in November 2022. Saudi Arabia targeted 60 GW of renewable power generation capacity while only 0.4 per cent of current capacity was from renewables in 2021.126 It generated about 0.8 TWH of renewable power in 2021 (Table 8.5). Its planned nuclear power plants would be operational after 2030.127 Sakaka Solar PV (300 MW) plant and 400 MW Dumat al-Jandal wind farm, the first phase of the National Renewable Energy Programme (NERP), are connected to the electricity grid. Power purchase agreements have been signed for about 10.23 GW from the awarded renewable projects, including the 2.06 GW solar PV power plant. Shuaibah in Mecca by ACWA Power in collaboration with the Badeel subsidiary of PIF. Significant progress has been reported in the renewable energy projects in NREP-2, including that of 1.5 GW Sudair plant. In September, the 4th phase of NERP was unveiled, the largest until then, adding 3.3 GW of renewable energy capacity, mostly from wind farms.128 The cost of renewable energy projects has escalated due to higher interest rates, global inflation and supply chain constraints but the kingdom has maintained a record-low tariff of US cents 1.04/Kwh.129 Green hydrogen projects gained significant traction in Future Investment Initiatives, with many delegates attending panel discussions on the nascent low-carbon fuel. The Neom has kingdom’s only green hydrogen development project, that would come online in 2026. Aqua Power operates

126 MEES, vol. 66, no. 5, 3 February, 2023, p. 15. 127 MEES, vol. 66, no. 5, 3 February, 2023, p. 15. 128 Jamie Ingram, “Saudi Accelerates Renewables Drive With Largest Phase Yet”,

MEES, 30 September 2022, https://www.mees.com/2022/9/30/power-water/saudiaccelerates-renewables-drive-with-largest-phase-yet/f4f5da10-40b6-11ed-ac87-5f79de 1c6464, last accessed 17 July 2023. 129 Energy & Utilities, “Acwa Power signs PPA for world record solar tariff”, 10 April 2021, https://energy-utilities.com/acwa-power-signs-ppa-for-world-record-solar-tar iff-news111772.html, accessed 17 July 2023.

320

MD. M. QUAMAR ET AL.

the US$6.3 billion Neom Green Hydrogen Project along with a PIF subsidiary and a US firm.130 Society The kingdom has been continuing its efforts towards social opening by promoting moderation in religious practices and ideas, while taking measures to improve the social climate for women and reduce restrictions on them. Games, sports, cinema, dance and music festivals and tourism without restriction on the mixing of genders have created newer avenues for residents and visitors. Saudi Arabia’s surprise win over Argentina in the group stage of FIFA World Cup final created unprecedented euphoria underlining the newfound love for recreational and sports activities.131 This led to the kingdom announcing a national holiday the next day.132 Partly, this catalysed the Saudi football club Al-Nassr’s signing of Portuguese international star Cristiano Ronaldo for a whopping US$75 million annual fee.133 Besides sports, Saudi Arabia has invested heavily in promoting cinema, with a significant rise in number of theatres and revenues generated through the sector.134 With the change in attitude towards socio-cultural issues, women are the biggest beneficiaries, with several restrictions being lifted and steps towards facilitating their participation in the socio-economic sphere. In September 2022, King Salman announced the appointment of Hala 130 MEES, vol. 66, no. 15, 14 April 2023, p. 14. 131 Marco Ferrari and Tamara Abueish, “Saudi Arabia defeats Argentina in stunning

World Cup upset”, Al-Arabiya, 22 November 2022, https://english.alarabiya.net/News/ saudi-arabia/2022/11/22/Saudi-Arabia-scores-against-Argentina-in-World-Cup-opener, accessed 12 July 2023. 132 The Hindu, “Saudi king declares holiday after shock World Cup win over Argentina”, 23 November 2022, https://www.thehindu.com/news/international/saudiking-declares-holiday-after-shock-world-cup-win-over-argentina/article66171373.ece, accessed 12 July 2023. 133 James Benge, “Cristiano Ronaldo completes $75 million-per-year move to Saudi club: ‘Vision that Al Nassr has is inspiring’”, CBS Sports, 30 December 2022, https://www.cbssports.com/soccer/news/cristiano-ronaldo-completes-75-millionper-year-move-to-saudi-club-vision-that-al-nassr-has-is-inspiring/, accessed 12 July 2023. 134 Razmig Bedirian, “Inside Hayy Cinema, Saudi Arabia’s first independent cinema and film community centre”, The National, 10 December 2022, https://www.thenation alnews.com/arts-culture/film-tv/2022/12/10/inside-hayy-cinema-saudi-arabias-first-ind ependent-cinema-and-film-community-centre/, accessed 12 July 2023.

8

SAUDI ARABIA

321

al-Tuwaijri, a former academic who served as head of the women’s engagement group during the Saudi G20 presidency in 2020, as chief of the Saudi Human Rights Council.135 In the same month, SaudiAmerican aerospace engineer Mishaal Ashemimry was elected as one of the 12 vice-presidents of the International Astronomical Federation.136 Later, Saudi Arabia announced a new space programme to send a women astronaut to space in 2023.137 In July, two women, Shehana bint Saleh al-Azzaz and Princess Haifa bint Mohammed were appointed to the Saudi cabinet. Azzaz was made Vice-Secretary General for cabinet affairs—the first woman to hold the position—and Princess Haifa was appointed Vice-Minister of Tourism.138 Notwithstanding the progress on social opening and women’s rights, Saudi Arabia scored poorly on the human rights count, especially on the freedom of speech and expression, political rights and rights of minorities and expatriates.139 Curbing dissent and lack of political rights continued to be a major concern. Saudi Arabia, however, continues to have a high HDI score. As of 2021, its HDI score was 0.875 and ranked 35 globally. It has a GDI score of 0.917 and a GII score of 0.247.140

135 Saudi Gazette, “King Salman appoints Hala Al-Tuwaijri as new Human Rights chief”, 22 September 2022, https://www.saudigazette.com.sa/article/625279, accessed 12 July 2023. 136 Arab News, “International Astronautical Federation elects first Saudi woman as vice president”, 25 September 2022, https://www.arabnews.com/node/2169261/saudiarabia, accessed 12 July 2023. 137 Marco Ferrari, “New Saudi space programme will see female astronaut in orbit by 2023: Report”, Al-Arabiya, 22 September 2022, https://english.alarabiya.net/News/ gulf/2022/09/22/New-Saudi-space-program-will-see-female-astronaut-by-2023-Report, accessed 12 July 2023. 138 Marco Ferrari, “Saudi Arabia’s cabinet appoints first female Vice Secretary”, Al-

Arabiya, 4 July 2022, https://english.alarabiya.net/News/gulf/2022/07/04/Saudi-Ara bia-s-cabinet-appoints-first-female-Vice-Secretary-, accessed 12 July 2023. 139 Human Rights Watch (HRW), “Saudi Arabia: Events of 2022”, https://www.hrw. org/world-report/2023/country-chapters/saudi-arabia, accessed 12 July 2023. 140 UNDP, Human Development Reports, “Saudi Arabia”, https://hdr.undp.org/datacenter/specific-country-data#/countries/SAU, accessed 12 July 2023.

322

MD. M. QUAMAR ET AL.

Bilateral Relations The Indo-Saudi relations have strengthened notably in various domains. There are greater political and diplomatic engagements while the security and defence cooperation has expanded to newer areas. In terms of trade, commerce and investments, there is a significant increase after Covid-19, which is likely to continue. India and Saudi Arabia have also been working to improve relations in cultural and soft areas through partnerships in sports, cinema and education. Besides, there is greater convergence on international political developments wherein New Delhi and Riyadh have adhered to strategic autonomy. A prime example of this was their response to the Ukraine crisis as they chose to underline the need for a peaceful resolution without joining the Western sanctions regime against Moscow. This, however, does not mean convergence on all regional and geopolitical matters as there are notable divergences of interest, especially vis-à-vis China and Pakistan, but India and Saudi Arabia have not allowed this to affect bilateral relations. Politics and Security The bilateral political and diplomatic engagements have been improving. Saudi Arabia is among the most important partners of India in the Gulf and Middle East. Likewise, India is a key partner for Saudi Arabia in Asia. As the two G20 economies striving for fast-paced growth, they have identified each other as important countries that can collaborate in various areas to grow together. There is a degree of convergence in the political philosophy of their leaderships, wherein the focus is on economic development. They converge on the need for moderation and they consider radicalism and terrorism as major potential threat to domestic and external instability, as noted in numerous joint statements between the two countries.141 These convergences have led them to focus on developing greater economic and defence cooperation.

141 Press Information Bureau (PIB), “India-Saudi Arabia Joint Statement during the State Visit of His Royal Highness the Crown Prince of Saudi Arabia to India”, 20 February 2019, https://pib.gov.in/newsite/PrintRelease.aspx?relid=188826, accessed 12 July 2023.

8

SAUDI ARABIA

323

In September 2022, during the visit of EAM Jaishankar to Riyadh, the two countries reiterated their commitments towards greater cooperation in political, economic, defence and cultural domains.142 During the visit, the EAM co-chaired the inaugural ministerial meeting of the “Committee on Political, Security, Social and Cultural Cooperation (PSSC), established under the framework of the India-Saudi Arabia Strategic Partnership Council.”143 Accordingly, both countries have formed four Joint Working Groups (JWGs) between the Indian Ministry of External Affairs (MEA) and Saudi Ministry of Foreign Affairs (MoFA), to discuss political and consular affairs, legal and security issues, social and cultural matters and defence cooperation. The two sides discussed important regional and international matters and reviewed their cooperation with multilateral organisations, including the United Nations and G20.144 The EAM met Crown Prince MbS in Jeddah and gave Prime Minister Modi’s invitation for a visit to India.145 In November, the scheduled stop-over visit of Crown Prince MbS was postponed over scheduling difficulties. The Crown Prince had earlier planned to meet PM Modi in New Delhi on his way to the G20 summit in Bali.146 Earlier, in May–June 2022, the row over Nupur Sharma’s derogatory statement against Prophet Muhammad escalated into a diplomatic challenge and many Gulf and Middle Eastern countries, including Saudi Arabia, issued official statements condemning Sharma, a spokesperson of

142 GoI, MEA, “Visit of External Affairs Minister, Dr. S. Jaishankar to the Kingdom of Saudi Arabia (September 10-12, 2022)”, 9 September 2022, https://mea.gov.in/ press-releases.htm?dtl/35690/visit+of+external+affairs+minister+dr+s+jaishankar+to+the+ kingdom+of+saudi+arabia+september+1012+2022, accessed 12 July 2023. 143 Ibid. 144 Ibid. 145 The Economic Times, “PM Modi renews invitation to Saudi Crown Prince Mohammed to visit India”, 13 September 2022, https://economictimes.indiatimes.com/ news/india/pm-modi-renews-invitation-to-saudi-crown-prince-mohammed-to-visit-india/ articleshow/94168649.cms?utm_source=contentofinterest&utm_medium=text&utm_cam paign=cppst, accessed 12 July 2023. 146 Dipanjan Roy Chaudhury, “Saudi Crown Prince Mohammed Bin Salman to reschedule India visit”, The Economic Times, 12 November 2022, https://economictimes. indiatimes.com/news/india/saudi-crown-prince-mohammed-bin-salman-to-rescheduleindia-visit/articleshow/95478767.cms, accessed 12 July 2023.

324

MD. M. QUAMAR ET AL.

the Bhartiya Janata Party (BJP).147 The Government of India and the BJP quickly defused the diplomatic row. While the MEA distanced the GoI from the statement, the BJP suspended Sharma and other leaders who had come out publicly in her support as a damage control measure. These helped minimise any possible political and diplomatic fallout.148 Some analysts underlined that the statement and its diplomatic fallout are likely to impact India’s relations with the Gulf countries significantly.149 In October, on Gandhi Jayanti, the Mecca-based Muslim World League showered praise on India for its non-violent history and the contribution of Mahatma Gandhi in shaping India’s political outlook.150 Both countries have significantly enhanced bilateral security and defence cooperation in multiple domains. The military-to-military ties have improved, while counter-terrorism remains a major area of cooperation. In February 2022, the Commander of Royal Saudi Land Forces, Fahd bin Mohammed al-Mutair, visited India and met with the Indian Chief of Army Staff. During the meetings in India, he discussed ongoing cooperation, visited the National Defence College (NDC) and interacted with the faculty and student officers.151 Maritime security has emerged as an important area of cooperation with regular port calls by Indian and Saudi ships and the exchange of visits among Naval leadership. In May 2022, four ships of the Indian Navy’s First Training 147 Foreign Ministry @KSAmofaEn, Twitter, “#Statement | The Ministry of Foreign Affairs expresses its condemnation and denunciation of the statements made by the spokeswoman of the #Indian Bharatiya Janata Party (#BJP), insulting the Prophet Muhammad peace be upon him.”, 1:59 AM, 6 June 2022, https://twitter.com/KSA mofaEN/status/1533546583874277377/photo/1, accessed 12 July 2023. 148 Geeta Mohan, “Saudi Arabia slams remarks on Prophet Muhammad, welcomes BJP’s decision to suspend Nupur Sharma”, India Today, 6 June 2022, https://www.ind iatoday.in/india/story/saudi-arabia-slams-remarks-prophet-muhammad-welcomes-bjp-dec ision-suspend-nupur-sharma-1958775-2022-06-06, accessed 12 July 2023. 149 Karan Thapar, “Full Text | ‘It Is a Very Serious Crisis’: Talmiz Ahmad on India’s Ties With the Muslim World”, The Wire, 16 June 2022, https://thewire.in/diplomacy/full-text-it-is-a-very-serious-crisis-talmis-ahmad-onindias-ties-with-the-muslim-world, accessed 12 July 2023. 150 ANI, “India gets unusual praise from Saudi Arabia’s World Muslim League”, 3 October 2022, https://www.aninews.in/news/world/asia/india-gets-unusual-praisefrom-saudi-arabias-world-muslim-league20221003093453/, accessed 12 July 2023. 151 N. Ram Prasad, “India-Saudi security and defence cooperation continues to develop and grow”, Arab News, 25 January 2023, https://www.arabnews.com/node/2238896/ world, accessed 12 July 2023.

8

SAUDI ARABIA

325

Squadron visited Jeddah as part of a five-nation overseas deployment.152 In February–March, the Royal Saudi Naval Forces participated in the biennial multi-national naval exercise Milan 2022 in Vishakhapatnam.153 In June, India and Saudi Arabia held the 5th Joint Committee on Defence Cooperation (JCDC) meeting in New Delhi. The JCDC discussed several important issues related to defence and security matters and reiterated the commitment to strengthen bilateral defence cooperation further.154 Trade and Commerce India and Saudi Arabia have long enjoyed robust economic relations that acquired new buoyancy in the post-Covid-19 economic recovery. The Strategic Partnership Council agreement signed between India and Saudi Arabia in 2019 witnessed significant economic progress. Saudi Arabia was India’s 4th largest trading partner during 2022–2023. The total bilateral trade increased from US$42.86 billion in 2021–2022 to about US$52.76 billion in 2022–2023 (Fig. 8.1). India’s exports to the kingdom have been witnessing high growth rates in the last two years. The total exports to the kingdom were about US$10.73 billion in 2022–2023 against US$8.76 billion in 2021–2022. The Indian exports comprised diverse products like food, chemicals, leather, engineering goods, textile machinery, etc. In 2022, the top five Indian exports to Saudi Arabia were petroleum products, basmati rice, motor vehicles/cars, organic chemicals and telecom instruments (Fig. 8.2). The Indian imports from the kingdom are dominated by petroleum and its products. During the year, with escalating oil prices, India’s imports from Saudi Arabia steeply increased to US$42.04 billion against US$34.10 billion in FY 2021. Consequently, India’s trade deficit with Saudi Arabia increased to US$31.31 billion in FY 2022 against US$25.34

152 ANI, “Indian Navy ships reach Saudi Arabia for overseas deployment”, 8 May 2022, https://www.aninews.in/news/world/asia/indian-navy-ships-reach-saudi-ara bia-for-overseas-deployment20220508171200/, accessed 12 July 2023. 153 The Hindu, “Naval exercise MILAN concludes in Visakhapatnam”, 5 March 2022, https://www.thehindu.com/news/national/multilateral-naval-exercise-milan-concludesin-visakhapatnam/article65193406.ece, accessed 12 July 2023. 154 The Print, “India, Saudi Arabia hold talks to boost defence cooperation”, 29 June 2022, https://theprint.in/india/india-saudi-arabia-hold-talks-to-boost-defence-coo peration/1017795/, accessed 12 July 2023.

326

MD. M. QUAMAR ET AL.

Fig. 8.1 India’s trade with Saudi Arabia, 2016–2022 (Source compiled from Goi, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

in FY 2021. In 2022, India’s top five import items from the kingdom were crude oil, petroleum products, fertilisers, plastic raw material and inorganic chemicals (Fig. 8.3). There is a convergence of trade interest and complementarity in the agro-food sector. India plays an important role in food supply chains in the kingdom. Saudi Arabia is among the top destinations for several Indian high-value agriculture commodities like cashew nuts, basmati rice, etc. A delegation from the Federation of Indian Exports Organisation (FIEO) comprising over 25 companies representing a vast basket of Indian food and agriculture products was hosted by the Embassy of India, Riyadh and the Consulate General of India (Jeddah) to promote Indian agro-food exports to the kingdom. They had extensive B2B meetings with Saudi businesses and Chambers of Commerce nationwide. Indian cooperatives KRIBHCO has signed an agreement for investments in a

8

SAUDI ARABIA

327

Fig. 8.2 India’s top five export items to Saudi Arabia, 2022–2023 (Source Goi, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

Fig. 8.3 India’s top five import items from Saudi Arabia, 2022–2023 (Source GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

328

MD. M. QUAMAR ET AL.

new phosphate project of Ma’aden, Saudi Arabia’s largest mining firm.155 Besides, India and Saudi Arabia also signed an agreement for an annual supply of 2.5 million tons of ammonia, DAP and NPK fertilisers for three years. The Indian Minister for Chemical and Fertilisers Mansukh Mandaviya visited Riyadh in August and met the Saudi Minister of Environment, Water and Agriculture, Abdulrahman bin Abdulmohsin al-Fadli and the Saudi Minister for Industry and Mineral Resources, Bandar Bin Ibrahim al-Khorayef. Minister of Commerce and Industry Piyush Goyal visited the kingdom in September to participate in the ministerial meeting of the Committee on Economy and Investments of India-Saudi Arabia Strategic Partnership Council. He and the Saudi Minister for Energy, Prince Abdul Azis Bin Salman al-Saud, co-chaired the meeting. The meeting streamlined efforts to realise the announcement of US$100 billion investments made by MbS during his visit to India in February 2019. About 41 areas of cooperation were identified under four broad domains of agriculture and food security; energy; technology and information technology; industry; and infrastructure.156 Both sides reiterated their commitment to cooperate in joint projects in India, including the West Coast refinery, developing strategic petroleum reserves facilities and investing in LNG infrastructure. They also explored the feasibility of institutionalising the Rupee-Riyal trade and introducing UPI and RuPay cards in Saudi Arabia. There were discussions on removing trade barriers like sanitary and phytosanitary measures and automatic registration and marketing authorisation of Indian pharmaceuticals in Saudi Arabia. Indian investment in the kingdom has crossed US$2 billion in various sectors.157 L&T is a strong and reliable partner for various entities executing many high-value projects. Saudi Arabia became the 19th largest investor in India, with cumulative investments of about US$3.16 billion

155 Business Standard, “Centre signs long-term fertilisers import deal with Saudi Arabia”, 25 August 2022, https://www.business-standard.com/article/economy-policy/ centre-signs-long-term-fertilisers-import-deal-with-saudi-arabia-122082501299_1.html, accessed 12 July 2023. 156 PIB, “Shri Piyush Goyal concludes fruitful visit to Saudi Arabia”, 19 September 2022, https://pib.gov.in/PressReleasePage.aspx?PRID=1860633, accessed 12 July 2023. 157 Embassy of India in Riyadh, “Visit of FIEO Delegation to the Kingdom of Saudi Arabia”, https://www.eoiriyadh.gov.in/news_detail/?newsid=59, accessed 12 July 2023.

8

SAUDI ARABIA

329

between April 2000 and December 2022.158 However, during 2022, only US$17 million in FDI flowed from the kingdom. Several Saudi companies operate in India across sectors with plans to increase their businesses. Abdul Lateef Jameel is an important investor in India in the mobility sector and is looking forward to further expanding its business footprint in India.159 Samvardhana Motherson International Limited, the Indian automotive giant, signed an MoU with Saudi Arabia’s Ministry of Investment to identify investment opportunities in the industrial and service activities of automotive parts in the kingdom.160 Motor vehicles and automotive parts are among the prominent Indian exports to the kingdom. Indian investment in the automotive sector would contribute to building forward and backward linkages between the two countries and capacity building in manufacturing in the kingdom. India is looked upon as a reliable technology partner for the kingdom. One of the largest Saudi Investments of US$100 million has been made by SABIC in Technology and Innovation Centre in Bengaluru. The company has offices in other Indian cities like Mumbai, Delhi NCR, Chennai, Pune and Vadodara.161 Mukesh Ambani, the CEO of Reliance Industries, gave an address at the FII in Riyadh and praised bilateral relations.162 During the visit of EAM S. Jaishankar to Saudi Arabia in September, food security, healthcare, pharmaceuticals and entertainment were areas identified for enhancing economic cooperation. These areas encompass significant job-generating commercial opportunities for both countries. There were follow-up talks on cooperation in medical disciplines and

158 Department for Promotion of Industry and Internal Trade (DPIIT), “Quarterly Fact Sheet: Fact Sheet on Foreign Direct Investment (FDI) Inflow”, December 2022, https://dpiit.gov.in/sites/default/files/FDI_Factsheet_December_2022.pdf, accessed 12 July 2023. 159 The Hindu, “Abdul Latif Jameel to invest $250 million in Greaves Electric Mobility”, 2 June 2022, https://www.thehindubusinessline.com/companies/abdul-latifjameel-to-invest-250-million-in-greaves-electric-mobility/article65486559.ece, accessed 17 July 2023. 160 The Economic Times, “Samvardhana Motherson and Saudi Arabia sign MoU for

industrial development”, 25 August 2022, https://economictimes.indiatimes.com/ind ustry/auto/auto-components/samvardhana-motherson-and-kingdom-of-saudi-arabia-signmou-for-industrial-development/articleshow/93770252.cms, accessed 12 July 2023. 161 SABIC, “SABIC Worldwide”, https://www.sabic.com/en/about/locations/sabicworldwide, accessed 17 July 2023. 162 MEES, vol. 65, no. 43, 28 October, 2022, p. 6.

330

MD. M. QUAMAR ET AL.

the exchange of information on academic courses. A 2.5 million Indian community provides a conducive ecosystem for collaboration in the entertainment sector. As part of Azadi Ka Amrit Mahotsav, the Embassy of India collaborated with Arabia Pictures Entertainment to screen the biopic Rocketry across movie theatres in Saudi Arabia from 1 July 2022.163 Energy Ties The availability of discounted Russian oil during the Ukraine war significantly impacted imports from the Persian Gulf region. Saudi Arabia became India’s third largest supplier of crude oil and petroleum products in 2022 after Russia and Iraq. During the year, it was also the thirdlargest supplier of crude oil after Iraq and Russia. After peaking in June, Russian oil imports declined with the narrowing of discounts, and crude oil supply from Saudi Arabia increased in later months.164 Saudi Arabia exported US$29.08 billion crude oil in 2022–2023 against US$22.87 billion in 2021–2022, but its relative share in India’s total crude oil imports declined from 18.68 per cent to 17.93 per cent (Table 8.6). The kingdom’s relative shares in India’s total petroleum products and hydrocarbon gas imports also declined between FY2020–21 and FY2021– 22. Saudi Arabia is a supplier of 30 per cent of India’s LPG imports. Similarly, India has been a supplier of gasol to Saudi Arabia but has been increasingly replaced by Russian supplies which come at highly discounted prices.165 In October, the Saudi Energy Minister Prince Abdul Aziz visited India and met Petroleum Minister Hardeep Singh, other government officials and business leaders from the private sector. There is increasing convergence of interest in supporting mutual renewable energy and climate goals targets. Alfanar Energy has been executing renewable energy projects in India since 2016, with more than 163 India in Saudi Arabia @IndianEmbRiyadh, Twitter, “As part of Azadi Ka Amrit Mahotsav, the Embassy of India is happy to collaborate with @ArabiaPictures for screening the biopic “Rocketry” across movie theatres in Saudi Arabia from July 01, 2022 Book your tickets at your nearest @VOX_Cinemas_KSA movie theatres”, 5:40 PM, 29 June 2022, https://twitter.com/IndianEmbRiyadh/status/1542118410183753728, accessed 12 July 2023. 164 The Economic Times, “Saudi beats Russia to become India’s second-largest oil supplier in August”, 15 September 2022, https://economictimes.indiatimes.com/news/ economy/foreign-trade/saudi-beats-russia-to-become-indias-second-largest-oil-supplier-inaugust/articleshow/94217838.cms, accessed 12 July 2023. 165 MEES, vol 66, no. 15, 14 April 2023, p. 10.

8

SAUDI ARABIA

331

Table 8.6 India’s energy trade with Saudi Arabia, 2019–2023 (US$ million)

Crude Oil Imports (HS2709) Petroleum Products Imports (HS 2710) Hydrocarbon Gases Imports (HS 2711) Total Mineral Fuel Imports from Saudi Arabia (HS 27) Mineral Fuel Imports as per cent of Total Imports from Saudi Arabia Petroleum Products Exports Share of Petroleum Products in India’s Total Exports to Saudi Arabia (%)

2019–2020

2020–2021

2021–2022

2022–2023

20,355.22 (19.81)

10,753.16 (18.08)

22,869.27 (18.68)

29,077.41 (17.93)

506.85 (6.44)

338.43 (5.86)

1,614.61 (16.16)

520.78 (4.80)

2,065.91 (11.81)

1,696.74 (10.85)

2,779.97 (10.52)

2,892.32 (9.07)

23,157.24 (15.07)

13,004.51 (13.04)

27,612.29 (14.17)

33,204.04 (12.73)

86.22

80.34

80.97

78.99

–

–

0.01

0.02

–

–

0

0

Source Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India. a Figures in the bracket are per cent of India’s total import/export of that commodity

US$600 million in investments.166 India and Saudi Arabia were reportedly mulling over linking the renewable energy grids with undersea cables from the Gujarat coast.167 Both countries are exploring hydrogen as a future source of energy. Saudi Arabia is a member of India-led International Solar Alliance (ISA). However, its premier renewable energy player 166 Invest India, “Saudi Arabia-India Relations”, https://www.investindia.gov.in/cou ntry/saudi-arabia, accessed 12 July 2023. 167 Business Standard, “India, Saudi Arabia explore renewable energy projects via undersea cables”, 21 October 2022, https://www.business-standard.com/article/eco nomy-policy/india-saudi-arabia-explore-renewable-energy-projects-via-undersea-cables-122 102100255_1.html, accessed 12 July 2023.

332

MD. M. QUAMAR ET AL.

ACWA Power is yet to invest in India. Both countries have committed themselves to work together in the framework of G20. Expatriates and Cultural Relations Indians form a large section of the expatriate community in Saudi Arabia. As of 2022, an estimated 2.5 million Indians live in the kingdom. Indians comprise professionals, and semi-skilled and unskilled domestic, industrial and construction workers.168 India and Saudi Arabia cooperated during the Covid-19 to manage the fallout on the expatriate community, including provision for medication and vaccination. Indian cultural practices, especially Yoga and Bollywood films, have become extremely popular in Saudi Arabia. In September 2022, media reports suggested that the kingdom plans to introduce Yoga courses in Saudi universities.169 Nouf al-Marwaai, a Saudi Yoga instructor credited with introducing the practice to the kingdom, was conferred with the Padma Shri in 2018.170 During his visit to the Kingdom in September, the EAM met with the Indian community and interacted with them. The GoI, through the Indian Embassy in Riyadh and consulates in other cities, makes efforts to resolve issues faced by the Indian expatriate community, including fraudulent or oppressive behaviour of the host sponsor or during medical and health emergencies. The MEA and Saudi Labour Ministry hold regular meetings to discuss issues faced by the Indian expatriate community. In November, the kingdom announced that Indians wishing to travel to the kingdom for work or leisure would be exempt from submitting a

168 Embassy of India in Riyadh, “India-Saudi Arabia Bilateral Relations”, February 2022, https://www.eoiriyadh.gov.in/page/india-saudi-bilateral-relations/, accessed 12 July 2023. 169 The Economic Times, “Saudi Arabia introduces Yoga in universities”, 29 September 2022, https://economictimes.indiatimes.com/news/international/saudi-arabia/saudi-ara bia-introduces-yoga-in-universities/articleshow/94526188.cms, accessed 12 July 2023. 170 Al-Arabiya, “Saudi’s first certified yoga instructor receives prestigious award from India’s president”, 20 May 2020, https://english.alarabiya.net/life-style/healthy-living/ 2018/03/25/Saudi-s-first-certified-yoga-instructor-receives-prestigious-award-from-Indias-president, accessed 12 July 2023.

8

SAUDI ARABIA

333

Police Clearance Certificate (PCC),171 a move welcomed by the Indian community and the GoI.172 Hajj The Hajj and Umrah pilgrimage is an important component of bilateral relations. Indians have been among the largest Hajj contingents, and the quota for Indian pilgrims was increased to 200,000 in 2019.173 Incidentally, this could not materialise as the Hajj in 2020 and 2021 were reduced to symbolic participation due to Covid-19 pandemic. In 2022, after two years, international pilgrims were again allowed, with nearly a million gathering in Mecca. According to the Hajj Committee of India, 56,634 Indians performed Hajj in 2022.174 The number of Indian pilgrims is likely to increase as Saudi Arabia gradually increases the total number of pilgrims.

Challenges and Opportunities Indo–Saudi relations have witnessed steady improvements in recent times developing into a strategic partnership. The political and diplomatic understanding and the personal rapport between Prime Minister Modi and Crown Prince MbS has added to the strength of the relations. Given the state of bilateral ties as of 2022, it might not be wrong to argue that the ongoing period is the best phase in their relations since 1947. Simultaneously, the flourishing of political, diplomatic, business, economic, trade, investment, security and defence ties has created newer opportunities for further strengthening and widening partnerships in newer areas.

171 ANI, “Saudi Arabia exempts Indian citizens from submitting Police Clearance Certificate for obtaining visa”, 17 November 2022, https://www.aninews.in/news/ world/asia/saudi-arabia-exempts-indian-citisens-from-submitting-police-clearance-certif icate-for-obtaining-visa20221117192552/, accessed 12 July 2023. 172 The Hindu, “Police clearance certificate no longer needed for Saudi visa”, 17 November 2022, https://www.thehindu.com/news/national/indians-exempted-from-pol ice-clearance-certificate-for-saudi-visa/article66149522.ece, accessed 17 July 2023. 173 Embassy of India in Riyadh, “India–Saudi Arabia Bilateral Relations”, February 2022, https://www.eoiriyadh.gov.in/page/india-saudi-bilateral-relations/, accessed 12 July 2023. 174 Haj Committee of India, “Previous Record: Year wise details”, https://hajcommit tee.gov.in/previous-record.php, accessed 12 July 2023.

334

MD. M. QUAMAR ET AL.

The biggest challenge to bilateral relations does not arise from exogenous factors rather from the possibility of letting the current window of opportunity to slide away without maximising the potentials. This period is specifically challenging for the Indian market and business community to be able to absorb potential investments from Saudi Arabia and deliver on the promises generated by Government of India. At the G2G level, the challenge lies in creating greater opportunities for cooperation in new and emerging areas in technical and technological fields, business start-ups and strategic areas such as defence manufacturing and space exploration. With the current emphasis on growth of entertainment sector in Saudi Arabia, lucrative opportunities emerge for Indian media and cinema industry. Besides, greater emphasis on technical and R&D collaboration, cooperation in education, healthcare and other services have high growth potential and can have appreciable social deliverables for both the countries.

CHAPTER 9

United Arab Emirates

Key Information Political System: Federation of Seven Emirates; Ruling Families: Abu Dhabi (Al-Nahyan); Dubai (Al-Maktoum); Sharjah (Al-Qasimi); Ras al-Khaima (Al-Qasimi); Ajman (Al-Nuaimi); Fujairah (Al-Sharqi); and Umm al-Quwain (Al-Mu’alla); President: Muhammed bin Zayed alNahyan (since 14 May 2022); Crown Prince of Abu Dhabi: Khaled bin Mohammed al-Nahyan (since 29 March 2022); Prime Minister and Vice-President: Mohammed bin Rashid al-Maktoum (PM since 11 February 2006 and VP since 5 January 2006); National Day: 2 December; Parliament: 40-member partially elected Federal National Council; Last Parliamentary Election: 5 October 2019; Major Group in Parliament: Political organisation prohibited. National Carrier(s): Emirates (Dubai); Etihad Airways (Abu Dhabi). Socio-Economic Indicators Area: 83,600 sq.km; Population: 9.36 million; Native: 11.9%; Expats: 88.1%; Religious Groups: Citizens (Sunnis 85%; Shias:15%); Residents: (76% Muslims, 9% Christians, 10% Hindus and Buddhists and others (consisting of Jews, Druze, Zoroastrians, Sikhs, Ahmadis, Ismailis and Dawoodi Bohras are 5%); Age Structure: 0–14 Years 16.23%, 15– 64 Years 81.77%, 65 Years and above 2%; Population Growth Rate: 0.8%; Life Expectancy at Birth: 79 years; Major Population Groups: © Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_9

335

336

MD. M. QUAMAR ET AL.

Emirati 11.6%; South Asian 59.4% (includes Indian 38.2%; Bangladeshi 9.5%; Pakistani 9.4%; other 2.3%), Egyptian 10.2%; Filipino 6.1%; others 12.8%; Adult Literacy Rate (Ages 15 and older): 98.1%; National Currency: UAE Dirham (AED); GDP (Current): US$415.02 billion; Foreign Trade: Exports US$308.5 billion, Imports: US$229.2 billion; Military Expenditure: 5.6% of GDP; Sovereign Wealth Fund: Abu Dhabi Investment Authority Value of Assets:US$853 billion; Emirates Investment Authority, Value of Assets:US$87 billion, Investment Corporation of Dubai, Value of Assets:US$320.38 billion, Mubadala Investment Company, Value of Assets: US$287.47 billion; National Debt: US$237.6 billion; GNI Per Capita (PPP, current international): $71,280; GDP Per Capita (PPP, current international): $44,315; Oil Reserves: 98 billion barrels (Rank 7 in the world; 6% of world reserves); Gas Reserves: 215 tcf (Rank 7 in the world; 3% of world reserves); Human Development Index: 0.911; Rank: 26; Infant Mortality Rate (deaths per 1,000 live births): 5.06; Maternal Mortality Ratio (deaths per 100,000 live births): 9; UN Education Index: 0.802; Gender Development Index: 0.953; Gender Inequality Index: 0.049; Labour Force: 6.074 million; Employment to Population Ratio (Ages 15 and older): 80.2%; Unemployment Rate: 3.36%; Urban Population: 87.8%; Rate of Urbanisation: 1.5% (2020–25 Estimates); Last National Census: 2005; World Press Freedom Index: Rank 166 out of 180; Score 33.71; Corruption Perception Index: Rank 27 out of 180; Score 67; Foreign Direct Investment (Inflows): US$20.67 billion; Individuals Using Internet (per cent of population): 100%; Net Migration Rate (per 1,000 people): 0; Forest Area (per cent of total Land Area): 4.5%; Carbon Dioxide Emissions (metric tons per capita): 20.5; Global Peace Index: Rank 52 out of 162; Score 1.848; Fintech Index: Rank 28 out of 83; Global Innovation Index: Rank 31 out of 132; Global Cybersecurity Index: Rank 5 out of 194; Score 98.06. India Related: Indian Cultural Centre: India Social and Cultural Centre, Abu Dhabi (since 2009); Number of Indians: 3,425,144; Currency Exchange Rate: 1 AED = INR 22.30; Non-Islamic Places of Worship for Indians: Two Temples, One Gurudwara and 40 Churches; Indian Schools: 85; Indian Banks: State Bank of India, Bank of Baroda (7), Bank of India, Union Bank of India, Punjab National Bank, IDBI Bank,

9

UNITED ARAB EMIRATES

337

ICICI Bank, Yes Bank, HDCF Bank, Kotak Mahindra Bank, IndusInd Bank, Axis Bank, Canara Bank, Federal Bank and South Indian Bank; Last Visit to India by the ruler: Sheikh Muhammad bin Zayed, Crown Prince of Abu Dhabi (January 2017); Last Indian Prime Minister to Visit the UAE: Narendra Modi (June 2022). Sources: CIA World Factbook 2023; UN Development Programme 2023; World Bank 2023; World Intellectual Property Organisation 2023; Vision of Humanity, 2023; UNCTAD World Investment Report 2023, Transparency International 2023; Reporters without Borders 2023; U.S. EIA 2023; Embassy of India, UAE, 2023. ∗ ∗ ∗ The ailing ruler of Abu Dhabi and President of the UAE, Khalifa bin Zayed al-Nahyan (r. 2004–2014), passed away on 13 May 2022. He was the second president of the UAE and had in 2004 succeeded his father, Zayed bin Sultan al-Nahyan, the founding president of the UAE (r. 1971– 2004). The demise of Sheikh Khalifa led to a leadership transition, and his younger half-brother, Crown Prince and acting ruler of Abu Dhabi, Mohammed bin Zayed al-Nahyan took over as the ruler of Abu Dhabi on 13 May. The Federal Supreme Council (FSC) of the UAE, elected him as the third president of the UAE on 14 May, and the de facto leader since January 2014 became de jure president of the UAE. MbZ as he is popularly known, is considered one of the influential leaders in the Arab and Islamic world and has initiated reform measures at social, political, economic, strategic and foreign policy levels. He is relatively young (b. 1961) and like his father might be able to transform the small Gulf federation into an influential regional power. The Indo-UAE relations flourished in the past few years, with the Emirates emerging as one of India’s closest strategic partners in the MENA region. Since 2014, under Prime Minister Narendra Modi and the de factor leadership of MbZ, both countries have built strong economic, political, security and cultural ties transforming them into a strategic partnership. In 2017, MbZ became the only leader not de jure head of the state whom India invited as chief guest for its Republic Day celebrations. This special gesture helped develop a remarkable friendship between Modi and MbZ. The two leaders have met at least six times since Prime Minister Modi’s first visit to the UAE in August 2015; he visited the UAE in February 2018, August 2019 and June 2022, while MbZ visited India

338

MD. M. QUAMAR ET AL.

in February 2016 and January 2017. The two met virtually and spoke over the telephone several times during the Covid-19 between 2020 and 2022, in addition to numerous meetings in multilateral platforms where the two countries are members. India and the UAE have initiated mini-lateral platforms such as the quadrilateral I2U2 and trilateral India–UAE–France to expand their collaboration. In March 2022, the two countries signed a bilateral Comprehensive Economic Partnership Agreement (CEPA) expected to take economic and commercial relations to newer heights.

