China Factor to Watch Out for as India & Oman Expand Strategic Partnership

 By Kanchana Ramanujam
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Located across the Arabian Sea, Oman is the closest maritime neighbour of India in the Gulf region, a close and strategic partner and a voice of moderation, neutrality and mediation in the turbulent Gulf region. Sharing borders with Yemen to the south and Strait of Hormuz to the north, both conflict-prone and disturbed, Oman is located in a tricky geography. For India, Oman has been a trusted port of call and a reliable friend across the seas. The relationship has been built across centuries with people and traders from both sides travelling across the sea for trade, education and medicine. Even the father of Sultan Qaboos (the current ruler of Oman), Sheikh Said bin Taimur, attended Mayo College at Ajmer in India where he mastered English and Urdu.

While the history of contacts between India and Oman can be traced back 5000 years, diplomatic relations between Indian and Oman was established in 1955 and the relationship was upgraded to strategic partnership in 2008. Over the years, the two countries have signed numerous agreements/ memoranda of understanding (MoUs) in key areas such as defence, peaceful uses of outer space, extradition, maritime issues, avoidance of double taxation, and so forth. Oman is also an important interlocutor at the Gulf Cooperation Council, the Arab League, and the Indian Ocean Rim Association.

Reports of the Indian External Affairs Minister, Dr S Jaishankar, travelling to Oman on December 24, 2019, come at an important juncture for both nations. Especially significant is the fact that the Indian minister will be reaching the shores of Oman after his visits to the US and Iran. Oman’s mediatory role in the Iran Nuclear Deal in July, 2015, is a well-known fact, as also its efforts to diffuse the current crisis between Iran and the US in the Persian Gulf. Both India and Oman are known and trusted across the region as nations with pragmatic and non-prescriptive foreign policies and this visit could provide a perfect opportunity to exchange notes on the situation in the region. Coming also at the back of Indian PM Modi’s visit to Oman in February 2018, it could provide opportunities to both sides to further expand their ties as also further strengthen India’s reinvigorated Look West policy.

Amidst the growing ties, the issue of China’s growing engagement in the region and especially in Oman, is a factor India should watch out for. As this visit takes place, we look at the current state of India-Oman partnership and how China factor could be a challenge in the future.

India & Oman

Oman is India’s oldest defence partner in West Asia and an ally in its anti-piracy campaign. In fact, Oman is the only country in West Asia with which India conducts exercises involving all three defence forces – army, air force, and navy. India is also considering setting up a defence production facility in Oman.[1]

India is among Oman’s top trading partners. For Oman, India was the third largest (after UAE and China) source for its imports and the third largest market (after UAE and Saudi Arabia) for its non-oil exports in 2018.[2] During the 2018-19 period, bilateral trade was US$ 5 billion.[3] India exports mineral fuels, mineral oils and products of their distillation; boilers, machinery and mechanical appliances; articles of iron or steel; electrical machinery and equipment, textiles and garments, chemicals, tea, coffee, spices, cereals and meat products and seafood to Oman and imports fertilisers; mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes; aluminum and articles thereof; organic chemicals; salt; sulphur; earths and stone; plastering materials, lime and cement.[4]

In the Sohar region of Oman, with an estimated total Indian investment of over US$2 billion, Indian entities comprise the largest foreign investors. In the Duqm special economic zone (SEZ), an Indo-Oman joint venture, Sebacic Oman, has set up the largest Sebacic acid plant in West Asia with an investment of US$ 62.7 million.[5]

To promote investments in India, the India-Oman Joint Investment Fund (OIJIF) – a joint venture between State Bank of India and Oman’s State General Reserve Fund – was initiated and the initial corpus of US$ 100 million has been fully utilised. Another $ 220 million has been raised by OIJIF for further investment.[6]

There are a total of more than 400 direct flights per week between Oman (Muscat and Salalah) and a dozen destinations in India.[7] India is also amongst the preferred destination for tourism and medical tourism for Omanis.

There are about 7,83,000 Indians in Oman, of which about 6,55,000 are workers and professionals.[8] There are Indian families living in Oman for more than 150-200 years. Pravasi Bharatiya Samman has been awarded to seven NRIs/PIOs from Oman, including Dr. Vinodan in 2019, in recognition of their contribution towards strengthening India-Oman relations as well as welfare of the Indian community in Oman.

