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Pak strategy cutrailed by Saudi economic interests in India

Pakistan is heavily in debt to Saudi Arabia and it depends hugely on the Kingdom's largess to avoid economic collapse.

By Vikram Singh Mehta

Two unconnected 'developments' and one 'fact' lead me to suggest India should deepen its economic linkages with Saudi Arabia through interlocking cross-country investments. The first development is the recent attacks on Saudi Arabia's oil and gas infrastructure. The second is the muscular, albeit irresponsible, anti-Indian diatribe by the Pakistani leadership. They have introduced the nuclear option in their language. The 'fact' is the location of a substantial part of our petroleum assets on- or offshore our western coastline. In my view, when seen through a common lens, these three matters reveal a heightened security risk scenario for India, but also offer a non-military option for mitigating the consequential outcome. Saudi Arabian investments in India's petroleum infrastructure and vice versa lie at the core of this option.

Saudi Arabia's oil and gas infrastructure has been attacked several times over the past several months. On May 12, four oil tankers, two of which belonged to Saudi Arabia, were damaged by limpet mines. On May 14, the East-West oil pipeline that runs for 1,200-km across the Arabian peninsula was bombed. On August 17, its super giant Shaybah oil field was sabotaged. And on September 14, unmanned aerial vehicles (drones) knocked out the Abqaiq oil processing facilities and the giant Khurais oil field. This latter attack took out 5.7 million barrels per day (mmbd), or 60% of Saudi Arabia's production of 9.8 mmbd. It was the largest disruption to oil supplies, ever.

The Abqaiq attack compelled India to contemplate drawing on its strategic reserves and also look for alternative supplies. Fortunately, the supply shortfall was made up quickly and prices, which had shot up by 12% in the immediate aftermath, returned to pre-attack levels within days. India did not suffer greatly from this disruption.

The attack also compelled India to ask questions related to Middle East geopolitics. Was the regional status quo now sustainable? How might the US react? Would they limit their response to non-violent options of sanctions (and cyber)? Or would they support a (covert or overt) retaliatory attack on Iranian assets. (The Kharg Island facilities would be a proportionate target). India has admitted they have no clarity on the answers. In fact, it appears no one does. Trump is talking of "maximum pressure," but he has refrained from a military response. Iran has said "no war, no negotiation," but it has signalled it may be amenable to the resumption of talks.

The attack has also compelled reflection on the state of the security of India's oil and gas infrastructure. The Saudi assets were ringed by sophisticated US Patriot anti-missile defence systems. Yet 17 facilities in Abqaiq and Khurais were hit by 25 low-flying cruise missiles. What does this say about the strength of defence systems when pitted against the forces of weaponised artificial intelligence? How vulnerable are our oil and gas assets on the western coast?

Specifically, the Mumbai High oil and gas fields; the Jamnagar refinery complex; and the LNG regasification terminals in Dahej, Hazira, Dabhol and Cochin. What, if any, steps should India take to tighten the security systems protecting these assets, especially in light of the heightened anti-India rhetoric by Pakistan. And, perhaps most important, what can India do to lengthen the odds of an attack against these assets?

It is in the context of this last question that I suggest that India promote cross-country investments with Saudi Arabia.

Pakistan is heavily in debt to Saudi Arabia and it depends hugely on the Kingdom's largess to avoid economic collapse. Saudi Arabia, consequently, has considerable leverage over Pakistan and Pakistan, in turn, cannot afford to ignore Saudi economic interests when war-gaming an offensive strategy against India. Were Saudi invested in Indian oil and gas assets, it might deter Pakistan from bringing these assets into their strategic calculus.

In this regard, there are two initiatives on the anvil that the government should encourage. One is the $40 billion joint venture refinery project in Ratnagiri. The partners are Aramco, Abu Dhabi National Oil Company (ADNOC) and Indian Oil. This project is currently stalled because of land acquisition and environmental clearance. As matters stand, it will be years before it sees the light of day. All parties remain, however, committed. The second is the proposed investment by Saudi Aramco into Reliance Industries. Mukesh Ambani announced at his AGM in June that Reliance and Aramco were in discussion regards the acquisition of a 20% stake by Aramco in Reliance oil, gas and chemical businesses. The commercial logic for Aramco is compelling. It would secure a captive outlet for 500,000 barrels a day of its crude oil and a foothold in India's downstream market. The logic for India (as distinct from Reliance) is comparably compelling. By giving Saudi Arabia a material stake in its petroleum sector, it would 'strengthen' the security perimeter around its oil and gas facilities.

There is a third initiative, albeit in the opposite direction, which should also be considered. This relates to Saudi Aramco's planned offering thorough an international public offer (IPO) of up to 5% of its shares to the public. The Crown Prince of Saudi Arabia, Mohammed Bin Salman (MBS), is driving this initiative. Its success is a matter of great personal importance to him, especially since his economic vision pivots around the revenues that will be generated through the IPO. The IPO may get delayed because of the attacks and the escalating tensions in the region-but when it is finally announced, India should look at it through a financial and strategic lens. The purchase of even a small stake would please MBS and deepen his commitment to prevent Pakistani adventurism.

No one should assume that such cross-country investments will provide an iron-clad guarantee. There can be no such assurance. Pakistan's behaviour is now so influenced by political emotions, domestic pressures and jingoistic fervour that there is little room for rational logic and dialogue. But as any student of history will know, it does not take much for irresponsible rhetoric to translate into violence. India should consequently pursue any and all ideas that lengthen the odds of such an outcome. A 'Saudi buffer' is one such idea.

(The author is chairman & senior fellow, Brookings India)