Domestic Developments Internally, the UAE is one of the most stable countries in the Gulf and MENA region. Since its foundation in 1971, it has followed a unique political and economic model that, over the years, has become a model attracting global businesses and diaspora from all parts of the world and evoking the admiration and envy of fellow Arab and regional countries.1 Despite being less democratic in terms of decision-making, the unique and successful federation of seven emirates allows a degree of cultural, social and educational autonomy to its constituents.2 Similarly, despite being a federation of monarchies, the rulers have built a strong federal political system by developing legislative, executive and judicial institutions with some degree of checks and balances and participation from all the seven emirates. For example, the FSC is the highest decision-making body that, in effect, is the final executive, legislative and judicial authority and the rulers of all the emirates elect the president and vice-president. By precedent, the rulers of Abu Dhabi and Dubai, the two dominant emirates, have been elected as president and vice-president, respectively.3 In addition, the Federal National Council (FNC) is a consultative and advisory body with 40 members, half of whom are elected, while the rest

1 Frauke Heard-Bey, “The United Arab Emirates: Statehood and Nation-Building in a Traditional Society,” Middle East Journal, 2005, vol. 59, no. 3, pp. 357–75. 2 The United Arab Emirates, The Cabinet, “Federal System”, https://uaecabinet.ae/ en/federal-system, accessed 26 June 2023. 3 The United Arab Emirates, The Cabinet, “Federal Supreme Council”, https://uae cabinet.ae/en/federal-supreme-council, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

339

are nominated. Besides, the Federal Supreme Court of the UAE is responsible for adjudicating federal disputes and is the UAE’s highest federal court of appeals on most matters.4 Government and Politics The UAE witnessed a political transition in May 2022 after the demise of ailing Sheikh Khalifa, the ruler of Abu Dhabi and president of the UAE since 2004.5 As expected, MbZ, the younger half-brother of the late ruler, Crown Prince and the Deputy Supreme Commander of the UAE Armed Forces took over as the ruler of Abu Dhabi on 13 May, the day of Sheikh Khalifa’s demise and the next day, he was elected as the president of the UAE by the FSC.6 The change of guard is unlikely to significantly impact the direction of UAE’s domestic politics and economic and foreign policy direction as MbZ was the de facto ruler ever since his elder half-brother had a stroke and became incapacitated in January 2014 and the federation is ruled through consensus despite the alleged centralising tendency of MbZ, 7 who has been, to a large extent, following the footsteps of his father and elder half-brother, the first two presidents of the UAE, in introducing transformative and forward-looking policies. Hence, the liberalising socio-economic tendency and centralised political system with a tightly controlled political culture are like to continue. If at all, the formal advent of MbZ might accelerate the process of reforms and transformation. At the same time, the MbZ era might have a deeply transformative impact on the future of the UAE. For one, MbZ is 62 years old and, by all accounts, is in good health, which means that he can likely have a long reign. Given the pace with which he brought reforms in the eight

4 The United Arab Emirates, “Ministry of Justice, “Federal Supreme Court”, https:// www.moj.gov.ae/en/about-moj/federal-supreme-court.aspx, accessed 26 June 2023. 5 Emirates News Agency-WAM, “President Khalifa passes away”, 13 May 2022, https://www.wam.ae/en/details/1395303046735, accessed 26 June 2023. 6 Emirates News Agency-WAM, “Breaking / Federal Supreme Council elects Mohamed bin Zayed as UAE President”, 14 May 2022, https://wam.ae/en/details/139530304 7321, accessed 26 June 2023. 7 Al-Jazeera, “Who is Mohamed bin Zayed, the UAE’s new president”, 14 May 2022, https://www.aljazeera.com/news/2022/5/14/who-is-sheikh-mohammedbin-zayed-al-nahyan-mbz-uaes-new-president, accessed 26 June 2023.

340

MD. M. QUAMAR ET AL.

years as de factor leader,8 it might not be a surprise if he leaves a deep legacy on the country both internally and externally. Since becoming the acting ruler in 2014, MbZ has transformed UAE’s foreign policy, making it proactive instead of reactive and making swift and decisive moves on regional matters.9 He has also shown the much-needed flexibility when the situation demands, such as in Yemen, Libya and Syria, and in many ways, has forced other regional leaders to follow suit, as was the case in signing the Abraham Accords normalising relations with Israel. Besides foreign policy, the leader has also been proactive in handling domestic political, economic and social challenges introducing new laws, bringing reform measures and tackling black swan and grey rhino events such as the Arab Spring protests and the Covid-19 pandemic. In January–February 2022, the new laws announced in November 2021 came into force. According to Emirati media reports, these are one of the broadest legal reforms since 1971.10 Among the areas covered in these laws are electronic transactions, copyright, trademarks, data protection, online security, commercial companies, industrial property, labour laws, higher education and issues related to crime and punishment.11 One of the key features is the easing of the laws against consensual sex among adults, extramarital affairs and recognition of children born outside the wedlock. The over 40 new laws introduced are likely to profoundly impact the vulnerable sections of society, especially women and expatriates.12 In July 2022, the UAE announced a new integrated social welfare programme worth Emirati Dirham (AED) 28 billion (approx. US$7.6

8 Ibid. 9 Karam Shahrour, “The evolution of Emirati foreign policy (1971-2020): The

unexpected rise of a small state with boundless ambitions”, SciencesPo, https://www.sci encespo.fr/kuwait-program/wp-content/uploads/2021/02/Shahrour-Karam-The-evolut ion-of-Emirati-foreign-policy-1971-2020.pdf, accessed 26 June 2023. 10 The National, “UAE enacts largest legal reform in its 50-year history”, 27 November 2021, https://www.thenationalnews.com/uae/2021/11/27/uae-enacts-lar gest-legal-reform-in-its-50-year-history/, accessed 26 June 2023. 11 Ibid. 12 Salam Al Amir, “UAE adjusts labour laws to provide flexibility in post-pandemic

workplaces”, The National, 16 November 2021, https://www.thenationalnews.com/uae/ 2021/11/16/uae-labour-law-allows-for-flexibility-for-post-pandemic-workplace/, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

341

billion) for low-income families.13 Provisions for allowances have been expanded and increased to different family members and for housing, higher education, job seekers and unemployment benefits. There are provisions for subsidies in electricity and water supplies and allowances to cover inflation and food supplement.14 The plan doubled the provision for spending from AED 14 billion to AED 28 billion (approx. US$3.8 billion to US$7.6 billion). In December, the UAE issued the Federal Law No. 41 of 2022 on Civil Personal Status for Non-Muslims that came into effect on 1 February 2023.15 It introduces comprehensive changes in legal provisions for civil and personal matters, including marriage, divorce, child custody and inheritance for non-Muslim residents.16 Accordingly, nonMuslim Emirati residents can choose to be governed by the personal laws of their home countries. Earlier, all residents of the UAE were governed by the Federal Personal Status Law No. 28 of 2005, which determined the rights of all parties in accordance with Sharia.17 As per the new law, the consent of the girl’s father is no longer required if both, the bride and groom, are 21 years and above. Women will have a right to file for divorce, and spouses can file for a no-fault divorce. Further, mutual custody of the child after divorce can be granted, and inheritance must be distributed to the surviving spouse and children without gender-based discrimination. In 2022, a surge in Covid-19 cases was witnessed in January–February and again in June-July but casualties were minimal, given the vaccine’s prevalence and the milder nature of infections. Between March 2020 and March 2023, the UAE recorded a total of 1.06 million cases of Covid-19

13 Rola Alghoul, Esraa Ismail and Lina Ibrahim, “UAE’s President restructures social welfare programme of low-income citizens”, Zawya, 5 July 2022, https://www.zawya. com/en/economy/gcc/uaes-president-restructures-social-welfare-programme-of-low-inc ome-citisens-xo7bgm7r, accessed 26 June 2023. 14 Ibid. 15 UAE Government Portal (U.ae), “Personal status affairs for non-Muslims”, https://

u.ae/en/information-and-services/social-affairs/personal-status-affairs-for-non-muslims, accessed 26 June 2023. 16 Chambers and Partners, “UAE issues Personal Status Federal Decree-Law for nonMuslims”, 21 December2022, https://chambers.com/articles/uae-issues-personal-statusfederal-decree-law-for-non-muslims, accessed 26 June 2023. 17 Ibid.

342

MD. M. QUAMAR ET AL.

infections and 2,349 deaths.18 Between January and December 2022, it recorded 289,773 Covid-19 infections and 186 associated deaths.19 The UAE has one of the highest rates of vaccine prevalence, with nearly 25 million doses of vaccine administered among the residents. By and large, the surge in 2022 did not disrupt normal life as offices, schools and public spaces remained open with a robust, and at times invasive, monitoring and control policy.20 Foreign Policy and Security The UAE has gradually adopted a policy of strategic balancing vis-à-vis great powers and proactive engagement in regional affairs. This can be viewed in many aspects of foreign relations and response to international crises. For example, after the Russian invasion of Ukraine, the UAE did not take a strong anti-Russia position, avoided serious criticism against Moscow and refused to join the Western sanctions regime; at the same time, it did not endorse the Russian invasion either and called for respect for sovereignty and peaceful resolution of the conflict. Currently, the UAE is a non-permanent member of the UNSC, where it refused to align with the Western powers in outrightly condemning Russia and abstained on the resolution brought by the US and European countries.21 The UAE felt that taking sides would prolong instead of resolving the conflict. The UAE’s decision to abstain in the UNSC was viewed by the US as siding with Russia. There were reports that MbZ refused to take President Biden’s phone call while the former spoke with President Putin.22 The reported tensions regarding the US request to the Gulf monarchies, 18 World Health Organisation (WHO), “United Arab Emirates”, https://covid19.who. int/region/emro/country/ae, accessed 26 June 2023. 19 Ibid. 20 United Arab Emirates, Ministry of Health & Prevention, “Ministry of Health launches Digital Health Monitoring Centre” at Arab Health 2022'' , 24 January

2022, https://mohap.gov.ae/en/media-center/news/24/1/2022/ministry-of-health-lau nches-digital-health-monitoring-centre-at-arab-health-2022, accessed 27 June 2023. 21 Nadeen Ebrahim, “Why Biden’s key Mideast allies aren’t condemning Russia’s Ukraine invasion”, CNN, 2 March 2022, https://edition.cnn.com/2022/03/02/middle east/mideast-summary-03-02-2022-intl/index.html, accessed 26 June 2023. 22 Firas Maksad, “A Crisis in U.S.-Middle East Relations”, The Wall Street Journal, 21 March 2022, https://www.wsj.com/articles/a-crisis-in-u-s-arab-relations-russia-china-uaedefense-iran-oil-drone-attacks-response-11647893535, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

343

including the UAE, to aid Europe, when the latter was no longer buying the Russian oil and gas, is also notable.23 This was also partly due to Emirati anger over the lukewarm US response to the drone attacks by Houthis or the Iraqi militias in January–February 2022. According to some analysts, these were policy responses to the US for shifting its focus away from the Middle East and the Persian Gulf to the Indo-Pacific.24 The refusal to take sides on the Ukraine crisis and not antagonising Russia could also be because of the Emirati reluctance to entangle itself in global power struggle. Ideally, smaller powers would be more inclined to condemn the Russian invasion, but given the fractious nature of Middle Eastern politics, they seek to avoid becoming a pawn in the global power struggle. At the same time, they took steps towards reconciliation and rapprochement at the regional level to offset any regional security threats. International oil geopolitics is another important factor that has been instrumental in the smaller Gulf states and Saudi Arabia taking a more nuanced position on the Russia-Ukraine crisis, even at the cost of antagonising the Biden administration.25 The UAE is part of the global OPEC+ cartel, led by Russia and Saudi Arabia, to control the supply and pricing of hydrocarbons. Despite the US being a major producer and increasingly an exporter, the global energy market is still controlled by the OPEC+ , and this means that the oil-rich Gulf monarchies who substantially depend on the international energy market for the stability of their economy do not wish to antagonise Russia. More importantly, their dependence on the West, so far as the oil market is concerned, has reduced significantly as much of their oil exports are directed to the Asian markets. Moreover, flooding the European market will harm oil prices and ease the upward trend in the pricing, which is not advantageous for their economic plans.26 23 Martin Chulov, “Biden rebuffed as US relations with Saudi Arabia and UAE hit new low”, The Guardian, 3 April 2022, https://www.theguardian.com/us-news/2022/apr/ 03/us-relations-saudi-arabia-uae-oil-crisis, accessed 26 June 2023. 24 Mohammed Baharoon, “UAE-U.S. Relations: What Went Wrong?”, The Arab Gulf States Institute in Washington (AGSIW), 22 April 2022, https://agsiw.org/uae-u-s-relati ons-what-went-wrong/, accessed 26 June 2023. 25 Eleonora Ardemagni, “Gulf Powers’ Increased Leeway in the Ukraine War”, Italian Institute for International Political Studies (ISPI), 28 October 2022, https://www.ispion line.it/en/publication/gulf-powers-increased-leeway-ukraine-war-36550, accessed 26 June 2023. 26 PWC, “Five GCC economic themes to watch in 2023”, https://www.pwc.com/ m1/en/blog/five-gcc-economic-themes-to-watch-in-2023.html, accessed 26 June 2023.

344

MD. M. QUAMAR ET AL.

While the UAE’s relations with the US tensed over the RussiaUkraine crisis and the refusal to heed the American demands for easing the OPEC+ oil production cuts, the relations with China continued to strengthen. In September 2022, during the Shanghai Cooperation Organisation (SCO) summit in Uzbekistan, the group approved the process of inducting the UAE as a dialogue partner.27 China has rapidly enhanced its economic engagements with the Gulf and Middle East, and the US is increasingly uneasy about Chinese forays in the region. In the first eight months of 2022, the UAE and China bilateral trade reached US$64 billion, with the two countries seeking to increase it to US$200 billion by 2030.28 The two countries also have plans to forge ties in scientific and technological areas, and some of the planned issues were reflected during the China-Arab and China-GCC summits in Saudi Arabia in December.29 China has been working to expand relations with the UAE and considers it the gateway for its commercial and economic forays in the Gulf and wider Middle East region.30 However, there is the US factor that could limit China-UAE relations, as witnessed during the rollout of the 5G network by Huawei; although this did not stop the Huawei deal, the UAE did halt the Chinese construction on the Khalifa Port, suspecting possible dual use.31 Besides global powers, the UAE has been working to improve relations with the regional countries over the past years. As a continuation of the Al-Ula Declaration of 2021, the reconciliation with Qatar continued. In 27 Lakshmi Priya, “Gulf Countries and the SCO Expansion”, Indian Council of World Affairs (ICWA), 28 September 2022, https://www.icwa.in/show_content.php?lang=1& level=3&ls_id=7986&lid=5341, accessed 26 June 2023. 28 Arabian Business, “UAE trade with China tops $64bn in 2022 so far, $200bn is 2030 target”, 4 November 2022, https://www.arabianbusiness.com/abnews/uae-tradewith-china-tops-64bn-in-2022-so-far-200bn-is-2030-target, accessed 26 June 2023. 29 Global Times, “China and UAE can inject stronger impetus into cooperation devt of science and technology: ambassador”, 23 December 2022, https://www.globaltimes.cn/ page/202212/1282509.shtml, accessed 26 June 2023. 30 Giulia Interesse, “China-United Arab Emirates (UAE): Bilateral Trade and Investment Outlook”, China Briefing, 29 August 2022, https://www.china-briefing.com/news/ china-united-arab-emirates-uae-bilateral-trade-investment-outlook/, accessed 26 June 2023. 31 Julian Borger, “Work on ‘Chinese military base’ in UAE abandoned after US intervenes—report”, The Guardian, 19 November 2021, https://www.theguardian.com/ world/2021/nov/19/chinese-military-base-uae-construction-abandoned-us-intelligencereport, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

345

December, MbZ landed in Doha and lauded the Qatari success in hosting the FIFA World Cup. He met Emir Tamim and was photographed being driven by the Qatari Emir.32 This compensated for his absence at the inaugural ceremony when the UAE was represented by the ruler of Dubai and Vice-President Mohammed bin Rashid al-Makhtoum. The UAE, especially Dubai, benefited considerably from Qatar hosting of the World Cup as many football fans from across the world preferred to base themselves in Dubai while many visited to experience the Dubai extravaganza.33 Dubai also started shuttle flights to and from Doha, leading to increased footfall, tourism boom, live telecasts of matches in public places, hotels and bars with international bands, music and food festivals.34 Simultaneously, the UAE has begun a process of reconciliation and improving relations with other regional countries, including Israel, Iran and Türkiye. Unlike Israel’s cold peace with Egypt and Jordan, relations with the UAE are deepening with every passing year. Since the signing of the Abraham Accords in 2020, the bilateral trade and commercial relations have grown, including healthcare, water security, agriculture and hydrocarbons.35 The two countries had many high-profile and ministerial visits in 2021 and 2022. President Isaac Herzog visited the UAE twice in 2022; first in January36 and again in December, on his way home from his first visit to Bahrain.37 However, speculations about challenges 32 Álvaro Escalonilla, “Mohammed bin Zayed visits Qatar for first time since blockade”. Atalayar, 6 December 2022, https://atalayar.com/en/content/mohamed-bin-zayed-visitsqatar-first-time-blockade, accessed 26 June 2023. 33 James M. Dorsey, “Qatar World Cup: An unintended boon for the UAE”, Modern

Diplomacy, 1 September 2022, https://moderndiplomacy.eu/2022/09/01/qatar-worldcup-an-unintended-boon-for-the-uae/, accessed 26 June 2023. 34 Abir Ahmar and Yousef Saba, “Soccer Fans enjoy World Cup from a distance at

Dubai festival”, Reuters, 21 November 2022, https://www.reuters.com/lifestyle/sports/ soccer-fans-enjoy-world-cup-distance-dubai-festival-2022-11-20/, accessed 26 June 2023. 35 Arab News, “UAE-Israel trade hits record high to reach $2.56bn in 2022”, 23 January 2023, https://www.arabnews.com/node/2237391/business-economy, accessed 26 June 2023. 36 Reuters, “Israel supports UAE security needs, president says on first visit”, 30 January 2022, https://www.reuters.com/world/middle-east/israeli-president-herzog-departs-uaefirst-visit-spokesman-2022-01-30/, accessed 26 June 2023. 37 Jonathan Lis, “Israel’s President Meets in Abu Dhabi With UAE President Sheikh Mohammed Bin Zayed”, Haaretz, 5 December 2022, https://www.haaretz.com/israelnews/2022-12-05/ty-article/.premium/israels-president-meets-in-abu-dhabi-with-uae-pre sident-sheikh-mohammed-bin-zayed/00000184-e29d-db06-a9de-ff9fdd580000, accessed

346

MD. M. QUAMAR ET AL.

to the political ties emerged in the wake of the change of government in Israel after the November Knesset elections, wherein former Prime Minister Benjamin Netanyahu returned to power, this time building an alliance with far-right politicians, some of whom had been convicted by the Israeli courts for inciting racial hatred.38 Nonetheless, commercial relations with Israel have continuously grown. In June 2022, the two sides signed a Free Trade Agreement (FTA), the largest trade agreement between Israel and an Arab country.39 The FTA aims to boost bilateral trade to US$10 billion in five years, and for the UAE, this is the second such agreement signed during the year after India. The bilateral trade between the Emirate and Israel doubled in 2022, reaching US$2.56 billion.40 Both have been working on defence and military cooperation, with the UAE reportedly set to buy advanced air defence systems from Israel.41 Relations with Türkiye rapidly turned around. For Abu Dhabi, this is an opportunity to enhance its economic diplomacy in the region, and for Ankara, this is an opportunity to bring much-needed foreign investments.42 On the other hand, there are geo-political factors. The shift in the US policy away from the Middle East has brought erstwhile rivals to diplomatic negotiations. Economic reasons like the fall in the value of Türkiye’s currency and UAE’s diversification objectives have brought

26 June 2023. 38 Ziv Bar’el, “What the UAE Hopes to Achieve by Embracing Israel’s Far-right Ben-Gvir”, Haaretz, 4 December 2022, https://www.haaretz.com/israel-news/202212-04/ty-article/.highlight/as-most-arab-allies-silent-on-new-govt-the-uae-welcomes-bengvir/00000184-d9c2-dc05-adae-fff398e90000, accessed 26 June 2023. 39 Christian Le Miere, “Will UAE-Israel trade deal open the door for other Arab

countries?”, The Arab Weekly, 4 July 2022, https://thearabweekly.com/will-uae-israeltrade-deal-open-door-other-arab-countries, accessed 26 June 2023. 40 Arab News, “UAE–Israel trade hits record high to reach $2.56bn in 2022”. 23 January 2023, https://www.arabnews.com/node/2237391/business-economy, accessed 26 June 2023. 41 Alexander Cornwell and John Irish, “Exclusive: Israel to sell air defence system to United Arab Emirates”, Reuters, 23 September 2022, https://www.reuters.com/world/ middle-east/exclusive-israel-sell-air-defence-system-united-arab-emirates-sources-say-202209-22/, accessed 26 June 2023. 42 Md. Muddassir Quamar, “Decoding Turkey’s Foreign Policy Recalibration in West Asia”, IDSA Comments, 14 June 2022, https://www.idsa.in/idsacomments/decoding-tur key-foreign-policy-mmquamar-140622, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

347

them countries closer. The possible economic competition with Saudi Arabia has led the UAE to find new regional partners and markets. On the other hand, for Türkiye, reconciliation with UAE can be the first step towards normalising relations with its Eastern Mediterranean neighbours, including Greece, Egypt and Israel, who share friendly relations with the UAE. In February 2022, Erdo˘gan visited the UAE and met with his Emirati counterpart, who had visited Ankara in November 2021, and the two sides signed mega trade and economic agreements.43 The two sides have been negotiating a comprehensive economic partnership agreement. The UAE came forth to extend humanitarian help to Türkiye in the aftermath of the devastating earthquake in November in its southeastern areas. The UAE created a humanitarian airbridge to deliver relief and medical supplies to the affected areas.44 Further, it allocated US$100 million as an earthquake relief fund for the victims in Türkiye and Syria.45 The UAE has been working towards a reconciliation with Iran. In August 2022, the two sides decided to restore diplomatic ties, after a gap of over six years.46 High-level ministerial talks between the two countries began in 2019, in the wake of the US withdrawal from JCPOA. The aim was to de-escalate tensions and ensure peace in the region. The UAE joined Saudi Arabia in suspending diplomatic ties after the violent attack on the Saudi Embassy in Tehran in January 2016. Given Iran’s growing regional military presence, the UAE thought it wise to reach out to the regime and test the diplomatic waters.47 The UAE restored diplomatic 43 Reuters, “Turkey, UAE sign agreements on trade, industry during Erdogan visit”, 15 February 2022, https://www.reuters.com/world/middle-east/turkeys-erdogan-visits-uaefirst-time-decade-2022-02-14/, accessed 26 June 2023. 44 Emirates, “Emirates launches humanitarian airbridge to transport emergency aid to victims of the Turkey-Syria earthquake”, 10 February 2023, https://www.emirates.com/ media-centre/emirates-launches-humanitarian-airbridge-to-transport-emergency-aid-to-vic tims-of-the-turkey-syria-earthquake/, accessed 26 June 2023. 45 Reuters, “UAE to allocate $100 mln for earthquake relief efforts in Syria, Turkey— WAM”, 7 February 2023, https://www.reuters.com/world/middle-east/uae-allocate100-mln-earthquake-relief-efforts-syria-turkey-wam-2023-02-07/, accessed 26 June 2023. 46 Al-Jazeera, “UAE ambassador to Iran to return, 6 years after relations severed”, 21 August 2022, https://www.aljazeera.com/news/2022/8/21/uae-says-ambassador-toiran-to-return-to-tehran-in-coming-days, accessed 26 June 2023. 47 Abdulkhaleq Abdulla, “The UAE-Iran diplomatic reset is part of a greater focus on regional stability”, The National, 24 August 2022, https://www.thenationalnews.com/ opinion/comment/2022/08/24/a-new-chapter-in-iran-uae-relations/, accessed 26 June 2023.

348

MD. M. QUAMAR ET AL.

ties despite drone attacks by Iran-backed Houthis in Yemen on Abu Dhabi in January 2022. As the US reduces its commitments in the region, the UAE is reaching out to Iran through economic and diplomatic means.48 It continues to be Iran’s largest trading partner and seeks to benefit from Iran’s dependence upon non-oil trade. The UAE, Iran and Türkiye are also working on building a land corridor for connectivity that is likely to reduce the 21-day-long Gulf-Red Sea-Suez Canal-Mediterranean Sea route to only six days.49 In Yemen, the UAE has expanded its involvement despite the Houthi drone attacks in January–February.50 It has strengthened its resolve to bring more areas under the control of Southern Transition Council (STC) which it backs and this led to the installation of a pro-Emirati governor in Shabwa Province.51 The UAE was instrumental in the coalition airstrikes to target Houthi fighters in retaliation for the drone attacks.52 However, the ceasefire in April, which lasted six months, generated some hope for resolving the conflict. The drone strike from Yemen, which some Iraqi fringe groups also claimed responsibility for,53 shocked UAE and forced it to take its security more seriously and shore up its defence procurements. During 2022, the UAE enhanced its engagements with the Taliban government in Afghanistan. In 2018–2019, the UAE kept away from

48 Alex Vaillancourt, “The UAE’s Iranian strategy”, Foreign Brief, 23 September 2022, https://foreignbrief.com/analysis/the-uaes-iranian-strategy/, accessed 26 June 2023. 49 Borzou Daragahi, “Iran is now a transit transportation hub for neighbouring

countries. Here’s how it happened”, Atlantic Council, 14 June 2022, https://www.atlant iccouncil.org/blogs/iransource/iran-is-now-a-transit-transportation-hub-for-neighboringcountries-heres-how-it-happened/, accessed 26 June 2023. 50 Ahmed Nagi, “Abu Dhabi’s Dilemma”, Carnegie Middle East Center, 18 January 2022, https://carnegie-mec.org/diwan/86206, accessed 26 June 2023. 51 Al-Jazeera, “Yemen: What is the Southern Transitional Council?”, 26 April 2022, https://www.aljazeera.com/news/2020/4/26/yemen-what-is-the-southern-transi tional-council, accessed 27 June 2023. 52 Ali al-Mujahed and Siobhán O’Grady, “More than a dozen killed in airstrikes on Yemeni capital in retaliation for Houthi attack on UAE”, The Washington Post, 18 January 2022, https://www.washingtonpost.com/world/2022/01/18/yemen-sanaa-uaehouthi-airstrike/, accessed 26 June 2023. 53 Al-Jazeera, “Timeline: UAE under drone, missile attacks”, 3 February 2022, https://www.aljazeera.com/news/2022/2/3/timeline-uae-drone-missile-attacks-houthisyemen, accessed 27 June 2022.

9

UNITED ARAB EMIRATES

349

the US-Taliban negotiations but this changed after the chaotic US withdrawal in 2021.54 The UAE was instrumental in evacuating over 28,000 Afghans who were being shifted to the US and it provided refuge to exiled President Ashraf Ghani.55 The Taliban claimed that the UAE banned him and his associates from engaging in Afghan politics from the Emirates soil. In September 2022, the UAE left Doha and Ankara behind in concluding the airport deal with the Taliban.56 On 4 December, the Taliban’s acting Defence Minister, Mullah Yakoob, son of Mullah Mohammad Omar, the leader of the Taliban regime during 1996–2001, visited UAE and held talks with MbZ.57 Although the UAE does not recognise the Taliban regime, it is gradually forging contacts with the regime for greater regional influence. The UAE has been shoring up its security and military preparedness with an eye on the regional security situation. It goes in tandem with a reconciliatory foreign policy to offset security threats.58 It is working towards greater self-reliance in weapons procurement and increased defence procurement.59 Moreover, the UAE is building strong military cooperation with Israel and the US. Many retired US military veterans have reportedly been hired by the UAE armed forces to train its military for shoring up home security and use in conflict zones where the UAE is

54 Giorgio Cafiero, “The UAE’s Approach to the Taliban”, Carnegie Endowment for International Peace, 24 January 2023, https://carnegieendowment.org/sada/88869, accessed 26 June 2023. 55 Bill Bostock, “Ousted Afghan president lived in a 5-star Abu Dhabi hotel after fleeing the Taliban, report says”, Business Insider, 14 June 2022, https://www.businessi nsider.com/afghanistan-president-living-luxury-uae-hotel-wife-choose-villa-report-2022-6, accessed 26 June 2023. 56 Rahim Faiez, “Taliban: UAE Firm to Run Flight Services on Afghan Airports”, The Diplomat, 9 September 2022, https://thediplomat.com/2022/09/taliban-uae-firmto-run-flight-services-on-afghan-airports/, accessed 26 June 2023. 57 Banafsha Binesh, “Mullah Yaqoob Mujahid Meets With Afghans in UAE”, Tolo News, 4 December 2022, https://tolonews.com/afghanistan-181039, accessed 26 June 2023. 58 Peter Salisbury, “Risk Perception and Appetite in UAE Foreign and National Security Policy”, Chatham House, 1 July 2020, https://www.chathamhouse.org/node/23704/ nojs, accessed 26 June 2023. 59 John Hill, “UAE implements two-pronged plan to expand and modernise”, Army Technology, 14 February 2023, https://www.army-technology.com/news/uae-defenceinvestment/, accessed 26 June 2023.

350

MD. M. QUAMAR ET AL.

involved, such as Yemen and Libya.60 The UAE has shored up defence production and, according to the SIPRI, has emerged among the top 25 weapon exporters in the world during 2017–2021.61 Economy The UAE economy returned to the pre-Covid-19 growth rate in 2022, and was propelled by high oil prices and growing non-oil sectors.62 It became the second largest economy after Saudi Arabia in the MENA region.63 Its economic growth had been one of the highest in the world64 amidst the slowing global economy, the Ukraine conflict and the Covid19 and its after effects. Its GDP at current prices increased from US$415 billion in 2021 to US$507.50 billion in 2022 (Table 9.1). Its GDP growth rate increased from 3.9 per cent to about 7.4 per cent during the same period. The oil sector was estimated to grow by 10.1 per cent in 2022 due to the easing of the OPEC+ agreement to increase production until it was reversed in November to cut production by 2 mbpd. The non-oil sector growth rates were estimated at 6 per cent during the year. A surge in tourism, construction and investments in real estate drove the non-oil sector. The UAE benefited from the spillover effect of the Qatar World Cup 2022 backed by its efficient logistics and proximity, with several hotels in Dubai reporting full occupancy.65 The UAE,

60 Craig Whitlock, “UAE Relied on Expertise of Retired U.S. Troops To Beef Up its Military”, The Washington Post, 18 October 2022, https://www.washingtonpost.com/inv estigations/interactive/2022/uae-military-us-veterans/, accessed 26 June 2023. 61 Pieter D. Wezeman, Alexandra Kuimova and Siemon T. Wezeman, “Trends in International Arms Transfers, 2021”, SIPRI Fact Sheet, https://www.sipri.org/sites/default/ files/2022-03/fs_2203_at_2021.pdf, accessed 26 June 2023. 62 Waheed Abbas, “UAE economy hits one of fastest growth rates in the world, says Central Bank”, Khaleej Times, 10 May 2023, https://www.khaleejtimes.com/business/ economy/uae-economy-hits-one-of-fastest-growth-rates-in-the-world-says-central-bank, accessed 27 June 2023. 63 Economist Intelligence Unit, UAE Country Report 2023. 64 Central Bank of UAE, Annual Report 2022, https://www.centralbank.ae/en/news-

and-publications/publications/, accessed 26 June 2023. 65 Nick Webster, “Dubai hotels expecting near full occupancy during Qatar World Cup 2022”, The National, 18 July 2022, https://www.thenationalnews.com/fifa-world-cup2022/2022/07/18/dubai-hotels-expecting-near-full-occupancy-during-qatar-world-cup2022/, accessed 27 June 2023.

9

UNITED ARAB EMIRATES

351

Table 9.1 UAE’s economic growth, 2019–23

GDP at Current Prices (US$ million) GDP Growth (annual per cent) Real GDP Growth (annual per cent) Real non-oil GDP Growth (annual per cent)a

2019

2020

2021

2022a

2023a

417,216

349,500

415,000

507,500

499,000

−2.1 1.11

−16.4 −4.96

18.8 3.9

– 7.4

3.5

2.7

−5.4

5.8

6.0–6.6

3.8

Sources UAE, Federal Competitiveness and Statistics Centre; a IMF, Regional Economic Outlook, Middle East, Central Asia, Statistical Appendix, 2023; Figures for 2023 are estimates

led by Dubai, has been the most popular non-religious tourist destination in the Persian Gulf region. However, it faces increasing competition as other GCC countries also pursue tourism as a part of the economic diversification.66 The easing of the Covid-19 restrictions and robust support policies have facilitated economic recovery of the Emirates. The share of the manufacturing sector had been highest at 10.37 per cent of GDP in 2021.67 Business sentiments were positive due to high liquidity induced by high oil revenues. The UAE ranked first globally for the best ecosystem for start-ups and entrepreneurship according to Global Entrepreneurship Monitor 2022.68 The government’s enabling policies, strong regulatory framework and advanced telecom infrastructure created several success stories of homegrown businesses like Nimshi.com, Agami and Noon.69 66 Dennis Sammut, “Tourism in the Gulf is a game changer”, Commonspace.eu, 14 February 2023, https://www.commonspace.eu/opinion/tourism-gulf-game-changer, accessed 27 June 2023. 67 United Arab Emirates, Federal Competitiveness and Statistics Centre (FCSC), National Accounts Estimates 2012-21, https://fcsc.gov.ae/en-us/Pages/Statistics/Statis tics-by-Subject.aspx#/%3Ffolder=Economy/National%20Account/National%20Account& subject=Economy, accessed 26 June 2023. 68 Arabian Business, “Why the UAE will remain the best country for startups and entrepreneurs in the years to come”, 11 April 2022, https://www.arabianbusiness.com/ startup/why-the-uae-will-remain-the-best-country-for-startups-and-entrepreneurs-in-theyears-to-come, accessed 26 June 2023. 69 Gulf News, “Online marketplace noon completes buy of fashion portal Namshi”, 13 February 2023, https://gulfnews.com/business/retail/online-marketplace-noon-com pletes-buy-of-fashion-portal-namshi-1.93819176, accessed 27 June 2023.

