India and Saudi Arabia have taken a significant step toward strengthening bilateral ties by agreeing to jointly develop two oil refineries in India. This move comes at a time when global economic uncertainties, coupled with shifting oil alliances, are prompting nations to build stronger strategic relations.

The agreement was announced after a high-level meeting between Prime Minister Narendra Modi and Saudi Crown Prince Mohammed bin Salman (MBS) in Jeddah. The two leaders discussed deepening engagement not only in energy but also in tourism and technology, marking a pivotal moment in their cooperation journey.

Refinery Deal to Energise Economic Ties

India’s Ambassador to Saudi Arabia, Suhel Ajaz Khan, revealed that the two nations had agreed to build two oil refineries through a joint venture, although specific locations and financial details are yet to be disclosed. This development aims to revitalize the sluggish investment flow from Saudi Arabia to India, which has seen only $10 billion of the $100 billion pledged in 2019 materialize so far.

Saudi Aramco’s historical interest in India’s refining sector, including earlier proposals to collaborate with Reliance Industries and build a mega complex in Maharashtra, faced hurdles over land and valuation. While it remains uncertain if Aramco will be directly involved in this latest initiative, the project underlines India's strategic priority to attract foreign energy investments.

Economic Backdrop and Strategic Intent

The timing of this deal is crucial. India is grappling with its slowest economic growth in four years, and Saudi Arabia faces pressure from softening global oil prices and limited gains from OPEC+ production strategies.

Both countries are also reacting to global trade disruptions, particularly US tariff policies, which have strained growth prospects. In this context, enhancing cooperation serves mutual interests by promoting energy security, job creation, and industrial growth.

Modi’s earlier remarks to Arab News also indicated interest in petrochemical collaborations, highlighting the long-term scope of this partnership beyond refining.

Tourism, Tech, and Beyond: Broader Cooperation Areas

Besides energy, the leaders also discussed collaborations in tourism and technology, two sectors crucial for diversifying economies and fostering people-to-people connections.

Saudi Arabia’s Vision 2030 agenda aims to transform its economy by investing in non-oil sectors, and India, with its burgeoning tech ecosystem and rich tourism offerings, presents a natural partner.

Strengthening people-centric engagement—such as visa facilitation, tourism promotion, and cultural exchanges—could become a vital part of this evolving relationship.

Missed Opportunities and Renewed Commitment

Historically, while Saudi Arabia has been India’s largest oil supplier, its share in the Indian market has declined due to increased imports from Russia and Iraq. These dynamics have necessitated renewed diplomatic efforts to keep the Saudi-India oil trade robust.

Several major deals in the past failed to take off:

• The $44 billion mega refinery project in Maharashtra was derailed due to land acquisition issues.

• A potential Aramco-Reliance stake deal stalled due to disagreements over valuation.

The latest announcement can be seen as an effort to reset these efforts under a more targeted and achievable framework.

Global Shifts Prompt Regional Realignments

The Modi-MBS meeting also needs to be seen in the context of shifting global energy and political landscapes. With India increasingly diversifying its energy basket and Saudi Arabia pushing to become a tech and logistics hub, the alignment of national priorities has become stronger.

Both nations are G-20 members and share common concerns on economic resilience, energy transitions, and geopolitical balance. The latest partnership lays a foundation for deeper alignment across trade, security, and diplomacy.

Energy Diplomacy in Action

This renewed commitment reflects a broader trend of energy diplomacy, where countries are leveraging energy ties to expand into strategic sectors. For India, energy imports account for a large chunk of its trade deficit, and stable, long-term refinery partnerships are essential.

For Saudi Arabia, this deal could help offset the loss of market share to Russia and Iraq, and also build goodwill within Asia’s fastest-growing major economy.

What Lies Ahead

The next few months will be critical in determining how this agreement is implemented. Key focus areas include:

• Identifying refinery sites

• Clarifying Saudi Arabia’s stake and involvement

• Ensuring state and environmental clearances in India

• Aligning financial and technical partnerships

Moreover, both governments are expected to establish a framework to monitor progress and ensure transparency.

This initiative can also inspire broader collaboration in infrastructure, logistics, and energy transition technologies like green hydrogen and solar power.

Conclusion

The latest agreement between India and Saudi Arabia marks a strategic turning point in their bilateral relationship. With shared goals of economic growth, energy security, and technological advancement, both countries appear committed to deepening their cooperation across critical sectors.

If effectively executed, the establishment of two oil refineries and enhanced engagement in technology and tourism could pave the way for a stronger, more resilient Indo-Saudi alliance in the years ahead.

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