In the News: The Eastward Economic Expansion of Saudi Arabia

When it comes to evaluating the most powerful Asian economies, it is clear that China and India occupy their own categories. In the case of India, a market often seen as a subcontinent on its own, the Kingdom of Saudi Arabia has been paying very close attention to investment opportunities. A recent announcement by Reliance Industries, an Indian business giant across multiple sectors underscores the interest and plans that Saudi Arabia has with this region in mind.

Among the many business operations conducted by Reliance, its refineries stand out as being the most lucrative. The Jamnagar refinery complex, located in the western state of Gujarat, is the largest in the world, and the Saudi Aramco energy giant is putting the final touches on a transaction that will allow it to hold a 20% stake on this facility. In addition to this stake acquisition, Aramco is ready to send 500,000 barrels of crude oil per day starting next year. In other words, by the time the deal is completed in March 2020, Reliance will be a major customer of Aramco, which will end up owning nearly a quarter of Reliance’s total energy business.

According to Middle East expert Amir Handjani, the Aramco/Reliance deal is significant not just because of its magnitude, which is estimated to be valued at more than $75 billion, but also because it bypasses the differences between the two countries over the Kashmir conflict, which in 2019 has turned into a powder keg. Writing for Foreign Policy magazine, Handjani points out that Aramco is moving forward with its ambitious plans of becoming the absolute leader of the global energy market.

Just after the Persian Gulf War, which culminated with the liberation of Kuwait in 1991, the Kingdom began to explore business options beyond crude oil extraction and exports. Similar to the footprint that Aramco will have in Jamnagar, the company already has such as presence in the Port Arthur refinery in Texas, the largest in the United States. Aramco is also involved in the development of a major refinery in China. Needless to say, Aramco’s portfolio is clearly heavy with Asian investments, which happen to be closely tied to sovereign interests in two of the world’s major economies.

Major energy investments are not the only economic ties being forged between Saudi Arabia and India; the former nation is going through a major infrastructure and real estate expansion, which is being completed with labor from the latter. In terms of macroeconomics, this situation results in remittances of about $11 billion per year; moreover, the hard and detailed work of Indian construction specialists allow quality projects to be completed on time.

Judging by the recent business moves Saudi Arabia is making, it is safe to assume that the Kingdom does not plan to stop at the Far East. Aramco has already made some investments in solar energy and wind farm technology, which means that this is a company that is not waiting around for oil reservoirs to dry up or for renewable energy sources to displace the dominance of crude oil.

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