Examining the GCC's Economic and Political Ties with China and India

This report analyzes the Gulf Cooperation Council's (GCC) relationships with China and India, focusing on the 'Look East' policy and the growing importance of these emerging economies for the GCC's energy exports and trade. The paper examines the reasons behind the GCC's shift towards Asia, highlighting the increasing trade dependence and strategic importance of China and India. It discusses the trade dynamics, including petroleum imports and exports, and suggests strategies to strengthen the relationships between the GCC and India, while also emphasizing the need for balancing relations between the East and West. The report explores the implications of China's and India's rising economic power on the GCC and provides a comprehensive analysis of the economic and political cooperation between these regions, including the impact of free trade agreements and strategic partnerships, with the aim of providing a comprehensive understanding of the GCC's strategic positioning in a changing global landscape.

Running head: GCC RELATION WITH CHINA AND INDIA
GCC Relation with China and India
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1GCC RELATION WITH CHINA AND INDIA
EXECUTIVE SUMMARY
The aim of this study is to examine the relation of the Gulf Cooperative Council (GCC) with the
China and India. The emerging economies like India and China are essential for the energy
importers of the Gulf countries. On contrary, these countries also dependent on the GCC for their
growing energy requirements. This paper analyses the reason behind the Look East policy of the
GCC. It also examines the role of the rising power India and China on the GCC. This paper
discusses the suggested strategies for strengthening the relationship between the GCC and India.
It also emphasizes on balancing the relation between East and West.

2GCC RELATION WITH CHINA AND INDIA
Table of Contents
Introduction......................................................................................................................................3
Reasons for Look East policy of GCC........................................................................................4
Rising power of India..................................................................................................................5
Rising power of China.................................................................................................................7
Gulf and India relation.................................................................................................................8
Gulf and China relation.............................................................................................................10
Suggested strategy to balance relations between West and East...............................................11
Suggested strategy to enhance relations with India...................................................................12
Analysis.....................................................................................................................................14
Conclusion.....................................................................................................................................15
References......................................................................................................................................17

3GCC RELATION WITH CHINA AND INDIA
Introduction
In the Gulf, the name of the Cooperation Council for the Arab States is the Gulf of
Cooperation Council (GCC). It was founded in 1981 by signing a charter by all member
countries. It is a regional intergovernmental economic and political union, which includes all
Arab states of the Persian Gulf and excludes Iraq (Kapiszewski, 2017). These are United Arab
Emirates (UAE), Saudi Arabia, Qatar, Oman, Kuwait and Bahrain. Headquarter of the GCC in
capital city of Saudi Arabia, Riyadh. In 2011, the organization transformed into a Gulf union
from the GCC, which strengthened the military, political and economic cooperation. The GCC
states are mainly dependent on oil industry. Thus, it took various measures in order to diversify
and reduce the dependency on oil sector. There is a strong relationship between the GCC and
Asian countries China and India. India is a South Asian country. In addition, China is an East
Asian country. This paper analyses the relation of the GCC with China and India. It also aims to
examine the reason behind Look East policy of the GCC (Ozturk & Al-Mulali, 2015).
The objective of this policy is to intensify the association of the GCC with two emerging
countries of the world. Moreover, both of these emerging countries are growing stronger and
establishes itself as rising power. Assessing the rising power of these two economies will help to
understand their contribution in the GCC. The association between these two countries and the
GCC is mainly depends on the trade related to crude oil. Apart from this, many initiatives had
been taken by the GCC, China and India to strengthen the economic and political cooperation.
Therefore, this paper examines the relation of India with the GCC. Moreover, it also includes the
relation of the GCC with the China (Naufal & Genc, 2014). It is important to balance the
relationship between West and East. Hence, this paper suggests some strategies which will create
a balance between West and East. It also emphasizes on the strategies that had implemented.

4GCC RELATION WITH CHINA AND INDIA
Moreover, Close ties with India benefits both the parties such as the GCC and India. Therefore,
this paper suggests strategies to enhance relation between India and the GCC. It is highlights the
existing policies. It also investigates the contribution of the India in the growth of the UAE.
Reasons for Look East policy of GCC
The trade relation between the GCC and Asian countries have grown substantially over
the last few years. Therefore, the Asian countries took the place of Europe and US in terms of
trade dependence. Moreover, 60% of the total international trade of the GCC belongs to Asian
countries (Gcc-sg.org, 2019). Likewise, these Asian countries and the GCC possess an important
place in the world trade. Asian countries and the GCC have recognized for its big exports. The
manufacture of goods and exports has witnessed in the Asian countries. On the other hand, the
GCC is known for its energy exports. Therefore, the trade between these two regions will
enhance the growth for the GCC and Asian countries. The major emerging economies include
India and China. To boost the relation of the GCC with India and China, Look East policy
adopted by the GCC. It will bring more cooperation in the field of economic and political
development (Deepak, 2018)t. Therefore, emergence of these two global powers have significant
implication on the GCC. Even for the oil importers of the Asia, Gulf countries are equally
important. Trade plays a major role for the development of all countries. Thus, the reliable
history of trade between Asian countries and the GCC, initiated the adoption of the Look East
policy.
The GCC countries are known as the leading partners of the Organization of Petroleum
Exporting Countries (OPEC). Moreover, around 30% of the proven oil reserves of the world are
located in the GCC countries. Therefore, the GCC countries will be able to fulfill the growing
energy demand if the Asian countries. In addition, for the development of the emerging

