A recent visit to Abu Dhabi provided an opportunity to meet senior Emirati officials and get their perspective on India-UAE ties amid the ongoing conflict and tensions in West Asia. Some of the conversations were focused on the unprecedented global energy shock unleashed by the twin blockades of the Strait of Hormuz by Iran and the United States. They also revealed the extent of support that India and the UAE had extended to each other over the past four months.
The virtually complete closure of the Strait since February 28 was a worst-case scenario, and the UAE proved to be a steadfast partner. Friends at the Abu Dhabi National Oil Company (ADNOC) spoke in hushed tones about midnight conversations between their CEO Dr Sultan Al Jaber and Minister of Petroleum and Natural Gas Hardeep Singh Puri.
There were situations that needed urgent, multi-agency coordination, and both sides showed that they could go the extra mile. ADNOC took calculated risks by sending ships laden with much-needed LPG to India. The vessels would typically switch off their transponders, use jamming equipment to keep the Iranian drones at bay and coordinate with the US Navy and Omani maritime authorities using specialised communication equipment as they sailed through a channel that hugs the Omani side of the Strait.
Other officials spoke of ship-to-ship transfers of LPG in the dark of the night at the Emirati port of Fujairah that lies beyond the Strait. Back in New Delhi, there were similar whispers of coordination by India’s security agencies with Iranian officials to secure the exit of a number of LPG tankers without paying any fee or toll.
Prime Minister Narendra Modi was in regular contact with UAE President Sheikh Mohamed bin Zayed, even as External Affairs Minister Dr S Jaishankar and National Security Adviser Ajit Doval visited Abu Dhabi in April and stayed in touch with their counterparts. The PM’s decision to visit Abu Dhabi on May 15, while the Iran-US ceasefire still looked fragile, delivered a strong message of India’s support, and the Emiratis sent a couple of F-16s to ceremonially escort Air India One as it entered the UAE’s airspace.
The visit was short but resulted in substantive agreements that would contribute to India’s energy security, including long-term supply of LPG, a major expansion of India’s strategic petroleum reserves and establishment of new strategic gas reserves in partnership with ADNOC.
The UAE’s decision to quit the Organisation of the Petroleum Exporting Countries (OPEC) amid the crisis was also an indication that it planned to raise its crude oil output from 3.2 million to almost 5 million barrels per day over the next year or so. It could end up supplying a larger share to the Indian market in the coming years.
It wasn’t just a one-way street. India also stepped up by creating an air bridge to the UAE and a maritime corridor from Nhava Sheva to Fujairah and Khor Fakkan to ferry everything from basmati rice and wheat flour to fruits, vegetables, medicines and toiletries. Several Etihad and Emirates aircraft that were lying idle due to the war were pressed into service to provide additional cargo capacity. The Lulu Group alone organised 78 flights from India to ensure that their hypermarkets remained well-stocked. The Indian government moved with exceptional speed to provide all clearances for the special flights; close coordination at senior levels on both sides ensured that the system functioned like clockwork.
However, India’s energy diplomacy wasn’t limited to the UAE. Hardeep Puri visited Qatar during the early days of the conflict to affirm India’s interest in remaining a long-term buyer of Doha’s vast LNG stocks. With Venezuela back in the field as an exporter of its uniquely heavy crude, it was no coincidence that New Delhi hosted acting President Delcy Rodriguez on an official visit. The Ministry of External Affairs also sent instructions to key diplomatic missions, and global networks of India’s oil majors were pressed into service to reach out to other significant energy producers, including Algeria, Nigeria, Equatorial Guinea, Gabon and Mozambique in Africa, and Brazil, Argentina and Guyana in Latin America.
A similar diplomatic agility was also on display in the way India pivoted from Russia to the US for its energy requirements. For over two years, Russia’s emergence as the largest supplier of crude oil to Indian refineries had become a major sticking point in India’s ties with the US.
A combination of factors, including the spectre of US sanctions, the desire to finalise a trade agreement with Washington DC and the disappearance of discounts on Russian crude following the Hormuz crisis persuaded India to rapidly increase its purchase of American crude oil and gas. There aren’t many countries that could have swivelled so smoothly from east to west to keep the petrol pumps stocked and the kitchens running.
In the long term, diversification of oil supplies is an essential hedge for a heavily import-dependent country like India. Diversification, however, doesn’t trump the geographical reality that the Gulf is India’s most proximate source of oil and gas. Iran, freshly liberated from the yoke of sanctions, has already reached out to Indian officials and refiners.
The UAE, meanwhile, is doubling the capacity of its pipeline to Fujairah to reduce its dependence on the Strait; the Saudis are planning a similar expansion of their pipeline to Yanbu on the Red Sea. Among the other producers, Iraq is trying to revive its colonial-era pipelines to the Mediterranean, while Kuwait, Bahrain and Qatar have fewer options to bypass the Strait of Hormuz.
Having successfully weathered an unprecedented energy crisis, India should quickly take advantage of softer energy prices and plentiful supplies to rebuild its strategic petroleum reserves and start working on similar reserves for LNG. The next closure of Hormuz could be lurking around the corner!