352

MD. M. QUAMAR ET AL.

To boost businesses further, a new Federal Decree Law number 37 of 2022 on family businesses was issued in October which came into force on 11 January 2023. It aims to facilitate smooth succession in family businesses and provide mechanisms for resolving family disputes.70 The UAE has been facing increased regional competition, especially from Saudi Arabia, to retain its edge as the business hub.71 Banks maintained adequate capital reserves, and asset quality has improved since the pandemic’s peak. The IMF has appreciated the Emirati macro-prudential framework promoting effective non-performing loan management. There had been satisfactory growth of the private sector credit. Financial Action Task Force (FATF), the global watchdog for money laundering and terror finance, added UAE to its “grey list” in 2022 for not doing enough to prevent money laundering and terror financing.72 This led to major efforts through the National Anti-Money Laundering/Combating Finance of Terror (AML/CFT) strategy and action plan for an effective regulation and enhanced monitoring as per FATF recommendations.73 The national rail project executed by Etihad Rail achieved another milestone after Ras al-Khaimah and Sharjah were connected to the network.74 It is the UAE’s largest infrastructure project that would eventually build 1,200 km of rail network from the borders of Saudi Arabia to Fujairah in the UAE. The network would connect the principal centres of industry, manufacturing, logistics, population and all major import 70 Clyde & Co, “Synopsis of new UAE Family Business Law”, 11 January 2023, https://www.clydeco.com/en/insights/2023/01/synopsis-of-new-uae-family-bus iness-law, accessed 26 June 2023. 71 The Times of India, “Saudi Arabia and the UAE- are they close allies or competing neighbours?”, 17 January 2022, https://timesofindia.indiatimes.com/world/middleeast/saudi-arabia-and-the-uae-are-they-close-allies-or-competing-neighbours/articleshow/ 88942896.cms, accessed 27 June 2023. 72 Sunainaa Chadha, “Explained: Why Dubai is on a FATF grey list and what it means for India”, The Times of India, 8 March 2022, https://timesofindia.indiatimes.com/ business/india-business/explained-why-dubai-is-on-a-fatf-gray-list-and-what-it-means-forindia/articleshow/90068564.cms, last accessed 27 June 2023. 73 KPMG, “Grey Listing of the UAE”, https://kpmg.com/ae/en/home/insights/ 2022/03/grey-listing-of-the-uae.html, accessed 27 June 2023. 74 The National, “Etihad Rail project gathers pace as Ras Al Khaimah and Sharjah connect to network”, 12 October 2022, https://www.thenationalnews.com/uae/2022/ 10/12/etihad-rail-project-takes-shape-as-ras-al-khaimah-and-sharjah-connected-to-net work/, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

353

and export terminals while forming an integral part of the GCC railway network. Fiscal Situation and Inflation Public finance is managed largely at the level of individual Emirates, and the federal budget represents less than 15 per cent of the total spending.75 The total government revenue as a share of GDP increased from 30.4 per cent in 2021 to 35.4 per cent in 2022. The Ministry of Finance introduced a 9 per cent corporate tax on business profits above AED 375,000 (US$102,118.61) to be levied from 1 June 2023.76 It comes four years after the introduction of VAT on 1 January 2018, implying that the UAE is slowly moving from a non-tax environment to a tax one that would give the government additional revenues to fund development activities. On the expenditure side, the social welfare programme for low-income citizens was restructured and the spending was enhanced from US$3.81 billion to US$7.62 billion during the year.77 The federal government also introduced four new allowances that included support for housing, university education, unemployed citizens over 45 years and job seekers. The government’s fiscal surplus increased as a percentage of GDP from 4 per cent in 2021 to 9 per cent in 2022.78 Total government gross debt decreased from 41.1 per cent of GDP in 2020 to 30 per cent in 2022.79 The Federal and provincial governments have envisaged local financial markets to play a vital role in developing the private sector. Both the stock markets of Abu Dhabi and Dubai bucked the slump in the global

75 EIU, UAE Country Report, February 2023, p. 7. 76 Manoj Nair, Justin Varghese and Nivetha Dayanand, “UAE to introduce 9

per cent corporate tax on business profits from June 1, 2023”, 31 January 2022, https://gulfnews.com/business/markets/uae-to-introduce-9-corporate-tax-on-bus iness-profits-from-june-1-2023-1.1643627271956, accessed 26 June 2023. 77 Rola Alghoul, Esraa Ismail and Lina Ibrahim, “UAE’s President restructures social welfare programme of low-income citizens”, Zawya, 5 July 2022, https://www.zawya. com/en/economy/gcc/uaes-president-restructures-social-welfare-programme-of-low-inc ome-citisens-xo7bgm7r, accessed 26 June 2023. 78 IMF, Regional Economic Outlook: Middle East and Central Asia, Statistical Appendix 2023. 79 IMF, Regional economic Outlook: Middle East and Central Asia, Statistical Appendix 2023.

354

MD. M. QUAMAR ET AL.

stock markets to perform strongly.80 The domestic financial markets were supported by increased liquidity due to increasing international prices of oil and gas and a flurry of IPOs backed by the Dubai government. Inflation increased dramatically from 0.2 per cent in 2021 to 4.8 per cent in 2022.81 The consumer price index rose in line with the global trend but remained below the world average of 8.8 per cent. The largest price increase was in the transportation sector (23 per cent), followed by recreation, sports and culture (13.1 per cent), food and beverages (7.2 per cent) and restaurants and accommodations services (7.2 per cent).82 Real estate prices and rents in the UAE, especially Dubai, have been rapidly growing, mainly attributed to the influx of Russian money and wealthy Russians to the city.83 The Central Bank of the UAE closely followed suit with the hike in interest rates by the US Federal Reserves. Nevertheless, private sector credit remained robust despite increasing interest rates.84 Employment and Expatriates Robust private sector activity generated new job opportunities in the Emirates. Employment increased from four million in November 2021 to about 4.9 million in August 2022.85 The UAE government has pursued different schemes since 2006 to employ more UAE nationals in UAE-based companies but Emiratis only constituted 5 per cent of the workforce (about 25,000) in the private sector. The Emirati Human Resource Competitive Council launched a scheme called Nafees with a budget of US$6.5 billion to encourage about 75,000 Emirates to join the private sector by 2026.86 The salary top-up by the government was to compensate the private sector, which are unwilling to pay lucrative salaries to prospective Emiratis. A Nafees award has been introduced to reward the private companies significantly contributing to Emiratisation of the

80 EIU, UAE, Country Report, January 2023. 81 Central Bank of UAE, Annual Report 2023. 82 Central Bank of UAE, Annual Report 2023. 83 Sameer Hashmi, “Russian influx drives up rental prices in Dubai”, 29 March 2022,

https://www.bbc.com/news/business-65037061, accessed 26 June 2023. 84 EIU, UAE, Country Report December 2023. 85 EIU, UAE, Country Report December 2023, p. 25. 86 EIU, UAE, Country Report December 2023, p. 31.

9

UNITED ARAB EMIRATES

355

workforce.87 It involves three categories: private companies, individuals and strategic partners of the Emirati Talent Competitiveness Council. The UAE is cautious about nationalising the job market to retain its competitiveness as a business hub and continued attraction for foreign investments. New goals and penalties for failing to comply were announced during the year, effective from January 2023. According to the new directives, the companies must have a minimum of 2 per cent Emiratis as their workforce by the end of 2022; 4 per cent by 2023; 6 per cent by 2024, 8 per cent by 2025 and 10 per cent by 2026.88 The key aspect of the scheme is that fines would be levied progressively on the companies for failing to meet the Emiratisation targets; however, the Free Economic Zones are exempted from these regulations. The UAE has made significant strides towards gender parity. About 66 per cent of the total workforce in the Emirates are women, and more women are working in the health, education and banking sectors. About 21,000 Emirati businesswomen make up 10 per cent of the private sector, managing projects worth about US$10.9 billion.89 Women represent 15 per cent of the board of directors of the Chamber of Commerce and industry groups in the UAE.90 The UAE cut its national working week to four and half days per week and became the first nation in the world to have a national working week shorter than the global five-day week.91 The weekend begins on Friday at noon and includes Saturday and Sunday and became the only Arab country not to have a Friday-Saturday weekend. However, in practice,

87 Khitam Al Amir, “UAE President, Vice President attend Nafis Award ceremony in Abu Dhabi”, 29 March 2023, https://gulfnews.com/uae/government/uae-presidentvice-president-attend-nafis-award-ceremony-in-abu-dhabi-1.94794267, accessed 27 June 2023. 88 Katie Nadworny, “UAE: New Fines for Failure at Emiratisation”, SHRM, 18 August 2022, https://www.shrm.org/resourcesandtools/hr-topics/global-hr/pages/uaenew-fines-failure-at-emiratisation.aspx, accessed 26 June 2023. 89 Hudhaifa Ebrahim, “United Arab Emirates celebrates Emirati Women’s Day”, The

Jerusalem Post, 29 August 2022, https://www.jpost.com/middle-east/article-715802, accessed 26 June 2023. 90 Ibid. 91 The Guardian, “UAE cuts working week to four-and-a-half days and moves week-

end”, 7 December 2021, https://www.theguardian.com/world/2021/dec/07/uae-cutsworking-week-and-shifts-weekend-back-a-day, accessed 26 June 2023.

356

MD. M. QUAMAR ET AL.

there were some tensions among the middle and lower-tier employees in the private sector as they had to cater to the GCC clients on Sundays.92 External Sector Unlike the other Gulf countries, non-oil exports and re-exports constituted most of the UAE’s total exports in 2021.93 The total exports of goods and services increased from US$425.16 billion in 2020 to US$519.30 billion in 2022 (Table 9.2). The total imports of goods and services increased from US$347.53 in 2021 to US$393.10 in 2022. The non-oil trade was at a record level of about US$607.1 billion in 2022. It grew by about 17 per cent over the previous year.94 The current account balance increased from a surplus of US$47.9 billion in 2021 to US$59.60 billion in 2022 (Table 9.2). The current account balance as a percentage of GDP increased from 6 per cent in 2020 to 11.6 per cent and 11.7 per cent in 2021 and 2022, respectively. According to the International Trade Centre, the top five import categories during 2021 were pearls, precious and semi-precious stones and metals (27.38 per cent); machinery (26.09 per cent); vehicles and parts (8.28 per cent); base metals and articles thereof (6.07 per cent) Table 9.2 UAE’s select current account indicators, 2019–22 (US$ million)

Exports of Goods and Services Petroleum Exports Imports of Goods and Services Current Account Balance

2019

2020

2021

2022a

404,046 52,417 321,525 –

350,279 31,341 297,326 21,100

425,160 54,595 347,529 47,978

519,300 – 393,100 59,600

Sources a IMF, Regional Economic Outlook Middle East and Central Asia Statistical Appendix 2023; OPEC, Annual Statistical Bulletin, 2022

92 Patrick Ryan, “One year on: the impact of the UAE’s new working week”, The National, 1 January 2023, https://www.thenationalnews.com/uae/2023/01/01/oneyear-on-the-impact-of-the-uaes-new-working-week/, accessed 26 June 2023. 93 EIU, UAE Country Report, February 2023. 94 Alkesh Sharma, “UAE non-oil foreign trade reaches record $607bn in 2022”,

The National, 6 February 2023, https://www.thenationalnews.com/business/economy/ 2023/02/06/uae-non-oil-foreign-trade-reaches-record-607-billion-in-2022/, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

357

and mineral products (5.34 per cent). The top export categories were mineral fuels (72.14 per cent); pearls, precious and semi-precious stones and metals (11.98 per cent); aluminium and articles thereof (3.99 per cent); and plastics and articles thereof (2.35 per cent). Due to expanding tourism and business services, the UAE has a net surplus in service trade, which was an estimated US$31.77 billion in 2022.95 In 2022, China was the largest trading partner in bilateral trade at AED 264.5 billion (US$72.01 billion), followed by India at AED 180.9 billion (US$49.25 billion) and Saudi Arabia at AED 135.2 billion (US$36.81).96 According to the Federal Competitiveness and Statistical Centre (FCSC), the top five import sources for the UAE and their respective shares in 2021 were China (19.2 per cent), India (7.7 per cent), the US (6.2 per cent), Japan (4.0 per cent) and Türkiye (3.5 per cent). The top five non-oil export destinations and the respective shares in 2021 were Saudi Arabia (12.27 per cent), India (11.06 per cent), Iraq (6.59 per cent), Hong Kong (4.96 per cent) and Oman (4.66 per cent). Table 9.3 gives the direction of UAE’s trade in 2022. India was the top export destination, followed by Japan, China, Thailand and Singapore. About 40 per cent of UAE’s foreign trade is non-oil with non-Arab Asian countries.97 The UAE government has supported export-oriented businesses by signing and negotiating several free trade agreements. It aims to conclude 22 comprehensive economic partnership agreements by 2031, including with Türkiye, Columbia, Georgia, Kenya, Cambodia and Ukraine by mid2023.98 It is well positioned to benefit from the shift in global supply chains due to the Ukraine war to emerge as an important trading and logistic hub. At the same time, the UAE has identified clean energy investments abroad to diversify its economy away from hydrocarbons. In June, with a pledge of US$10 billion investments, the UAE signed a tripartite agreement to set up 2 GW of green hydrogen and 10 GW of wind power in Egypt and 2 GW of renewables in Jordan.99 95 EIU, UAE Country Report, January 2023. 96 Alkesh Sharma, “UAE non-oil foreign trade reaches record $607bn in 2022”,

The National, 6 February 2023. https://www.thenationalnews.com/business/economy/ 2023/02/06/uae-non-oil-foreign-trade-reaches-record-607-billion-in-2022/, accessed 26 June 2023. 97 EIU, UAE Country Report, February 2023, p. 24. 98 EIU, UAE Country Report, February 2023. 99 EIU, UAE Country Report December 2023, p. 26.

358

MD. M. QUAMAR ET AL.

Table 9.3 UAE’s direction of trade, 2022 Top five non-oil trading partners

Top five export destinations (US$ million)

Top five import sources (US$ million)

a Top five destinations of LNG export 2021 (bcm)

China (60,836) India (44,803) Saudi Arabia (33,937) US (25,502)

India (51,829.70) Japan (42,765.16) China (42,598.08)

China (61, 660.07) India (27,454.04) US (21,307.30)

India (4.9) Japan (1.8) China (1.0)

Thailand (16,438.53) Singapore (14,823.14)

Japan (13,766.32)

South Korea (0.4)

Türkiye (11,947.70)

Pakistan (0.3)

Iraq (16,952)

Sources IMF Database; a British Petroleum; UAE, Ministry of Economy https://www.moec.gov.ae/ en/international-trade-map; Figures in the Bracket a Values/Volumes of Imports/Exports

The UAE-Qatar bilateral trade was yet to reach its pre-boycott levels. The bilateral trade was US$3.6 billion by the end of 2021 as against US$6.7 billion in 2016.100 The UAE imports from Qatar have recovered to their pre-boycott level, but exports were still lagging. However, the reexports from the UAE to Qatar have increased to the pre-boycott levels. In September, during the visit of the UAE President to Oman, about US$8 billion in trade and investment commitments were made, including a framework for constructing a cross-border railway network.101 Energy and Environment The oil and gas reserves had increased by two billion stock tank barrels and 1 tscf, respectively, during 2022, taking the total oil reserves to 113 billion stock tank barrels and 290 tscf of natural gas.102 There have been some small-scale production from unconventional reserves, but large-scale development had not started. Abu Dhabi National Oil Company (ADNOC) plans to increase crude oil production capacity to 5 mbpd by 2027 and wants to achieve gas self-sufficiency by 2030. It is

100 EIU, UAE Country Report January 2023, p. 23. 101 EIU, UAE Country Report December 2023, p. 22. 102 MEES, vol. 65, no. 48, 2 December 2022, p. 3.

9

UNITED ARAB EMIRATES

359

expected to invest about US$150 billion over 2023–2027. Oil production increased from 2.74 mbpd in 2021 (Table 9.4) to 3.14 mbpd in 2022. The UAE emerged as a major global oil trading and storage hub in 2022 as global oil trade was re-routed following the Ukraine war. The demand for Fujairah storage capacity (65 million barrels) increased and was fully booked. The departure of trading firms from Moscow led to their relocation to Dubai.103 The strategic location of Fujairah between the Asian and the European demand centres has been a significant competitive advantage. The influx of Russian crude peaked in August at about 270,000 bpd.104 The presence of Russian crude and the heavy presence of already sanctioned Iranian crude oil added to the logistical complexity of Fujairah.105 Fujairah reportedly imported 157,000 bpd of Iranian oil for further export to China106 and likewise reportedly imported record volumes of 250,000 bpd of Russian oil in August and September for re-export.107 Natural gas production increased from 55.5 bcm in 2020 to 57.0 bcm in 2021. Moreover, the UAE imported 1.4 bcm of LNG and 19.5 bcm of piped gas from Qatar in 2021.108 It also exported 8.8 bcm of LNG (Table 9.4), of which 4.91 bcm went to India, 1.8 bcm to Japan and 1 bcm to China (Table 9.3). The LNG facility of Fujairah is expected to come online in 2027. Once completed, the total LNG capacity at Das Island and Fujairah would be about 16.2 million tons annually.109 In November, the government announced the creation of ADNOC Gas, a new world-class gas processing and marketing company combining the operations, maintenance and marketing of ADNOC Gas processing and ADNOC LNG. There are also plans for IPO of its minority stakes in the

103 MEES, vol. 65, no. 38, 23 104 MEES, vol. 66, no. 12, 24 105 MEES, vol. 66, no. 12, 24 106 MEES, vol. 65, no. 38, 23

September, 2022, p. 12. March 2023, p. 6. March 2023, p. 6. September 2022, p. 12.

107 MEES, vol. 65, no. 38, 23 September 2022, p. 12. 108 BP, Statistical review of world energy, 2022. 109 MEES, vol. 66, no. 8, 24 February 2023, p. 5.

360

MD. M. QUAMAR ET AL.

Table 9.4 UAE’s energy statistics, 2018–21

Oil Production (mbpd)a Oil Consumption (Thousand bpd) Crude Oil Exports (mbpd)a Refining throughput (Thousand bpd) Refining Capacity (Thousand bpd) Petroleum Products Exports (Thousand bpd) Natural Gas Production (bcm) Natural gas marketed production (billion standard cubic metre) Natural Gas flaring (bcm) Natural Gas Consumption (million standard cubic metre) LNG Exports (bcm) LNG Imports (bcm) Carbon Dioxide Emission from Energy (million tons) Renewable Energy Generation (TWH)

2018

2019

2020

2021b

3.01 1,004 2.30 1,096 1,229 916.0 58.1 55.10

3.06 972 2.41 1,037 1,307 881.8 57.5 55.10

2.78 855 2.42 936 1,331 839.6 55.4 55.06

2.74 952 2.93 939 1,246 890.9 57.0 54.49

1.3 70.03

1.0 68.23

1.1 70.76

1.0 68.19

7.4 1.0 272.2

7.7 1.6 270.3

7.6 1.5 347.4

8.8 1.7 260.1

1.3

3.8

4.6

5.2

Sources a UAE, Federal Competitiveness and Statistics Centre; b British Petroleum, Statistical Review of World Energy, 2022; OPEC, Annual Statistical Bulletin, 2022

Abu Dhabi exchange in 2023. ADNOC has raised significant resources through the IPO of its subsidiaries to fund its investment ambition.110 The UAE is at the forefront of transitioning to low-carbon fuels in the MENA Region and aims at net zero domestic emission by 2050. In September, the UAE updated its nationally determined contribution (NDC) ahead of the COP 27 conference in Egypt. In the updated NDC, the UAE increased its 2030 emission reduction target from 30 to 23.5 per cent.111 The carbon emissions from its energy sector declined from 347.4 million tons in 2020 to 260.1 million tons in 2021 (Table 9.4). The key driver of the reduction would be the electricity sector. The third unit of the Baraka nuclear power plant was connected to the grid during

110 Hadeel Al Sayegh, “Abu Dhabi’s ADNOC looks to raise up to $2 bln from IPO of gas unit”, Reuters, 23 February 2023, https://www.reuters.com/business/energy/abudhabis-adnoc-sets-price-range-ipo-its-gas-unit-statement-2023-02-23/, accessed 27 June 2023. 111 MEES, vol. 65, no. 41, 14 October 2022, p. 14.

9

UNITED ARAB EMIRATES

361

the year and added 4.2 GW of power.112 The UAE has been adding solar and nuclear power capacity. By the end of 2022, it had installed 3.2 GW of non-hydropower renewable energy capacity.113 However, adding large amounts of nuclear and solar capacity leads to several systemic challenges, particularly in winter. The co-generational fleet’s technical flexibility must be maintained through upgrades and rapid water and power generation de-coupling. The total installed clean energy capacity in the Emirates was about 15.3 GW.114 About 5.2 TWH of electricity was generated from renewables in 2021, mostly from solar photovoltaics. Dubai’s Mohammed bin Rashid al-Maktoum solar park has an operational capacity of 2.027 GW, and the tender for the sixth phase would begin soon. Abu Dhabi’s Al-Dafra Solar Plant would be completed by 2023, and the contract for a third 1.5 GW photovoltaic solar facility at Ajban was underway. The UAE would be hosting COP 28 in Dubai in November–December 2023, which would take stock of the progress since the Paris Agreement towards limiting global warming by 1.5 degrees by 2030. Society The UAE hosts one of the most diverse demography in the world. Out of its population of about 10 million, over 88 per cent are non-Emiratis.115 This means Emirati citizens number only around 120,000 or 11.6 per cent of the total resident population. In addition to Emiratis, among the nationalities present in the country are Indians who make up about 38 per cent, Bangladeshis, Egyptians and Pakistanis at about 9–10 per cent each and Filipinos at 6 per cent. Besides, many other groups of expatriates, including Europeans and Africans of different nationalities, Americans and Northeast and Southeast Asians, Afghans and others reside and work in the country. There is a religious diversity as well, with Muslims constituting the majority at 76 per cent, Christians at around 9 per cent, and the remaining 15 per cent are Hindus, Buddhists, Sikhs, Druze, Jews

112 EIU, UAE country report January 2023 p. 28. 113 EIU, UAE country report January 2023 p. 28. 114 MEES, vol. 65, no. 41, 14 October 2022, p. 14. 115 CIA, “United Arab Emirates”, 21 June 2023, https://www.cia.gov/the-world-fac tbook/countries/united-arab-emirates/#people-and-society, accessed 26 June 2023.

362

MD. M. QUAMAR ET AL.

and others.116 Such diversity has allowed UAE to have a multicultural experience despite most residents belonging to the Arab and Muslim category. This has enabled the UAE taking the lead among the Gulf and Arab countries to introduce a more accommodative social and legal environment attractive for expatriates from across the world. Among the steps taken in 2022 was introducing new laws covering personal and civil matters whereby expatriates of non-Islamic faith can be covered under their respective religious or national laws.117 Additionally, the UAE has taken the lead in making its visa and labour regime more liberal and attractive. The new laws that came into effect in February 2022 are aimed at attracting the best place talents from across the world.118 Reforms are underway to attract talented individuals through a visa regime that offers long-term residency and other benefits.119 This also gives casual visitors to stay up to 60 days, doubling the time of their stay, to help them explore the economic opportunities the country offers. Simultaneously, the new labour laws have provisions for the Emiratisation of the workforce at one level, with the Nafees Award introduced to encourage the process.120 This aims to fill 75,000 private sector positions with Emirati citizens in the next five years. And the award, launched in December 2022, rewards the firms and individuals

116 Ibid. 117 Sharmila Dhal, “New Federal Personal Status Law takes effect in UAE on February

1: All you need to know”, Gulf News, https://gulfnews.com/uae/government/newfederal-personal-status-law-takes-effect-in-uae-on-february-1-all-you-need-to-know-1.935 52944, 31 January 2023, accessed 26 June 2023. 118 Pinsent Masons, “The new UAE Labour Law: what employers need to know”, 3 May 2022, https://www.pinsentmasons.com/out-law/guides/new-uae-labour-law-foremployers, accessed 26 June 2023. 119 Shaji Mathew, “UAE Cabinet Approves New Entry, Residence Scheme for Foreigners”, Bloomberg, https://www.bloomberg.com/news/articles/2022-04-18/uae-cabinetapproves-new-entry-residence-scheme-for-foreigners, accessed 26 June 2023. 120 Zawya, “Mansour bin Zayed launches NAFIS Award to recognise Emiratis and private companies that excel in Emiratisation”, 19 December 2022, https://www.zawya. com/en/press-release/people-in-the-news/mansour-bin-zayed-launches-nafis-award-torecognise-emiratis-and-private-companies-that-excel-in-emiratisation-knhfjt2l, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

363

who took efforts in helping to achieve the Emiratisation of the workforce.121 Alternatively, the firms can be penalised for failing to meet the required Emiratisation target. The condition of women in the country has been constantly improving, with the UAE authorities taking measures to increase their representation in public life. According to one media report, their representation in the formal workforce increased by 66 per cent as of 2022.122 Women’s participation in the private sector has also increased. The World Economic Forum’s Global Gender Gap Report, 2022 places the UAE at the top in terms of gender parity in the Arab world, which the government claims to reflect “a national commitment to empowering women across the public and private sectors.”123 Women have made major strides in achieving equity with men in education, governance, business and other sectors. While socio-economic indicators paint a rosy picture, international human rights organisations have found evidence of continued repression regarding media and political freedoms, underlining the regime of online and physical surveillance in the country.124 As of 2021, the UAE has an HDI score of 0.911 and ranks 26 globally and first among Arab states. It has a GDI score of 0.958 and a GII value of 0.049.125

121 Gillian Duncan, “UAE’s new labour law explained: all you need to know about the 2022 changes”, The National, 20 June 2022, https://www.thenationalnews.com/ uae/2022/06/20/uaes-new-labour-law-explained-all-you-need-to-know-about-the-2022changes/, accessed 26 June 2023. 122 Hudhaifa Ebrahim, “United Arab Emirates celebrates Emirati Women’s Day”, The Jerusalem Post, 29 August 2022, https://www.jpost.com/middle-east/article-715802, accessed 26 June 2023. 123 Embassy of the United Arab Emirates in Washington D.C., “Women’s Empowerment in the UAE”, https://www.uae-embassy.org/sites/default/files/inline-files/UAE% 20Embassy_Women%27s%20Empowerment_08-22.pdf, accessed 26 June 2023. 124 Human Rights Watch (HRW), “United Arab Emirates: Events of 2022, https:// www.hrw.org/world-report/2023/country-chapters/united-arab-emirates#3775af, accessed 26 June 2023. 125 UNDP, Human Development Reports, “United Arab Emirates”, https://hdr.undp. org/data-center/specific-country-data#/countries/ARE, accessed 26 June 2023.

364

MD. M. QUAMAR ET AL.

Bilateral Relations Indo-UAE relations have flourished over the years, and several notable developments took place in 2022 in political, diplomatic, security, economic and cultural realms that are likely to strengthen the ties further and advance the realisation of the bilateral strategic partnership. India and the UAE have been foraying into developing multilateral partnerships with other regional and extra-regional countries to tackle emerging challenges with a focus on issues such as food and energy security, sustainable development, connectivity, boosting trade and development and tackling the problems of climate change and global warming. There are further efforts to boost the India–UAE partnership in areas such as space exploration, defence manufacturing, Artificial Intelligence, cybersecurity and business start-ups. In March 2022, the two countries signed a comprehensive strategic partnership agreement to take the bilateral trade to US$100 billion in five years.126 Politics and Security In January 2022, India faced a peculiar situation when the Houthi rebels in Yemen hijacked a UAE-flagged ship, with seven Indian sailors, heading towards the Hodeida Port. Given that India does not recognise the Houthis-run government nor does it have any direct contact with the rebel groups, the fate of Indian sailors hanged in the balance. New Delhi began a multi-national effort to get the sailors home and engaged with Saudi Arabia, UAE and Oman. On 11 January, the spokesperson of the Ministry of External Affairs, in response to media queries, underlined that India was closely monitoring the situation and has been in touch with the shipping company that employed the Indian nationals and as well as authorities in the UAE and other regional countries.127 The issue was 126 Kirtika Suneja, “India–UAE free trade pact comes into force”, The Economic Times, 1 May 2022, https://economictimes.indiatimes.com/news/economy/foreigntrade/india-uae-free-trade-pact-comes-into-force/articleshow/91236888.cms, accessed 26 June 2023. 127 GoI, MEA, “Official Spokesperson’s response to media queries on Indian sailors on the UAE flagged ship Rwabee seized by the Houthis”, 11 January 2022, https:// mea.gov.in/response-to-queries.htm?dtl/34750/Official_Spokespersons_response_to_m edia_queries_on_Indian_sailors_on_the_UAE_flagged_ship_Rwabee_seised_by_the_Hou this, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

365

finally resolved when the sailors were released with the help of Omani interlocutors in April soon after the Yemeni ceasefire came into force on 2 April.128 After the drone attack son 17 January, in which two Indian nationals had been killed at an ADNOC oil facility in Abu Dhabi, External Affairs Minister S. Jaishankar held a telephonic conversation with the Emirati Foreign Minister Abdullah bin Zayed and condemned the attack. The two leaders discussed the security situation in the region, and the Emirati FM “conveyed the deepest condolences of the UAE Government on the death of two Indians. He assured that the UAE Government would extend the fullest support to the families of the deceased. His authorities are in continuous touch with the Indian Embassy in that regard.”129 The EAM “condemned the terror attack in the strongest terms…emphasised that… such an attack on innocent civilians was completely unacceptable and against all civilised norms” and “…appreciated the immediate assistance provided by UAE authorities to the Embassy in responding to this tragic situation.”130 On 18 February, the India–UAE virtual summit was held by Prime Minister Narendra Modi, and the then de facto ruler Mohammed bin Zayed. In his opening remarks, the prime minister appreciated the UAE for successfully organising the Expo 2020 despite the Covid-19 challenges and underlined the continued commitment of the two countries to expand bilateral trade, economic and investment ties.131 The virtual summit focused on important bilateral, regional and international issues,

128 The Hindu, “India thanks Oman, other parties concerned on release of seven Indians in Yemen”, 25 April 2022, https://www.thehindu.com/news/national/indiathanks-oman-other-parties-concerned-on-release-of-seven-indians-in-yemen/article65353 654.ece, accessed 26 June 2023. 129 GoI, MEA, “Telephonic conversation between External Affairs Minister Dr. S. Jaishankar and Foreign Minister of UAE HH Sheikh Abdullah bin Zayed Al Nahyan”, 18 January 2022, https://mea.gov.in/press-releases.htm?dtl/34758/Telephonic_conv ersation_between_External_Affairs_Minister_Dr_S_Jaishankar_and_Foreign_Minister_of_ UAE_HH_Sheikh_Abdullah_bin_Zayed_Al_Nahyan, accessed 26 June 2023. 130 Ibid. 131 GoI, MEA, “English translation of Opening Remarks by Prime Minister, Shri

Narendra Modi at the India–UAE Virtual Summit”, 18 February 2022, https://mea. gov.in/Speeches-Statements.htm?dtl/34878/English_translation_of_Opening_Remarks_ by_Prime_Minister_Shri_Narendra_Modi_at_the_IndiaUAE_Virtual_Summit, accessed 26 June 2023.

366

MD. M. QUAMAR ET AL.

and the two leaders discussed the “historic and friendly relations between the two countries, at a time when India is celebrating 75 years of its Independence as Azadi Ka Amrit Mahotsav and UAE is celebrating the 50th anniversary of its foundation.”132 Trade and commercial relations featured prominently in the discussions.133 The two sides released a joint vision statement underlining the future direction of the bilateral ties.134 Among other documents signed or released during the day were the Comprehensive Economic Partnership Agreement (CEPA),135 MoU on India–UAE Joint Commemorative Stamp; MoU between APEDA, DP World and Al-Dahra for Cooperation in Food Corridor; and MoU for Mutual Cooperation between the International Financial Services Centres Authority (IFSCA), GIFT City and the Abu Dhabi Global Market Financial Services Regulatory Authority (FSRA).136 India and UAE held consultations on UN issues on 26 April 2022 in Abu Dhabi and “exchanged views on priority areas during their ongoing UNSC tenure. In keeping with their Comprehensive Strategic Partnership, they agreed to work closely together on key issues on the UNSC agenda, on their shared commitment to reformed multilateralism and counter-terrorism.” Further, the Indian side “congratulated UAE on its successful Presidency of the UNSC in March 2022. Both sides welcomed their convergences and mutual support on multilateral issues.”137 After 132 GoI, MEA, “India–UAE Virtual Summit 16 February 2022”, 16 February 2022, https://mea.gov.in/press-releases.htm?dtl/34870/IndiaUAE_Virtual_Summit_16_ February_2022, accessed 26 June 2023. 133 Press Information Bureau (PIB), “India–UAE Virtual Summit”, 16 February 2022,

https://pib.gov.in/Pressreleaseshare.aspx?PRID=1799087, accessed 26 June 2023. 134 GoI, MEA, “Joint India–UAE Vision Statement—Advancing the India–UAE Comprehensive Strategic Partnership: New Frontiers, New milestones”, 18 February 2022, https://www.mea.gov.in/bilateral-documents.htm?dtl/34877/Joint_IndiaUAE_Vis ion_Statement__Advancing_the_IndiaUAE_Comprehensive_Strategic_Partnership_New_ Frontiers_New_milestones, accessed 26 June 2023. 135 GoI, MEA, “India–UAE Virtual Summit 18 February 2022”, 18 February 2022, https://mea.gov.in/press-releases.htm?dtl/34879/IndiaUAE_Virtual_Summit_18_ February_2022, accessed 26 June 2023. 136 GoI, MEA, “List of documents launched/signed during the India–UAE Virtual Summit”, 18 February 2022, https://mea.gov.in/bilateral-documents.htm?dtl/34880/ List_of_documents_launchedsigned_during_the_IndiaUAE_Virtual_Summit, accessed 26 June 2023. 137 GoI, MEA, “India–UAE Consultations on UN Issues”, 26 April 2022, https:// mea.gov.in/press-releases.htm?dtl/35234/IndiaUAE_Consultations_on_UN_Issues,

9

UNITED ARAB EMIRATES

367

the demise of Sheikh Khalifa on 13 May, India declared a day of mourning the following day138 and the Indian national flag was flown at half-mast across the country; President Ram Nath Kovind and Prime Minister Modi expressed their condolences to the ruling family and the people of UAE, noting the contributions of the “visionary leader” towards “strengthening of India–UAE bilateral relations and the welfare of the Indian community in UAE.”139 On 14 May, Vice-President Shri Venkaiah Naidu visited the UAE to convey the condolences of the president and the people of India and conveyed the best wishes to Mohammed bin Zayed upon his election as the next president of UAE.140 EAM Jaishankar visited the Embassy of the UAE in New Delhi to record his condolences. On 28 June, Prime Minister Modi visited the UAE while returning from the G7 summit in Krün, Germany and met with President MbZ. This was the first meeting between the two leaders after the latter took over the presidency. According to the MEA, the primary purpose of the meeting was to convey personal condolences on the demise of Abu Dhabi’s ruler and Emirati president in May. Modi “conveyed his heartfelt condolences” to President MbZ and family members, including NSA Tahnoun bin Zayed, Deputy Prime Minister Mansour bin Zayed and MD of Abu Dhabi Investment Authority (ADIA) Hamed Bin Zayed and Foreign Minister Abdullah Bin Zayed.141 Modi also congratulated MbZ on his election as the President of the UAE, and the two leaders

accessed 26 June 2023. 138 GoI, MEA, “India declares one-day national mourning on demise of President of the UAE and Ruler of Abu Dhabi”, 13 May 2022, https://mea.gov.in/press-releases. htm?dtl/35304/India_declares_oneday_national_mourning_on_demise_of_President_of_ the_UAE_and_Ruler_of_Abu_Dhabi, accessed 26 June 2023. 139 Ibid. 140 GoI, MEA, “Vice President of India visited the UAE to convey condolences on

passing away of HH Sheikh Khalifa bin Zayed Al Nahyan”, 15 May 2022, https:// mea.gov.in/press-releases.htm?dtl/35309/Vice_President_of_India_visited_the_UAE_to_ convey_condolences_on_passing_away_of_HH_Sheikh_Khalifa_bin_Zayed_Al_Nahyan, accessed 26 June 2023. 141 GoI, MEA, “Meeting between Prime Minister and President of the UAE and Ruler of Abu Dhabi His Highness Sheikh Mohamed bin Zayed Al Nahyan”, 28 June 2022, https://mea.gov.in/press-releases.htm?dtl/35457/Meeting_between_Prime_Min ister_and_President_of_the_UAE_and_Ruler_of_Abu_Dhabi_His_Highness_Sheikh_Moh amed_bin_Zayed_Al_Nahyan, accessed 26 June 2023.