The signing of the agreement on use of logistic facilities at Duqm port by Indian Navy during the Indian PM’s visit was historic and opens an absolutely new dimension to the relationship.[9] The ongoing talks on cooperation in space are significant too.

With a huge Indian diaspora in Oman, extending facilities like RuPay card in Oman (akin to such initiatives recently in Saudi Arabia, UAE and Bahrain) could not only help expatriate Indians but can also be a useful addition to India’s digital initiative.

China & Oman

China started cultivating ties with the Arab countries following the former Soviet Union’s invasion of Afghanistan. Beijing has cultivated close ties with Oman and the latter was, in fact, the first country to deliver oil to China.[10] As of today, 92.99 per cent of Oman’s oil exports go to China, making China Oman’s largest oil importer.[11] The relationship, however, goes beyond hydrocarbons. Oman, a founding member of the China-proposed Asian Infrastructure Investment Bank, facilitated Chinese operations in the Omani ports of Suhar and Salalah during the Yemen Crisis. China and Oman have extensively cooperated in East Africa. In Tanzania, both the countries initiated the up-gradation of the Bagamoyo port and construction of an SEZ, expected to facilitate the entry of Chinese goods to the other African countries. Oman, on the other hand, has built a network of fuel storage tanks in Africa.[12]

China and Oman have been holding annual, strategic consultations since 2005 to deliberate on regional and international security issues. The bilateral relationship was upgraded to Strategic Partnership in May 2018, through a China-Oman joint communiqué.[13]  Oman is also a member of China’s Belt and Road Initiative (BRI).

Oman and China signed an agreement to establish an Oman-China Industrial Park at Duqm in 2016. The Industrial Park in Duqm and is expected to receive an estimated US$ 10.7 billion investment by 2022. This was the first major investment of its kind being made by any country in Oman. There are media reports that China plans to set up an oil refinery too in the Petrochemical complex of the SEZ of Duqm.[14]

Oman (and West Asia in the larger sense) also offers China’s Muslim community to engage with their co-religionists in the region, thus strengthening people-to-people contact. Oman Wanfang, for e.g., which is developing the China-Oman (Duqm) Industrial Park under the BRI, is a subsidiary of Wanfang China from the Ningxia Hui Autonomous Region which has a significant Muslim population.[15]

China has identified Oman as a key country in the region and has been enhancing defence ties with it steadily. China has a Defence Attaché in Oman since 2013 and its warship conduct port calls during anti-piracy operations, the last one being Chinese warship Xi’an which visited Salalah port in June, 2019. Another factor for growing perception on the rising influences of China in Oman is the Chinese financial assistance which comes at a time when Oman is facing financial difficulties due to low oil prices. Most recently, on 15 December, it was reported that Nama Holding, Oman’s holding company of state-owned electricity network companies signed an agreement to sell 49 per cent share in Oman Electricity Transmission Company to China’s State Grid International Development Ltd.[16]

Oman, in developing closer ties with China, gains not just in terms of Chinese investments and technology, but also in terms of close relationship with yet another P5 member of United Nations Security Council (in addition to the UK and the US).

The Duqm Factor

The Duqm port in Oman is of strategic importance to international actors such as India, China, and the US. It offers an alternate route outside the Straits of Hormuz with direct access to the Arabian Sea. In fact, the US naval combatants get to access the Duqm port as an alternative to the Bahrain port.[17] India is already developing a few berths in Duqm port as per the MoU signed between India and Oman in 2018. While this move was reported in various sections of the Indian media as being aimed at countering the growing Chinese influence in the region,[18] it barely holds any water as China is actively involved in the construction of the China-Oman (Duqm) Industrial Park as part of BRI.

In view of Gwadar and Jiwani, the significance of Duqm is only set to grow. With Gwadar clearly under Chineses influence, the port of Duqm could become a point of strategic flash-point in the Arabian Sea, especially between India and China.

Conclusion

India and Oman enjoy unquestioned trust and mutual respect, going well beyond military or trade. However, amidst this bonhomie, slow and steady ingress of China into the equation needs to be watched out for. China has been known to slowly influence state systems and make them financially dependent before exerting its total supremacy.

This visit could help India list out its concerns over Chinese engagement in Oman as also further deepen and broaden the Indo-Omani strategic partnership. Any positive outcome in new areas like space, RuPay card, investments in India would be welcome.

References:

[1] Chaudhury, D. (2018). India, Oman may talk on Duqm port, space agency. [online] The Economic Times. Available at: https://economictimes.indiatimes.com/news/defence/india-oman-may-talk-on-duqm-port-space-agency/articleshow/65927466.cms?from=mdr  [Accessed 21 Dec. 2019].

