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The Abraham Accord: Changes to India’s Middle East Balancing Act

Updated: Sep 22, 2021

One of India’s biggest foreign policy successes since independence was to de-hyphenate itself from Pakistan. In the eyes of the west, there existed an invisible umbilical cord between the two countries, and a ‘balance’ was preferred in contrast to truly independent bilateral relations. Until the Modi administration(1), India also hyphenated Israel and Palestine, which hamstrung engagement. The Arabian peninsula though, has for years progressively been de-hyphenating Israel and Palestine, which significantly reduces India’s foreign policy constraints in the region. However, the task is anything but simple when a plethora of powers are involved. We attempt to dissect motivations and potentials behind India’s engagement with the Middle East, with a special emphasis on what the recent Abraham Accord brings on the table for India.

Why is India invested in the Middle East at all?

One word- necessity. India’s relations with the Gulf states is multifaceted and of considerable strategic depth. India and the Gulf have a relationship borne of both bonhomie and necessity, whereby they compliment each other's needs and goals. However, the Gulf is by no means the only important partner when it comes to India’s strategic and economic calculus. To the east of the Gulf lies Iran, an important element to India’s Middle East policy. To the west of the Gulf lies Israel, a country which has fast emerged as one of India’s prime focus points in recent years. These three regions are distinct cogs in the Indian foreign policy machine that must work in tandem.

Indo- Gulf Relations

Energy Security

The Gulf states have a long and varied relationship with India. As one knows, India imports roughly 83.9% of its petroleum(2), of which 71.5% is from the Middle East (with Iraq, Saudi Arabia and the UAE being the top three)(3). Despite an effort by the Indian government to cut dependency by 10% by 2022, cheap crude oil prices and energy constraints have instead translated into even greater imports(4). With American sanctions bound to continue upon Iranian oil(5), and African grades being sweeter (therefore costlier), the Gulf shall continue to take centre stage when it comes to India’s energy security. Another little known fact is that India, owing to its massive refining capacity, is a large net exporter of petroleum products, which is the single largest export by value. A significant amount of this is exported to the Middle East as well, with the second largest destination being UAE(6). Hence, investments in the energy sector of India have been bolstered by Gulf money as well, with the latest being Saudi Arabia(7).

Migration & Remittances

Indians in Arab nations account for 19.89% of the diaspora(8). Migration from India has a long history in the economic and social rise of the Gulf as the peninsula of prosperity. A noteworthy aspect of this relationship is the importance of each side for the other. The Gulf region as a host market for Indians and India’s importance as a source country of manpower for the region has emerged as an economic fait accompli of sorts.Within the Gulf,the distribution of Indian populations among Gulf states has shifted over time, closely reflecting the dynamic economic realities of the region. Hence, while Saudi Arabia accounted for 40% of all Indian migrants in the region, followed by Kuwait in 1990, come 2015, Saudi Arabia’s share had declined to 35%, while Kuwait’s had crashed to 10%. Displacing them both, the UAE has fast emerged as the chosen destination for India’s labour,with Indian migrants growing six fold in twenty years.One can also see a slow shift in the occupational characteristics of Indian migrants. In the 1970s and 80s, nearly 90% of Indian migrants in the Gulf were blue collar workers.Today, the proportion of white collar workers is roughly 30% or more in some countries.These are mainly professionals in the service sector, such as doctors, engineers, IT professionals etc. Increasingly, however, one can see knowledge based workers in technology driven industries as well as entrepreneurs(9). This is in line with the inexorable diversification of Gulf economies, a policy induced push by states trying to wean themselves off their dependence on oil revenues. The Government of India on its part, has historically encouraged migration to the Gulf states through schemes and a litany of agreements with Gulf states(10). In the pre-liberalisation economy, remittances not only balanced deficits but also provided scarce foreign exchange. After liberalization, not only did these two factors maintain their prominence, but a host of other goals were also recognized- soft power, strategic relationships, and energy security. Emigration also has been understood as a necessity for India’s social stability, especially considering the phenomenon of jobless growth even in boom years.