368

MD. M. QUAMAR ET AL.

exchanged views on several important bilateral, regional, international and multilateral issues, including the signing of the CEPA. During 31 August-1 September, EAM Jaishankar visited the UAE to co-chair the 14th India–UAE Joint Commission Meeting (JCM) and 3rd India–UAE Strategic Dialogue. These meetings are part of the regular official-level exchanges to review the progress in bilateral relations and to discuss plans for the future. The 14th JCM took stock of “the ongoing discussions between the two sides in the area of food security, including in the I2U2 framework”142 and the ministers “expressed happiness at the forward movement in healthcare and education cooperation,” underlining the prospects for joint work on the sector in third countries. In this regard, they recalled a “team consisting of both government and private sector representatives from India and UAE visited Kenya and Tanzania recently to identify opportunities for joint projects in the health sector.”143 The JCM discussed establishing an IIT in UAE expressing hope that the joint working group would chart out a plan soon. Among other issues discussed were the “importance of promoting start-ups and entrepreneurship in different fields such as fintech, edutech, healthtech, agritech, logistics and supply chains.”144 Two MoUs on wildlife conservation and cultural cooperation were also signed during the JCM. On 21–22 November 2022, Emirati Abdullah bin Zayed visited New Delhi, met with EAM Jaishankar, and held talks on the progress of bilateral ties as part of the regular diplomatic and political consultation.145 The focus of the discussion was on taking stock of the progress in CEPA and also of overall trade, investments and commercial relations.146 Earlier on 14 July, the first I2U2 leadership summit took place virtually and was 142 GoI, MEA, “14th India–UAE Joint Commission Meeting”, 2 September 2022, https://mea.gov.in/press-releases.htm?dtl/35669/14th_IndiaUAE_Joint_Commiss ion_Meeting, accessed 26 June 2023. 143 Ibid. 144 Ibid. 145 GoI, MEA, “Visit of Foreign Minister of the United Arab Emirates to India (21-22 November 2022)”, 21 November 2022, https://mea.gov.in/press-releases.htm? dtl/35907/Visit_of_Foreign_Minister_of_the_United_Arab_Emirates_to_India_2122_Nov ember_2022, accessed 26 June 2023. 146 GoI, MEA, “External Affairs Minister meets Foreign Minister of UAE”, 22 November 2022, https://mea.gov.in/press-releases.htm?dtl/35912/External_Affairs_M inister_meets_Foreign_Minister_of_UAE, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

369

attended by Prime Minister Modi, President MBZ, Israeli Prime Minister Yair Lapid and President Joe Biden of the US. The leaders discussed “possible joint projects within the framework of I2U2 as well as the other common areas of mutual interest to strengthen the economic partnership in trade and investment…” with projects that “can serve as a model for economic cooperation and offer opportunities for our businesspersons and workers.”147 On 28 July, India–UAE–France trilateral was held in New Delhi to discuss various important issues of mutual interest and the sides “exchanged perspectives on the Indo-Pacific region and explored the potential areas of trilateral cooperation including Maritime Security, Humanitarian Assistance and Disaster Relief (HADR), Blue Economy, Regional Connectivity, Cooperation in Multilateral Fora, Energy and Food Security, Innovation and Start-ups, Supply Chain Resilience and Cultural and People-to-People Cooperation.”148 The UAE was among the Gulf countries that issued a statement condemning the derogatory comments by the ruling Bharatiya Janata Party (BJP) spokesperson during a live television broadcast. The Ministry of Foreign Affairs and International Cooperation of the UAE “underscored the need to respect religious symbols and not violate them, as well as confront hate speech and violence. The Ministry also noted the importance of strengthening the shared international responsibility to spread the values of tolerance and human coexistence while preventing any practices that would inflame the sentiment of followers of different religions.”149 The row, however, did not significantly damage bilateral relations as the BJP and the Government of India responded swiftly and underlined their commitment towards respect for all faiths. The fact that soon after the row, Prime Minister Modi visited the UAE underlined the continuing confidence among the Indian and Emirati leaders in

147 GoI, MEA, “First I2U2 (India-Israel-UAE-USA) Leaders’ Virtual Summit”, 12 July 2022, https://mea.gov.in/press-releases.htm?dtl/35489/First_I2U2_IndiaIsraelUA EUSA_Leaders_Virtual_Summit, accessed 26 June 2023. 148 GoI, MEA, “Meeting of Focal Points of India, France and UAE”, 28 July 2022, https://mea.gov.in/press-releases.htm?dtl/35562/Meeting_of_Focal_Points_ of_India_France_and_UAE, accessed 26 June 2023. 149 United Arab Emirates, Ministry of Foreign Affairs, “UAE condemns statements insulting the Prophet in India”, 6 June 2022, https://www.mofaic.gov.ae/en/mediahub/ news/2022/6/6/06-06-2022-uae-india, accessed 26 June 2023.

370

MD. M. QUAMAR ET AL.

maintaining high-level contacts and strengthening strategic relations.150 Several other high-level political visits were exchanged during the year, including by Chief Minister of Kerala Pinarayi Vijayan,151 Minister of Environment, Forest and Climate Change Bhupendra Yadav in May152 and again in September153 and by Petroleum Minister Hardeep Puri in October.154 India and UAE have developed a robust security partnership in counter-terrorism, maritime security, military-to-military ties and defence sales and production. During the India–UAE virtual summit in February, the two sides agreed to enhance their maritime security cooperation and jointly fight cross-border terrorism.155 In March, a delegation of the UAE-armed forces came to India for a six-day visit; the first Armyto-Army Staff Talks (AAST) was held in Pune, focusing on enhancing cooperation between the two armies and holding joint exercises. The delegation visited many military institutes, including the School of Artillery in Nashik, Armoured Corps Centre and School and Mechanised Infantry Centre and School in Ahmednagar, the National Defence Academy, Command Hospital, Southern Command, Army Institute of

150 Shubhajit Roy, “After Prophet row, PM meets UAE President, both underline ties”, The Indian Express, 29 June 2022, https://indianexpress.com/article/india/pm-modiuae-president-sheikh-mohamed-abu-dhabi-7996962/, accessed 26 June 2023. 151 Sajila Saseendran, “Kerala chief minister Pinarayi Vijayan arrives in UAE ahead of Kerala Week at Expo 2020 Dubai”, Gulf News, 29 January 2022, https://gul fnews.com/uae/kerala-chief-minister-pinarayi-vijayan-arrives-in-uae-ahead-of-kerala-weekat-expo-2020-dubai-1.85292594, accessed 26 June 2023. 152 PIB, “Union Minister Bhupender Yadav meets with H.E. Dr Sultan Al Jaber, UAE Climate Envoy and Minister of Industry and Advanced Technology”, 26 May 2022, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1828542, accessed 26 June 2023. 153 PIB, “Union Minister of Environment, Forest and Climate Change participates in the Ministerial Roundtable for Green Economy, World Green Economy Summit, UAE”, 28 September 2022, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=186 2958, accessed 26 June 2023. 154 The Indian Express, “India, UAE armies hold talks in Pune to enhance cooperation”, 28 March 2022, https://indianexpress.com/article/cities/pune/india-uae-armieshold-talks-in-pune-to-enhance-cooperation-7838240/, accessed 26 June 2023. 155 Dipanjan Roy Chaudhury, “India, UAE agree to jointly fight terror, enhance maritime security coop”, The Economic Times, 19 February 2022, https://economict imes.indiatimes.com/news/economy/foreign-trade/india-uae-agree-to-jointly-fight-terrorenhance-maritime-security-coop/articleshow/89672735.cms, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

371

Physical Training, Military Intelligence School and Depot and College of Military Engineering in Pune.156 On 25 May, the 11th India–UAE Joint Defence Cooperation Committee (JDCC) meeting was held in New Delhi and it “reviewed the progress made in military-to-military engagements, including joint exercises, expert exchanges, industry cooperation and cooperation in the field of research and development” and “decided to identify new avenues and examine areas of mutual interest for Joint Venture to enhance defence industry cooperation.”157 In October, media reports suggested that the UAE firm Caracal has “lost out on a mega deal to deliver close-quarter battle (CQB) carbines to the Army despite emerging as the lowest bidder, (and) has tied up with an Indian company to produce its portfolio of small arms via the ‘Make in India’ route.”158 Trade and Commerce India was the UAE’s second largest non-oil trading partner after China in 2021, with a share of 9.21 per cent. In 2022, it was the leading export destination and the second largest source of imports for the Emirates (Table 9.3). The UAE was India’s third largest trading partner after the US and China in 2022–2023. It was India’s second-largest source of imports and the second largest export destination. Figure 9.1 shows India’s bilateral trade with the UAE since 2016. Total bilateral trade increased from US$72.88 billion in 2021–2022 to US$84.84 billion and 2022–2023. India’s total exports to the UAE increased from US$28.05 billion in 2021–2022 to US$31.61 billion in 2022–2023. Its

156 The Indian Express, “India, UAE armies hold talks in Pune to enhance cooperation”, 28 March 2022, https://indianexpress.com/article/cities/pune/india-uae-armieshold-talks-in-pune-to-enhance-cooperation-7838240/, accessed 26 June 2023. 157 PIB, “Defence Secretary & Chief of Force Development Authority at MoD, UAE discuss ways to enhance defence cooperation”, 25 May 2022, https://www.pib.gov.in/ PressReleasePage.aspx?PRID=1828195, accessed 26 June 2023. 158 Snehesh Alex Philip, “UAE firm ties up with Indian company to sell rifles after losing out on Army’s mega carbine deal”, The Print, 19 October 2022, https://theprint.in/defence/uae-firm-ties-up-with-indian-company-to-sellrifles-after-losing-out-on-armys-mega-carbine-deal/1174023/, accessed 26 June 2023.

372

MD. M. QUAMAR ET AL.

imports increased from US$44.83 billion in 2021–2022 to US$53.23 in 2022–2023. India had a trade deficit of 21.6 billion in 2022–2023.159 The India–UAE CEPA that came into effect on 1 May 2022 is one of the most important free trade agreements (FTA) signed by India in recent years. The CEPA is expected to significantly enhance bilateral trade and business between the two countries. India has been for long trying to have an FTA with the GCC and the India–UAE CEPA has revived the interest in the India–GCC FTA. About 90 per cent of Indian exports benefited immediately from duty concessions and included items like gems and jewellers, electronics and mechanical machinery and appliances, textiles and agricultural goods like tea, coffee, sugar, spices, edible vegetables,

Fig. 9.1 India’s trade with UAE, 2016–2022 (Source Compiled from GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

159 GoI, Directorate General of Foreign Trade, Department of Commerce, Ministry of Commerce and Industry, https://tradestat.commerce.gov.in/eidb/iecnttopn.asp, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

373

etc. Oil is not part of the CEPA. Several sectors that benefited from increasing exports under the FTA were labour intensive with consequent impact on job opportunities. Indian exporters increasingly utilised the FTA, as evidenced by a significant increase in certificates of origin (COO) from about 415 in May 2022 to 8,440 in March 2023.160 About 54,000 COO were issued under FTA between May 2022 and March 2023.161 There were about US$11.49 billion in re-exports in the bilateral trade with UAE.162 One of the major gainers of the CEPA was India’s gold exports which jumped by 42 per cent in the first two months of the FTA coming into effect in May.163 India got zero duty access to the UAE market and allowed one per cent duty concession on gold imports from UAE up to 200 tons of shipment. Pharmaceuticals received particular emphasis in the CEPA and were incorporated as a separate annexure to facilitate market access for Indian pharmaceutical products in the UAE market. Indian pharmaceutical products approved by developed countries regulators like the US, UK, the EU and Japan would get automatic registration and marketing authorisation in 90 days.164 The top five import items from the UAE were petroleum crude, petroleum products, pearls, precious stones and metals, gold and aircraft and space crafts (Fig. 9.2). The top five items of India’s exports to the UAE in 2022–2023 were petroleum products, gold and other precious metals and stones, telecom instruments, pearl and semi-precious stones

160 Melissa Cyrill, “India’s Exports to UAE Reached US$31.3 Bn in FY23: One Year Anniversary of CEPA”, India Briefing, 1 May 2023, https://www.india-briefing.com/ news/indias-exports-to-the-uae-reach-new-high-with-us32-billion-projection-in-fy202223-27504.html/, accessed 26 June 2023. 161 Ibid. 162 UAE, Ministry of Energy, https://www.moec.gov.ae/en/international-trade-map,

accessed 26 June 2023. 163 GoI, Department of Commerce, Twitter, “India’s Gold Jewellery exports to the #UAE rose by a sharp 42 per cent in two months of a free trade pact coming into effect in May. #IndiaUAECEPA”, 5:04 PM, 24 August 2022, https://twitter.com/DoC_GoI/ status/1562403086702084098, accessed 26 June 2023. 164 The Economic Times, “UAE supports India’s ambition of 450 GW of renewable energy by 2030: Official”, 25 January 2023, https://energy.economictimes.indiatimes. com/news/renewable/uae-supports-indias-ambition-of-450-gw-of-renewable-energy-by2030-official/97294995, accessed 26 June 2023.

374

MD. M. QUAMAR ET AL.

and iron and steel (Fig. 9.3). The UAE is also India’s major transhipment hub. In October, UAE multi-national logistic company DP World offered a 60 per cent discount to Indian companies setting up operations in the Dubai Incubation Centre, the third largest export hub after Hong Kong and Singapore and about 10 per cent of the global trade passes through it.165 DP World had set up India Business Incubation Centre in 2020 as a gateway to the world market for Indian exporters. Besides, no corporate tax is levied on Indian companies in the India Business Incubation Centre.166 According to the Emirates Chamber of Commerce, about 11,000 new Indian companies were registered in Dubai.167 India and UAE are working towards simplifying custom procedures through a “green corridor” that digitally handles Indian exports in Abu Dhabi and Dubai before they can be ready for global markets.168 Indian companies have invested about US$85 billion in the UAE in various sectors.169 Many Indian companies have set up manufacturing units either as joint ventures or in Special Economic Zones for cement, building material, textiles, engineering products, consumer electronics, etc. India’s Reliance Industries is participating in a vital phase 1 petrochemical project in Ta’zis Ruwais. During the Abu Dhabi International Petroleum Exhibition and Conference, 2022 (ADIPEC), a joint venture

165 Rachayita Sidharth, “DP World opens the gates to its Dubai Incubation Centre for Indian Companies”, 12 October 2022, https://www.logisticsinsider.in/dp-world-opensthe-gates-to-its-dubai-incubation-center-for-indian-companies/, accessed 26 June 2023. 166 Invest India, Twitter, “The India–UAE delegation visited the Kenyatta National Hospital to understand its functioning and discuss areas of collaboration and support to provide state-of-the-art healthcare facilities to the people of Kenya”, 1:25 PM, 24 August 2022, https://twitter.com/investindia/status/1562347975375872003, accessed 26 June 2023. 167 Piyush Goyal, Twitter, “In this article jointly written with UAE Minister of State for Foreign Trade @ThaniAlZeyoudi, we highlight how the deal is a turning point in our economic ties & a model for cross-border collaboration”, 1:28 PM, 18 February 2023, https://twitter.com/PiyushGoyal/status/1626853523584602115, accessed 26 June 2023. 168 Rachayita Sidharth, “DP World opens the gates to its Dubai Incubation Center for Indian Companies”, 12 October 2022, https://www.logisticsinsider.in/dp-world-opensthe-gates-to-its-dubai-incubation-center-for-indian-companies/, accessed 26 June 2023. 169 Confederation of Indian Industry, “India & UAE Moving towards a Golden Era”, 24 May 2022, https://www.ciiblog.in/india-uae-moving-towards-a-golden-era/, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

375

Fig. 9.2 India’s top five import items from UAE, 2022–2023 (Source GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https://dashboard.commerce.gov.in/commercedashboard.aspx)

Fig. 9.3 India’s top five export items to UAE, 2022–2023 (Source GoI, Directorate General of Foreign Trade, Ministry of Commerce and Industry, https:// dashboard.commerce.gov.in/commercedashboard.aspx)

376

MD. M. QUAMAR ET AL.

incorporation agreement was signed for a US$2 billion ethylene dichloride (EDC), PVC production facility between India’s Reliance Industries and Abu Dhabi Chemicals Derivative Company RSC Ltd (TA’ZIS).170 Several trade and commerce promotion talks and exhibitions took place throughout the year. In August, about 200 delegates gathered in the UAE–India B2B meet in Dubai. Indian Minister of Ports, Shipping and Waterways Sarbananda Sonowal has a roundtable discussion with the heads of shipping companies in the UAE. The food sector has a huge potential to boost India–UAE economic cooperation. India Pavilion at Abu Dhabi International Food Exhibition displayed innovative and healthy millet-based food products by Indian companies. The Indian officials discussed with the UAE’s leading supermarket chains, for in-stall promotion of millets.171 During the first Summit of I2U2 in July, the UAE pledged US$2 billion to develop integrated food parks in India.172 Similarly, the Indian Embassy in the UAE and the Gems and Jewellery Export Promotion Council organised an international gems and jewellery show 2022 in Dubai in November 2022.173 The India–UAE joint delegation visited the national hospital in Kenya to discuss areas of collaboration in healthcare facilities in that country. Representatives of both countries also visited Tanzania to look into opportunities in healthcare.174 India’s representative from the Ministry of 170 Business Today, “Reliance signs shareholder agreement with TA’ZIS for $2 bn investment”, 26 April 2022, https://www.businesstoday.in/latest/corporate/story/reliancesigns-shareholder-agreement-with-tazis-for-2-bn-investment-331316-2022-04-26, accessed 26 June 2023. 171 PIB, “APEDA inks Memorandum of Understanding (MoU) with Lulu Hypermarket for export promotion of millets in GCC countries”, 24 February 2023, https://www.pib. gov.in/PressReleasePage.aspx?PRID=1902163, accessed 27 June 2023. 172 The Economic Times, “I2U2 summit: UAE to invest USD 2 billion to develop integrated food parks across India”, 14 July 2022, https://economictimes.indiatimes. com/industry/cons-products/food/i2u2-summit-uae-to-invest-usd-2-billion-to-developintegrated-food-parks-across-india/articleshow/92877369.cms, accessed 26 June 2023. 173 GJEPC, “GJEPC Along With The Embassy of India In UAE organises India Jewellery Exposition Centre (IJEX) BSM In Conjunction with IIJS Premiere 2022 Roadshow In Dubai”, 20 July 2022, https://gjepc.org/solitaire/gjepc-along-withthe-embassy-of-india-in-uae-organises-india-jewellery-exposition-centre-ijex-bsm-in-conjun ction-with-iijs-premiere-2022-roadshow-in-dubai/, accessed 27 June 2023. 174 Invest India, Twitter, “The High Commission of India, Tanzania hosted a business roundtable interaction for representatives from India and UAE to discuss and streamline the areas of cooperation to build and support Tanzania healthcare sector”, 5:03 PM, 23

9

UNITED ARAB EMIRATES

377

Information and Broadcasting participated in the global media congress in Abu Dhabi and highlighted opportunities in Indian media. Many Indian films are being made in Abu Dhabi. During the year, a proposal was discussed for IIT Delhi to partner Abu Dhabi Department of Education and Knowledge (ADEK) in setting up its campus in Abu Dhabi.175 Similarly, space partnerships were being explored as an important pillar in bilateral relations. India’s Minister of State in PMO Jitendra Singh addressed the Abu Dhabi Space Debate opening ceremony on 5 December and highlighted India’s role in promoting the benefits of space research to its neighbourhood and global South.176 There has been a growing complementarity in services, with the Emirates having a niche in travel and transport and India having competence in telecommunication, information technology and other business services. 177 In October, the first Joint Commission on Manpower was held in Dubai and discussed strengthening cooperation for greater mobility and facilitating the workforce. The 4th Joint Committee for counsellor affairs was held in October in Abu Dhabi to discuss issues that impact the people of both countries. The first ever India–UAE award was announced to honour companies that give consultancies to further India–UAE business.178 UAE was India’s seventh largest FDI investor, with a cumulative investment of about US$12.03 billion by the end of December 2022.179 August 2022, https://twitter.com/investindia/status/1562040442832572416, accessed 26 June 2023. 175 Business Today, “IIT-Delhi may establish campus in UAE: Education Ministry”, 2 August 2022, https://www.businesstoday.in/education/story/iit-delhi-may-establish-cam pus-in-uae-education-ministry-343450-2022-08-02, accessed 26 June 2023. 176 PIB, “Union Minister Dr Jitendra Singh describes India as a key Global Player in the Space sector and says, India is keen to take its Space cooperation with the UAE to newer heights”, 5 December 2022, https://pib.gov.in/PressReleaseIframePage.aspx? PRID=1880942, accessed 27 June 2023. 177 RBI, “Exploring India’s Export Potential through the Lens of Export Similarity Indices”, 22 May 2023, https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=21793, accessed 26 June 2023. 178 India Global Forum, Twitter, “The first-ever UAE-India Awards is all set to acknowledge the efforts of consultancies providing expert advice across sectors to propel business in the - corridor.”, 12:49 PM, 26 October 2022, https://twitter.com/IGFupd ates/status/1585169193053609985, accessed 26 June 2023. 179 Department for Promotion of Industry and Internal Trade (DPIIT), “Quarterly Fact Sheet: Fact Sheet On Foreign Direct Investment (FDI) Inflow”, December 2022, https://dpiit.gov.in/sites/default/files/FDI_Factsheet_December_2022.pdf, accessed 26

378

MD. M. QUAMAR ET AL.

During the year, India received about US$3.29 billion of FDI from the UAE (as against US$1 billion in 2021–2022), and the Emirates was fourth largest FDI investor during the year.180 The tenth India– UAE High-Level Joint Task Force on Investment was held in October in Mumbai. It was co-chaired by the Indian Minister of Commerce and Industry, Piyush Goyal, and Sheikh Hamad bin Zayed al-Nahyan, a member of the executive council of Abu Dhabi. It agreed to set up a fast track mechanism in UAE to help Indian businesses and investors. The Indians were among the major investors in the Emirates and had bought US$4.3 billion worth of real estate in 2022. The status of the India–UAE bilateral investment treaty (under negotiation) was considered to be satisfactory, and the emphasis was on developing single-window solutions and virtual trade corridors to reduce time and cost.181 In the India Business Forum organised by the Confederation of Indian Industry in Mumbai, the UAE delegates hailed India as an indispensable partner.182 Both sides agreed that the growing ties would be instrumental in navigating global challenges like climate change, sustainability, food, security, etc. In October 2022, a new temple was inaugurated in Dubai by Sheikh Nahyan bin Mubarak al-Nahyan, Minister of Tolerance and Coexistence and Sanjay Suri, India’s ambassador to the UAE. A massive Hindu temple is under construction in Abu Dhabi and scheduled to be completed in 2024.

June 2023. 180 RBI, “Annual Report”, 30 May 2023, https://rbi.org.in/scripts/AnnualReportPub lications.aspx?Id=1394, accessed 26 June 2023. 181 PIB, “Shri Piyush Goyal co-chairs 10th Meeting of the India–UAE High Level Joint Task Force on Investments along with His Highness Sheikh Hamed bin Zayed Al Nahyan, Member of the Executive Council of the Emirate of Abu Dhabi”, 11 October 2022, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=186 6716&RegID=3&LID=1, accessed 26 June 2023. 182 India in UAE, Twitter, “Dr @ThaniAlZeyoudi hails growing ties which will help both countries navigate global challenges globally during the #IndiaUAEBusinessForum in Mumbai. Calls India indispensable partner for the UAE”, 11:16 AM, 10 October 2022, https://twitter.com/IndembAbuDhabi/status/1579347499260968960, accessed 26 June 2023.

9

UNITED ARAB EMIRATES

379

Energy Ties The UAE was the fourth largest supplier of crude oil to India in 2022– 2023. India imported about US$16.84 billion in 2022–2023 against US$12.30 billion in 2021–2022 (Table 9.5). The share of UAE in India’s crude oil supply was about 10.38 per cent in 2022–2023. It was also the second largest supplier of petroleum products after Russia during the year, with a share of 19.61 per cent. Imports of petroleum products from the Emirates were about US$2.13 billion in 2022–2023. For the UAE, India was the third largest importer of crude oil.183 The UAE was the second largest supplier of hydrocarbon gases to India after Qatar, with a share of 22.26 per cent in 2022–2023. India imported about US$7.10 billion worth of hydrocarbon gases, including LNG and LPG. The Emirate’s share in India’s total Import of mineral fuels was about 10.62 per cent during the same period. Due to increasing prices of energy imports, the share of mineral fuels in India’s total imported from UAE increased from 45.32 in 2021–2022 to 52.05 per cent in 2022–2023. India also exports petroleum products to the UAE, which increased from US$5.70 billion in 2021–2022 to US$8.05 billion in 2022–2023. In November, a high-profile Indian delegation led by Minister of Petroleum and Natural Gas Hardeep Singh Puri attended the ADIPEC 2022 in Abu Dhabi. The delegation discussed investment opportunities in India’s oil and gas sector. The minister also met his Emirati counterpart and discussed further energy cooperation and pathways to clean energy transition. He also met the Minister of Industry and Advanced Technology and CEO of ADNOC, Sultan Ahmed al-Jaber and an MOU between ADNOC and Gail India was signed during the meeting.184 Investments in green energy start-ups have gained traction. Abu Dhabi Investment Authority and Mubadala have investments in India’s green

183 The Economic Times, “UAE supports India’s ambition of 450 GW of renewable energy by 2030: Official”, 25 January 2023, https://energy.economictimes.indiatimes. com/news/renewable/uae-supports-indias-ambition-of-450-gw-of-renewable-energy-by2030-official/97294995, accessed 26 June 2023. 184 Hardeep Singh Puri, Twitter, “Meeting my friend HE Sultan Ahmed Al Jaber,

Minister of Industry & Advanced Technology of UAE & MD & Group CEO of @ADNOCGroup & discussed ways to further our energy cooperation. An MoU between & ADNOC & @gailindia was also exchanged during the meeting”, 6:13 PM, 31 October 2022, https://twitter.com/HardeepSPuri/status/1587062703817826304, accessed 26 June 2023.

380

MD. M. QUAMAR ET AL.

Table 9.5 India’s energy trade with UAE, 2019–22 (US$ million)

Crude Oil Imports (HS 2709)

2019–2020

2020–2021

2021–2022

2022–2023

10,927.52 (10.64) 2,060.61 (26.20) 2,656.72 (15.19) 16,196.71 (10.54) 53.53

7,360.73 (12.38) 1,160.58 (20.09) 2,713.16 (17.34) 11,822.66 (11.86) 44.41

12,304.83 (10.05) 1,630.53 (16.32) 5,374.23 (20.34) 20,320.22 (10.43) 45.32

16,840.67 (10.38) 2,128.27 (19.61) 7,095.99 (22.26) 27,704.95 (10.62) 52.05

2,699.72 (10.66) 16.19

5,702.57 (8.55) 20.33

8,047.83 (8.34) 25.46

Petroleum Products Imports (HS 2710) Hydrocarbon Gases Imports (HS 2711) Total Mineral Fuel Imports from UAE (HS 27) Share of Mineral Fuel Imports in Total Imports from UAE (%) Petroleum Products Exports 5,564.68 (13.65) Share of Petroleum Products in 19.29 India’s Total Exports to UAE (%)

Source GoI, Ministry of Commerce and Industry, Department of Commerce, https://tradestat.com merce.gov.in/eidb/default.asp; * Figures in the bracket are per cent of India’s total import/export of that commodity

energy portfolio.185 India, the UAE and the US identified energy as one of the six key areas for joint investment under the I2U2 framework during their first Summit.186 The I2U2 agreed to advance a 300 MW hybrid renewable energy project in Gujarat comprising solar and wind energy. An MOU was signed in May between India’s Ministry of Environment Forest and Climate Change and the office of the UAE Special Envoy on Climate Change on Climate Action. It laid the foundation for streamlining the clean energy partnership in all aspects of the bilateral engagement. Both countries extended support to meet mutual renewable energy and carbon emission reduction targets.

185 Global SWF, “The Green March of India’s Billionaires: Sovereign Funds Join the Parade”, 12 October 2022, https://globalswf.com/news/the-green-march-of-india-s-bil lionaires-sovereign-funds-join-the-parade, accessed 26 June 2023. 186 PIB, “English translation of Address by Prime Minister Shri Narendra Modi at the I2U2 Summit”, 14 July 2022, https://pib.gov.in/PressReleaseIframePage.aspx?PRID= 1841490, accessed 27 June 2023.

9

UNITED ARAB EMIRATES

381

Cultural Relations and Expatriates India and UAE share strong cultural and civilisation bonds. About 3.5 million Indians reside in UAE, representing 25 per cent of all overseas Indian passport holders187 and as of December 2022 constitute the largest nationality in the Emirates. The increasing number of professional Indian expatriates in the Emirates also opened opportunities for collaboration in service sectors. Indian chartered accountants are among most successful businesspersons in the Emirates.188 Indian food products, films, music and dance forms, cuisine, clothing and other products are popular. According to the Indian Embassy in the UAE, the country is one of the world’s biggest markets for Bollywood films, and several local channels show Indian content in Arabic.189 In February 2022, India and UAE signed an MoU to establish an India–UAE Cultural Council.190 The vision statement released at the time underlined the need for greater cooperation in education, arts and music and dance. Besides, the UAE has become a major destination for Indian sports and recreational events. The UAE has a vibrant Indian community that has been active in promoting Indian culture, yoga, dance, music and sports.191 The new labour laws introduced in the UAE would benefit many Indians living there or aspiring to make a life there.192

187 Khaleej Times, Twitter, ““A total of 25 per cent of all Indian passport holders overseas reside in the UAE, which says a lot about our relationship,” added Mr Sunjay Sudhir”, 12:08 PM, 18 August 2022, https://twitter.com/khaleejtimes/status/156015 4253779410945, accessed 26 June 2023. 188 Prasar Bharati Dubai, Twitter, “Indian chartered accountants have now become

some of the most successful business leaders in the UAE.—@ThaniAlZeyoudi—Minister of State for Foreign Trade, UAE. “, 8:05 PM, 4 April 2023, https://twitter.com/Prasar_ Dubai/status/1643260894636392448, accessed 26 June 2023. 189 Embassy of India, Abu Dhabi, Dubai, “India–UAE cultural relations”, https://ind embassyuae.gov.in/cultural-relation.php, accessed 26 June 2023. 190 GoI, MEA, “List of documents launched/signed during the India–UAE Virtual Summit”, 18 February 2022, https://mea.gov.in/bilateral-documents.htm?dtl/34880/ List_of_documents_launchedsigned_during_the_IndiaUAE_Virtual_Summit, accessed 26 June 2023. 191 Embassy of India, Abu Dhabi, Dubai, “India–UAE Cultural Relations”, https:// indembassyuae.gov.in/cultural-relation.php, accessed 26 June 2023. 192 Biju Govind, “NRIs to benefit from UAE’s new policy on immigration”, The Hindu, 1 October 2022, https://www.thehindu.com/news/national/uae-to-revolutio nise-its-immigration-laws-from-october-3-nris-anticipate-benefits/article65958287.ece, accessed 26 June 2023.

382

MD. M. QUAMAR ET AL.

Challenges and Opportunities Indo-UAE relations have witnessed a significant growth in the last decade, especially in terms of political understanding, security cooperation and economic engagements and have transformed into a strategic partnership. Consistent political and diplomatic efforts and appreciation of mutual interests have elevated the relationship to newer heights. The signing of the CEPA is a landmark moment and will further strengthen bilateral trade, business and investments. Moreover, India and UAE have joined hands through minilaterals, such as I2U2 and India–UAE–France trilateral that could further expand their relations and work towards regional development. Nonetheless, there remain challenges as the pace and scope of realisation of potentials in terms trade, business and investments are way below expectations. This requires concerted efforts through G2G and B2B engagements. There are also opportunities in new and emerging areas, including space exploration, Artificial Intelligence, startups, education and cultural exchanges. Potentials in defence exports and manufacturing present newer opportunities that need greater efforts on part of the stakeholders in both the countries.

CHAPTER 10

Yemen

Key Information Political System: Republic; Government: De facto split into two led by Houthis and UN-recognised government based in Sana’a and Aden respectively; Ruling Parties/Groups: Presidential Leadership Council (PLC based in Aden) led by Chairman Rashad Muhammad al-Alimi (since 7 April 2022); Supreme Political Council (SPC based in Sana’a) led by Chairman Mahdi al-Mashat (since 19 April 2018); Prime Ministers: Maeen Abdulmalik Saeed (PLC) (since 18 October 2018) and AbdelAzis bin Habtour (SPC) (since 4 October 2016); National Day: 22 May; Parliament: 111-member nominated Majlis al-Shura (Consultative Council) and 301-memebr elected Majlis al-Nuwwab (House of Representatives); Last Parliamentary Election: 27 April 2003; Last Presidential Election: 21 February 2012; Major Parliamentary Group: NA; National Carrier: Yemenia. Socio-Economic Indicators Area: 527,968 sq. kms; Population: 32.98 million; Native: NA; Expats: NA; Religious Groups: Muslims 99% (Sunnis 65%, Zaydi Shias 35%), Others (Jews, Christians, Hindus and Baha’is) less than 1%; Age Structure: 0–14 Years 35.14%, 15–64 Years 61.52%, 65 Years and above 3.34%; Population Growth Rate: 2.1%; Life Expectancy

© Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_10

383

384

MD. M. QUAMAR ET AL.

at Birth: 64 Years; Major Population Groups: Yemeni Arabs, AfroArabs, South Asians and Europeans; Adult Literacy Rate (Age 15 and older): 70.1%; National Currency: Yemeni Rial (YER); GDP (US$ Current): US$21.61 billion; Foreign Trade: Exports—US$956.82 million, Imports—US$8.64 billion; Military Expenditure: 4–5% of GDP; External Debt: US$6.80 billion; GNI Per Capita (PPP, current international): $3,280; GDP Per Capita (PPP, current international): $3,437; Oil Reserves: 3 billion barrels (Rank 29th in world; 0.18% of world reserves); Gas Reserves: 17 tcf (Rank 31st in the world, 0.24% share of world); Human Development Index: 0.455; HDI Rank: 183 out of 189; Infant Mortality Rate (deaths per 1,000 live births): 45.54; Maternal Mortality Ratio (deaths per 100,000 live births): 183; UN Education Index: 0.350; Gender Development Index: 0.496; Gender Inequality Index: 0.820; Employment to Population Ratio (ages 15 and older): 33.1%; Labour Force: 7.3 million; Unemployment Rate: 13.57%; Urban Population: 39.8%; Rate of Urbanisation: 3.71% (2015–2020 estimates); Last National Census: 2004; World Press Freedom Index Rank: Rank 169 out of 180, Score 29.14; Corruption Perception Index: Rank 176 out of 180, Score 16; Foreign Direct Investment (Inflows): US$−370.98 million; Individuals Using Internet (per cent of population): 26.7%; Net Migration Rate (per 1,000 people): −29,998; Forest Area (per cent of Land Area): 1.0%; Carbon Dioxide Emissions (metric tons per capita): 0.4; Global Peace Index: Rank 162 out of 162, Score 3.407; Fintech Index: Not Ranked; Global Innovation Index: Rank 131 out of 132; Global Cybersecurity Index: NA. India Related Indian Cultural Centre: None; Number of Indians: 10,500; Currency Exchange Rate: 1 YER = INR 0.33; Number of Non-Muslim Places of Worship for Indians: Several old Hindu Temples in Aden and 4 Churches; Indian Schools: 1; Indian Banks: None (Bank of India has a branch incorporated into the National Bank of Yemen); Last Visit to India by the ruler: President Ali Abdullah Saleh (March 1999); Last Indian Prime Minister to Yemen: None since 1947. Sources: CIA World Factbook 2023; UN Development Programme 2023; World Bank 2023; World Intellectual Property Organisation 2023; Vision of Humanity, 2023; UNCTAD World Investment Report 2023,

10

YEMEN

385

Transparency International 2023; Reporters without Borders 2023; U.S. EIA 2023; Embassy of India, Yemen, 2023. ∗ ∗ ∗ The conflict in Yemen continued in 2022 despite the UN-mediated truce that came into effect for two months on 2 April and was renewed twice in June and August. A similar effort in October to extend the truce for six months could not materialise. The six months of halt in fighting between April and September did create a window of opportunity to address the humanitarian crisis and raised a possibility for negotiations. Fighting resumed in October, although the intensity and frequency were less compared to the situation between January and March, one of the war’s deadliest phases. During the year, the UAE-backed Southern Transition Council (STC) and its armed militia, Giants Brigades were actively engaged in combat with the Houthi fighters. Despite the six-month truce, the civilian casualties continued to rise. Given the conflict, Indian engagement with Yemen remained minimal. The hijacking of a UAE-flagged vessel in January, including seven Indian crew, raised concerns in New Delhi, leading to successful backchannel diplomacy through Oman for their release.

