RW Johnson uncovers the intricate dynamics of the India-Middle East Economic Corridor and its potential to reshape global trade. The Oxford Don explores the Gulf’s transformation into a major immigration hub and India’s economic ties with the Gulf Cooperation Council and delves into Israel’s pivotal role, marked by a burgeoning trade agreement with the UAE, substantial energy discoveries, and its emergence as a technological powerhouse. RW uncovers how Israel’s strategic position and advanced capabilities position it as a key player in the evolving landscape of international relations.
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Realpolitik in the Middle East II
By R.W. Johnson
In an earlier article I pointed out the significance of the proposed IMEC (India-Middle East Economic Corridor) scheme which looks likely to transform not only Indian trade with Europe but the economics and politics of the Middle East. It is worth pointing out that the Gulf is now the world’s second biggest immigration corridor (after the Mexico-US border). Already the migration there of Indians has become a dominant factor – Indians now provide 30% of the Gulf workforce. In many Gulf states the Indian population is a large share of the total:
___STEADY_PAYWALL___
Total population Of which overseas Indians
Bahrain 1.47 m. 316,175
Kuwait 4.27 m. 929,903
Oman 4.58 m. 689,145
Qatar 2.7 m. 692,039
Saudi Arabia 36.41 m. 2,814,568
UAE 9.44 m. 3,104,586
India and the Gulf Co-operation Council (grouping all the Gulf states) are in negotiations for a free trade agreement but already in 2021-22 India’s trade with the GCC was worth $154 billion. While this trade was heavily in the GCC’s favour, this was more than offset by the over $80 billion a year India earns in remittances from the GCC – indeed, the GCC accounts for over 65% of all India’s remittances. Meanwhile there has been a pick-up (from a very low base) in GCC investment in India, especially from the UAE – though it is dwarfed by Mauritius, by far the largest foreign investor in India with over $81 billion already placed there by 2014. Mauritius is, of course, an offshore financial centre so the exact origins of this FDI flow is unknown.
Israel occupies a key position in this fast-developing commercial nexus.. It now has a full free trade agreement with the UAE which, from a standing start, has quickly become Israel’s 16th largest trading partner – in 2022 trade between the two countries rose by 110%. Indian investors are by far the biggest financial presence in the UAE and are already deeply involved in this trade, which could go on doubling for some time. So explosive is the growth of this trade that it has undoubtedly exercised pressure on Saudi Arabia to make similar arrangements. Moreover, Israel’s large gas and oil finds in the Mediterranean – its Leviathan gas find alone has 22 trillion cubic feet of recoverable gas – and the speed with which Israel has moved to exploit them – have already made Israel an important player in energy markets. In 2015 Israel also made a significant oil discovery in the Golan Heights, near the Syrian border. Its energy independence now seems possible.
However, the large gas finds in the Eastern Mediterranean have also produced a number of very difficult situations as all the nations affected (Turkey, Greece, Jordan, Egypt, Cyprus etc) tried to demarcate their parts of the sea under which their gas lay. Israel found itself involved in these disputes and formed a very solid block with most of the other countries as they tried to deal with Turkey’s often outrageous claims which cut across others. In addition, of course, there was inevitable trouble between Turkey and Greece as well as with the Greek Cypriots. Israel did well: it ended up with very warm relations with most of the other nations involved and, at the end, also managed to save their diplomatic relationship with Turkey as well.
The immense oil wealth of the Saudis and the UAE have already made the Gulf into a major banking centre and this too seems certain to grow in importance. Already comparisons are drawn between the way Singapore has emerged as the major off-shore banking centre for China and the way in which the Gulf may perform the same function for India.
Although Israel is a nation of only nine million people, it could well play an out-size role in the new world of IMEC because its hi-tech abilities mean that it has much to offer that no other Middle Eastern state can rival. Thus, for example, the continual attempts by Hamas and Hezbollah to launch rockets into Israel have had the effect of making Israel’s Iron Dome missile defence system the best known in the world. Anyone can watch footage of Israel’s interceptor missiles shooting down Palestinian rockets, rather as in a firework display. Since both the Saudis and the UAE have recently experienced rocket attacks from the Iranian-backed Houthis they are likely to be customers for their own Iron Domes.
Indeed, in many ways Israel has the attributes of a much larger state. Its army, though small, is well trained and very capable and is generally ranked as about the tenth strongest army in the world, way ahead of the armies of far larger states. Moreover, Israel is a nuclear state. It has had atomic weapons since 1966 – over 50 years – and is today reckoned to have 80-400 nuclear warheads. Moreover it has the full nuclear triad, defined as the capability of nuclear missile launching from land-based silos, submerged submarines and airborne bombers. The only other countries with that capability are the US, UK, France, Russia and China.
Israel began developing anti-ballistic missile technology in the 1980s and has modified it so that it can take out not only smaller missiles but even artillery shells. The fact that it already has this system in use and that it visibly works makes it far more attractive to potential customers than anything offered elsewhere. Already in June 2023 Germany paid Israel its first instalment of $615m. to purchase its Arrow-3 anti-missile defence system. This is a far more ambitious programme, jointly developed by Israel Aerospace Industries and Boeing. It is designed to shoot down missiles above the Earth’s atmosphere and Israel already deploys such a system to protect it against possible Iranian missiles.
Germany wants the Arrow-3 in order to protect itself against Russia. But Germany is only one of the 17 countries to sign up for the European Sky Shield Initiative, which envisages missile defence right across Europe. Israel might well end up supplying Arrow-3s to them all. Israel could, in other words, become a main arms supplier as well as a producer of sophisticated instrumentation. Already it’s known that one (unnamed) European country is also trying to buy Merkava main battle tanks from Israel. The Merkava is roughly equivalent to the M-1 Abrams, the Challenger 2 and Leopard 2 – but the Merkava’s real selling point is that of all these tanks it is the least vulnerable to drone warfare.
Israel also has a reputation for “tweaking” even the most advanced American technology that it acquires, such as its F-35 fighter jets, for its expertise in computers and avionics gives it an edge. Foreign countries are often keen to assess and acquire these Israeli “improvements”. Naturally this led to wistful eyes being cast at Israeli weapons systems by Ukraine but Israel has been careful to sell nothing to Ukraine.
The point is that Israel has friendly relations with Russia – Putin has visited Israel several times and takes pleasure in the large Russian-speaking population there as part of “the Russian world”. But Israel is also intensely wary. Russia has troops in neighbouring Syria who could easily make trouble for Israel if Putin so wished. And Israel is also extremely aware of the large Jewish populations of Ukraine and Russia who would be easy targets for Russia’s wrath if Israel failed to maintain its neutrality.
So Israel’s foreign relations are often not what you might think. One of the most hopeful moments in the recent fighting with Hamas came with Narendra Modi’s message of sympathy and support. India, he said, had had plenty of experience of jihadist Muslim terrorists and couldn’t but sympathize with Israel as it dealt with that same menace. Modi not only broke with his BRICS partners and many others in the Global South when he said this. He was also signalling to a future IMEC partner.
Yet Israel cannot simply become absorbed in a Gulf-Indian nexus – the existence of the diaspora, its embattled relations with Iran and its proteges, its multiple connections with the developed world and its continuous desire to attract more Jewish immigrants to further consolidate its strength – all give Israel an almost uniquely complicated set of international relationships to deal with. Many of Israel’s opponents in the Muslim world and the Global South do not understand these complexities. For them there is just a simple battle between Palestinians and Jews. But it hasn’t been that simple for a long time now.
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