While remittances go hand in hand with migration, the relationship between the two isn’t always symmetrical. While remittances amounted to roughly 2.7% of India’s GDP in 2019, The lion’s share of remittances come from the Gulf states, amounting to more than half of total remittances. These remittances not only fulfil their traditional role as outlined above for the country, but have become essential as drivers of local economies. The Indian state of Kerala, for example, receives the maximum proportion of remittances at 19% of the total. It is equivalent to roughly 35% of the state’s income(11), which balances the books of families living there.

Strategic Cooperation


Trade for the entire region is dependent on the safety and openness of the Indian Ocean region. India has a pre-eminent position as a net security provider. The Indian Ocean is far from a placid place, with multiple armed conflicts playing out on its rim. The most well known has been piracy around the Horn of Africa, but newer flash points such as Yemen, tensions with Iran on the Straits of Hormuz, continued instability in Iraq, Qatar’s continuing spat with its fellow Gulf neighbours, and Pakistan’s terror network also relying on the illegal maritime trade. Adding to this, China has been steadily expanding its presence with bases in Pakistan and Djibouti along with a strong foothold in Bangladesh and Sri Lanka. Hence, the Indian Ocean is reverting to its historical nature of being an ocean of churn. Within this context, securing the seas becomes an overriding concern for nations whose livelihoods depend on it.

In recent years, India has evolved into a key partner when it comes to collaboration and defense capacity building for multiple GCC states. India has traditionally had very close security relations with the Sultanate of Oman, its oldest strategic partner in the region. The Indian and Omani navies have a mutually intimate relationship, with Omani ports routinely hosting Indian vessels. The recent Maritime Transport Agreement among three other defence agreements between the two countries in 2018 has further opened up trade and security relations(12). Mutual defense cooperation aside,Oman gives India not just a presence to secure the straits of Hormuz but also an eye on East Africa.

Bilateral cooperation when it comes to defense for India and the United Arab Emirates has also grown steadily in recent years along with other facets for the relationship. Cooperation is governed by a Joint Defense Cooperation Committee, which is in turn governed by the Defense Ministries of both countries. This was further bolstered by the appointment of a permanent resident Defence Advisor (DA)(13) at the Indian Embassy in Abu Dhabi in March, 2013. India and the UAE also hold an Annual Defence Dialogue. As recently as 2017, the two countries signed two MoUs to promote cooperation in the areas of cyberspace, arms and the transfer of technology(14). The Indian and Emirati navies and air forces have also regularly participated in joint exercises.

Recent trends have also augured well for the Indo- Saudi relationship of late. A marquee naval exercise between the two countries heralded a new phase of closer relations in 2020. More interestingly, Saudi Arabia has been known to show interest in joint production and import of defence equipment. Both countries agreed to “ensure the security and safety of waterways in the Indian Ocean region and the Gulf region from the threat and dangers that may affect the interests of the two countries”(15).


Both India and the Gulf nations face significant national security risks from transnational terror groups.This has partially been enabled by increasing openness to transnational labour flows as well as increased economic integration. Illicit fund transfers, greater volumes of migration flows as well as a general destabilisation of the region has exacerbated existing issues. The rise of social media and its inherently under regulated and real time nature serves as a critical force multiplier for troublemakers. Pakistan has long acted as a crucible of terror in the region, adeptly using terror and terror financing as instruments of state policy. Both the Gulf and India, not only have home grown terror networks handheld by Pakistan but with increasing transnational flows, the global has become inextricable from the local. The 21 Indian nationals from Kerala who joined the Islamic State in Afghanistan travelled through the UAE, Kuwait, Bahrain, Oman and Bahrain, emblematic of the challenge authorities face in an integrated world(16). The confluence of a long history of Islamic extremism in the Mappila community of Kerala, Gulf migration, and social media radicalisation have led to Kerala having the maximum number of IS related cases in India(17).