Domestic Developments The internal situation in Yemen remained marred in conflict, fighting and a serious humanitarian crisis. The biggest obstacle to peace is the inability of the warring Yemeni factions—the Houthi movement (Ansarallah), and the UN-recognised government and Southern Transition Council (STC)—to initiate direct talks. The Houthis have been running a parallel government in the north while the government and STC control most of the south and east. Hence, Yemen is de facto divided into North and South Yemen—reminiscent of the pre-1990 era. Besides, global terrorist organisations—Al-Qaeda and Islamic State (ISIS)—have been trying to get a foothold in the vast inhabited areas in the east, bringing back the

386

MD. M. QUAMAR ET AL.

memories of the late 1990s and early 2000s when Al-Qaeda in Arabian Peninsula was based in Yemen.1 The Houthi movement is led by Abdel Malik al-Houthi, who is recognised as the spiritual and political head of the quasi-state run by the movement. The National Salvation Government (NSG) was formed in August 2016 and is run by the Supreme Political Council (SPC). The Houthi movement formed the Supreme Revolutionary Council (SRC) in February 2015 after taking over Sana’a, and the SRC handed over power to SPC on 15 August 2016. Mahdi al-Mashat of the Houthi movement has headed the SPC since April 2018, while the NSG, which acts as the executive arm of the SPC, has been led by Abdel-Azis bin al-Habtour of the General People’s Congress (GPC) since 2016. Nonetheless, the political power is retained by the SPC. On the other hand, the UN-recognised government in Yemen was led by Abdrabbuh Mansur Hadi since 2012, but he was forced out in April 2022 with a Presidential Leadership Council (PLC) (headed by Rashad al-Alimi) taking over as the executive body. The PLC was formed at the behest of Saudi Arabia, and its formation was announced in Riyadh on 7 April. The PLC comprises eight members, including Alimi as chairman, who was earlier an advisor to President Hadi. Other members of the PLC are Tareq Saleh, Sultan al-Arada, Abu Zara’a al-Muharrami, Abdullah Bawazeer, Othman Megali, Aidarus al-Zoubaidi and Faraj al-Buhsani (Table 10.1). The transition of power from Hadi to the PLC did generate some hope for a united front among the UN-recognised government, the STC and other factions in the war-ravaged country against the Houthi movement.2 However, the PLC has remained far from united and has been marred by internal differences, with members prioritising their narrow agenda over consensus-building for a peaceful political solution.3 Thus, 1 International Crisis Group, “Yemen’s al-Qaeda: Expanding the base”, 2 February 2017, https://www.crisisgroup.org/middle-east-north-africa/gulf-and-arabian-peninsula/ yemen/174-yemen-s-al-qaeda-expanding-base, accessed 24 May 2023. 2 Ali al-Sakani, “Yemen inaugurates new presidential council”, Al-Jazeera, 19 April 2022, https://www.aljazeera.com/news/2022/4/19/yemen-inaugurates-new-pre sidential-council, accessed 17 April 2023. 3 Gregory D. Johnsen, “Shabwa and cracks in the foundation of Yemen’s Presidential Leadership Council”, The Arab Gulf States Institute in Washington, 19 August 2022, https://agsiw.org/shabwa-and-cracks-in-the-foundation-of-yemens-presid ential-leadership-council/, accessed 24 May 2023.

10

YEMEN

387

Table 10.1 Members of Yemen’s Presidential Leadership Council, April 2022 Name

Role

Affiliation/s

Rashad Muhammad al-Alimi Tareq Saleh

Chairman Member

Sultan Ali al-Arada

Member

Abed al-Rahman Abu Zara’a

Member

Abdullah al-Alimi Bawazeer

Member

Othman Hussein Megali

Member

Aidarus al-Zoubaidi Faraj Salim al-Buhsani

Member Member

Former Advisor to President Hadi A military commander and nephew of former president Ali Abdullah Saleh; represents National Resistance movement Member of Al-Islah Party and Governor of Marib; represents Sunni Tribes from oil-rich central region Member of STC and leader of its armed wing Giants Brigades Al-Islah Party; was a close aide of Hadi Tribal leader from Sa’dah governorate; former lawmaker Commander of STC Former Governor of Hadramout

Source Saeed al-Batati, “In a rare session in Aden, Yemen’s parliament approves new leadership council, government,” Arab News, 19 April 2022, https://www.arabnews.com/node/2066471/mid dle-east, accessed 17 April 2023

Yemen remains a casualty of internal factionalism and war, with the civil war continuing unabated and worsening the humanitarian situation. The Conflict Violence escalated in Yemen in January 2022 and continued to rage until the UN-mediated ceasefire came into effect on 2 April. The Giants Brigade launched “Operation Southern Cyclone” against the Houthis in the Shabwa governorate, supported by Saudi-led airstrikes after Anwar alAwlaqi of the STC was appointed governor.4 Within days, Awlaqi claimed that the STC had taken control of the governorate from the Houthi

4 Al-Arabiya, “Shabwa…The coalition carries out 28 targets in 24 hours”, 2 January

2022, https://www.alarabiya.net/arab-and-world/yemen/2022/01/02/%D8%B4%D8% A8%D9%88%D8%A9-%D8%A7%D9%84%D8%AA%D8%AD%D8%A7%D9%84%D9%81-% D9%8A%D9%86%D9%81%D9%91%D8%B0-28-%D8%A7%D8%B3%D8%AA%D9%87%D8% AF%D8%A7%D9%81%D8%A7%D9%8B-%D8%A8%D9%80-24-%D8%B3%D8%A7%D8%B9% D8%A9, accessed 24 May 2023.

388

MD. M. QUAMAR ET AL.

movement.5 Independent sources confirmed that the Giants Brigades have at least taken over two districts—Usaylan and Bayhan.6 With the escalation in violence, the Houthi militias hijacked a UAE-flagged cargo ship off the coast of Hodeida Port on 2 January.7 While Saudi Arabia, the UAE, Yemeni government accused the Houthi movement of piracy, claiming the ship contained medical supplies, the Houthis alleged that the ship was carrying weapons, hence was taken over by their forces.8 Violence continued to escalate for weeks, with several Saudi-led air strikes targeting Houthi-held areas to help the ground offensive of the government and STC forces. On the other hand, Houthis relentlessly targeted southern regions in Saudi Arabia by drones.9 With UAE’s increased role in Yemen, the Houthis launched drone strikes at various places inside the UAE in January–February. On 17 January, a drone attack at an ADNOC storage facility led to a blast in which three workers—two Indians and a Pakistani—were killed.10 A simultaneous attack at an underconstruction facility inside the Abu Dhabi international airport premises led to a fire without any casualty.11 Emirati and American security agencies later reported intercepting and destroying three more Houthi drone

5 Samy Magdy, “Yemeni government says southern province retaken from rebels”, AP News, 11 January 2022, https://apnews.com/article/middle-east-iran-saudi-arabiayemen-houthis-66733bc7ada63559212b9efebb2606da, accessed 24 May 2023. 6 Armed Conflict Location & Event Data Project (ACLED), “Regional Overview: Middle East 11 December 2021–7 January 2022”, 13 January 2022, https://acleddata.com/2022/01/13/regional-overview-middle-east-11-december2021-7-january-2022/, accessed 24 May 2023. 7 Reuters, “Yemeni Houthis hijack UAE-flagged cargo ship—Al Arabiya”, 3 January 2022, https://www.reuters.com/world/middle-east/yemeni-houthis-hijack-uaeflagged-cargo-ship-al-arabiya-2022-01-03/, accessed 24 May 2023. 8 Yemen Press Agency, “Sanaa broadcasts audio and video scenes about the military equipment of the seized Emirati ship”, 3 January 2022, https://www.ypagency.net/ 421413, accessed 24 May 2023. 9 ACLED, “Regional overview: Middle East 11 December 2021–7 January 2022”,

13 January 2022, https://acleddata.com/2022/01/13/regional-overview-middle-east11-december-2021-7-january-2022/, accessed 24 May 2023. 10 Al-Jazeera, “Timeline: UAE under drone, missile attacks”, 3 February 2022, https://www.aljazeera.com/news/2022/2/3/timeline-uae-drone-missile-attacks-houthisyemen, accessed 24 May 2023. 11 Ibid.

10

YEMEN

389

and missile attacks.12 The attacks led to retaliatory air strikes by Saudiled forces on 18 January on a Houthi camp in Sana’a, where 12 people were reportedly killed. A bomb explosion on 21 January was reported in a detention centre in the Houthi stronghold Saada Province in the northwest, where over 90 people died.13 The Houthis alleged that a Saudi air strike caused the explosion in Saada, although this was denied by Riyadh.14 A simultaneous strike on a telecommunication building in Hodeida led to an internet blackout across Yemen.15 With the escalation in retaliatory violence, January 2022 was one of the deadliest months in the ongoing civil war, with nearly 600 civilian casualties reported.16 Attacks continued in February and March, leading to stepped-up efforts by the UN Secretary General’s Special Envoy on Yemen, Hans Grundberg, for a ceasefire and political negotiations. On 15 February, while briefing the Security Council, Grundberg announced a new framework with a multi-track process for political, security and economic matters towards finding a resolution.17 The special envoy also underlined the urgent need for de-escalation. In conjunction with the UN-led efforts and for a ceasefire during the Holy month of Ramadan, Saudi Arabia called for a GCC-led summit meeting with all Yemeni factions between 29 March and 7 April.18 While the GCC member states and other Yemeni 12 Ibid. 13 Ibid. 14 Reuters, “Saudi-led coalition denies targeting detention centre in Yemen’s Saada”, 22 January 2022, https://www.reuters.com/world/middle-east/saudi-led-coalition-den ies-targeting-detention-centre-yemens-saada-2022-01-22/, accessed 24 May 2023. 15 Celine Alkhaldi and Mostafa Salem, “Airstrikes kill 70 people and knock out internet in Yemen”, CNN , 21 January 2022, https://edition.cnn.com/2022/01/21/middleeast/ yemen-detention-strike-internet-outage-intl/index.html, accessed 24 May 2023. 16 Save the Children, “Yemen: January deadliest month since 2018 with one civilian killed or injured every hour”, 11 February 2022, https://www.savethechildren.org/ us/about-us/media-and-news/2022-press-releases/yemen-january-deadliest-month-since2018, accessed 24 May 2023. 17 Office of the Special Envoy of the Secretary-General for Yemen (OSESGY), “Briefing to United Nations Security Council by the special envoy for Yemen, Hans Grundberg”, 15 February 2022, https://osesgy.unmissions.org/briefing-united-nations-securitycouncil-special-envoy-yemen-hans-grundberg-1, accessed 24 May 2023. 18 Azis El Yaakoubi, “GCC officials consider inviting Yemen Houthis to consultations in Riyadh”, US News, 15 March 2022, https://www.usnews.com/news/world/articles/ 2022-03-15/exclusive-gcc-officials-consider-inviting-yemen-houthis-to-consultations-inriyadh, accessed 24 May 2023.

390

MD. M. QUAMAR ET AL.

factions met and talked, the Houthis rejected the call stating their aversion to attending any meeting in Riyadh and calling for a neutral venue for any meaningful dialogue.19 Houthi leader Abdel Malik underlined in a televised speech that Saudi Arabia should first show its commitment towards a truce by withdrawing the siege over Sana’a airport and ports. On the first day of the summit meeting on 29 April, the Saudi Arabialed coalition announced a unilateral ceasefire and halting of hostilities to facilitate peace negotiations in view of the beginning of Ramadan.20 Eventually, on 2 April, the Houthis and the Yemen government entered a two-month ceasefire with the agreement of “A halt to the fighting, coupled with the entry of fuel ships, and the easing of restrictions on the movement of people and goods in, out and within the country, will contribute to building trust and creating a conducive environment to resume negotiations for a peaceful settlement of the conflict.”21 Among the modalities agreed included adherence to a complete ceasefire between 2 April and 2 June; freezing all current military positions and stalling all military, aerial and maritime offensive; entry for 18 fuel ships to Hodeida port within the two months to ease the fuel shortage in Houthi-held areas; movement of flights in and out of the Sana’a airport to Jordan and Egypt; and talks to reopen roads in Tais and other governorates.22 The parties agreed to renew the truce twice on 2 June and 2 August, but another attempt to have a six-month truce on 2 October failed.23

19 Al-Jazeera, “Gulf states hold Yemen talks despite boycott by the Houthis”, 29 March

2022, https://www.aljazeera.com/news/2022/3/29/gulf-states-to-hold-yemen-talks-des pite-boycott-by-houthi-rebels, accessed 24 May 2023. 20 Jon Gambrell, “Saudi-led coalition to halt fighting in Yemen to jump-start peace

talks”, Los Angeles Times, 29 March 2022, https://www.latimes.com/world-nation/ story/2022-03-29/saudi-led-coalition-to-halt-fighting-in-yemen-to-jump-start-peace-talks, accessed 24 May 2023. 21 UN News, “UN welcomes announcement of two-month truce in Yemen”, 1 April 2022, https://news.un.org/en/story/2022/04/1115392, accessed 24 May 2023. 22 Office of the Special Envoy of the Secretary-General for Yemen (OSESGY), “United Nations initiative for a two-month truce” https://osesgy.unmissions.org/united-nationsinitiative-two-month-truce-0, accessed 24 May 2023. 23 OSEGGY, “Statement from the UN special envoy on the negotiations to extend and expand the nationwide truce in Yemen”, 2 October 2022, https://osesgy.unmiss ions.org/statement-un-special-envoy-negotiations-extend-and-expand-nationwide-truceyemen, accessed 24 May 2023.

10

YEMEN

391

The ceasefire immediately impacted the internal situation in Yemen with a drop in casualties despite occasional local-level violations and led to an improvement in access to essential supplies, including food and fuel.24 At the end of the GCC summit, the non-Houthi factions in Yemen agreed to put in a new system of governance, with President Hadi being replaced by a PLC. The relative success during the first two months led to a renewal of the ceasefire in June and again in August.25 Buoyed by the success of the truce since 2 April, the UN special representative called for a renewal of the ceasefire for six months, but this could not materialise, and the parties only agreed to an extension of two months.26 Eventually, on 2 October, the Yemeni factions failed to agree for another renewal, and the six months of truce, the longest in the eight-year civil war, ended.27 The UN special envoy was unsuccessfully pushing for a further ceasefire, with a proposal for “the payment of civil servant salaries and pensions; the opening of specific roads in Tais and other governorates; additional destinations for flights to and from Sana’a airport; unhindered entry of fuel ships into Hodeida port, strengthening de-escalation mechanisms through the Military Coordination Committee; and a commitment to release detainees urgently.”28 One of the key reasons for the failure to renew the ceasefire in October was increased violations and fighting among different factions and tribal forces, especially in Tais, Marib and Shabwa governorates. In August, the 24 ACAPS Analysis Hub, “Yemen: The key economic incentives of peace”, 17 May 2022, https://www.acaps.org/sites/acaps/files/slides/files/20220517_acaps_yemen_ana lysis_hub_key_economic_incentives_of_peace.pdf, accessed 24 May 2023. 25 UN, “Extending truce ‘best opportunity’ for peace in Yemen, special envoy tells Security Council, as speakers urge reopening of roads, more funding for aid operations”, 11 July 2022, https://press.un.org/en/2022/sc14964.doc.htm, accessed 24 May 2023. 26 Azis El Yaakoubi, “U.N. presses Yemen warring parties for six-month truce extension—sources”, Reuters, 18 July 2022, https://www.reuters.com/world/middleeast/un-presses-yemen-warring-parties-six-month-truce-extension-sources-2022-07-18/, accessed 24 May 2023. 27 Mohammed Alghobari and Reyam Mokhashef, “Yemen truce expires as U.N. keeps pushing for broader deal”, Reuters, 4 October 2022, https://www.reuters.com/world/ middle-east/yemen-truce-expires-un-keeps-pushing-broader-deal-2022-10-03/, accessed 24 May 2023. 28 OSESGY, “Statement from the UN special envoy on the negotiations to extend and expand the nationwide truce in Yemen”, 2 October 2022, https://osesgy.unmissions. org/statement-un-special-envoy-negotiations-extend-and-expand-nationwide-truce-yemen, accessed 24 May 2023.

392

MD. M. QUAMAR ET AL.

STC launched “Operation Arrows of the East” in Abyan to fight the AQAP. This led to a confrontation between STC and AQAP, accounting for 10 per cent of the total fatalities during the 6-month truce.29 Hostilities and fighting resumed after the efforts to renew the ceasefire failed, leading to increased casualties, especially of civilians, including women and children.30 Economy Yemen witnessed its most peaceful period since 2015, consequent to the six months truce in 2022.31 The economic growth was estimated to stabilise at 2 per cent in 2022 and 3.2 per cent in 2023 (Table 10.2). The GDP at current prices increased from US$19.91 billion in 2021 to US$27.59 billion in 2022. Yemen has been one of the poorest countries in the world, and due to political turmoil and conflicts that broke out since the Arab uprising in 2011, its per capita income had been declining for most of the previous decade. The GDP per capita at PPP started increasing from US$1,997.42 in 2021 to US$2,136.28 in 2022 and is estimated to further increase to US$2,237.34 in 2023 (Table 10.2). However, the uncertainty surrounding the ongoing conflict and the availability of external financing were the downside risks to economic growth. About 70 per cent of the economy is informal, and about 70 per cent of the population lives in rural areas.32 Agriculture is the main sector but is challenged by droughts, bouts of flooding and swarms of pests, especially locusts and 2022 was recorded as the third driest year in the last 29 ACLED, “Violence in Yemen during the UN-mediated truce: April–October 2022”,

14 October 2022, https://acleddata.com/2022/10/14/violence-in-yemen-during-theun-mediated-truce-april-october-2022/, accessed 24 May 2023. 30 Civilian Impact Monitoring Project, “CIMP monthly report”, https://civilianimpact. activehosted.com/social/99296ad1eb8cd89661d163ddea3f16f1.4194, accessed 24 May 2023. 31 World Food Programme (WFP), “Annual country report 2022: Yemen”, https:// www.wfp.org/operations/annual-country-report?operation_id=YE01&year=2022#/ 25611, accessed 24 May 2023. 32 Relief Web, “Solar powered water pumps help Yemeni farmers restore their agricultural livelihoods”, 13 January 2020, https://reliefweb.int/report/yemen/solar-poweredwater-pumps-help-yemeni-farmers-restore-their-agricultural-livelihoods, accessed 25 May 2023.

10

YEMEN

393

Table 10.2 Yemen’s economic growth, 2019–2023

GDP at current prices (US$ million) GDP per capita at PPP (International Dollar) Real GDP growth (annual per cent)

2019

2020

2021

2022

2023a

21,888

18,850

19,911

27,594

28,099

2,185.96

1,979.73

1,997.42

2,136.28

2,237.34

1.4

−8.5

−1.0

2.0

3.3

Source IMF World Economic Outlook; a IMF estimates

four decades.33 During June–August 2022, heavy rainfall caused floods and flash floods in northern and central Yemen, leading to casualties and damages. About 300,000 people, mostly in displacement sites and settlements, were affected across 146 districts in 18 governates.34 The agriculture sector only meets around 20 per cent of the country’s food needs due to limited agricultural land and water resources. Besides, poor agriculture practices, an eight-year conflict, high fuel prices and transportation disruptions have eroded the sector’s potential to augment the food supply. Yemen has to depend on imports to meet its requirement of staple food like wheat. The truce between April and September 2022 facilitated increased output and private sector sales. An increase in the supply of oil derivatives augmented the power supply and improved people’s living conditions. It also lowered fuel prices in the local market, positively impacting private sector production and transportation costs.35 However, divided executive authorities have led to double taxation and customs duties, which invariably depressed the private sector economic activities.36 The roads between

33 Food and Agriculture Organisation of the United Nations, “Yemen: Quarterly food security report”, April–September 2022, https://reliefweb.int/report/yemen/yemen-qua rterly-food-security-report-global-events-inflation-and-erosion-livelihoods-driving-food-ins ecurity-yemen-april-september-2022, accessed 24 May 2023. 34 OCHA Relief Web, “Yemen: Floods—Jun 2022”, https://reliefweb.int/disaster/fl2022-000265-yem, accessed 24 May 2023. 35 Federation of Yemen Chambers of Commerce and Industry, “The impact of the truce on activity of the private sector in Yemen”, 2023, https://fycci-ye.org/upload/166 9145208.pdf, accessed 25 May 2023. 36 Ibid.

394

MD. M. QUAMAR ET AL.

different Yemeni governates were closed by rival factions, incurring additional costs on the private sector for using long and difficult alternative routes for transportation.37 Yemeni ports and airports were yet to become fully operational. The banking services mostly cater to the urban population. They faced several challenges from the ongoing economic collapse and warring parties competing for financial control. The Central Bank of Yemen is divided between Sana’a and Aden, and there has been fierce competition between the two branches over the administration and regulation of commercial and Islamic banks. Though the Central Bank of Yemen shifted to Aden, the original branch in Sana’a retained maximum administrative staff, information records and jurisdiction over major commercial hubs in the Houthi-controlled areas.38 Digitalisation is primitive, with internet penetration of about 27 per cent, of which 8.5 per cent (2.5 million) are active on social media.39 As the conflict raged, the economy developed into a de facto dual economy, split between internationally recognised governmentadministered and Houthis-controlled areas.40 The country has two bank notes41 and the divergent exchange values of both currencies in Yemen have led to the mushrooming of money exchange companies that operate outside the control of the Aden-based Central Bank of Yemen. New Yemeni Riyal in circulation since 2017 in the government-controlled areas has faced occasional volatility and depreciation because of the government’s expansionary policy to fund its expenditure.42 The government 37 Ibid. 38 Mohammed Al Qalisi and Taimur Khan, “Yemen’s central bank becomes latest

front line in civil war”, The National, 26 September 2016, https://www.thenationalnews. com/world/yemens-central-bank-becomes-latest-front-line-in-civil-war-1.208640, accessed 25 May 2023. 39 The World Bank, “Individuals using the Internet (% of population)—Yemen, Rep.”, https://data.worldbank.org/indicator/IT.NET.USER.ZS?locations=YE, accessed 25 January 2023. 40 The World Bank, “Yemen economic monitor, Spring 2022 | Clearing skies over

Yemen?”, 13 June 2022, https://www.worldbank.org/en/country/yemen/publication/ yemen-economic-monitor-clearing-skies-over-yemen-spring-2022, accessed 24 May 2023. 41 Reuters, “Yemen’s rival powers battle over banknotes”, 18 January 2020, https:// www.reuters.com/article/us-yemen-economy-currency-idUSKBN1ZH034, accessed 25 May 2023. 42 Ibid.

10

YEMEN

395

sought assistance from Saudi Arabia and UAE, which pledged about US$2 billion to boost the dwindling foreign exchange reserves and prop up its currency value.43 Fiscal Situation and Inflation During 2022, the fiscal situation slightly improved with economic recovery during the six months truce. The government revenue as a percentage of GDP increased from 7.1 per cent in 2021 to 10.4 per cent in 2022.44 Government expenditure as a percentage of GDP also increased from 9.3 per cent to 12.6 per cent. Its net debt decreased from 69.3 per cent of GDP to 48.1 per cent in the same period.45 The government fiscal deficit marginally reduced from 5.2 per cent of GDP in 2020 to 5 per cent in 2021 and is estimated to be further reduced to 4.7 per cent in 2022.46 Electricity subsidies and the composition of government expenditure put pressure on the fiscal situation. Transparency and accountability in using scarce public resources are the important issues that needed to be addressed to catalyse additional donor funding.47 External finance has been a critical lifeline for Yemen to pay for essential imports, meet urgent social spending and address infrastructural gaps. The IMF has been assisting the Central Bank of Yemen to enhance its operational capabilities and transparency.48 Higher global commodity prices have put upward pressure on inflation estimated at around 45 per cent, and food inflation around 58 per cent by August, threatening food insecurity.49 Yemen is 90 per cent importdependent for its food needs. About 40 per cent of wheat imports was

43 SANA’A Centre for Strategic Studies, “Rial depreciates amid delays in pledged Saudi, Emirati support”, 11 July 2022, https://sanaacenter.org/the-yemen-review/june-2022/ 18155, accessed 24 May 2023. 44 World Bank, Fiscal monitor, October 2022, p. 62. 45 World Bank, Fiscal monitor, October 2022, p. 65. 46 International Monetary Fund (IMF), “Regional Economic Outlook: Middle East

and Central Asia”, https://www.imf.org/en/Publications/REO/MECA, accessed 26 May 2023. 47 IMF, “IMF staff concludes visit to Yemen”, 5 October 2022, https://www.imf. org/en/News/Articles/2022/10/05/pr22336-yemen-imf-staff-concludes-visit-to-yemen, accessed 26 May 2023. 48 Ibid. 49 Ibid.

396

MD. M. QUAMAR ET AL.

sourced from Russia and Ukraine; the war in Ukraine increased shortages and prices. Nearly 17 million people in the country were estimated to experience acute food insecurity, whereas only about 10.5 million received some humanitarian aid.50 However, by November, an updated integrated food security classification showed no pockets of famine-like conditions for the first time since 2019 due to the truce and efforts by the World Food Programme (WFP) and its partners. At the same time, about 6.1 million people were projected to be one step away from famine by late 2022. About 3.3 million Yemenis, including 2.3 million children and 1.3 million pregnant and lactating women and girls, were estimated to suffer from acute malnutrition.51 Estimates suggest that about 21.7 million people needed humanitarian assistance by December 2022.52 The number of persons needing material assistance was about 23.4 million by the end of 2022, with 19 million facing acute insecurity.53 During the year, the UN had to cut back on its life-saving programmes, including emergency food distribution, by almost half due to lack of funding.54 During the visit of the chairman of the PLC, Dr Rashad Al-Alimi to Saudi Arabia in June, Crown Prince Mohammed bin Salman announced the Saudi Development and Reconstruction Programme for Yemen that would provide US$400 million to support 17 development projects that included energy, transportation, education, water, health and infrastructure. Since the formation of the PLC in April 2022, Saudi Arabia and the UAE have pledged several large-scale contributions that included US$2 billion to support the Central Bank’s foreign exchange reserves and currency value; US$300 50 Help Age International, “The food, fuel, finance crisis: Yemen under spotlight”, 28 March 2023, https://www.helpage.org/news/the-food-fuel-finance-crisis-yemen-underthe-spotlight/, accessed 24 May 2023. 51 WFP, “Annual country report 2022: Yemen”, https://www.wfp.org/operations/ann ual-country-report?operation_id=YE01&year=2022#/25611, accessed 24 May 2023. 52 US Agency for International Development (USAID), “Yemen—Complex emergency”, Fact Sheet #6, 24 March 2023, https://reliefweb.int/report/yemen/yemen-com plex-emergency-fact-sheet-6-fiscal-year-fy-2023, accessed 24 May 2023. 53 IMF, “IMF staff concludes visit to Yemen”, 5 October 2022, https://www.imf. org/en/News/Articles/2022/10/05/pr22336-yemen-imf-staff-concludes-visit-to-yemen, accessed 24 May 2023. 54 U.S. Department of State, “Additional humanitarian assistance for the people of Yemen”, 27 February 2023, https://www.state.gov/additional-humanitarian-assistancefor-the-people-of-yemen/, accessed 24 May 2023.

10

YEMEN

397

million for humanitarian relief; US$400 million to support development projects; and US$900 million to finance oil derivatives for power plants.55 However, there were reported delays in the disbursement of aid by the donor countries. Newly found PLC also delayed parliamentary sessions to approve necessary reforms to utilise the US$3 billion Gulf aid.56 Employment and Expatriates The country has a labour force of about 7.3 million. Agriculture contributes about 30 per cent of the total employment. Employment in industry was 11.7 per cent of the total in 2021.57 Self-employed persons constituted 56.8 per cent of the total employment and the total unemployment rate was 13.9 per cent in 2021,58 which marginally reduced to 13.6 per cent in 2022. Female unemployment was almost double at 26.3 per cent in 2021.59 Ongoing conflict, power struggles and closure of roads limit employment generation opportunities. Despite the war situation, about 73,000 migrants reached Yemen facing great threats and limited access to service and assistance upon their arrival.60 About 4.2 million people are internally displaced.61 The Yemenis rely on remittances and aid for their daily consumption. However, the dominant share of the remittances comes from other

55 Sana’a Center For Strategic Studies, “Rial depreciates amid delays in pledged Saudi, Emirati support”, 11 July 2022, https://sanaacenter.org/the-yemen-review/june-2022/ 18155, accessed 24 May 2023. 56 Mohammed Alghobari, “Yemen rifts stall reforms needed to access Gulf aid, sources say”, Reuters, 12 September 2022, https://www.reuters.com/world/middle-east/yemenrifts-stall-reforms-needed-access-gulf-aid-sources-say-2022-09-12/, accessed 24 May 2023. 57 Organisation of Islamic Cooperation, OIC Statistics Database, https://www.sesric. org/oicstat.php, accessed 24 May 2023. 58 The World Bank, “Unemployment, total (% of total labour force) (modelled ILO estimate)—Yemen, Rep.”, https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?loc ations=YE, accessed 24 May 2023. 59 Organisation of Islamic Cooperation, OIC Statistics Database, https://www.sesric. org/oicstat.php, accessed 24 May 2023. 60 USAID, “Yemen—Complex emergency”, Fact Sheet #6, 24 March 2023, https:// reliefweb.int/report/yemen/yemen-complex-emergency-fact-sheet-6-fiscal-year-fy-2023, accessed 24 May 2023. 61 Federation of Yemen Chamber of Commerce, “The impact of the truce on the activity of the private sector in Yemen”, 2023, https://fycci-ye.org/upload/1669145208. pdf, accessed 26 May 2023.

398

MD. M. QUAMAR ET AL.

regions in Yemen, as many businesses and individuals supported their families in Houthi-controlled areas by working in Aden and Marib. The two currency systems in the country have complicated the internal movement of goods, people and financial flows, and intra-Yemen financial flows declined as economic war raged between the warring parties.62 Dependency on external remittances, especially from the GCC, increased during the conflict63 as the economic activities in Yemen were gridlocked. Saudi Arabia has been the biggest source of remittances, which exhibited significant vulnerability during the Covid-19 and due to its labour reforms.64 The Covid-19 pandemic prompted a shift in remittance flow from cash to digital and from informal to formal channels due to the electronic services provided by Saudi and Yemeni banks.65 External remittances are an important source of foreign exchange and are significant for supporting the value of the domestic currency. External Sector The balance of payment situation improved due to increase in oil exports. Petroleum exports constituted 55.27 per cent of the total exports in 2021. It increased from US$772.17 million in 2020 to US$1.2 billion in 2021 (Table 10.3). Agriculture exports increased from US$237.87 million in 2020 to US$277.89 million in 2021. The total exports of goods and services consequently increased from US$1.2 billion in 2020 to US$1.6 billion in 2021. The closure of ports and roads due to the conflict decimated exports from an average of US$6 billion before 2018.66 The imports of goods and services also increased from US$8.4 billion in 2020 to US$9.2 billion in 2021. Due to the six months truce in 2022, fuel imports through the Hodeida port increased four-fold.67 62 Ibid. 63 ACAPS

Analysis Hub, “The impact of remittances on Yemen’s economy”, 15 October 2021, https://www.acaps.org/sites/acaps/files/products/files/20211015_ acaps_yemen_analysis_hub_impact_of_remittances_on_yemens_economy.pdf, accessed 24 May 2023. 64 Ibid. 65 Ibid. 66 IMF, “Regional Economic Outlook: Middle East and Central Asia”, https://www. imf.org/en/Publications/REO/MECA, accessed 26 May 2023. 67 WFP, “Annual country report 2022: Yemen”, https://www.wfp.org/operations/ann ual-country-report?operation_id=YE01&year=2022#/25611, accessed 24 May 2023.

10

YEMEN

399

Table 10.3 Yemen’s select current account indicators, 2019–2021 (US$ million)

Exports of goods and services Petroleum exports Imports of goods and services Current account balance

2019

2020

2021

1,600 1,065.46 10,500 −840

1,200 772.17 8,400 −1,105

1,600 1,213.54 9,200 −1,012

Sources IMF data mapper

The current account deficit reduced marginally from US$1.10 billion in 2020 to US$1 billion in 2021. It was estimated to be about US$3.14 billion in 2022.68 The current account deficit as a percentage of GDP increased from −5.1 per cent in 2021 to an estimated −11.4 per cent in 2022.69 Gross official reserves increased from US$0.9 billion in 2020 to US$1.4 billion in 2021, which could cover less than one and a half months of imports.70 Table 10.4 shows the direction of Yemen’s trade in 2021. The top five export destinations in 2021 were China, Thailand, Italy, Malaysia and South Korea, while the top five import sources were China, Türkiye, the US, Australia and Brazil. Yemen is yet to resume its LNG exports. As a result, Yemenis are crucially dependent on external aid to meet their immediate needs.71 The top four donor countries in 2022 were the US, Saudi Arabia, Germany and the EU.72 Since the beginning of the conflict, the cumulative aid to Yemen was about US$5 billion from the US and

68 Organisation of Islamic Cooperation, OIC Statistics Database, https://www.sesric. org/oicstat.php, accessed 24 May 2023. 69 World Bank, World Economic Outlook, 2022, p. 145. 70 IMF, “Regional Economic Outlook: Middle East and Central Asia”, https://www.

imf.org/en/Publications/REO/MECA, accessed 26 May 2023. 71 The Embassy of the Kingdom of Saudi Arabia in Washington DC. “Saudi Arabia and the Yemen Conflict: Humanitarian aid to the people of Yemen”, April 2017, https://www.saudiembassy.net/sites/default/files/FactSheet_Humanitarian% 20Aid%20Yemen%20Fact_April2017.pdf, accessed 24 May 2023. 72 The Guardian, “UN raises $1.2bn from donors towards $4.3bn Yemen aid plan”, 27 February 2023, https://www.theguardian.com/world/2023/feb/27/un-raises-12bnfrom-donors-towards-yemen-aid-plan, accessed 24 May 2023.

400

MD. M. QUAMAR ET AL.

Table 10.4 Yemen’s direction of trade, 2021 (US$ million) Top five export destinations

Top five import sources

Top five energy export destinations

China (633.25) Thailand (406.83) Italy (77.72) Malaysia (57.35) South Korea (56.53)

China (2,570.11) Türkiye (1,097.99) US (271.37) Australia (256.41) Brazil (269.46)

China (617.22) Thailand (385.10) Italy (62.19) Malaysia (23.10) –

Source International Trade Centre

grants by Saudi Arabia were estimated to be more than US$4.2 billion.73 About 70 per cent of all humanitarian aid arrives through the port of Hodeida. Energy and Environment Control over oil and gas revenues has been the key contestation between the internationally recognised government based in Aden and the Houthis. The Houthis have constrained the government’s ability to export oil since the beginning of the conflict. After the end of the six-month truce, violence resumed and the Houthis began bombarding the southern oil terminals, demanding salaries for those working in the Houthi areas and a share in the hydrocarbon revenues.74 During the eight-year civil war, oil production fell sharply from 153,000 bpd in 2014 to 67 bpd in 2021. Similarly, natural gas production declined from 9.8 bcm to 0.4 bcm. Table 10.5 gives the energy statistics for 2018–2021. The LNG exports are yet to begin. Yemen’s only LNG facility at Balhaf

73 Ministry of Electricity and Energy, Yemen (MoEE, Yemen), “The Ministry of Electricity signs with ‘the Saudi Programme for the Development and Reconstruction of Yemen’ oil derivatives grant worth $200 million” (original in Arabic), https://moee-ye. com/site-ar/2307/, accessed 24 May 2023. 74 Mohammed Alghobari and Reyam Mokhashef, “Yemen rivals ramp up economic war as U.N.-backed truce efforts limp”, Reuters, 8 December 2022, https://www. reuters.com/world/middle-east/yemen-rivals-ramp-up-economic-war-un-backed-truce-eff orts-limp-2022-12-08/, accessed 24 May 2023.