[2] Brief on India – Oman Bilateral Relations. (2019). [pdf] Ministry of External Affairs, Government of India. Available at: https://mea.gov.in/Portal/ForeignRelation/India-Oman_Bilateral_2019.pdf  [Accessed 21 Dec. 2019].

[3] Ibid.

[4] India-Oman Relations. (2017). [pdf] Ministry of External Affairs, Government of India, pp.2-3. Available at: https://www.mea.gov.in/Portal/ForeignRelation/26_Oman_November_2017.pdf  [Accessed 21 Dec. 2019].

[5] Brief on India – Oman Bilateral Relations. (2019). [pdf] Ministry of External Affairs, Government of India. Available at: https://mea.gov.in/Portal/ForeignRelation/India-Oman_Bilateral_2019.pdf  [Accessed 21 Dec. 2019].

[6] Press Information Bureau, Government of India, Ministry of Commerce & Industry (2018). 8th India-Oman Joint Commission Meeting Begins in Muscat. [online] Available at: https://pib.gov.in/Pressreleaseshare.aspx?PRID=1538758  [Accessed 21 Dec. 2019].

[7] India – Oman Relations. (2016). [ebook] Ministry of External Affairs, Government of India, p.5. Available at: https://www.mea.gov.in/Portal/ForeignRelation/Oman.pdf  [Accessed 21 Dec. 2019].

[8] Brief on India – Oman Bilateral Relations. (2019). [pdf] Ministry of External Affairs, Government of India. Available at: https://mea.gov.in/Portal/ForeignRelation/India-Oman_Bilateral_2019.pdf  [Accessed 21 Dec. 2019].

[9] Chaudhury, D. (2018). PM Modi’s Oman visit: Indian Navy can now access Duqm port. [online] The Economic Times. Available at: https://economictimes.indiatimes.com/news/defence/pm-modis-oman-visit-navy-can-now-access-duqm-port/articleshow/62894357.cms?from=mdr  [Accessed 21 Dec. 2019].

[10] Rakhmat, M. (2014). Exploring the China and Oman Relationship. [online] Thediplomat.com. Available at: https://thediplomat.com/2014/05/exploring-the-china-and-oman-relationship/  [Accessed 21 Dec. 2019].

[11] Chinadaily.com.cn. (2019). China remains Oman’s largest oil importer in November. [online] Available at: https://www.chinadaily.com.cn/a/201912/12/WS5df1a0cca310cf3e3557da5e.html  [Accessed 21 Dec. 2019].

[12] Legrenzi, M., & Lawson, F. H. (2018). China-Oman relations and the Indian Ocean security dilemma. Global Change, Peace & Security, 1–6. doi:10.1080/14781158.2019.1538944

[13] Xinhuanet.com. (2018). China, Oman issue joint statement on establishment of strategic partnership. [online] Available at: http://www.xinhuanet.com/english/2018-05/26/c_137206872.htm  [Accessed 21 Dec. 2019].

[14] Anon, (2016). Duqm Economist, [online] (5). Available at: https://duqm.gov.om/upload/publications/en_SEZAD_Quarterly_Magazine_Issue_5.pdf  [Accessed 21 Dec. 2019].

[15] Xi, L. and Yuanyong, Y. (2018). Spotlight: China, Oman establish industrial park to boost bilateral cooperation. [online] Xinhuanet.com. Available at: http://www.xinhuanet.com/english/2018-12/19/c_137683272.htm  [Accessed 21 Dec. 2019].

[16] Nair, D. and Chan, V. (2019). China’s State Grid Nears Oman Electricity Stake Purchase. [online] Bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2019-12-15/china-s-state-grid-said-to-near-oman-electricity-stake-purchase  [Accessed 21 Dec. 2019].

[17] Sinha, S. (2019). Time to establish a security architecture in Indo-Pacific. [online] The Sunday Guardian Live. Available at: https://www.sundayguardianlive.com/opinion/time-establish-security-architecture-indo-pacific  [Accessed 21 Dec. 2019].

[18] Roy, S. (2018). Narendra Modi Oman visit: India secures access to key Duqm port for military use. [online] The Financial Express. Available at: https://www.financialexpress.com/india-news/india-secures-access-to-key-oman-port-for-military-use/1063544/  [Accessed 21 Dec. 2019].