India has been concerned by various nefarious individuals wanted by the country using Gulf nations as a sanctuary. An overall increase in cooperation has seen the deportations of many such individuals to India materializing on charges of terrorism. The perception of the Gulf being the backyard of Pakistan’s notorious external intelligence agency, the ISI, has seen its wings clipped.

A drawback of the Gulf being a source of remittances to India is terror financing couched as remittances. The two largest systems which were earlier used were the hawala system and wire transfers. Wire transfers, while being heavily regulated since the days of India’s closed economy are also subject to heavy fees and taxation. This has led to the blossoming of the informal and underground hawala system, which according to some estimates, India has lost over $1.5 trillion in tax revenue in the last 60 years due to hawala transfers(18). Its unregulated nature makes it attractive for criminals, money launderers and terrorists. The Indian Mujahideen’s chief financier, Abdul Wahid Sidibappa moved funds from the UAE to India this way(19) as did the Pakistani terror outfit, the Lashkar-e-Taiba prior to the 26/11 terror attack in Mumbai(20), with Hawala being used along with fronts posing as charities to fund terror networks(21). While India and the GCC cooperate on financial regulation, India has recently been extending elements of domestic banking into the Gulf to regularise these flows through minimal red tape and fees. The introduction of the RuPay card to the gulf is seen as one such decision(22).

India-Israel Relations

It was under the leadership of Prime Minister Atal Bihari Vajpayee, when diplomatic ties with Israel were fully established. The watershed year of 1991 drastically changed ground realities and priorities for India. Economic liberalisation, the end of the Cold War, and the redundancy of the Non Aligned movement provided fecund ground for Indo-Israeli relations to blossom. Israel, on its part, had normalised relations with Egypt and Jordan, which made it far easier for India to approach Israel without inviting Arab scorn.

Israeli exports to India, amounted to nearly $4.84 billion in 2018, making Israel India’s 10th largest trading partner. However, regular trade aside, defense goods happen to be India’s primary commercial interest when it comes to Israel. A lot of high ticket, cutting edge technology platforms and weaponry have been imported from Israel over the years. Prime amongst them are Phalcon AWACS (Airborne Early Warning and Control System),a range of UAVs, and a varied range of missile systems for our Navy and Air Force(23). Israel is a world leader in innovation based defence technologies, and provides end- use critical technologies which can be rolled neatly with minimal delays considering India’s Byzantine procurement process. More than that, Israel provides indirect access to American technologies along with Israel’s indigenous State and entrepreneurial defence ecosystems. Israel is also a pioneer in green technologies ranging from agriculture to water management, which is of much use to India.

The Deal with the Deal

Israel and the Gulf have had a silent detente since decades now, characterised by open secrets of mutual liaison. While Jordan and Egypt had normalised relations in 1994 and 1979 respectively, the Gulf states have maintained a faux sense of distance in their optics. The Palestinian question is even today a matter of strong public opinion in the Gulf(24), which poses as a constraint to both engagement and State legitimation. The troubles of the Arab spring too remain in the minds of their rulers in the same vein, and hence once can expect relations with Israel to publically remain in a grey area. However, the Abraham Accord between the UAE and Israel(25), seems to be a recent exception. The UAE has promised an end to their boycott of Israel along with a complete normalisation of diplomatic ties in exchange for Israel suspending its plans to annex territories in the West Bank. It comes without doubt that the move came with close consultation between the Gulf quartet (GCC sans Qatar, the enfant terrible of the grouping) and ipso facto Saudi blessings. This momentous change comes on the heels of a number of changes in the region- a multifaceted threat from Iran, Gulf’s need to diversify away from a hydrocarbon economy, and the changing role of American presence in the Middle East.