10

YEMEN

401

Table 10.5 Yemen’s energy statistics, 2018–2021

Oil production (thousand bpd) Natural gas production (bcm) Natural gas flaring (bcm) LNG exports (bcm) Renewable energy generation (TWH)

2018

2019

2020

2021

94 0.1 0.5 0 250.0

95 0.3 0.7 0 250.0

88 0.3 0.9 0 252.80

67 0.4 0.9 0 252.81

Source British Petroleum Review of World Energy Statistics, 2022

was shut down in 2015 when Total, the largest stakeholder, left the country.75 Only about 73 per cent of the population had access to electricity in 2020.76 Due to disrupted oil and gas production, there has been a fuel shortage to run the power plants. Yemen received a grant of 250,000 metric tons of diesel (estimated cost of US$200 million77 ) from Saudi Arabia through the Saudi Programme for Development and Reconstruction of Yemen to operate nearly 70 power plants.78 The support has helped the Ministry of Electricity and Energy to maintain power supplies in government-controlled governorates. Between October and December 2022, three batches of supplies from Saudi Arabia were received by Yemen. The UAE power companies were in talks for the implementation of three service and development projects in Hadhramaut, including the establishment of a gas-fired power station of 150 MW, construction of a crude oil refinery with a capacity of 25,000 bpd, storage tanks, a free zone and a unit for domestic gas. The government signed a Memorandum of Understanding with Siemens Energy in Berlin to lay a roadmap for electric power, support its 75 U.S. Energy Information Administration, “Yemen”, 13 November 2023, https:// www.eia.gov/international/analysis/country/YEM, accessed 24 May 2023. 76 Organisation of Islamic Cooperation, OIC Statistics Database, https://www.sesric. org/oicstat.php, accessed 24 May 2023. 77 MoEE, Yemen, “The Ministry of Electricity sighs with ‘the Saudi Programme for the Development and reconstruction of Yemen’ Oil derivatives grant worth $200 million” (original in Arabic), https://moee-ye.com/site-ar/2307/, accessed 24 May 2023. 78 MoEE, Yemen, “During the reception of the second batches of the oil derivatives grant…the Ministry of Electricity appreciates the brothers’ support in the Kingdom for Yemen” (original in Arabic), https://moee-ye.com/site-ar/2348/, accessed 24 May 2023.

402

MD. M. QUAMAR ET AL.

infrastructure and create sustainable energy solutions. An agreement was also signed with UAE’s Masder in Abu Dhabi for establishing Yemen’s first solar power plant with a capacity of 120 MW.79 The government is in talks with the Qatar Fund for Development to support the electricity sector and restart the stalled project of the Qatari electricity station.80 Renewable power generation capacity was 252.81 TeraWatt hours in 2021 (Table 10.5). Yemen is one of the most resource-poor countries in the world. The prolonged conflict had brought about extensive environmental damage, including land and scarce water resources. Land and water was the second largest source of conflict in Yemen; reportedly, about 4,000 people are killed yearly in land and water conflicts.81 It is estimated that conflict over resources would increase in the coming years with further depletion of land and water resources.82 With severe fuel shortages due to the blockade of Houthi-controlled areas and restriction of imports into Hodeida Port, people have been cutting down trees for firewood. More than five million trees have been cut down since 2018, and about 889,000 trees have been used annually to fuel bakeries and restaurants in Sana’a alone.83 Another looming environmental disaster was from FSO Safer; a super oil tanker near the Red Sea coast which was in the advanced stages

79 MoEE, Yemen, “Signing the establishment of the first solar electricity generation project in Aden” (original in Arabic), https://moee-ye.com/site-ar/2352/, accessed 24 May 2023. 80 MoEE, Yemen, “The Minister of Electricity and Energy is discussing with the Director of the Qatar Fund on ways for developmental support for the electricity sector projects in our country” (original in Arabic), https://moee-ye.com/site-ar/2136/, accessed 24 May 2023. 81 Civilians in Conflict, “Risking the future: Climate change, environmental destruction, and conflict in Yemen”, October 2022, https://civiliansinconflict.org/wp-content/upl oads/2022/10/CIVIC_Report_Yemen_ClimateCrisis_ProtectionofCivilians.pdf, accessed 24 May 2023. 82 Center for Civilians in Conflict, “Risking the future: Climate change, environmental destruction, and conflict in Yemen”, 4 October 2022, https://reliefweb.int/rep ort/yemen/risking-future-climate-change-environmental-destruction-and-conflict-yemen, accessed 24 May 2023. 83 Islamic Relief Worldwide, “Yemen’s climate crisis is threatening lives, livelihoods and culture”, 25 March 2022, https://islamic-relief.org/news/yemens-climate-crisis-is-threat ening-lives-livelihoods-and-culture/, accessed 24 May 2023.

10

YEMEN

403

of decay.84 About US$95 million have been raised from private companies, donors and the public for a two-phased UN plan to prevent the spill by transferring the oil on to a large crude carrier. However, the efforts were hampered by the price hike of the crude oil due to the Ukraine war and about US$34 million was additionally required to implement the UN plan.85 Humanitarian Crisis The humanitarian situation in Yemen remained a major cause of concern for the global community during 2022. A prime area of concern was the shortfall in the pledged financial aid. As of March 2022, the UN received only US$1.3 billion of the US$4.27 billion pledges.86 With the fighting in Ukraine attracting global attention, the humanitarian efforts in Yemen fell off the international radar. In March, the UN Emergency Relief Coordinator and Under-Secretary-General for Humanitarian Affairs addressed the Security Council and underlined that “Yemen is becoming a chronic emergency, marked by hunger, disease and other miseries that are rising faster than aid agencies can reverse.”87 He further warned that three out of four Yemenis need humanitarian assistance with food and fuel shortages, which threaten to derail these efforts. Since the beginning of the war in Yemen in March 2015, nearly 4.6 million people have been internally displaced due to conflict, of which 80 per cent are women and children. However, the monthly displacement rate declined by 76 per cent during the six months truce period.88 Due

84 United Nations, “Yemen’s climate crisis is threatening lives, livelihoods and culture”, https://www.un.org/en/StopRedSeaSpill, accessed 24 May 2023. 85 Ibid. 86 Lisa Barrington

and Stephanie Nebehay, “U.N. raises less than a third of $4.27 bln sought for Yemen to avoid starvation”, Reuters, 16 March 2022, https://www.reuters.com/world/middle-east/un-seeks-43-bln-yemen-avert-massstarvation-funding-dwindles-2022-03-16/, accessed 24 May 2023. 87 United Nations, “Amid violence, decreased humanitarian aid, world must not leave Yemen behind, emergency relief coordinator tells Security Council”, 15 March 2022, https://press.un.org/en/2022/sc14831.doc.htm, accessed 24 May 2023. 88 OCHA, “Yemen humanitarian needs overview 2023”, 20 December 2022, https:// reliefweb.int/report/yemen/yemen-humanitarian-needs-overview-2023-december-2022enar, accessed 24 May 2023.

404

MD. M. QUAMAR ET AL.

to the war in Ukraine, a serious challenge emerged in ensuring food security, with food prices rising significantly in both Houthi-controlled and government-administered areas. This began to ease after the coming into effect of the ceasefire in April and the resumption of food supplies from Ukraine and Russia under the Türkiye-mediated Black Sea Grain Initiative in July.89 Nonetheless, food and health security remains a serious challenge so far as the humanitarian situation is concerned. An estimated 17 million Yemenis are food insecure.90 The worst affected are women and children. According to one estimate, over 11,000 children have been killed, maimed or injured since the beginning of the conflict while 9.2 million children need safe water and hygiene, and two million are out of school.91 The estimates suggest that nearly 2.2 million Yemeni under five years of age are victims of malnutrition and wasting, while 1.3 million pregnant and lactating mothers suffer from malnutrition.92 A comprehensive vaccination campaign helped control the cholera outbreak in 2021 and 2022, but it remains a concern. The Covid-19 pandemic remained under control with international help towards vaccination. Of the 11,945 confirmed cases and 2,159 deaths due to the pandemic, 1,817 cases and 174 deaths were reported in 2022.93 Yemen is among the ten lowest-ranked countries in terms of HDI, with a score of 0.455 as of 2021, which had dropped consistently since 2013, when it was 0.513.94 Yemen’s GDI score in 2021 was 0.496, and its GII score was 0.465. The inequality-adjusted HDI in 2021 was 0.307, with a loss of 32 per cent compared to 2020.

89 United Nations, “Vessel movements”, https://www.un.org/en/black-sea-grain-initia tive/vessel-movements, accessed 24 May 2023. 90 WFP, “Yemen emergency”, https://www.wfp.org/emergencies/yemen-emergency, accessed 24 May 2023. 91 UNICEF, “More than 11,000 children killed or injured in Yemen”, 12 December 2022, https://www.unicef.org/press-releases/more-11000-children-killed-orinjured-yemen, accessed 24 May 2023. 92 Ibid. 93 John Hopkins University & Medicine, “Yemen”, https://coronavirus.jhu.edu/reg

ion/yemen, accessed 24 May 2023. 94 UNDP, Human Development Reports, “Yemen”, 8 September 2022, https://hdr. undp.org/data-center/specific-country-data#/countries/YEM, accessed 24 May 2023.

10

YEMEN

405

Bilateral Relations India’s engagement with Yemen has been minimal since the beginning of the conflict. As India scrambled to rescue its stranded citizens from Yemen, it also decided to move the Indian Embassy in Yemen to neighbouring Djibouti on 14 April 2015. In January 2022, a crisis arose after the UAE-flagged Rwabee was hijacked by Houthi militias off the coast of Hodeida as the ship had seven Indian sailors among its crew.95 The initial efforts to secure the release of the ship and its crew faced hurdles due to accusations and counter-accusations by the Yemeni government, the Houthi movement and Saudi Arabia and UAE. Finally, after consistent efforts of UN emissaries and Omani interlocutors, the Houthis agreed to release the ship and the crew members three weeks after the beginning of a comprehensive ceasefire on 2 April. The 14-member crew of Rwabee, including seven Indians, landed in Muscat on 26 April, from where they were brought home. India thanked Oman for its efforts in the release of its nationals.96 New Delhi, in the meanwhile, has welcomed the ceasefire first announced unilaterally by Saudi Arabia.97 It again welcomed the extension of the truce in July and called for a comprehensive ceasefire underlining its own efforts towards humanitarian assistance to Yemen.98 Trade and Commerce Over the past decade, bilateral trade has also fallen considerably due to the ongoing conflict in Yemen. However, it increased from US$809 million in 2020–2021 to US$1.16 billion in 2022–2023 (Fig. 10.1). The trade 95 The Hindu, “U.N. mission speaks to crew members of UAE-flagged vessel seized by Houthis with seven Indians on board”, 13 January 2022, https://www.thehindu. com/news/national/un-mission-speaks-to-crew-members-of-uae-flagged-vessel-seised-byhouthis-with-seven-indians-on-board/article38265091.ece, accessed 24 May 2023. 96 The Indian Express, “India thanks Oman on release of seven Indian sailors in Yemen”, 26 April 2022, https://indianexpress.com/article/india/india-thanks-oman-on-release-ofseven-indian-sailors-in-yemen-7887487/, accessed 24 May 2023. 97 Business Standard, “India welcomes ceasefire in Yemen, calls for peace and security”, 7 April 2022, https://www.business-standard.com/article/international/india-wel comes-ceasefire-in-yemen-calls-for-peace-and-security-122040701111_1.html, accessed 24 May 2023. 98 India at United Nations, YouTube, “Mr. Prakash Gupta, Joint Secretary (UNP) speaks at the #UNSC Meeting on #Yemen”, 11 July 2022, https://www.youtube.com/ watch?v=Iv68YspwXF0&t=14s, accessed 24 May 2023.

406

MD. M. QUAMAR ET AL.

before the outbreak of conflict was about US$1.5 billion in 2014–2015, and India was the third largest importer from and the fifth largest exporter to Yemen.99 India was among the top supplier of pharmaceuticals. India’s exports to Yemen were about US$786 million in 2020–2021, which increased to US$1,000.36 million in 2022–2023, the highest since the civil war started in 2015. The top five items of exports were Basmati rice, sugar, wheat, pharmaceuticals and readymade garments (Fig. 10.2). Yemen turned to India for wheat supplies as its strategic food stock was running low due to the supply disruption from Ukraine and Russia. A Yemeni delegation visited India in July for supplies, and India, despite the ban on wheat exports due to surging domestic prices, granted exemptions

Fig. 10.1 India’s trade with Yemen, 2015–2022 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India)

99 GoI, MEA, “India-Yemen relations”, January 2016. https://www.mea.gov.in/Por tal/ForeignRelation/Yemen_Jan_2016_english.pdf, accessed 24 May 2023.

10

YEMEN

407

to the war-torn country.100 Thus, India became the key supplier of wheat to Yemen in the wake of the Ukraine war. Before the outbreak of the conflict, India imported LNG from Yemen and had some investments in the oil and gas fields. However, with the eruption of the conflict, India’s imports from Yemen, especially energy, stopped. Top import items were iron and steel, miscellaneous commodities, small amounts of aluminium and products and lead and copper products.101

Fig. 10.2 India’s top five export items to Yemen, 2022–2023 (Source Compiled from Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India)

100 Reuters, “Yemenis hope to import wheat from India as food runs low—Minister”, 7 July 2022, https://www.reuters.com/world/yemenis-hope-import-wheat-india-food-runslow-minister-2022-07-07/, accessed 24 May 2023. 101 GoI, Ministry of Commerce and Industry, “Monitoring dashboard”, https://das hboard.commerce.gov.in/commercedashboard.aspx, accessed 24 May 2023.

408

MD. M. QUAMAR ET AL.

Expatriates and Cultural Relations India has had a long history of cultural and people-to-people contact with Yemen. Migration to and from Yemen has been reported since at least medieval times, and a Yemeni-Hadhramauti diaspora has made India its home, while nearly 10,000 people of Indian origin persons have made Yemen their home.102 In addition, about 500 non-resident Indians live and work in Yemen despite the ongoing civil war.103 The number of Indians before the war that began in March 2015 was close to 5,000,104 but a majority preferred to return to India under Operation Raahat.105 India has also provided scholarships through the Indian Council of Cultural Relations (ICCR) to Yemeni students to attend higher education institutions in India106 but the ongoing war has halted most of the cultural engagement and people-to-people contacts.

Challenges and Opportunities The conflict in Yemen lingers on despite the six months truce during April–September 2022. While the international and regional mediation efforts have accelerated, internal differences and divergences among external actors have hampered peace efforts. The humanitarian situation remains critical. India’s engagement with Yemen has come to a halt since 2015 and there are only minimal trade. The Indian Embassy in Sana’a remains closed and the conflict has indirectly affected India due to the heightened security threats in the Gulf of Aden and Red Sea as well as by the Houthi missile attacks on Saudi Arabia and UAE. Any progress in bilateral relations is conditional upon the resolution of the conflict.

102 GoI, MEA, “Population of overseas Indians”, https://mea.gov.in/population-ofoverseas-indians.htm, accessed 24 May 2023. 103 Ibid. 104 GoI, MEA, “Annual report 2015–16”, https://www.mea.gov.in/Uploads/Public

ationDocs/26525_26525_External_Affairs_English_AR_2015-16_Final_compressed.pdf, accessed 26 May 2023. 105 Ibid. 106 Indian Council for Cultural Relations (ICCR), “Scholarship manual—Academic

year 2022–23”, https://iccr.gov.in/sites/default/files/2022-08/Scholarship%20manual. pdf, accessed 26 May 2023.

10

YEMEN

409

Though seemingly improbable, New Delhi can work with regional partners in the Gulf, it can find ways to convert the situation in Yemen into a future opportunity.

CHAPTER 11

GCC

The Cooperation Council of Gulf Arab States or Gulf Cooperation Council (GCC) is a multilateral platform of the Gulf Arab monarchies seeking greater coordination, cooperation and integration in economic and security domains. Despite facing difficulties since its inception in 1981 and questions over its relevance, especially when the member states often squabble and compete among themselves, the GCC remains the only successful regional multilateral organisation in the Middle East. The grouping has been focusing on economic integration, connectivity, infrastructure development and peace and stability in the member states and the neighbourhood. India’s relationship with the GCC is based on mutual interest in economic cooperation, political understanding, labour migration and energy security. In 2022, India and GCC renewed the negotiations for a Free Trade Agreement (FTA).

Internal Developments The end of the Qatar crisis in January 2021 and a successful containment of Covid-19 by early 2022 have brought a new vigour among the GCC states for political engagement and economic integration. Among the important developments during the year was the convening the 43rd GCC summit in Riyadh on 9 December 2022 on the sidelines

© Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_11

411

412

MD. M. QUAMAR ET AL.

of Chinese President Xi Jinping’s visit to Saudi Arabia.1 The summit meeting was chaired by the Crown Prince of Saudi Arabia Mohammed bin Salman and was attended by King Hamad bin Isa al-Khalifa of Bahrain, Qatari Emir Tamim bin Hamad al-Thani, Kuwaiti Crown Prince Sheikh Mishal al-Ahmad al-Jaber al-Sabah, Deputy Prime Minister of Oman Sayyid Fahd bin Mahmoud al-Said, Ruler of Fujairah Hamad bin Mohammed al-Sharqi representing the UAE and GCC Secretary-General Nayef al-Hajraf.2 Politics and Security The December GCC summit praised Qatar for successfully hosting the FIFA World Cup 2022, including “the positive impact it has on the human legacy and its civilisational, cultural, and intellectual rapprochement among world peoples.”3 The Supreme Council of the GCC, comprising the heads of the member states, additionally denounced “the malicious media campaigns” against Qatar over its hosting the mega football event.4 Among the key regional issues that the summit’s final communique included was the continuing Israeli disenfranchisement of the Palestinians from their land and rights in the occupied territories. It called for a peaceful resolution based on the June 1967 border and a two-state solution.5 The communique called for a quick resolution of conflicts in Syria and Yemen while urging Iran to abide by international “principles and charters, fulfil its nuclear obligation, cooperate

1 Ministry of Foreign Affairs of the People’s Republic of China, “President Xi Jinping Attends First China-GCC Summit and Delivers Keynote Speech”, 10 December 2012, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/202212/t20221 210_10988406.html, accessed 6 June 2023. 2 Lama Alhamawi, “GCC Supreme Council lauds Saudi convening of summits, looks forward to strengthening cooperation with China”, Arab News, 9 December 2022, https://www.arabnews.com/node/2213731/saudi-arabia, accessed 6 June 2023. 3 Qatar News Agency, “43rd GCC Summit Final Communique Praises Qatar’s World Cup Hosting Success”, 9 December 2022, https://www.qna.org.qa/en/News-Area/ News/2022-12/09/0020-43rd-gcc-summit-final-communique-praises-qatar’s-world-cuphosting-success, accessed 6 June 2023. 4 Ibid. 5 Lama Alhamawi, “GCC Supreme Council lauds Saudi convening of summits, looks

forward to strengthening cooperation with China”, Arab News, 9 December 2022, https://www.arabnews.com/node/2213731/saudi-arabia, accessed 6 June 2023.

11

GCC

413

with International Atomic Energy Agency, and maintain the principle of good neighbourliness.”6 In response to this, the spokesperson of the Iranian foreign ministry subsequently condemned the GCC communique for its “baseless allegations” and “policy of Iranophobia” while terming the GCC as “Persian Gulf Cooperation Council.”7 The first GCC-China summit was held on the sidelines of the GCC summit on 9 December 2022. China has, in recent years, extensively engaged the GCC as a regional organisation and has been trying to develop closer economic, political and strategic partnership with the group.8 Among the issues discussed during the meeting was “strengthen[ing] the existing strategic partnership between the GCC and China” and “pushing it towards new horizons in various political, economic and cultural fields.”9 The GCC and China also approved the joint action plan for 2023–2027. A major discussion was the need for post-Covid-19 economic recovery, ensuring global supply chains, energy flows, food security and the use of technology for clean and renewable energy sources. The GCC also reaffirmed its commitment to a one-China policy that does not recognise Taiwan as a separate state. Other important global and regional issues were also discussed. The bonhomie displayed during the GCC-China summit underscored the growing significance of China for the GCC states and the continuing Chinese engagement with the regional grouping. Earlier on 16 July 2022, during the visit of President Joe Biden to Saudi Arabia, the GCC participated in the Jeddah Security and Development Summit, which was also attended by the leaders of Jordan, Egypt

6 Ibid. 7 Islamic Republic of Iran, Ministry of Foreign Affairs, “Foreign Ministry Spokesman

reacts to baseless allegations in the final communiqué of the 43rd summit of the Persian Gulf Cooperation Council”, 11 December 2022, https://en.mfa.ir/portal/NewsView/ 702656, accessed 6 June 2023. 8 Ministry of Foreign Affairs of the People’s Republic of China, “President Xi Jinping Attends First China-GCC Summit and Delivers Keynote Speech”, 10 December 2022, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/202212/t20221 210_10988406.html, accessed 6 June 2023. 9 Secretariat General of the Gulf Cooperation Council (GCC-SG), “Statement of the Riyadh Summit for Cooperation and Development between the GCC and the People’s Republic of China”, 9 December 2022, https://www.gcc-sg.org/ar-sa/MediaCenter/ NewsCooperation/News/Pages/news2022-12-9-4.aspx, accessed 6 June 2023.

414

MD. M. QUAMAR ET AL.

and Iraq.10 Biden’s visit to Saudi Arabia was significant for several reasons. It is an established practice to have summit meetings with GCC and Arab leaders. During the Jeddah meeting, “the leaders affirmed their common vision for a region where peace and prosperity prevail. They renewed their call for Iran to fully cooperate with the International Atomic Energy Agency and with regional countries to keep the Gulf free of weapons of mass destruction.”11 The GCC reiterated this in November at the UN during the third “Conference on the Establishment of a Middle East Zone Free of Nuclear Weapons and Other Weapons of Mass Destruction.”12 Regional security, climate change and peaceful resolution to Yemen, Syria and the Israeli-Palestinian conflict were also discussed. The US reiterated its continued commitment to GCC states in countering any threats to peace and security.13 During the year, the GCC countries discussed developing greater connectivity, seamless travel and continued political dialogue for greater economic, social and security integration among the member states. Plans for a railway network among the GCC states were revitalised.14 Qatar allowed seamless visa-free travel for GCC citizens during the FIFA World Cup, while other GCC states facilitated the stay of numerous international fans who had come to watch and support their national teams in the tournament.15 Hence, the world cup underlined that the GCC

10 Arab News, “Arab leaders, US President Biden affirm common vision for region at Jeddah summit”, 20 July 2022, https://www.arabnews.com/node/2123541/saudiarabia, accessed 6 June 2023. 11 Ibid. 12 Ephrem Kossaify, “Gulf Cooperation Council renews commitment to nuclear

weapon-free Middle East”, Arab News, 15 November 2022, https://www.arabnews.com/ node/2199901/middle-east, accessed 6 June 2023. 13 Arab News, “Arab leaders, US President Biden affirm common vision for region at Jeddah summit”, 17 July 2022, https://www.arabnews.com/node/2123541/saudiarabia, accessed 6 June 2023. 14 Gulf-Insider, “GCC nations to revitalise plan for railway network”, 2 June 2022, https://www.gulf-insider.com/gcc-nations-to-revitalise-plan-for-railway-network/, accessed 6 June 2023. 15 Khitam Al Amir, “GCC citizens, residents now allowed to enter Qatar without Hayya card for non-ticket holders for World Cup 2022”, Gulf News, 6 December 2022, https://gulfnews.com/qatar-world-cup-2022/news-views/gcc-citisens-residents-now-all owed-to-enter-qatar-without-hayya-card-for-non-ticket-holders-for-world-cup-2022-1.925 29839, accessed 6 June 2023.

11

GCC

415

countries could set aside their differences when needed to support each other.16 The GCC has also sought greater cooperation with like-minded regional countries, especially Jordan and Morocco.17 The Gulf-Jordan forum was held in the Eastern Province of Saudi Arabia in September 2022, and numerous issues of regional significance were discussed during the meeting.18 Economy The GCC countries managed to turn around from the economic impact of the Covid-19 pandemic and its consequent oil price and demand shock. As the Covid-19 restrictions were relaxed and international energy prices increased, there was substantial economic recovery in the GCC in 2021 and 2022. The GDP at current prices increased from US$1.4 trillion in 2020 to US$1.7 trillion in 2021 and further to US$2.0 trillion in 2022 (Table 11.1). The GCC ranked 12th globally in GDP at current prices in 2021. The per capita GDP was about US$33,600 in 2022. The economic recovery has been mostly driven by non-hydrocarbon sectors in 2021. The real GDP growth rate, that was negative at 4.5 per cent in 2020, increased to 3.1 per cent in 2021 (Table 11.1). It was expected to be 6.5–6.9 per cent in 2022 before moderating to 3.7 per cent in 2023.19 Most of the GCC countries had achieved pre-Covid-19 levels of growth in 2021. The real non-oil GDP growth rate was about 4.5 per cent and 4 per cent in 2021 and 2022, respectively (Table 11.1). The proportion of the non-oil sector increased from 58 per cent of GDP in 2012 to about 64 per cent in 2022. 16 Ravi Krishnan, “FIFA World Cup brings tourism, economic boost for Dubai”,

Khaleej Times, 4 December 2022, https://www.khaleejtimes.com/business/fifa-worldcup-brings-tourism-economic-boost-for-dubai, accessed 6 June 2023. 17 Olympic Council of Asia, “Gulf sports get huge shot in the arm with more countries at next GCC Games plus inclusion of two new multi-sports events”, https://ocasia.org/news/3062-gulf-sports-get-huge-shot-in-the-arm-with-morecountries-at-next-gcc-games-plus-inclusion-of-two-new-multi-sports-events.html, accessed 6 June 2023. 18 Arab News, “Gulf-Jordanian forum to be held Sept. 27”, 13 September 2022, https://www.arabnews.com/node/2161276/saudi-arabia, accessed 6 June 2023. 19 The World Bank, “Gulf Economic Update: Green Growth Opportunities in the GCC”, Fall 2022, https://documents1.worldbank.org/curated/en/099337010182222 173/pdf/IDU16928b14e11cef1492f1a4481263a1f40d4c4.pdf, accessed 6 June 2023.

416

MD. M. QUAMAR ET AL.

Table 11.1 Economic growth in GCC, 2019–22

GDP at current prices (US$ Trillion) GDP per capita current prices (US$ Thousand) *Real GDP growth (Annual %) *Real non-oil GDP growth (Annual %)

2019

2020

2021

2022

2023*

1.6 28.9

1.4 24.4 −4.5 −3.6

1.7 29.7 3.1 4.5

2.0 33.60* 6.5 4.0

2.0 – – 3.7

2.5

Source GCC Statistical Centre, National Accounts; GCC Atlas Various https://www.gccstat.org/en/; * IMF, Regional Economic Outlook: Middle East and Central Asia October 2022

The impact of the Ukraine war and the tight global financial conditions that followed had a limited impact in the GCC region. The direct impact of the war was positive through higher oil prices and consequent revenues. Though the region benefited from higher hydrocarbon prices, the uncertainties and the notable slowdown in the global economy are significant downside risks. Despite weakening global growth, the outlook for GCC remained strong, supported by a favourable oil market and recently implemented structural reforms. The issue of food security and rising food prices remain a challenge forcing the GCC states to look for alternative sources including India and Southeast Asian countries. The Turkish-mediated Black Sea Grain Initiative came as a relief for the GCC countries who remain externally dependent for their food security. Private sector credit achieved its pre-pandemic levels in 2022. However, the corporate financial performance like revenue growth, profitability leverage, liquidity and capital expenditure had displayed more vulnerability due to the Covid-19 pandemic compared to the previous shocks from the financial crisis of 2008 or the collapse of oil prices in 2014.20 The twin attack of Covid-19 and reduced oil revenues exacerbated these vulnerabilities, but supportive fiscal and monetary policies have buffered it to some extent. The rate of return (profitability) of medium firms in the GCC has reduced from 15.2 per cent in 2007 to 4.1

20 International Monetary Fund (IMF), “Gulf Cooperation Council: Economic Prospects and Policy Challenges for the GCC Countries”, Policy Papers, 15 November 2022, https://www.imf.org/en/Publications/Policy-Papers/Issues/2022/11/29/GulfCooperation-Council-Economic-Prospects-and-Policy-Challenges-for-the-GCC-Countries525945, accessed 6 June 2023.

11

GCC

417

per cent in 2021.21 The GCC central banks have followed a tight monetary policy and have increased lending rates five times between January and October 2022, which might dampen the recovery in the non-oil sectors. Besides, fiscal risk also stems from the large public sector and state-owned enterprises. The GCC stock markets performed better than those in US and Europe for most of 2022, but began to be affected due to a global slowdown in the last quarter.22 Morgan Stanley Capital International’s MSCI GCC Index, indicative of stock indexes, closed in 2022 with a decline of 4.12 per cent23 after witnessing one of the largest gains globally in 2021.24 Some GCC countries have experienced increased financial flows into real estate and digital sectors since the onset of the war in Ukraine. Local financial markets also witnessed inflows on the back of higher oil prices. The region is investing heavily in the opportunities of the metaverse that extend beyond next-generation gaming and online shopping. The technology is estimated to contribute US$15 billion annually to the GCC economy by 2030.25 The region saw a resurgence in tourist arrivals as Covid-19 restrictions eased and mega events were hosted. They were 13.9 million tourist arrivals and about 10.5 thousand hotel occupancies in the GCC region in 2021.26 About 29 million GCC citizens moved among member states in 2021.27 The value of outbound tourism was estimated to be US$18.3 billion in 2022, primarily for leisure trips. The region accounts for 60 21 Ibid. 22 Salim A. Essaid, “GCC no longer immune to global market constraints: AI data”,

Al-Monitor, 30 November 2022, https://www.al-monitor.com/originals/2022/11/gccno-longer-immune-global-market-constraints-ai-data, accessed 6 June 2023. 23 MSCI, “MSCI GCC Countries Combined Index (USD)”, 28 April 2023, https:// www.msci.com/documents/10199/6ea0316d-4067-4cc0-ab01-2b28ef407d2c, accessed 6 June 2023. 24 Zawya, “GCC Index ‘declines in 2022’ led by Qatar and Saudi Arabia”, 2 January 2023, https://www.zawya.com/en/markets/equities/gcc-index-declines-in-2022-led-byqatar-and-saudi-arabia-otlrmktr, accessed 6 June 2023. 25 Gulf Insider, “Metaverse expected to add $15B annually to GCC economies by 2030 “, 8 December 2022, https://www.gulf-insider.com/metaverse-expected-to-add-15b-ann ually-to-gcc-economies-by-2030/, accessed 6 June 2023. 26 GCC-Stat, “GCC Outlook December, 2021” https://gccstat.org/en/statistic/pub lications/gcc-outlook, accessed 6 June 2023. 27 Ibid.

418

MD. M. QUAMAR ET AL.

per cent of the total outbound travel in the Middle East.28 The rising population, increase in middle-class income and high spending propensity have driven outbound tourism in the GCC region. The GCC tourists are generally keen for vacations with friends and family, escape from summer heat, experience new cultures and participate in new activities.29 Fiscal Situation and Inflation High hydrocarbon revenues have eased pressure on fiscal balances. Fiscal break-even prices for all GCC countries (except Bahrain) at which the budget would balance remained below the average oil price in 2022.30 The GCC countries were expected to have a fiscal surplus of 5.3 per cent of GDP in 2022, the first since 2014.31 The GCC governments utilised some fiscal surpluses to increase social support, mitigate inflationary pressure and facilitate economic recovery. Notably, energy subsidies and expenditures of national companies or state-owned entities that are recorded off the budget may distort the assessment of fiscal balance. It is expected that the government would save more than one-third of the windfall hydrocarbon gains in contrast to the previous pro-cyclic fiscal policies. The fiscal and current account surpluses augmented the financial buffers that dropped significantly during the pandemic. The total government spending in the GCC region was about US$552.3 billion, and the total government revenues were US$510.3 billion in 2021.32 There has been a sustained increase in the share of wages and salaries in total government spending since 2011, reaching an

28 Future Market Insights, “GCC Outbound Tourism Market Outlook (20222032)”, July 2022, https://www.futuremarketinsights.com/reports/gcc-outbound-tou rism-industry-analysis-and-forecast, accessed 6 June 2023. 29 Ibid. 30 IMF, “Gulf Cooperation Council: Economic Prospects and Policy Challenges for

the GCC Countries”, Policy Papers, 15 November 2022, https://www.imf.org/en/Pub lications/Policy-Papers/Issues/2022/11/29/Gulf-Cooperation-Council-Economic-Pro spects-and-Policy-Challenges-for-the-GCC-Countries-525945, accessed 6 June 2023. 31 The World Bank, “Gulf Economic Update: Green Growth Opportunities in the GCC”, Fall 2022, https://documents1.worldbank.org/curated/en/099337010182222 173/pdf/IDU16928b14e11cef1492f1a4481263a1f40d4c4.pdf, accessed 6 June 2023. 32 GCC-Stat, “GCC Outlook December, 2021” https://gccstat.org/en/statistic/pub lications/gcc-outlook, accessed 6 June 2023.

11

GCC

419

average of 15.4 per cent of the non-oil GDP of the GCC countries.33 The steep fall in oil prices in 2014 triggered fiscal adjustments, steep cuts to capital expenditure and energy subsidy reforms. Since 2018, the GCC countries have levied more taxes, excise tax (Qatar) and VAT (Bahrain, Oman, Saudi Arabia and UAE). Most GCC countries continued their fiscal consolidation in 2022, with some fiscal loosening in UAE and Qatar resulting from higher subsidies and wages.34 Between 2008 and 2018, frequent tax exemptions, wage increases and subsidies reduced the fiscal space for capital expenditure necessary for improving public services and infrastructure. Besides, the government’s inability to reverse expansion in expenditures has increased public debt. The GCC average public debt ratio as a per cent of GDP was estimated to decrease to the pre-pandemic level to about 46 per cent in 2022, even though debt service remained high due to the tight global finance market.35 The total assets with the commercial banks in the region were about US$2.7 trillion in 2021.36 Inflation in the GCC increased from 0.8 per cent in 2020 to an average of 2.1 per cent in 2021. It was expected to be 3.6 per cent in 2022.37 However, it was relatively mild compared to other high-income countries. The central banks in the region raised interest rates in tandem with the US Federal Reserves to discourage spending as inflation increased. About 2 per cent of the GCC’s agricultural imports and 44 per cent of its total wheat imports were from Russia and Ukraine in 2020.38 The governments had stockpiled food items and began to explore new markets to maintain their food supplies. The food inflation was about 6 per cent in June but was contained through price caps, subsidies, financial exemptions and credits to farmers and agribusinesses. Food items 33 IMF, “Regional Economic Outlook: Middle East and Central Asia”, October 2022,

https://www.imf.org/en/Publications/REO/APAC/Issues/2022/10/13/regional-eco nomic-outlook-for-asia-and-pacific-october-2022, accessed 6 June 2023. 34 Ibid. 35 IMF, “Gulf Cooperation Council: Economic Prospects and Policy Challenges for

the GCC Countries”, Policy Papers, 15 November 2022, https://www.imf.org/en/Pub lications/Policy-Papers/Issues/2022/11/29/Gulf-Cooperation-Council-Economic-Pro spects-and-Policy-Challenges-for-the-GCC-Countries-525945, accessed 6 June 2023. 36 Ibid. 37 Ibid. 38 Ibid.

420

MD. M. QUAMAR ET AL.

constituted about 12 per cent of all imported goods in the GCC region. The GCC region plays a role in achieving regional and global food security. In April 2020, GCC governments announced the establishment of a common food supply network among the member countries to meet the challenge of Covid-19 supply disruptions and advance stockpiling in individual countries.39 Inflationary pressure dampened consumer spending and was reflected in a decline in the shipment of smartphones to the GCC by 5.9 per cent in the third quarter of 2022 to 5.23 million units. Inflation was seen to dent consumer spending among low and middle-level price brands.40 The real estate sales between January and October 2022 were about US$143.1 billion, surpassing US$136.9 billion registered in 2021, even though the number of transactions declined by 6 per cent.41 Value for transactions in Saudi Arabia and Dubai was significantly higher, illustrative of consumer demand and investment appetite.42 Employment and Expatriates The GCC governments had intensified the drive to hire more nationals against the backdrop of Covid-19-induced loss of jobs for expatriate workers. There was about a 7.7 per cent increase in job creation in the first quarter of 2022, which increased by 2 per cent in the fourth quarter of 2021.43 Significant job increases were in environment, social and governance (ESG), real estate and digital transformation, especially cloud-based and cybersecurity jobs. The total number of workers in the GCC region was about 26.8 million in 2021, which decreased from 28.0 million in 2020 due to the reduced number of expatriate workers. According

39 Middle East Monitor (MEMO), “GCC approves food supply network for member states”, 17 April 2020, https://www.middleeastmonitor.com/20200417-gcc-approvesfood-supply-network-for-member-states/, accessed 6 June 2023. 40 Arab News, “GCC smartphone market to grow 13.8% in Q4, predicts industry report”, 22 December 2022, https://www.arabnews.com/node/2220311/business-eco nomy, accessed 6 June 2023. 41 Arab News, “GCC’s real estate sales soar 42% to hit $137bn”, 27 June 2022, https://www.arabnews.com/node/2111761/business-economy, accessed 6 June 2023. 42 Ibid. 43 Gulf Insider, “GCC witnesses 7.7% increase in job creation”, 11 April 2022, https://

www.gulf-insider.com/gcc-witnesses-7-7-increase-in-job-creation/, accessed 6 June 2023.