5GCC RELATION WITH CHINA AND INDIA
economies of the Asia, enormous energy is required. Hence, the Look East policy acted as a
trade booster. It also ensured the energy security for these emerging countries. On the other hand,
GCC also considers Asian countries as the most vital strategic market for its energy exports
(Barston, 2014). As US took policies to establish itself as an energy-sufficient country. The focus
of the GCC countries shifted towards the increasing demand of oil in China and India. On
contrary, the GCC countries were also able import goods from these manufacturing giants. It
helped in the growth and development of the GCC countries.
Rising power of India
The significance of the development countries scaled up in the finance, trade and
production. Many investors from foreign countries wanted to invest in developing countries. It
further boosted the international trade. International trade is considered as the dynamic comment
of the economic growth and development. In recent years, India improved its performance in the
manufacturing sector of the country. Thus, it enabled the country to export goods produced in the
country. In addition, it also required enormous amount of energy in order to meet the rising
energy demand in the country. The country emphasized on the growth of the trade and
investment. It also took many steps in this regard. It initiated various bilateral ties with the
countries around the word (Alam & Ahmed, 2017). Therefore, India can be a most lucrative
export market for the GCC countries. In addition, it opens up the trade relation between two
parties. The relation of the India in terms of trade is gradually strengthening. The exports and
imports between these two parties resulted in economic growth for both participants.

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Figure 1: The trade balance of the India with GCC countries ($US millions)
Source: (Mea.gov.in, 2019)
Figure 1 represents the trade balance of the India with GCC countries from 2006 to 2015.
Graphically, imports was higher than the exports between two participants in trade. Initially,
imports and exports both increased drastically. However, later it took a slight downward trend
(Aslan, Kutuk & Oduncu, 2015).
Figure 2: Petroleum import of the India from the GCC countries ($US dollars)
Source: (Mea.gov.in, 2019)

7GCC RELATION WITH CHINA AND INDIA
Figure 2 illustrates the petroleum imports of the India from the GCC countries from 2006
to 2015. Graphically, it shows imports of the petroleum and non-petroleum from the Gulf
countries (India.gov.in, 2019). The trend in both categories improved initially. However, from
the 2014 onwards it took a downward trend. The growing market of the India required huge
petroleum and petroleum products. Therefore, GCC countries supplied the energy to the country.
Hence, it also helped the GCC countries in gaining economic benefits. In addition, both parties
started various projects in the market of each other, which resulted in positive growth rate. They
also increased the free flow of labor and investment.
Rising power of China
China establishes itself as a leading country of the world. It placed itself as largest
exporter and second largest importer of the world. It is also ranked as largest economy in terms
of purchasing power and second largest country in terms of nominal GDP in the world
(Bbc.com, 2019). The strong growth of the manufacturing and service sector brought significant
economic gain in the country. It emergence of Chain as a global power is inevitable. The
population and sheer size of the economy with its robust economic and political performance
make it one if the leading economies of the world. Other than trade and investment, it also spread
itself in the field of security to dominate the world market. China launched its major diplomatic
project in the GCC region, called One Belt, One Road (OBOR) (Lirong, M, 2015). The trade
flow between the China and the GCC increased sharply. It is predicted that the growth of trade
between the GCC and China would be from 350 billion US dollars to 500 billion US dollars by
2020.
The trade related to energy also spiked dramatically due to rapid industrial development
and burgeoning population. As the GCC has the surpluses of oil. It can easily fulfill the energy