The Iran Factor

US imposed sanctions leave Iran with very little to gain from its relationship with India. The aforementioned sanctions on Iranian oil and trade have spelt a death knell for greater economic engagement with not just India, but most of the world. One must remember, that economic hardship in Iran(26) is already materialising into serious destabilisation and accelerating crackdowns(27). Iran’s economic strangulation is also putting immense stress upon Iran’s bankrolling of its vast empire of proxies. This has already stymied Indo- Iranian trade, as well as relations. Sanctions and the resulting domestic instability has seen Iranian regime once again adopt strong Islamic nationalism. This has not boded well for India, especially when Ayatollah Khameini makes statements regarding Jammu & Kashmir over the years(28).

The unintended consequences of these sanctions is Iran running out of options, and embracing China, the only country willing to flout sanctions so as to profiteer from a desperate Iran. The prospects for Iran’s earlier big ticket participation in the International North-South Transport Corridor connecting Mumbai to Moscow seem to have been downsized(29). China on its part, manages to partially alleviate four interrelated strategic goals with this purported $400 billion Strategic Partnership. One, it gains increased access to the Western Indian Ocean to protect its shipping routes; Two, its ambitions to bring Central Asia into its economic fold and bolster its hold over Xinjiang; Three, it gets to diversify away from its dependence upon the straits of Malacca, which are at a striking distance from Indian bases on the Andaman and Nicobar islands (its ‘Go West’ policy(30)); And four, China’s strategy of containing India in its near neighbourhood gains further impetus.

While China does have major investments in the Gulf, offering Iran such a lifeline will be viewed through the prism of the GCC’s hostility with Iran and will certainly push the Gulf closer to India as a result.The early 2000s saw a silent detente between the peninsula and Israel, motivated primarily to coordinate against Iranian influence in the region. This hostility has reached nigh paranoid heights with Iranian influence spreading across the region, following Shia dominated protests in Bahrain having to be crushed with Saudi intervention(31). With the deal, India’s ease of collaborating with both the parties on counterterrorism and strategic matters increases manifold. The speculated Israel backed Trans- Arab Corridor may gain new life and an Indian connection as well, creating new economic opportunities.

Trade Access

The UAE has fast emerged as a global transport hub, with sea and air cargo volumes rivalling traditional centres such as Hong Kong and London(32). The UAE’s unique location between the East and West along with being light on regulation has enabled UAE to build a robust trading economy. It is also emerging as a financial centre, and is making forays into high tech services. Israel, however, is a mediterranean State between the Middle East and Europe, with a reputation for technological innovation being a driving force in the economy(33). Its large population involved in cutting edge research and application, high R&D spending, along with indirect subsidisation of access to technology by the west, has made Israel a veritable technological power.

While the UAE and Israel’s complementarities are apparent, India potentially stands to benefit immensely from the emerging dynamic. UAE’s status as a global transport hub and Israel’s access to free EU markets as well as its enviable tech offers India a number of windfall gains. Not only will India have better market access across the Middle East (including Turkey), Israel’s FTA with the EU(34) can lower obstacles for India, which has been struggling to negotiate an FTA with the EU on its end. India also has been at odds with the USA for an FTA arrangement, something which Israel has(35). Adding to this, Israel is in talks with the Russian led EAEU for another FTA with them(36), giving India another opportunity to be seized.

Gulf Capital & Israeli Technology

Israel and the Gulfs aspirational goals compliment each other. Saudi Arabia’s(37) as well as the UAE’s(38) economic goals primarily stem from two legacy features; One, both countries have a stated aim to diversify away from petroleum and into high income services as well as specific sectors in the minerals, chemicals and defence spaces. The second feature is a disproportionate dependence on the United States when it comes to technology and technologically intensive products. Meanwhile, Israel fulfils these niches by virtue of its world class research ecosystem which hosts a vibrant startup scene along with a solid backbone(39). With the end of the economic boycott, one can expect a massive infusion of Israeli technology into Gulf businesses. Simultaneously, mutual investment flows between the Gulf and Israel in each others’ sectors of interest may surge, considering both Saudi Arabia(40) and UAE(41) invest heavily into futuristic firms abroad. India stands to benefit immensely through these developing synergies.