11

GCC

421

to the GCC Statistical Centre, the total GCC resident population was 57,630,000 in 2020, which marginally dropped to 56,390,000 in 2021.44 The GCC countries’ total working-age population (15 years and above) was about 45.6 million in 2021. In the past few years, these countries have reformed labour laws facilitating greater labour mobility in the dichotomous labour market. With economic recovery, the employment of expatriate workers seems rebounding, and that of the nationals also increased. However, the GCC labour market still suffered from fragmentation, with large public sectors employing the nationals and the private sector dominated by expatriate workers.45 The share of the private sector in generating employment ranged from 91.6 per cent in the UAE to 81.8 per cent in Oman in 2021 (Table 11.2). The share of nationals in total employment was highest in Oman at about 35.8 per cent and lowest in Qatar at about 5.7 per cent.46 There has been improvement in the female labour participation rate, but significant gaps remain as the participation remained less than half of the male counterparts. The GCC’s female labour market participation rates were less than the average of emerging economies. The share of women in managerial positions was about 16 per cent in the GCC (as against 27 per cent in the emerging markets), and it was 10 per cent of the total ministerial positions, against 20 per cent in the emerging market economies, in 2020. The share of expatriate workers having educational status above secondary was highest in the UAE (39.7 per cent) and lowest in Oman (18.3 per cent) (Table 11.2). The proportion of expatriate workers with less than secondary education was highest in Oman (69.8 per cent) and lowest in Saudi Arabia (41.4 per cent). Expatriate workers with less than secondary education predominate in Bahrain and Oman, implying their increased risk to economic vulnerabilities. The GCC currencies (except Kuwait) maintain fixed pegs to the US dollar. During the year, the strong US dollar benefited the expatriate

44 GCC-STAT, “Population”, https://dp.gccstat.org/en/DashBoards?2ncd0h4AYU12 Vp2d9ze9w, accessed 6 June 2023. 45 IMF, “Gulf Cooperation Council: Economic Prospects and Policy Challenges for the GCC Countries”, Policy Papers, 15 November 2022, https://www.imf.org/en/Pub lications/Policy-Papers/Issues/2022/11/29/Gulf-Cooperation-Council-Economic-Pro spects-and-Policy-Challenges-for-the-GCC-Countries-525945, accessed 6 June 2023. 46 GCC-STAT, “Population”, https://dp.gccstat.org/en/DashBoards?2ncd0h4AYU12 Vp2d9ze9w, accessed 6 June 2023.

422

MD. M. QUAMAR ET AL.

Table 11.2 Profile of GCC labour market, 2021

Bahrain Kuwait Qatar Oman Saudi Arabia UAE

Employment in Private Sector (per cent of Total)

Citizens in Total Employment (%)

81.6 81.9 87.2 81.8 86.9 91.6

28.3 17.4 5.7 35.8 26.4 NA

Educational Qualification among Expatriate Workers (%) Below Secondary

Secondary

Above Secondary

67.4 59.6 54.9 69.8 41.4 41.7

15.1 18.0 16.0 11.9 24.6 18.6

17.5 22.4 29.1 18.3 34.0 39.7

Source Compiled from GCC Statistical Centre, GCC Atlas 2022

workers, whose domestic currencies at home were depreciating with inflation.47 For example, Omani Riyal has appreciated 60 per cent against Indian Rupee since 2012.48 Thus, investing Gulf incomes in assets valued in depressed currencies abroad, such as real assets, gained traction in 2022. It also implied more economic leakages from the region due to the remittances of the migrant workforce. External Sector According to the GCC Statistical Centre, the total GCC trade in 2021 was about US$1.15 trillion, which increased significantly from US$834.2 billion in 2020. The GCC region ranked 13th globally in merchandise exports; 14th in commodity trade volume; and fourth globally in merchandise trade surplus in 2021.49 Total exports of goods and services crossed pre-Covid-19 levels to reach US$969.9 billion in 2021 (Table 11.3). The total imports of goods and services, however, remained less than the pre-Covid-19 values and were about US$710.2 billion in 47 Sebastian Castelier, “Gulf currencies pegged to dollar keep migrant workers’

families afloat”, Al-Monitor, 12 December 2022, https://www.al-monitor.com/origin als/2022/12/gulf-currencies-pegged-dollar-keep-migrant-workers-families-afloat, accessed 6 June 2023. 48 Ibid. 49 GCC-STAT, “Development Indicators”, https://gccstat.org/en/, accessed 6 June

2023.

11

Table 11.3 Select external indicators in GCC states, 2019–21 (US$ billion)

*Exports of goods and services Exports of goods *Imports of goods and services Imports of goods Current account balance Intra-GCC exports

GCC

423

2019

2020

2021

928.5 612.1 720.8 458.9 92.1 –

711.9 478.5 613.9 395.7 −17.0 –

969.9 668.6 710.2 478 138.2 102.8

Sources GCC Statistical Centre, Foreign Trade, https://www.gcc stat.org/en/; *IMF, Regional Economic Outlook: Middle East and Central Asia October 2022

2021. The current account surplus was about US$138.2 billion in 2021 (Table 11.3) and was expected to reach 17.2 per cent of GDP in 2022.50 According to the International Trade Centre, energy comprised about 65 per cent of the total GCC exports in 2021. Despite the growth of non-oil sectors, diversification to non-oil exports had been very little, except for Bahrain. The top five non-oil export categories in 2021 were pearls and semi-precious stones, metals, etc. (7 per cent); plastics and articles thereof (4.3 per cent); electrical machinery (4 per cent); mechanical machinery (2.3 per cent); and organic chemicals (2.2 per cent). The top five import categories for the region were pearls and precious stones, metals, etc. (13.8 per cent); electrical machinery (10.6 per cent); mechanical machinery (9.4 per cent); mineral fuels (8.7 per cent), and vehicles and parts (7.1). The GCC region also imported about US$57.4 billion worth of mineral fuels and distillates.51 Table 11.4 gives the direction of trade for the GCC region in 2021 dominated by Asian countries. China was the leading trade partner. The war in Ukraine increased global oil prices and demand for non-Russian gas, mainly in Europe. The intra-GCC exports were about US$102.8 billion in 2021 (Table 11.3), mainly to Saudi Arabia (Table 11.4). The

50 The World Bank, “Gulf Economic Update: Green Growth Opportunities in the GCC”, Fall 2022, https://documents1.worldbank.org/curated/en/099337010182222 173/pdf/IDU16928b14e11cef1492f1a4481263a1f40d4c4.pdf, accessed 6 June 2023. 51 Trade Map, “List of imported products for the selected product: TOTAL All products”, https://www.trademap.org/Product_SelCountry_TS.aspx?nvpm=1%7c%7c38% 7c%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c1%7c2%7c1%7c1%7c1%7c1%7c1, accessed 6 June 2023.

424

MD. M. QUAMAR ET AL.

Table 11.4 GCC’s direction of trade, 2021 (US$ billion) Top five export destinations

Top five import sources

Top five energy export destinations

Top five destinations of LNG and other hydrocarbon gases exports

India (42.53)

China (97.16)

China (12.40)

China (33.91) Saudi Arabia (31.64) Iraq (15.81) Japan (15.46)

US (39.74) India (35.14)

Japan (11.84) South Korea (10.98)

South Korea (9.56) India (8.91) China (7.84)

UAE (35.46) Japan (21.46)

India (10.53) Singapore (4.85)

Japan (4.81) UK (2.77)

Source Compiled from International Trade Centre Database

UAE was the main source of intra-GCC imports. The region has about 1,232 unified technical regulations regarding goods and services. There has been an upsurge in intra-GCC economic engagement after the resolution of the Qatar crisis and the lifting of the economic boycott on the emirate by its Arab neighbours. The logistic challenge of hosting the world’s largest tournament, FIFA World Cup 2022, in Doha had a positive spill over on the GCC economies. The UAE was likely to benefit the most due to its well-developed tourism and logistics sectors in Qatar’s neighbourhood.52 Oman Air also announced special prices for travellers heading for the World Cup 2022. The intra-GCC Railway project was revitalised by establishing the GCC Rail Authority in December 2021. The project aims to set up a 2,177km rail line connecting Kuwait in the north, via Jubail and Dammam in Saudi Arabia, Manama (Bahrain) and Doha (Qatar), Abu Dhabi, Dubai and Fujairah (UAE) and finally connecting Muscat (Oman). The railway line is expected to become operational by 2025.53

52 Arab News, “World Cup to provide an extra economic boost to GCC: S&P survey”, 9 November 2022, https://www.arabnews.com/node/2196336/business-eco nomy, accessed 6 June 2023. 53 Gulf Insider, “GCC nations to revitalise plan for railway network”, 2 June 2022, https://www.gulf-insider.com/gcc-nations-to-revitalise-plan-for-railway-network/, accessed 6 June 2023.

11

GCC

425

The 25th ministerial meeting for financial markets in the GCC countries adopted regulations for registering financial products in the regional financial markets.54 They are also looking towards activating a knowledge portal for regional financial markets. About 558,000 GCC nationals held shares in about 669 joint stock companies in other member states with an investment of about US$372 million.55 The governments continued investing in economic diversification and foreign assets to shore up global partnerships. Flush with funds in 2021 and 2022, the GCC countries bought several global assets yielding substantial rents. In the US, they moved their investments from conventional treasuries to equities.56 Activities in the non-oil sectors have boosted the flow of remittances in the Middle East and other countries. The GCC governments have made efforts to increase their attractiveness for foreign investment. However, FDI inflows in the region had been low in terms of per cent of GDP as compared to their global peers.57 There had been a pre-Covid-19 upward trend in FDI, but it was less than its earlier peak. The pandemic-induced slowing down of the global economy consequent to the rise in fuel, food and commodities prices in 2022 implied that the FDI would not significantly increase in the short to medium term. Besides, there have been concerns about the spillover effect of political instability in the Middle East and weak legal and regulatory structures in the GCC region.58 The GCC countries have been keen to foster innovation and the total number of patents awarded by the Gulf patent office was about 11,912 by the end of 2022.59

54 Arab News, “GCC market regulators approve plan to facilitate investment accounts opening”, 5 October 2022, https://www.arabnews.com/node/2175601/business-eco nomy, accessed 6 June 2023. 55 GCC-STAT, “Development Indicators”, https://gccstat.org/en/, accessed 6 June 2023. 56 Al-Monitor, “The Gulf Briefing: swapping petrodollars for assets”, 29 November 2022, https://www.al-monitor.com/originals/2022/11/gulf-briefing-swapping-petrodoll ars-assets, accessed 6 June 2023. 57 World Government Summit, “De-risking the Investment Landscape. High-impact FDI policies for the GCC”, 30 June 2021, https://www.worldgovernmentsummit.org/ observer/reports/2021/detail/de-risking-the-investment, accessed 6 June 2023. 58 Ibid. 59 GCC-STAT, “Development Indicators”, https://gccstat.org/en/, accessed 6 June

2023.

426

MD. M. QUAMAR ET AL.

The GCC states and related institutions have been leading in providing development finance through the Arab coordination group to tackle food security and climate adaptation. In the wake of the Ukraine war and the attendant increase in global food prices, they pledged about US$41 billion to Egypt, Jordan, Pakistan and Yemen in official support and investments. They have disbursed more than US$22 billion till 2022.60 The food security action plan was agreed upon in May 2022 with a seed money of US$10 billion to help finance the food import bills for lower-income countries.61 Energy and Environment The GCC region has 34 per cent of the world’s crude oil reserves. Globally, the region ranked first in oil reserves and production, second in natural gas reserves and third in marketed natural gas production in 2021.62 Table 11.5 shows the per cent share of the GCC countries in the oil and natural gas liquids and marketed natural gas production during 2021. Saudi Arabia had a 53.5 per cent share, followed by UAE at 17.2 per cent, Kuwait 14.5 per cent, Qatar 7.8 per cent, Oman 5.9 per cent and Bahrain 1.1 per cent in oil and natural gas liquid production in 2021. The hydrocarbon sector accounts for more than 30 per cent of the regional GDP and generates more than 50 per cent of the fiscal and export receipts.63 The GCC countries produced and exported less oil in 2021 than in 2020 (Table 11.6). They produced 16.0 mbpd of oil in 2021 and exported 11.94 mbpd. The refining capacity in the region increased to 6.57 mbpd in 2021 from 6.03 mbpd in 2020. However, the refining throughput was much less at 5.19 mbpd in 2021. The GCC countries

60 IMF, “Regional Economic Outlook: Middle East and Central Asia”, October 2022, https://www.imf.org/en/Publications/REO/APAC/Issues/2022/10/13/regional-eco nomic-outlook-for-asia-and-pacific-october-2022, accessed 6 June 2023. 61 Zawya, “ACG Institutions launch food security action with initial US$10bln pack-

age”, 20 June 2022, https://www.zawya.com/en/press-release/companies-news/acginstitutions-launch-food-security-action-with-initial-us10bln-package-e8yfpere, accessed 13 June 2023. 62 GCC-STAT, “Development Indicators”, https://gccstat.org/en/, accessed 6 June 2023. 63 Ibid.

11

GCC

427

Table 11.5 Share in energy production in GCC countries, 2021 Share in Total GCC Crude Oil and Natural Gas Liquids Production (%) Bahrain 1.1 Kuwait 14.5 Qatar 7.8 Oman 5.9 Saudi Arabia 53.5 UAE 17.2

Share in Total GCC Marketed Natural Gas Production (%) 3.9 2.9 46.6 8.0 27.1 11.5

Source Compiled from GCC Statistical Centre, GCC Atlas 2022

produced 427.7 bcm of natural gas in 2021, surpassing the pre-Covid-19 levels of 417.1 bcm in 2019 (Table 11.6). They exported about 3.50 mbpd of natural gas during the year but natural gas flaring remained significant at 8.9 bcm. Electricity production in all the GCC countries is more than their consumption levels. However, the buffer was very small for Bahrain, Oman and Qatar. The GCC interconnection grid generated a cumulative saving of US$1.15 billion by the end of 2022.64 The value of the carbon dioxide emission saved from the intra-GCC Power Grid was about US$32.4 million. The power consumption in the desalination of water in Table 11.6 GCC’s energy statistics, 2018–21

Oil Production (mbpd) Crude Oil Exports (mbpd) Refining Capacity (Thousand bpd) Refining Throughput (Thousand bpd) Natural Gas Production (bcm) Natural Gas Marketed Production (bcm) Natural Gas Flaring (bcm) Natural Gas Exports (mbpd)

2018

2019

2020

2021

17.8 12.45 5793 5506 413.2 415.66 8.9 2.31

17.3 13.04 5941 5266 417.1 400 8.9 3.61

16.2 12.29 6029 4681 413.2 – 8.8 3.51

16.0 11.94 6574 5191 427.7 447.7 8.9 3.50

Source Compiled from IMF, Regional Economic Outlook: Middle East and Central Asia, October 2022; BP, Statistical Review of World’s Energy 2022

64 Ibid.

428

MD. M. QUAMAR ET AL.

the region was about 38 TWH year equivalent to 0.2 per cent of the total global power consumption. Desalination of water is an energy-intensive process. About 311 litres per capita and 6.3 bcm of desalinated water were produced in 2021.65 Heavily subsidised public utilities and voluntary building codes have led to inefficient energy consumption and building practices. The construction sector contributes about 17 per cent of greenhouse gas emissions in the GCC.66 Some private developers have started to adopt sustainable building practices, like in Dubai Sustainable City.67 The region has one of the world’s highest generation of per capita waste. The GCC households generate huge food waste, and the most prevailing practice has been to dump wastes in landfills with no gas capture and with high leakages, causing adverse environmental and public health risks.68 The GCC governments have ambitious plans to improve waste management through integrated solutions that reduce, reuse and recycle waste.69 There are many private companies recycling different kinds of waste, but the industry is not mature or established due to a lack of waste recycling policies that would encourage waste segregation at the point of generation.70 During COP27 held in Egypt in November 2022, the GCC countries made a case for a two-pronged approach focusing on oil and green energy

65 Ibid. 66 The World Bank, “Gulf Economic Update—Green Growth Opportunities in the

GCC”, 31 October 2022, https://www.worldbank.org/en/country/gcc/publication/ gulf-economic-update-october-2022, accessed 6 June 2023. 67 Ismail Radwan, “The Sustainable City in Dubai: from dream to reality”, World Bank Blogs, 20 July 2022, https://blogs.worldbank.org/arabvoices/sustainable-citydubai-dream-reality, accessed 13 June 2023. 68 Tariq A. Al Maeena, “Food waste strategies vital to GCC sustainability”, Gulf News, 12 February 2023, https://gulfnews.com/opinion/op-eds/food-waste-strategies-vital-togcc-sustainability-1.93766130, accessed 6 June 2023. 69 World Future Energy Summit, “GCC Government mandates see waste management efforts stepping up”, https://www.worldfutureenergysummit.com/en-gb/future-insightsblog/gcc-government-mandates-see-waste-management-efforts-stepping-up.html, accessed 13 June 2023. 70 Zawya, “Rebound Plastic Exchange to support GCC-wide efforts in sustainable waste management”, 22 November 2022, https://www.zawya.com/en/press-release/ companies-news/rebound-plastic-exchange-to-support-gcc-wide-efforts-in-sustainablewaste-management-ym4hugf0, accessed 13 June 2023.

11

GCC

429

in tackling climate change.71 In COP26, they had come under pressure to make stronger commitments towards reducing oil emissions which led them to set the ambitious goals to reach net zero by 2050. However, during the year, with global energy shortages in the wake of the Ukraine crisis, the GCC oil producers made a case for increased investments in hydrocarbons before a complete and successful transition to alternative energy could be made.72 At the same time, the GCC countries have started working on emission controls in tandem with their role as energy hubs. The GCC states have aligned their national interest with climate change goals in the last few years. Society and Culture The GCC societies have strong cultural and religious ties and familial relations among the citizens of member countries. Hence, the they continue to strive for greater societal and cultural interaction among its members, a core objective of the GCC.73 Despite occasional political differences, the social bonds among the citizens have been strong, and was visible during the FIFA World Cup that was celebrated across GCC countries.74 This was despite the fact that until 2 January 2021, three GCC countries had blockaded Qatar creating some bitterness at the societal level. The common cultural heritage of the GCC states also plays a pivotal role in keeping the group intact, although, at times they compete for status, power and regional influence.

71 Sabena Siddiqui, “GCC states focused on both oil, green energy at COP27”, AlMonitor, 18 November 2022, https://www.al-monitor.com/originals/2022/11/gcc-sta tes-focused-both-oil-green-energy-cop27, accessed 6 June 2023. 72 Ibid. 73 GCC-SG, “About GCC”, https://www.gcc-sg.org/en-us/AboutGCC/Pages/Starti

ngPointsAndGoals.aspx, accessed 6 June 2023. 74 S. Faizi, “FIFA World Cup 2022: The spirit of football and a beautiful solidarity”, The Indian Express, 14 December 2022, https://indianexpress.com/article/opinion/fifaworld-cup-2022-qatar-controversy-football-spirit-8323905/, accessed 6 June 2023.

430

MD. M. QUAMAR ET AL.

Bilateral Issues India and GCC have strong bilateral relations. This was not affected by the Qatar crisis, as India balanced relations between the squabbling parties and remained neutral throughout the period. The end of the crisis brought newer opportunities, especially in the economic and strategic realms. After over a decade, India and GCC countries resumed discussion for a bilateral FTA in 2022. The GCC remains one of India’s crucial sources of energy supplies, and both sides have discussed greater cooperation in maritime security, counter-terrorism, emerging technologies, trade and investments, tourism and cultural cooperation and renewables. Politics and Security During 2022, External Affairs Minister S. Jaishankar held two meetings with GCC Secretary-General Nayef al-Hajraf; first in September during the EAM’s visit to Saudi Arabia and second in November when the Secretary-General visited India. These visits reiterated the revitalisation of India-GCC engagement in the aftermath of the Covid-19 pandemic, focusing on economic engagements, healthcare cooperation and food and energy security. An MoU on the mechanism for diplomatic consultations was signed during the EAM’s meeting with the Secretary-General in Riyadh.75 During Al-Hajraf’s visit, the announcement of the revival of FTA negotiations was made in a joint press conference with Commerce Minister Piyush Goyal in New Delhi on 25 November.76 On his part, the GCC Secretary-General emphasised the historic ties and trade relations and underlined that the two sides are keen to take bilateral cooperation forward and seek greater economic integration.77 India and GCC

75 The Hindu, “India, Gulf Cooperation Council sign MoU to facilitate consultations”, 11 September 2022, https://www.thehindu.com/news/national/india-gulf-cooperationcouncil-sign-mou-to-facilitate-consultations/article65878096.ece, accessed 6 June 2023. 76 Press Information Bureau (PIB), “India-Gulf Cooperation Council (GCC) decide to pursue resumption of Free Trade Agreement (FTA) Negotiations”, 25 November 2022, https://pib.gov.in/PressReleasePage.aspx?PRID=1878714, accessed 6 June 2023. 77 GCC-SG, “During his meeting with the Indian Foreign Minister. GCC Secretary General” Relations between the GCC and the Republic of India are historic and we seek more coordination, cooperation to face challenges and seize opportunity in all fields, 24 November 2022, https://www.gcc-sg.org/ar-sa/MediaCenter/NewsCooperation/News/ Pages/news2022-11-24-10.aspx, accessed 6 June 2023.

11

GCC

431

countries have strong ties and commonalities of strategic interest, given their geographic and cultural interlinkages and both seek regional peace, stability and security cooperation against common threats.78 Trade and Commerce According to GCC Atlas, in 2022, India was the GCC’s second-largest trading partner, with a share of 10.1 per cent after China’s with a share of 17.9 per cent. The GCC, on the other hand, is the largest trading bloc for India as of 2021–22,79 with 77.01 per cent YoY growth rate.80 According to the Ministry of Commerce, it maintained its lead between 2022 and 2023. The total bilateral trade of US$184.55 billion in 2022– 23 (Table 11.7) has surpassed previous levels in several years. India’s total exports to the GCC during the period were about US$51.30 billion, with a share of 11.38 per cent of India’s total exports. Its total imports from the region were about US$133.25 billion, with a share of about 18.66 per cent of total imports. Negotiations for a FTA resumed in November 2022 after a long gap. Previous rounds of negotiations were held in 2006 and 2008. Both Table 11.7 India’s trade with GCC, 2018–23 (US$ million)

Exports to GCC Imports from GCC Total Trade

2018–19

2019 - 20

2020–21

2021–22

2022–23

41,621.97 79,715.68 121,337.65

40,466.26 80,464.64 120,930.9

27,758.72 59,589.45 87,348.17

43,931.73 110,723.45 154,655.18

51,306.00 133,249.00 184,555.00

Source Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India

78 Embassy of India in Riyadh, “India-GCC Relations”, August 2021, https://www. eoiriyadh.gov.in/page/india-gcc-relations/, accessed 6 June 2023. 79 Al-Arabiya, “GCC emerges as India’s largest trading partner bloc: Indian commerce ministry”, 28 December 2022, https://english.alarabiya.net/business/economy/2022/ 12/28/GCC-emerges-as-India-s-largest-trading-partner-bloc-Indian-commerce-ministry, accessed 6 June 2023. 80 Indian Brand Equity Foundation (IBEF), “Indian Economy News”, 22 December 2022, https://www.ibef.org/news/the-bilateral-trade-between-india-and-gulf-cooper ation-council-gcc-witnessed-an-increase-of-77-06-year-on-year-basis, accessed 6 June 2023.

432

MD. M. QUAMAR ET AL.

sides agreed to expedite the agreement on legal and technical issues.81 During the negotiations, food security issues, logistics and regulations were discussed. India’s exports to the region during the year witnessed one of the highest growth rates. The Federation of Indian Export Organisation (FIEO) planned B2B delegations, exhibitions, interactive sessions and capacity building to push India’s exports. Members of the organisation also participated in the Super Sourcing Dubai (SSD) show to connect the Indian exporters with the decision-makers in supermarkets, hypermarkets, retail chains and importers in the GCC, Middle East and Africa.82 Figures 11.1 and 11.2 give India’s top exports and imports to the region. The top export items were petroleum products; gold and precious metals; telecom instruments, pearls precious and semi-precious stones, Basmati rice, motor vehicles/cars and iron and steel. The top import items were mineral fuels, pearls, precious stones and metals, fertilisers, plastic, articles, organic and inorganic chemicals. Pearl, precious stones and metals were among the largest items of India’s exports and imports to the region. India increased taxes on gold imports from 7.5 per cent to 12.5 per cent in June 2022. It increased the price differential between India and the GCC, which further widened with the weakening Rupee generating savings of 10 to 15 per cent in buying gold in the GCC.83 India is the second largest gold consumer in the world and meets most of its demand through imports.84 India-GCC non-oil trade was about US$71 billion in 2021–22. Significant bilateral trade in services existed between India and the GCC of

81 The Hindu, “India, GCC group to launch free trade pact negotiations on November

24”, 17 November 2022, https://www.thehindu.com/news/national/india-gcc-groupto-launch-free-trade-pact-negotiations-on-november-24/article66147633.ece, accessed 6 June 2023. 82 Outlook, “India’s Exports To GCC Countries Grew By 44% In 2021-22: FIEO”, 21 September 2022, https://www.outlookindia.com/business/india-s-exports-to-gcc-cou ntries-grew-by-44-in-2021-22-fieo-news-224840, accessed 13 June 2023. 83 Gulf-Insider, “GCC: Buying gold becomes cheaper”, 3 July 2022, https://www. gulf-insider.com/gcc-buying-gold-becomes-cheaper/, accessed 6 June 2023. 84 Outlook, “At 611 Tonnes, India Is Second Largest Gold Jewellery Consumer In World, Says WGC Report”, 19 January 2023, https://www.outlookindia.com/business/ at-611-tonnes-india-is-second-largest-gold-jewellery-consumer-in-world-says-wgc-reportnews-254989, accessed 13 June 2023.

11

GCC

433

Fig. 11.1 India’s top export items to GCC, 2022–23 (Source Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India)

Fig. 11.2 India’s top import items from GCC, 2022–23 (Source Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India)

434

MD. M. QUAMAR ET AL.

about US$14 billion in 2021–22.85 India’s services exports were about US$5.5 billion, and imports were about US$8.3 billion during the year.86 India’s flagship carrier Air India announced an Independence Day offer for flights from the GCC cities to major cities in India, with air tickets from Dubai as low as Dh 330.87 Under the initiative “one India one fare,” Air India announced attractive one-way fares for direct flights from the GCC (except Oman) to all the cities in India. The GCC investment in India was estimated at over US$18 billion in 2022.88 They had been a surge in NRI investments in the Indian real estate market seizing upon the opportunities of rupee depreciation and opportunities for technology-enabled virtual tours and online site inspections. About 41 per cent of the NRI investment was from the GCC countries, displaying increasing demand for luxury homes.89 Besides the metro cities, the investments more easily flowed into non-metro cities like Ahmedabad, Goa, Kochi and Chandigarh. Migration from India to the GCC has slowed in the last few years, and there has been a sharp decrease in immigration clearance for unskilled and semi-skilled workers to the region since 2016. As per the RBI survey, the share of the GCC in India’s total remittances declined from 50 per cent in 2016–17 to above 30 per cent in 2020–21.90 India-Gulf is the second

85 PIB, “India-Gulf Cooperation Council (GCC) decide to pursue resumption of Free Trade Agreement (FTA) Negotiations”, 25 November 2022, https://pib.gov.in/PressR eleasePage.aspx?PRID=1878714, accessed 6 June 2023. 86 Ibid. 87 Gulf-Insider,

“GCC-India: Air India launches Independence Day offer”, 9 August 2022, https://www.gulf-insider.com/gcc-india-air-india-launches-independenceday-offer/, accessed 6 June 2023. 88 Fortune India, “Bilateral trade between India, GCC up 40.53% to $111.71 bn between Apr-Oct”, 21 December 2022, https://www.fortuneindia.com/macro/bilateraltrade-between-india-gcc-up-4053-to-11171-bn-between-apr-oct/110832, accessed 6 June 2023. 89 Shashank Vashishtha, “Why is Indian real estate becoming a preferred investment destination for NRIs in GCC?”, Financial Express, 12 February 2023, https://www.fin ancialexpress.com/money/why-is-indian-real-estate-becoming-a-preferred-investment-des tination-for-nris-in-gcc/2979216/, accessed 6 June 2023. 90 Reserve Bank of India (RBI), “Headwinds of COVID-19 and India’s Inward Remittances”, 16 July 2022, https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=21141#T1, accessed 6 June 2023.

11

GCC

435

Table 11.8 Number of Indians in the GCC and registered in E-Migrate system, 2021–23 Number of Indians in GCC (as on April 2023)

Bahrain Kuwait Qatar Oman Saudi Arabia UAE Total GCC

3,23,292 1,028,274 779,351 691,539 2,592,166 3,419,875 8,834,497

No. of Indians who Left for Work through E-Migrate 2021

2022

6382 10,158 49,579 19,452 32,845 10,844 129,260

10,232 71,432 30,871 31,994 178,630 33,233 346,160

Sources https://www.mea.gov.in/rajya-sabha.htm?dtl/36462/question+no3913+difficulties+faced+by+ labourers+working+abroad; https://www.mea.gov.in/lok-sabha.htm?dtl/36371/question+no2905+ind ian+migrant+workers

highest migration corridor, with a share of 28 per cent.91 However, they were repeated concerns in the Indian Parliament over the conditions of the Indian workers in the GCC region.92 Table 11.8 shows the increase in the number of Indian workers who got e-migrate clearance from 129,260 in 2021 to 346,160 in 2022. The migrant flows to the GCC region increased with economic recovery. However, the prospective migrants also often used the tourist visa to go to GCC countries for work, and hence, the e-migrant data is often an understatement of the actual migrant flow to the region. Energy Ties GCC countries contributed 36.08 per cent of India’s oil imports and 81.26 per cent of hydrocarbon gas imports during 2022–23. Due to the escalation in energy prices, the crude oil imports from the GCC

91 Ibid. 92 Pooja Yadav, “Explained: Why Are Indian Migrant Workers Dying In The Gulf

Countries”, 25 July 2022, https://www.indiatimes.com/explainers/news/why-are-indianmigrant-workers-dying-in-the-gulf-countries-575571.html accessed 13 June 2023.

436

MD. M. QUAMAR ET AL.

Table 11.9 India’s energy trade with GCC, 2019–22 (US$ million)

Imports of Crude Oil (2709) Imports of Petroleum Products (2710) Imports of Hydrocarbon Gases (2711) Exports of Petroleum Products (2710)

2019–20

2020–21

2021–22

2022–23

38,499.05 (37.47) 3449.08 (43.85) 12,762.85 (72.96) 6640.09 (16.28)

23,352.90 (39.26) 2028.32 (35.10) 11,560.40 (73.90) 3712.58 (14.65)

47,698.59 (38.95) 3993.46 (39.97) 20,114.86 (76.12) 9452.52 (14.17)

58,474.88 (36.04) 3,576.55 (32.94) 25,907.44 (81.26) 12,469.52 (12.92)

Source Directorate General of Foreign Trade, Ministry of Commerce and Industry Government of India; Figures in the Bracket are per cent of the total imports/exports of that commodity

were about US$58.48 billion in 2022–23, significantly higher than preCovid-19 levels in 2019 (Table 11.9). Similarly, the imports of gaseous hydrocarbons (LPG and LNG) were about US$25.90 billion during the period. India also exported an increasing amount of petroleum products to the GCC region; the region’s relative share in total exports of petroleum products declined between 2020 and 2022 (Table 11.9). The exports of petroleum products were about US$12.47 billion in 2022–23. There is a growing interest among the GCC countries to collaborate with India in exploiting renewable energy and hydrogen gas. Besides, many business opportunities are emerging to lower the carbon footprints of energy systems.93 Culture The most important part of India-GCC cooperation is the people-topeople connection. Nearly 8.5 million Indian expatriates and people of Indian origin live and work in the GCC countries; by some estimates, the number is higher at over 10 million.94 Despite the havoc created by the Covid-19 pandemic and the associated disruption in daily lives,

93 Abdelkhaleq Ahmad, “ESG offers GCC firms new business opportunities”, Arab News, 8 June 2022, https://www.arabnews.com/node/2099741, accessed 13 June 2023. 94 Nikita Rawat, “Indian expats who made a fortune in the Gulf”, Media India, 3 January 2021, https://mediaindia.eu/diaspora/indian-expats-who-made-a-fortune-in-thegulf/, accessed 13 June 2023.

11

GCC

437

trade and business and return migration, wherein nearly two million returned home under Vande Bharat mission from the GCC States during Covid-19, Indians continue to return to the GCC countries to find work. Some impacts of job nationalisation and localisation have been felt, but the flow of migrant workers to and the inflow of remittances from the GCC countries continued in 2022. The Indian workers in GCC countries are recognised for their skills and discipline and have created a niche for themselves regarding professional work and reliability. Gradually, the demography of the workers in terms of the type of professional engagement as well as in terms of coming from different parts of India have also changed. The Indians in GCC countries form a crucial bridge in bilateral relations with the host countries.

Challenges and Opportunities The GCC remains India’s most important and largest trading partner and the bilateral relations with individual states have revolved around trade, business and investments. Much of India’s engagements are bilateral and the bloc has a whole remains internally divided or divergent on important issues. This has affected any meaningful progress in India-GCC relations. The resumption of FTA negotiations is a good sign and the major challenge for India would be to overcome the intra-GCC differences. Trade, business and investments remain the most important areas of opportunity. Food security, healthcare, pharmaceuticals, education, human resource, technology and start-ups are specific areas that present opportunities for India and GCC to cooperate and strengthen their partnership.

CHAPTER 12

Policy Options

1. Proactive instead of Reactive: Despite greater political and diplomatic engagements, India mainly reacts to regional developments. A more proactive approach is a precondition for expanding its manoeuvrability and safeguarding of its interests. While Prime Minister Modi significantly expanded political engagements, the establishment continues to play catch-up and has not fully capitalised the potentials of Modi’s transformative Gulf policy. 2. Ineffective utilisation of constitutional positions: India has not been fully utilising the services of the constitutional offices, namely Presidents, Vice-Presidents and Lok Sabha Speakers, to advance its diplomatic engagements. They should be used more frequently for diplomatic purposes in the Persian Gulf to expand Indian influence among the political class and general public. In cases where this has happened recently, the poor handling proved counterproductive, as was the case during the visit of Vice-President M. Venkaiah Naidu to Qatar in June 2022. 3. Under-utilisation of soft power: Prime Minister Modi has received several awards and honours from the regional countries since he assumed office in 2014. However, India has failed to use similar options to show its admiration of the leaders of the Persian Gulf region and advance its interests. The only exception was Sultan Qaboos of Oman, who was awarded the Nehru Award for 2004 (announced in 2007) and the Gandhi Peace Prize for © Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5_12

439

440

MD. M. QUAMAR ET AL.

2019 (announced in 2021 after his demise). The lack of imagination and ineffectiveness were apparent as both these awards could not be conferred upon Sultan Qaboos in person. A more effective and imaginative effort is required to fully capitalise the potentials of these and other honours in furtherance of Indian interests in the Persian Gulf countries. 4. Need for Reorganisation of Divisions: In the MEA, the nine Persian Gulf countries are handled by three different divisions. While the six GCC countries come under the Gulf Division, Iran falls in the PAI (Pakistan, Afghanistan and Iran) Division, while Iraq and Yemen are handled by the WANA (West Asia and North Africa) Division. This has perpetuated the diffused thinking and often hampers coordination or interactions. These are also compounded by poor strength within the MEA, who are already engaged in myriad of routine activities. 5. Receptive to alternatives: There is an inherent aversion among policymakers to explore and listen to the broader civil society, academia and think tanks on foreign policy matters. Even mildest criticisms in closed-door meetings evoke knee-jerk reactions from the elites who believe that the foreign policy is the exclusive and unquestionable domain of the practitioners. A critical and honest appraisal is a precondition for an effective foreign policy but is largely absent. Time has come for the establishment to be more receptive and accommodative of critical—and even alternative— appraisals of the functioning, policies and strategies of the Indian foreign policy establishment. 6. Iran Challenge: Iran remains a serious foreign policy challenge for India. While the nuclear issue, regional discords and conflicts and Iran-US problems hamper the bilateral relations, the developments in Afghanistan and access to Central Asia result in a constant clamour for greater engagements with Tehran. As a result of these diverse pressures, India continues to lack a coherent Iran policy for nearly two decades, and this must be rectified at the earliest. 7. Pakistan and China Factors: The traditional preoccupation with Pakistan has been replaced by a new obsession with China. Earlier the Pakistan factor hampered Indo-Gulf relations, and the obsession with China is now gaining similar traction. A more coherent and balanced Indian policy is needed to understand China, its policies and strategies in the Persian Gulf region.