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requirement of the country. Other than crude oil, the GCC also exported energy-intensive goods
such as aluminum and phosphate. As production cost of these goods are cheap in the GCC
countries. On the other hand, GCC able to import cheap labor from the labor-intensive countries.
Therefore, large number of laborers works in the market of the GCC countries. It is assumed that
due to energy-surpluses of the GCC countries and huge requirement of the China, the oil exports
in the country would grow at 3.7% per annum by 2030 (Javid, Sharif & Alkhathlan, 2018). In
addition, the GCC and China also started diversification plan of their bilateral ties beyond
hydrocarbons. In the Jizan Economic city of the Saudi Arabia, Chinese company Aluminium
Corporation of China (Chinalco) planned to set up a primary smelter. The close relation between
the leading member of the GCC and China will laed to higher economic growth for the
economies. The free-trade agreement between the China and GCC will further strengthen the
relationship.
Gulf and India relation
The Gulf countries and India already signed more than ten free trade agreements in order
to deepen the relationship between these two parties. These trade ties boosts the export market of
these two. These various trade talks includes Regional Comprehensive Economic Partnership
(RCEP) of 16 nation (Arora & Mohajeri, 2017). In 2018, Prime Minister of India visited the
GCC member country UAE and met the crown prince of the country in order to strengthen the
trade ties between two parties. Moreover, in 2016, two countries had elevated their association
into a Comprehensive Strategic Partnership. It aimed to enhance cooperation across varied
sectors such as investment and trade along with agriculture, space, security and defence. There
was a stumbling block in the relationship between the UAE and India. The close relation of the
UAE with the Pakistan scaled down the growth of trade between these two countries. However,

9GCC RELATION WITH CHINA AND INDIA
the Comprehensive Strategic Partnership between these two countries assured the progress of the
relationship related to trade (Osman, Gachino & Hoque, 2016). Moreover, other countries of this
council such as Bahrain, Qatar, Kuwait, Saudi Arabia and Oman also participated in trade and
investment with the India. The below tables provide the data related to export and import of the
India with the GCC countries.
Table 3: Imports of the India from all the GCC countries ($US millions)
Source: (India.gov.in, 2019)
Table 3 represents the imports of the India from all the GCC countries from 2000 to
2016. Historically, India imported mostly from the UAE and Saudi Arabia. Other countries of
the region also import partners of the country. The maximum import was in the area of
petroleum and petroleum products.

10GCC RELATION WITH CHINA AND INDIA
Table 4: Exports of the India from all the GCC countries
Source: (India.gov.in, 2019)
Table 4 illustrates the exports of the India from all the GCC counties from 2000 to 2016.
Historically, India mainly exported goods to the UAE and Saudi Arabia. Other countries of the
GCC also exported goods from the India. The imports of the India is less diversified than the
exports of the country. The flow of the petroleum product was not in one direction (Vorisek,
2016). The robust growth in the petrochemical and refining sector resulted in two way flow of
the petroleum products. However, the trade gap between these two regions increased as the
energy requirement in the emerging countries like India was higher.
Gulf and China relation
Trade and investment act as the base for close ties between the China and GCC. Trade
related to energy plays a pivotal role in the growth of the GCC and China (Gov.cn, 2019). In
2016, the relation between six states of the Gulf and China gradually strengthen when president

11GCC RELATION WITH CHINA AND INDIA
of China visited Saudi Arabia. The bilateral talk related to security and economic sector between
two parties opened a new road. The demand for the oil increased significantly in China due to its
One Belt One Road project that includes the GCC countries. Therefore, the GCC will open up
the sea lanes and will supply huge oil for the China’s project. It is projected that the trade
between the China and GCC would reach 350billion US dollars in the next decade. Previously,
US was the main importer of the GCC. Now, China surpassed US to become major export
market for the GCC countries (Sultan, 2016). As the presence of the US declined in the Middle
East, China would also take in the security architecture of the GCC countries. In addition, China
also maintained a balance between the trade relation with GCC and Iran. The total amount of
trade with the GCC was four ties greater than the trade with the Iran as of 2016. Thus, it helped
to protect the diplomatic interest of the China in both regions. To develop security ties with the
GCC, China deployed naval vessels off the Somali coast to the mission of antipiracy. In Yemen,
the forces of the Emirati and Saudi Arabia also used UAVs made by the China. In addition, the
GCC maritime had abutted by the two arteries of One Belt, One Road project of the China.
However, the GCC is not worried about the close relation between the China and Iran, they
embraced the way China balanced the relation between the Iran and GCC (Dalwai, Basiruddin &
Abdul Rasid, 2015). On the other hand, US is worried about the growing ties between the China
and GCC. The increasing role of the China and decreasing role of the US may possesses threats
for the US economy. As it will intensify the dominance of the China in the global market.
Suggested strategy to balance relations between West and East
The Gulf countries visibly surged their military, economic and diplomatic involvement in
the East. It played a pivotal role in the economic transformation of the East. It helped the region
with its largest proven oil reserves in the world. It further boosted economic growth by scaling