India is fertile grounds, both as a market and as an investment destination. India offers an affordable talent pool, large industrial capacities which have bright growth prospects, as well as political will inviting investments and export oriented ventures. This transregional potential, if harnessed, will provide massive employment and investment opportunities to resident Indians as well as emigres. Emigres in particular may see better upskilling and job options opening up, which would translate into greater remittance flows, and a higher stock of human capital for the country in the event of their return.


India, which has traditionally been the world's largest importer of arms, lost this unenviable crown, to Saudi Arabia quite recently(42). It is not difficult to understand why the Gulf as well as India desire defense indigenisation. Both currently lack a satisfactory military-industrial-academic complex which translates to costly imports. Israel, in this regard, can be of much help while the prospect remains profitable for itself. India has been steadily inaugurating measures such as regulatory forbearance and incentives in the form of endeavours such as defense-industrial corridors. It also has a tried and tested history of running defense joint ventures such as Brahmos Aerospace and is witnessing firms small and large willing to enter the defense industry. With some effort, a veritable defense products chain can be set up with Israeli knowhow, Gulf cash, and Indian resources for a mutually beneficial partnership. Simultaneously, Indian arms exports (a fast rising phenomenon(43)) do not compete with Israeli niches. Meanwhile, the three countries will not only be able to increase indigenisation of their hardware, but doing so will also loosen up the presence of stringent American terms and conditions which come with their weapons. In a related sphere, the aerospace and space sectors can also blossom into a comprehensive value chain owing to Indian and Israeli expertise, in a steadily deregulated environment, servicing the needs of all three.


The Indian Electronics sector had long faced stiff competition from Chinese imports, and has required a consistent focus for it to slowly emerge as a major industry. Following lucrative incentives and facilities since the days of the ‘Make in India’ campaign, mobile phone assembly saw a leap with growth continuing even today(44). India is attempting to replicate this success in other verticals, such as electronic components(45) and medical devices(46), access to Israeli expertise and Gulf capital can supercharge these efforts. It also raises the possibility of Indian professionals in sectors such as finance and IT enabling businesses in Israel and the Gulf to improve their standing due to lower costs. The final point is that of securing privacy and security concerns in technologies by ditching Chinese imports, considering China’s access to data with impunity from companies operating there(47). Apart from this, Israel is a world leader in green technologies such as recycling, water management, and desalination. Considering climate change may shave off upto 10% of Indian per capita GDP by 2050(48), climate resilient and sustainable technology from Israel could be an important result of this partnership.

Petroleum and Chemicals

While India has consistently been amongst the top exporters of refined petroleum products, recent focus upon India’s chemical industries has fructified into India becoming a net exporter of the same(49). While Saudi Arabia is already heavily investing into Indian petroleum infrastructure, Israel may be next considering India’s second largest exports to it are petroleum products as well. It fits neatly into Indian plans to double their oil capacity by 2030(50), offering growth opportunities and a better deal for everyone. Non- pharmaceutical chemicals too are fast emerging as an upcoming opportunity, which can make much use of Israeli expertise and Gulf investments. On the pharmaceutical front, India is pushing to set up API production to reduce Chinese dependence for its massive generics pharma industry which is the world’s largest. To this end, a litany of new incentive schemes(51) have been implemented, forming a robust basis for sustained growth in the sector.

The US in the Middle East: Quo Vadis?

The American thirst for Middle Eastern oil, to put it mildly, is all but quenched(52). The United States has now become a net exporter of oil, unfettering it from the strategic compulsion of playing chowkidar in the Middle East. This begets the question- Why exactly is the US still in the Middle East?