12

POLICY OPTIONS

441

8. Cultural Diplomacy: India has started using cultural diplomacy more vigorously under Prime Minister Narendra Modi to advance foreign policy interests. However, in the Persian Gulf, cultural diplomacy has largely been confined to the expatriate community and has only partially reached the citizens of the respective countries. Yoga, Ayurveda, Bollywood, classical dance and music, theatre, archaeology, architecture, tourism and higher education can contribute to advance India’s appeal. In addition to the official initiatives, the GoI should encourage civil society organisations, cultural groups and educational institutions to develop partnerships with their counterparts in the Gulf countries. 9. Domestic-Foreign Policy Linkage: The inherent linkages between domestic politics and foreign policy are often disregarded or unrecognised by the Indian government, bureaucracy and civil society. This leads to problems, even with the friendly Gulf Arab countries, as witnessed during the Nupur Sharma controversy in May–June 2022. Although it did not hamper bilateral relations, a greater understanding of the domestic-foreign policy linkages by the establishment is necessary for the seamless functioning of India’s engagements with the outside world. 10. India-GCC FTA: The revival of India and GCC free trade agreement (FTA) negotiations is an important development in 2022. In the light of the comprehensive economic partnership agreement between India and UAE, the FTA with GCC will facilitate greater B2B ties and help the realisation of the economic potential. As negotiations require more dexterity, representatives of industry and chambers of commerce should be involved at Track 1.5 and Track 2 levels for a smooth resolution of sticking points. 11. Business Ties: While the trade, energy and investment ties with the Gulf countries form the pillar of bilateral relations, these have been mainly achieved through government-led initiatives. The ties between businesses, industries and corporations remain meagre or are confined to relations among major oil and gas corporations and Indian businesses based in the Gulf investing in big-ticket government-led projects. In other words, the economic ties between India and the Gulf mostly rely on G2G ties, and B2B ties remain frugal. 12. Inability to Attract SWFs: India is one of the fastest-growing markets in the world. The GoI has been working to attract foreign

442

MD. M. QUAMAR ET AL.

investments to accelerate economic growth. Gulf countries, especially Saudi Arabia and the UAE, have promised to invest billions of dollars in India through portfolios and FDIs. However, the capacity of the Indian market to attract sovereign wealth funds (SWFs) from the Gulf monarchies requires serious introspection, restructuring and transformation. 13. Partnerships in skill development: The generation of jobs for the nationals is a priority for the Gulf Arab governments. Nationalisation of job markets in the GCC countries may be detrimental to Indian expatriates. But India can further the Arabisation by contributing to skilling the Gulf nationals in various sectors. Such an options opens doors for collaboration in several other sectors and increased job opportunities for both regions. The Gulf countries have been eyeing Indian technology and knowledge-intensive sectors, even while trying to build their capabilities. Joint R&D centres may be set up in upcoming areas to capitalise on the Gulf interests and requirements. 14. Dependence on Gulf Energy: India has long relied on the Persian Gulf region for energy security. Despite the growing quantity of imports, the dependency on the Gulf is likely to continue. Nonetheless, there is some diversification mainly due to the increased preference for non-renewables to reduce carbon footprints and newer import options. For example, in 2022, India imported large quantities of discounted oil from Russia, while its oil and gas imports from the US and Australia saw a sustained increase and these in turn marginally dipped the share of the Persian Gulf region in India’s energy imports from 65 per cent in 2021–22 to 56 per cent in 2022–23. However, India’s dependence on region for over 90 per cent of its LPG, a key domestic fuel requirements, remains unaltered and is likely to grow further. Same goes for natural gas imports. These call for broad-based energy ties and creating partnerships in energy transition. 15. Rationalisation of Expatriate Data: In the wake of Covid-19, scores of Indians returned from the GCC countries and several Gulf returnees were also compelled to come home due to host countries changing labour laws and regulations. Since 2022, after regular flights resumed, many have returned to the Gulf to resume their previous employment or in search of newer ones. However, the data on Indian expatriates in the Gulf between 2019 and

12

POLICY OPTIONS

443

2022 remain constant, with very little variation. Current estimates suggest the presence of about 8.5 million Indian expatriates in the GCC countries. The publicly available data pertains only to Emigration Certificate Required (ECR) category and those registered on e-migrate system, and hence, many who travel to the GCC do not figure in the official statistics. A more accurate figure is necessary for better understanding, analysis and policy-making on expatriates, especially for contingency plans during emergencies. 16. Need for Expanding Knowledge Base: There is a serious need to expand India’s knowledge base on the Gulf beyond officialdom and the foreign policy establishment. The poor knowledge base in academia and meagre research output in terms of quality and quantity has hampered an in-depth understanding of the region essential for policy initiatives. The lack of institutions, research centres, university departments and think tanks focusing on the Persian Gulf region is a serious problem which needs immediate attention. Poor research grants and human resource management have hampered capacity building and knowledge base in the country.

Index

A Abdollahian, Hossein/ Amir-Abdollahian, Hossein, 25, 83, 98, 115, 123 Abdulaziz, Ahmed bin, 292 Abdullah II, King of Jordan, 215 Abraham Accords, 7, 12, 44, 52, 53, 215, 340, 345 Abubaker, Haval, 154 Abu Dhabi National Oil Company (ADNOC), 358–360, 365, 379, 388 Afghanistan–Iran bilateral relations, 26, 114 Akleh, Sheerin Abu, 254 al-Abadi, Haider, 129, 131 al-Alimi, Rashad, 6, 305, 386, 396 al-Assad, Bashar, 7, 9, 214 al-Awfi, Salim, 208, 227 al-Bunyan, Yousef bin Abdullah, 295 al-Busiadi, Badr, 230 al-Fares, Rana, 169 al-Hajraf, Nayef, 172, 412, 430 al-Hakim, Ammar, 129, 131 Ali, M.A. Yusuf, 75

al-Jaber, Sultan Ahmed, 379 Al Jazeera Bahrain, 76 al-Kadhimi, Mustafa, 127 al-Khaled, Alia, 168 al-Khalifa, Abdullah bin Ahmed, 69 al-Khalifa, Khalifa bin Salman/ al-Khalifa, Salman bin Khalifa, 45, 47, 48 al-Maamari, Mohammed, 208 al-Makhtoum, Mohammed bin Rashid, 258, 335, 345, 361 al-Maliki, Nouri, 6, 126, 127, 129 al-Marwaai, Nouf, 332 Al Maya, 77 al-Mayman, Basmah, 313 al-Mutairi, Abdulrahman, 169 al-Nahyan, Khalifa bin Zayed, 337, 367 al-Nahyan, Mohammed bin Zayed, 337 al-Nimshan, Humdan, 186 al-Rumhi, Mohammed, 208 al-Rushaid, Abdul Wahab, 169, 182 al-Saadoun, Ahmad, 168

© Middle East Institute New Delhi (MEI@ND) 2023 Md. M. Quamar et al., Persian Gulf 2023, Persian Gulf, https://doi.org/10.1007/978-981-99-6380-5

445

446

INDEX

al-Sabah, Ahmad, 165, 167, 169, 172, 196 al-Sabah, Mishal al-Ahmad Al-Jaber, 163, 167 al-Sabah, Nasser, 169 al-Sabah, Sabah al-Ahmad al-Jaber, 164, 171 al-Sabah, Sabah al-Khaled, 165, 167 al-Sabah, Talal al-Khaled, 169 al-Said, Fahd, 211 al-Said, Theyazin bin Haitham, 205, 207 al-Saud, King Abdulaziz bin Abdulrahman, 292 al-Saud, Prince Abdul Aziz Bin Salman, 328 al-Shaheen, Osama, 187 al-Shaikh, Hamad bin Mohammed, 295 al-Sheikh, Prince Mohammed bin Salman in Sharm, 172 al-Sudani, Mohammed Shia/ al-Sudani, Shia, 6, 125, 127, 128, 131, 134, 139, 141, 161 al-Suhaimi, Sarah, 313 al-Thani, Emir Tamim/Tamim, Emir, 3, 25, 54, 247, 249–253, 273, 274, 276, 304, 345, 412 al-Thani, Mohammed bin Abdulrahman, 250 al-Tuwaijri, Hala, 321 Al-Ula Declaration, 7, 252, 344 Al-Ula GCC Summit, 44 al-Zayani, Abdullatif, 47, 51 Amini, Mahsa, 4, 5, 17, 83–86, 89, 91, 93, 104, 113, 114, 124, 137 Aqleh, Shireen Abu, 175 Arab Peace Initiative, 175 Ashouri, Anoush-e, 88 B Bahrain

aluminium export, 64, 73 Bahrainization programme, 60 bicameral legislative body, 45 carbon emissions, 65, 360 China relations, 51 corruption in, 16 Covid-19 outbreak, 44, 56, 68 cryptocurrency exchange-Binance, 56 demographic profile, 49 digital transformation in, 61 economic growth, 55, 56, 62, 67 economic linkages with Saudi Arabia, 62 economic prospects, 44 economic recovery post-Covid-19, 55 efficiency of government services, 58 employment rate, 60 energy exports, 64 expatriate professionals in, 61 exports of goods and services, 62 favourable destination for weddings, 75 financial markets and stock exchanges, 20 fiscal transparency, 58 foreign investment in, 58, 147 foreign policy and security, 49 GDP and GNI, 42 gender inequality in, 16 Golden Residency Visa, 67 Grand Prix, 56 Hindu temples in, 78 Human Development Index, 15, 42, 68 human rights violations, 43, 66 Indian citizens in, 79 India-related cultural centres, 42 inflation in, 57, 59

INDEX

inheritance and transfer of citizenship, 67 Israel relations, 44, 52 Labour Registration Programme, 61 logistics sector, 56 Majlis al-Nuwwab (Council of Representatives), 45, 125 Majlis ash-Shura (Consultative Council), 45 municipal elections, 45 natural gas production, 65 non-oil sector growth rate, 19, 55 oil production, 2, 64 parliament and parliamentary election, 7, 45, 86 political situation, 44 Pope Francis visit, 54 promotion of sustainable energy, 65 reconciliation with Qatar, 54 regional hub of manufacturing and logistics, 76 registered voters, 46 Shia–Sunni discord, 45 socio-economic indicators, 41 status of women, 45, 46, 67 urbanisation rate, 42 US relations, 50 VAT rate, 57 Bahrain Institute for Rights and Democracy (BIRD), 46, 47 Barzani, Nechirvan, 25, 154 Bennett, Naftali, 52 Biden, Joe, 3, 7, 8, 10, 17, 24, 137, 172, 249, 295, 299, 300, 342, 343, 369, 413 Bochasanwasi Akshar Purushottam Swaminarayan Sanstha (BAPS), 78 BRICS, 26, 50, 93, 108 Bushehri, Jenan, 168

447

C Chevron Phillips, 269 China-Arab Summit, 24, 28, 52, 138, 177, 211 China-Gulf relations, 8 China-Saudi relations, 28, 96 China’s Belt and Road Initiative (BRI), 9, 28, 300 ConocoPhillips, 266, 267 COP27 Summit, 11, 428 COP28 Summit, 11 corruption Corruption Perceptions Index Ranking, 17 Covid-19 economic fallouts of, 2 societal impact, 12 cultural diplomacy, 441

D Daina, Mohammed bin Mubarak bin, 47, 48 Democracy Index, 13, 14 Doval, Ajit, 26, 115, 231

E Egypt Kuwait, relations with, 174 Qatari investments in, 253 Saudi Arabia, relations with, 12, 212 EIU Democracy Index, 14, 15 el-Sisi, Abdel Fattah, 174, 215 Emigration Certificate Required (ECR) category of emigrants, 443 energy market, 3, 20, 106, 203, 282, 299, 301, 302, 343 Erdo˘gan, Recep Tayyip, 174, 253, 302, 303, 347

448

INDEX

F FIFA World Cup, 3, 17, 19, 25, 88, 108, 173, 245, 248, 250, 251, 256, 257, 266, 270, 272, 276, 284, 286, 304, 311, 320, 345, 412, 414, 424, 429 financial markets and stock exchanges, 19 G Gantz, Benny, 52 Gender Inequality Index (GII), 15, 16, 42, 68, 82, 114, 126, 154, 164, 195, 206, 230, 244, 273, 288, 321, 336, 363, 384, 404 global economy, post-Covid-19, 29 Global Freedom Score, 15 Global Innovation Index, 13, 42, 82, 126, 164, 206, 244, 288, 336, 384 Global Passport Ranking, 18 Goyal, Piyush, 26, 328, 374, 378, 430 Gulf Cooperation Council (GCC) agriculture imports, 419 average public debt ratio, 419 communique, 412, 413 cultural and religious ties, 429 development of greater connectivity, 414 elections, 6, 7 electricity production and power consumption, 427 employment opportunities, 37, 68 expatriates in, 420, 436, 442 exports and imports, 432 female labour participation rate, 421 financial markets and stock exchanges, 19 fiscal balance, 418 GCC–China Summit, 413

GDP growth rate, 415 government revenues, 418 hydrocarbon revenues, 418 impact of Ukraine War, 259, 416 inflation rate, 419 monetary policy, 417 nationalization of job markets, 29, 437, 442 oil and natural gas production, 426 political engagement and economic integration, 411 refining capacity, 426 stock markets, 417 tourism sector, 19, 424 Turkish-mediated Black Sea Grain initiative, 416 waste management, 428 Gulf-Jordan forum, 415 Gulf migration from India, 30

H Hadi, Abdrabbuh Mansur, 305, 386 Hassad food company, 260 Herzog, Isaac, 53, 345 Houthi missile and drone attacks, 5, 408 Huajin Aramco Petrochemical Company, 317 human rights violations, 17, 43, 66, 171, 272 Hussein, Fuad, 135, 154

I India economy, 29 electricity generation needs, 34 energy imports, 77, 201, 277, 379, 442 Energy Trade with the Persian Gulf Countries, 34, 36

INDEX

LPG and LNG Imports, 37, 282, 436 total crude oil imports, 34, 158, 330 India-Abrahamic Accords, 12 India Armenia-Iran trilateral grouping, 122 India–Bahrain bilateral relations diplomatic relations, 78 energy ties, 77 exports and imports, 73 Indian investments in Bahrain, 73 maritime security, 71 political and security engagements, 69 India–GCC bilateral relations cultural relations, 284 economic engagements, 430 energy trade, 436 exports and imports, 432 free trade agreements, 372 GCC investments in India, 434 healthcare cooperation, 430 Indian expatriates, 25, 29, 30, 32, 78, 436 India-GCC FTA, 430, 431, 441 India–Iran bilateral relations Chabahar Port, 83, 117, 123 exports and imports, 117, 118 facilitation of transit of goods from Russia to India, 122 Indian exports to Iran, 118 Iranian students in India, 123 mutual legal assistance treaty (MLAT), 116 political and security engagements, 83, 115 Rupee–Rial payment mechanism, 118 visa issuance system, 121 India–Iraq bilateral relations capacity building programmes, 157

449

crude oil trade, 143, 148, 158 cultural relations, 159 energy trade, 159 exports and imports, 155, 159 Iraqi students in India, 161 medical tourism, 159 political and diplomatic exchanges, 154 trade and investments ties, 155 yoga programs, 157 India–Kuwait bilateral relations Bharat Bill Payment Services (BBPS), 199 cultural relations, 201 exports and imports, 197 Indian expatriates in Kuwait, 201, 202 Kuwaiti investments in India, 200 Nupur Sharma controversy, 196 Solar Forum, 201 India–Oman bilateral relations exports and imports, 226, 234 FDI from Oman, 237 green ammonia project, 239 Indian expatriates, 231, 240 India’s LNG imports, 238 joint bilateral exercise Naseem al-Bahr, 233 medicinal plants processing, 231 Rwabee incident, 405 security and defence collaboration, 231, 233 sharing of UPI platform, 238 solar alliance, 239 trade and economic cooperation, 234 India–Persian Gulf relations bilateral trade, 30 culture and entertainment, 37 defence ties, 26 Dubai Expo–India Pavilion, 26 economic engagement, 29

450

INDEX

energy ties, 29, 33 natural gas imports, 442 remittances to India, 32 India-Qatar bilateral relations cultural relations, 284 diplomatic issues, 25 economic ties, 276 export of petroleum products, 279, 283 exports and imports, 277 Indian expatriates, 284, 285 international flight arrangements, 282 issue of funding PFI, 276 LNG and LPG trade, 34 Nupur Sharma controversy, 274, 285 Qatari investments in India, 283 India–Saudi bilateral relations agro-food sector, 326 cultural relations, 332 exports and imports, 325 Hajj and Umrah pilgrimage, 333 Indian expatriates, 332 Ma’aden project, 328 maritime security, 324 oil trade, 314 supply of ammonia DAP and NPK fertilizers, 328 yoga practices in Saudi, 332 India–UAE bilateral relations collaboration in healthcare facilities, 376 Comprehensive Economic Partnership Agreement (CEPA), 25, 30, 338 counter terrorism cooperation, 370 crude oil trade, 379 cultural relations, 381 economic and investment ties, 365 exports and imports, 373 food sector, 376

Indian companies in, 376 Indian expatriates, 381 military ties and defence sales and production, 370 petrochemical projects, 374 petroleum products, 30 space partnerships, 377 India-UAE-France trilateral cooperation, 26, 338, 369, 382 India–Yemen bilateral relations cultural relations, 408 Indian expatriates, 408 Indo-Bahraini relations, 43 inflation, 19, 20, 22, 29, 32, 59, 100, 104, 143, 181, 219, 260, 311, 319, 341, 354, 419, 420, 422 innovation, 12, 75, 212, 231, 425 International North-South Transport Corridor (INSTC), 108 International Solar Alliance (ISA), 77, 159, 201, 240, 284, 331 Iran Afghan refugees in, 105 Amini, Mahsa controversy, 5 China, relations with, 96 corruption in, 16 crude oil reserves, 108 current account indicators, 106, 146 cyber programme, 92 development of North and South Pars gas fields, 110 diplomatic relation with Saudi Arabia, 98 economic growth, 100, 101 economic recovery, 2 energy statistics, 110 environment issues, 111 exports and imports, 106 female youth unemployment, 105 foreign and security policies, 99 foreign policy, 93, 124

INDEX

gas reserves and production, 109 GDP and GNI, 82 gender inequality in, 16 Ghast-e-Irshad (morality police), 84 growth rate of non-oil GDP, 101 hijab controversy, 86, 93, 111, 113, 124 Human Development Index, 82, 114 human rights violations, 17 India-related cultural centres in, 82 inflation in, 100, 104 Iranian football team controversy, 88 Iranian response to Ukraine war, 94 Israel, relation with, 87 Joint Comprehensive Plan of Action (JCPOA), 90, 116, 118 Majles-e Showra-ye Eslami (Islamic Consultative Assembly), 81 maritime boundary issues with Kuwait, 189 narcotics smuggling, 117 national currencies and exchange rates, 108 nuclear power, 111 Nupur Sharma controversy, 115 oil revenues, 100, 102 Oman, relations with, 97, 98, 108 on Nagorno-Karabakh conflict, 99 parliament and parliamentary election, 86 privatization in, 102 Qatar, relations with, 97, 108 refining capacity, 109, 110 regional policy, 94, 99 relations with Western powers, 96 renewable energy generation, 110, 112 rights of women and ethnic minorities, 84 Russia, relations with, 93, 96, 107

451

sanctions against, 92 Shah-e-Cheragh shrine attack, 117 social situation in, 112 status of women, 97 Taliban regime, relations with, 99 terrorist attacks in, 89 urbanisation rate, 82 Iranian ballistic missile programme, 92 Iraq business environment for private sector, 140 development of new oil exploration blocks, 148 dollar smuggling and money laundering, 147 economic growth, 140, 141, 152 exports and imports, 125, 159 external public debt, 142 female labour participation rate, 144 fiscal situation and inflation, 142 food prices, 137, 143 foreign direct investment (FDI), 126, 147 foreign policy and security, 136 fuel imports, 149 gas shortages, 151 gender inequality in, 16 Human Development Index, 126 impact of Russia-Ukraine War, 137 imports from Türkiye, 147 intra-Kurdish rivalry, 130 Iraqi Dinar’s exchange rate, 141 Iraqi oil prices, 145 ISIS, threats from, 155 Kurdistan Regional Government (KRG), 137, 143, 150, 151, 154, 161 military activities in Kurdish region, 136 Muqtada al-Sadr’s Sadrist movement (Sairoon), 126

452

INDEX

non-oil revenues, 142 oil production and exports, 139 oil smuggling, 148 parliament and parliamentary elections, 125, 126 political instability, 127 population growth rate and youth unemployment, 144 Sadrist Movement, 128, 134 Saudi Arabia, relations with, 139 Save the Homeland alliance, 127, 129, 131 UN Assistance Mission in, 132 urbanisation rate, 126 Israeli passport, ranking of, 18 J Jaishankar, S., 25, 123, 154, 165, 195, 230, 273, 289, 323, 329, 365, 367, 368, 430 Jinping, Xi, 9, 24, 52, 96, 138, 177, 211, 251, 300, 412 Johnson, Boris, 10, 302 Joint Comprehensive Plan of Action (JCPOA), 4, 8, 90, 91, 116, 118, 347 K kafala (sponsorship) system, 17, 247, 262 Kani, Ali Bagheri, 116, 121 Khaleej al-Bahrain oil reserves, 64 Khamenei, Ali, 81, 87, 105 Khan, Imran, 302 Khashoggi affair, 8 Kovind, Ram Nath, 367 Kuwait Al-Dabdaba project, 192 China, relations with, 177 cordial ties with Türkiye, 174 development of Dorra gas field, 189

digital transformation and e-governance, 179 economic growth, 178 Egypt, relations with, 174 employment of Kuwaitis, 182 expatriate workers in, 174, 181, 183–187 export of refined products, 188 fees for expatriate workers, 185, 186 fiscal situation and inflation, 179 Fitch Ratings, 180 foreign policy and security, 171 GCC countries, relations with, 171, 195 gender inequality in, 16 GNI and GDP, 164 Human Development Index, 164, 195 investment in refinery upgrades, 191 Iran, political and trade relations with, 173 Iraq, relations with, 171 LNG imports, 188, 191, 192 Majlis al-Ummah, 166 maritime boundary issues with Iran, 189 non-oil exports, 187 non-oil GDP growth, 178 oil prices, 178, 179, 192, 197 parliament and parliamentary election, 163, 166, 167 political and diplomatic contacts, 173, 203 political settlement in Syria, 173 political uncertainty, 165 real estate sector, 181 renewable energy development, 201 response in Qatar Crisis, 171, 172 response to Yemen crisis, 172 rights of domestic workers, 183

INDEX

role in negotiation between GCC countries and Lebanon, 175 Russia, relations with, 176 Saudi Arabia, relations with, 171 suspension of issuing work permits to Egyptian workers, 185 Ukraine crisis, 178, 203 US, relations with, 176

L labour laws and regulations, 442 Latif, Abdul Rashid, 6, 125 Lavrov, Sergei, 95, 211 Lulu chain of hypermarkets, 75

M Mahindru, Admiral Sanjay, 72 MbS (Mohammed bin-Salman), 3, 8, 9, 17, 23, 289, 290, 292, 295, 299, 300, 302–304, 308, 311, 317, 323, 328, 333 MbZ (Mohammed bin-Zayed), 3, 337, 339, 340, 367 Mekdad, Faisal, 214 minilateral initiatives, 11 Misri, Vikram, 70 Mittal, Deepak, 284 Modi, Narendra, 25, 42, 69, 71, 80, 82, 83, 115, 116, 165, 195, 206, 230, 232, 241, 244, 273, 276, 288, 289, 323, 333, 337, 365, 367, 369, 439, 441 Mohammed bin Rashid Al Maktoum Knowledge Foundation, 258 Mohammed bin Zayed, 337 Muraleedharan, V., 70, 231, 238, 273, 274

N Nagorno-Karabakh conflict, 99

453

Naidu, Venkaiah, 25, 230, 274, 281, 367, 439 Naik, Zakir, 275, 285 Najeeb, K., 241 Namazi, Baquer, 88 Negev Forum, 53 Netanyahu, Benjamin, 53, 54, 346 Nupur Sharma controversy, 27, 71, 115, 232, 274, 285, 441

O oil geopolitics, 293, 343 oil reserves, 19, 64, 108, 149, 164, 317, 358, 384, 426 Olayan, Hutham, 313 Olayan, Lubna, 313 Oman bilateral ties with GCC countries, 213 China, relations with, 210 corruption in, 206 demographic profile, 240 domestic political situation, 208 economic growth strategies, 216 economic ties, 23 employment opportunities, 220 expatriate workers in, 220 exports and imports, 226, 234 fiscal consolidation and reforms, 218 foreign policy and security, 210 gender inequality in, 16 GNI and GDP, 206 green hydrogen sector, 227, 228 Human Development Index, 206, 229 India-related cultural centres in, 206 inflation in, 218, 219 Iran, relations with, 213 Islamic banking in, 217

454

INDEX

LNG export revenues, 223, 238 maritime boundaries, 224 municipal elections, 209 natural gas production in, 226 non-oil exports, 222, 234 non-oil GDP growth, 216 Nupur Sharma controversy, 232 oil production and consumption, 225, 226 Omanization, 208, 220, 228 on Israel, 214 on Qatar crisis, 212 on Ukraine crisis, 211 parliament and parliamentary election, 205 renewable energy production, 227 role in reducing tensions in Yemen, 213 Russia, relations with, 210 Saudi Arabia, relations with, 212 Sovereign Investment Partnership (SIP) agreement with UK, 210 special and economic zones, 217 Syria, relations with, 214 total trading in MSX, 219 trade or financial links with Russia, 220 UAE, relations with, 212, 224 US, relations with, 210 Vision 2040, 207, 217, 218 Yiti sustainable tourism project, 216 Oman-Etihad Rail Company, 212, 224 Oman Investment Authority (OIA), 206, 218, 223 Operation Southern Cyclone, 387 Organization of Islamic Cooperation (OIC), 29, 71, 304, 399, 401

P Padukone, Deepika, 285

Pakistan factor, 28, 440 Paris agreement on climate change, 112 partition neutral zone (PNZ), 23 passport ranking, 18 Persian Gulf countries China, relations with, 8, 28 corruption in, 16 gender inequality in, 15 human rights violations, 17 inter-faith relations in, 55 oil reserves, 19 progress trajectory, 14 reorganization of divisions, 440 Russia, relations with, 9, 107 trends in, 2 US, relations with, 7, 8 political and diplomatic engagements, 25, 69, 230, 289, 300, 301, 322, 439 Popular Front of India (PFI), 275 privatization, 22, 102, 140 Putin, Vladimir, 10, 49, 95, 176, 250, 342

Q Qatar accusations of human and labour rights violations, 246 achievements in education, 258 Afghanistan, relations with, 273 as a global sporting hub, 245 as a mediator role in regional disputes, 273 as mediator in intra-regional disputes and problems, 254 China, relations with, 251 commitment to reduce carbon dioxide emissions, 270 corruption allegations, 245 corruption in, 245

INDEX

economic growth, 255, 259 employment rate, 258 energy statistics of, 268 expatriates in, 245, 262, 284 exports and imports, 243, 277 FIFA World Cup 2022, 309, 350, 424 financial conditions and inflation, 259 financial services, 257 food security challenges, 261 foreign exchange reserves, 264 foreign investments, 37 foreign policy and security, 248 gas field projects, 266 gas supply, 226, 251, 264, 267 GCC countries, relations with, 4, 7, 8, 23, 54, 108, 213, 267 gender inequality in, 16 Germany, relations with, 266 Global Competitive Index ranking, 258 Global Knowledge Index ranking , 258 Golden Pass and North Field expansion projects, 268 Human Development Index, 244, 273 human rights violations, 272 hydrocarbon exports, 255 incubator and accelerator programmes, 281 Indian naval officers’ detention in, 27 Iran, relations with, 252 Israel, relations with, 254 joint ventures in energy sector, 267 labour laws, 262 logistics sector, 256 LPG and LNG supplies, 265, 266, 286 maritime boundary agreements, 254

455

migrant labourers, 262 natural gas production, 267, 268 non-oil exports, 263 on Ukraine crisis, 248 parliament and parliamentary election, 243, 249 partnership agreements with European countries, 264 petrochemical production capacity, 269 ranking of passports, 18 real estate sector, 256 relations with US, 249 rights of non-binary people, 247 Saudi Arabia, relations with, 251 security and defence ties with US, 249 solar power plants, 270 tourism sector, 255 Türkiye, ties with, 253 QatarEnergy, 268, 270

R Raisi, Ebrahim, 25, 81, 83, 86, 90, 95, 97, 98, 103, 104, 108, 111, 115, 116, 213, 224, 252 Ramaphosa, Cyril, 315 Rasheed, Abdul Lateef, 133 Rashid, Abdul Latif, 6, 125 Rasht-Astara railway lines, 107 Razaei, Mohsin, 267 regional integration, 23, 216, 267 Richwhite, Christopher, 88 Rouhani, Hassan, 82 Rushdie, Salman, 93 Russia-China geopolitical alignment, 50 Russia-Iran concurrence, 50 Russia-Iran regional cooperation, 95 Russian Direct Investment Fund (RDIF), 59

456

INDEX

Russian oil and gas exports, sanctions on, 22

S Sadr, Moqtada al-, 6, 160 Sairoon Movement, 6 Salehabadi, Ali, 104 Salih, President Barham, 6, 133 Salman, Khalid bin, 292 Salman, King Mohammed bin, 289 Salman, Mohammed bin, 3, 212, 251, 289, 396, 412 Sanctions, Iran, 4, 92, 118 Saudi Arabia ACWA power, 36, 315, 319, 332 Biden’s visit to, 299, 414 China, relations with, 24, 300 consumer price index (CPI) score, 311 corruption in, 16 Covid-19 impact, 296 crude oil exports, 317, 318 defence imports, 306 demographic profile, 49 economic diversification, 22, 308, 310, 312–314 economic ties, 23, 62 education level, 312 Egypt, relations with, 305, 316 employment opportunities, 311 entertainment sector, 309, 330, 334 female labour participation, 313 fight against Yemeni rebels, 298 fiscal situation, 310 Founding Day celebration, 290 fuel oil burns in, 318 Gender Inequality Index, 288, 321 GNI and GDP, 287 green hydrogen projects, 319, 320 Houthi drone and missile attacks, 298, 389

Human Development Index, 288, 321 inflation rate, 311 Iran, relations with, 303 Israel, relations with, 305 King Salman International Complex for Maritime Industries and Services, 308 Kings of, 293 maritime defence capabilities, 306 MbS (Mohammed bin-Salman), 289, 290, 292, 295, 299, 300, 302–304, 308, 311, 317, 323, 328, 333 military operations in Yemen, 8 National Renewable Energy Program (NERP), 319 natural gas reserves, 317 Neon City project, 309 non-oil sector’s real growth rate, 19, 307 non-religious tourism, 308 oil production and consumption, 299, 302, 317, 318 oil reserves, 288, 317 power generation capacity, 319 privatization, 22 Qatar, relations with, 304 regional politics, 301, 303 renewable power generation, 319 ruling family, 287 Russia, relations with, 301 Saudization policy, 312 Shareek (Partner) initiative, 312 smuggling of drugs, 306 socio-economic reforms and changes, 291 space programme, 321 steel import, 308 tax system, 310 urbanisation rate, 288 US, relations with, 299

INDEX

Vision 2030, 288, 290, 299, 307–309, 311, 312 Saudi Arabia-Pakistan relations, 302 Saudi Aramco, 22, 64, 311, 314, 317, 318 Saudi-Jordan Joint Investment Fund, 316 Sayeed, Ausaf, 69 Scholz, Olaf, 266 Shanghai Cooperation Organization (SCO), 25, 26, 50, 83, 93, 95, 116, 117, 250, 344 Sharif, Shahbaz, 302 Shoukry, Sameh, 214 soft power, 439 Sovereign Wealth Fund Mumtalakat, 57 sovereign wealth funds (SWFs), 42, 82, 125, 164, 206, 244, 254, 287, 336, 442 status of women, 97 strategic hedging, 11, 300 Sunni Taqaddum (Progressive) Party, 6 Swaraj, Sushma, 195

T Tamim, Emir, 249–253, 273, 274, 276, 345 Tariq, Sultan Haitham bin, 207, 241 Thackwray, Bridget, 88 Tibalaji Petrochem Pvt Ltd, 118 Tiwari, Purnendu, 28 transnational cooperation, 12 Türkiye, 2, 7, 91, 98, 99, 107, 109, 127, 136–139, 145–147, 150, 151, 174, 253, 260, 275, 302, 303, 315, 345–348, 357, 358, 399, 400, 404

457

U Ukraine crisis, 2, 8, 22, 137, 178, 203, 211, 248, 302, 322, 343, 344, 429 UltraTech Cement Bahrain, 75 United Arab Emirates Afghanistan, relations with, 348 as oil storage and trading hub, 225 China, relations with, 344 clean energy investments, 357 corruption in, 16 demographic profile, 361 economic growth, 19, 351, 442 Emiratization policy, 355, 363 employment rate, 336 exports and imports, 336, 358, 371 Federal National Council (FNC), 335, 338 financial markets and stock exchanges, 353 foreign policy, 337, 339, 340, 342, 349 free trade agreements, 346, 357, 372, 373 GNI and GDP, 336 Human Development Index, 336, 363 inflation rate, 354 infrastructure projects, 352 integrated social welfare programme, 340 Iran, relations with, 345 Israel, relations with, 340, 345–347 labour laws, 340, 362, 381 legal reforms, 340 manufacturing sector, 351 MbZ (Mohammed bin-Zayed), 339, 342, 345, 349, 367, 369 media and political freedoms, 363 nationalities present in, 361 national working week, 355 natural gas production, 359

458

INDEX

non-oil sector growth, 350 oil production and consumption, 359, 360 on Ukraine crisis, 343, 344 on Yemen crisis, 348, 350, 364 parliament and parliamentary election, 335 personal laws, 341 Qatar, relations with, 344, 358 religious diversity, 361 rights and status of women, 341 role in Yemen, 388 Saudi Arabia, relations with, 347, 364 security and military preparedness, 349 social welfare programme, 353 solar and nuclear capacity, 361 start-ups and entrepreneurship, 351, 364, 368 status of women, 363 tax system, 353 tourism sector, 350, 357 trading partners, 358 Türkiye, relations with, 345, 346 urbanisation rate, 336 US, relations with, 344

V Vandecasteele, Olivier, 89 Vienna talks, 4, 7, 90 Vijayan, Pinarayi, 370

W Wahhab, Mohammed bin Abdul, 290, 296 Wei Fenghe, 211

Y Yadav, Bhupendra, 370 Yakoob, Mullah, 349 Yemen agriculture sector, 393 Ansar Allah movement, 98, 385 balance of payment situation, 398 banking services, 394 Black Sea Grain Initiative, 404 dual economy, 394 economic recovery, 2, 19, 395 employment opportunities, 397 expatriates in, 340, 397, 408 exports of goods and services, 398, 399 food and health security, 404 gender inequality in, 16 Houthi movement, 385, 386, 388, 405 Human Development Index (HDI), 15, 404, 384 humanitarian situation in, 387, 403, 404, 408 impact of flash flood, 393 imports, 30, 384, 393, 395, 398, 399, 402, 407 India-related cultural institutions, 408 inflation rate, 395 natural gas production, 400 oil reserves, 384 Rwabee hijack incident, 405 Saudi Development and Reconstruction Programme for, 396 Saudi military operations in, 8 Saudi Programme for Development and Reconstruction of, 401 share of remittances, 397 solar power capacity, 402 tax system, 393

INDEX

Z Zaghari, Nazanin, 88

459

Zayed, Mohammed bin. See MbZ (Mohammed bin-Zayed) Zayed, Sheikh Muhammad bin, 337