Introduction

India and the United Arab Emirates (UAE) recently held bilateral talks aimed at deepening their Comprehensive Strategic Partnership. During this meeting, several important agreements were signed, including advancements in civil nuclear cooperation, energy security, and trade diversification.

Key Agreements Signed During the Visit

1. Civil Nuclear Cooperation: 

• India and the UAE signed a Memorandum of Understanding (MoU) for civil nuclear cooperation. The partnership between India’s Nuclear Power Corporation (NPCIL) and the Emirates Nuclear Energy Company (ENEC) will focus on the operation and maintenance of the Barakah Nuclear Power Plant, the first of its kind in the Arab world.

2. Energy Security: 

   Several agreements were reached in the energy sector, such as:

• LNG Supply: A long-term Liquefied Natural Gas (LNG) supply agreement was signed, ensuring a stable supply of LNG to India.
• Strategic Petroleum Reserve: An MoU with India’s Strategic Petroleum Reserve Limited (ISPRL) was inked to enhance India’s energy security by securing crude oil supply during global disruptions.

   3. Food Parks: 

Another MoU was signed with the Government of Gujarat to develop food parks in India, with the UAE’s involvement under the I2U2 (India-Israel-UAE-US) partnership, boosting India’s agri-infrastructure.

Importance of the UAE for India

1. Strategic Partnership:  The growing political and strategic alignment between India and the UAE is reflected in the elevation of their relationship to a comprehensive strategic partnership. The establishment of a strategic security dialogue also highlights their shared goals in regional stability.
2. Bilateral Trade: The UAE is India’s third-largest trading partner, with trade reaching USD 84.5 billion in FY23. The Comprehensive Economic Partnership Agreement (CEPA) signed in 2022 significantly boosted bilateral trade by 16%.
3. Foreign Direct Investment (FDI):   The UAE emerged as India’s fourth-largest investor in FY23, with FDI inflows surging threefold to USD 3.35 billion. This reflects the UAE’s increasing interest in India’s growing economy.
4. Energy Security:  As a major oil supplier, the UAE plays a critical role in securing India’s energy needs. The UAE is integral to India’s Strategic Petroleum Reserve (SPR), ensuring stability during times of geopolitical uncertainty.
5. Financial Collaboration:   India and the UAE have enhanced their financial cooperation with initiatives like the introduction of India’s RuPay card and Unified Payments Interface (UPI) in the UAE. Additionally, both countries have agreed to settle cross-border transactions in their local currencies, boosting trade and economic integration.
6. Space Cooperation:  The two nations are also expanding cooperation in space exploration. ISRO and the UAE Space Agency (UAESA) signed an MoU focusing on peaceful space exploration, opening doors for collaborative space missions.
7. Defence and Security Cooperation:   India and the UAE continue to strengthen their defence ties through joint military exercises likeDesert Cyclone. The UAE has also shown interest in Indian defence products such as the BrahMos missile and the Tejas fighter jet.

Challenges in India-UAE Relations

1. Trade Diversification:   Despite CEPA’s success in increasing trade, it remains concentrated in a few sectors like gems, petroleum, and smartphones. Expanding into new areas such as technology and renewable energy is crucial for further growth.
2. Rising Import Costs:   The increase in imports from the UAE, growing by 19% in FY23, has put pressure on India’s trade surplus. Finding ways to reduce dependency on specific imports while boosting exports is essential for a balanced trade relationship.
3. Non-Tariff Barriers: Indian exporters face hurdles such as mandatory Halal certification, which affects processed food exports to the UAE. Addressing such barriers is critical for increasing India’s market access.
4. Human Rights Concerns:  Issues surrounding the Kafala system, particularly the treatment of migrant workers, remain a concern. India must advocate for reforms to ensure better working conditions for its migrant workers in the UAE.
5. Geopolitical Balancing: Navigating the complex political landscape of the Middle East, especially concerning the Israel-Hamas conflict and UAE’s relations with Iran, poses a diplomatic challenge for India.
6. Financial Support to Pakistan: The UAE’s financial aid to Pakistan raises concerns for India, particularly regarding the potential misuse of funds for activities detrimental to India’s security interests.

Way Forward

• Promote Trade Diversification: Expanding trade into emerging sectors like renewable energy, technology, and pharmaceuticals will help create a more balanced and sustainable trade relationship between the two nations.
• Strengthen Economic Collaboration: Exploring joint ventures and partnerships in sectors like infrastructure and manufacturing can further enhance economic ties, mitigating the impact of rising imports and increasing mutual growth.
• Address Human Rights Issues: India should engage in dialogues with UAE authorities to address concerns about migrant labor rights under the Kafala system, ensuring compliance with international labor standards.
• Focus on Common Interests: India and the UAE should continue aligning on shared strategic interests in energy, trade, and regional stability, ensuring that geopolitical tensions do not hinder their growing partnership.

Conclusion

India and the UAE share a strong relationship built on strategic partnerships, robust trade, and shared energy security goals. While challenges like trade diversification and labor rights persist, both nations are addressing them through diplomacy and collaboration. Their growing partnership will be key to shaping future regional and global engagements.