The fact that the Trump Administration brokered the Abraham Accord makes a definitive implication that the American car in the Middle East is yet to run out of gas. This deal, bolsters American grip on the region, but brings together ambivalent allies. While one of the reasons for the deal may be the looming US Presidential elections and Benjamin Netanyahu’s tenuous futur, it does not take away from the gravity of the deal itself. By making Israel and the Gulf come out in the open, it radically changes dynamics which were once sacrosanct. The Americans can now sell weapons and provide support to the Gulf with far greater ease and with an eye on maintaining the shreds of stability which still remain while bottling the Persian jinn. The story is not all hunky dory though, with it becoming amply clear that the Gulf countries will leverage the looming elections so as to stretch the envelope of this deal and extract maximum concessions by threatening to pull out. Any future deal between a Gulf nation and Israel, will be a hostage to such pressures, and it is unclear to what extent Israel can bend.

With Persian recalcitrance continuing unabated, and Chinese presence slowly making waves in the Indian Ocean, one can argue that American presence in the Middle East is an act of preserving the prevailing global order. The vital trade routes of the Indian Ocean connect the majority of humankind with each other and maintaining control over this space is essential for any superpower, aspiring or otherwise. The American decision to rebalance its naval forces to the then Pacific Command(53), which was promptly rebranded as the Indo-Pacific Command stands moot in this regard. The crystallisation of the American strategic partnership with India as an addition to its web of alliances in the Middle East, stands parallel with Chinese hold on Pakistan, and now Iran, shows a slow polarisation along the Indian Ocean rim. While the Americans have successfully eased Gulf-Israeli relations, Erdogan’s Turkey which is trying to position itself as an alternative to the Gulf in matters concerning Islamic nationalism is a serious issue for the region.Turkey has already engaged in a military intervention in Libya, which has led to a serious crisis with a key ally, Egypt. One must remember, that Turkey plays an outsized role in the Mediterranean, and is the west’s gateway to the Black Sea. In case of a Russian invasion, it will be Turkey which will stand as NATO’s bulwark not only due to its location but also due to it being the second largest force in all of NATO(54). Its increasingly dissonant stance vis-a-vis the west has the potential to seriously complicate three fronts at once- the Middle East and North Africa, the Mediterranean, and the southern flank against Russia. A US resignation in the Middle East at this juncture may precipitate such a crisis.

The insuperable status of the US Dollar as the principle reserve currency of the world provides it an unshakable level of credibility. One of the reasons why Jerome Powell, the Chairman of the Federal Reserve, can inspire the internet to visualise him running a money printing machine(55) in the name of quantitative easing is because of this. The rock solid essentiality the dollar holds in today’s financial system is auto cyclical in nature; the essentiality upholds its status, and the status drives the essentiality. However, one needs some oil to lubricate the system. Crude oil is the single largest, and most essential trading commodity for the world. Oil importers must buy regardless of the price, and oil exporters must sell to balance their books. The American hold on the Middle East is intricately connected to its hold on the global financial system, without which American power cannot be conceived of. Hence it should come as no surprise, that the US chooses to maintain an indelible presence in the Middle East. India is one of the beneficiaries of this arrangement, since security threats in the Middle East are connected to oil prices, which are a perennial headache for the nation. American chowkidari is a silent subsidy for all oil importers including India. This is the final piece in India’s Middle East puzzle, a mosaic of risks and rewards.

(Ishan Dhar graduated from George Washington University with a Bachelor's Degree in Political Science in 2015. He has formerly been a Researcher & Project Officer at the Australia India Institute and a Research Intern at the Institute of Peace & Conflict Studies in New Delhi. Ishan has also participated in Tiger Watch's wildlife conservation interventions since 2014. He has co-authored the titles Wildlife Warriors and Jhalana: Leopard Forest in the Pink City.)

(Deekhit Bhattacharya is an Economics Graduate from the Delhi College of Arts and Commerce, University of Delhi. He has interned previously at the Australia India Institute at New Delhi, and the Federation of Indian Exports Organisations under the Ministry of Commerce, the Government of India.)


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