Saudi-Pakistan Defense Pact: Why India’s Oil Supply Remains Secure – For Now
Despite a deepening security alliance between Saudi Arabia and Pakistan, India’s crucial oil imports from the Kingdom are unlikely to be disrupted. In fact, recent data suggests a continued, and even growing, reliance on Saudi crude, highlighting the primacy of economic interests over shifting geopolitical sands. This isn’t simply about barrels and prices; it’s a signal of a changing global order where energy security trumps traditional alliances.
The Enduring India-Saudi Energy Partnership
Saudi Arabia remains one of India’s top three crude oil suppliers, selling just over 600,000 barrels per day in July, according to data from Kpler. This volume places Riyadh alongside Russia and Iraq as key providers to the world’s third-largest crude consumer. A senior source familiar with the matter confirmed to CNBC that India will continue to receive Saudi oil, stating plainly, “Of course.” This assurance comes amidst speculation that the newly formalized defense pact between Saudi Arabia and Pakistan could potentially jeopardize India’s energy access.
The core reason for this continued partnership is simple: mutual benefit. Asif Iqbal, president of the Indian Economic Trade Association, emphasized that both nations operate based on national interests. Saudi Arabia recognizes the importance of maintaining a strong commercial relationship with India, a rapidly growing economy and a vital market for its oil. This pragmatic approach underscores a broader trend of nations prioritizing economic ties even as geopolitical alignments evolve.
BRICS and the Shifting Global Landscape
India’s membership in BRICS (Brazil, Russia, India, China, and South Africa) further solidifies its position as a key energy partner for Saudi Arabia. The Kingdom is actively seeking to diversify its economic relationships, and BRICS nations represent a significant growth opportunity. This diversification isn’t about abandoning existing partners like the United States, but rather about hedging against risk and securing long-term economic stability. The expansion of the BRICS alliance itself signals a desire for a more multipolar world, where power and influence are distributed more evenly.
Dollar Dependence: A ‘Phantom Agreement’
Alongside concerns about geopolitical shifts, speculation has swirled around a potential move away from U.S. dollar-denominated oil trade. However, sources within Saudi Arabia have dismissed these claims as a “phantom agreement.” Dollar pricing remains the bedrock of Saudi crude exports, despite Riyadh’s efforts to balance its relationships with the U.S., Pakistan, and India. This continued reliance on the dollar highlights the challenges of dismantling a system deeply entrenched in global finance.
While some nations, including China, are actively exploring alternatives to the dollar for trade settlements, a widespread shift away from the greenback appears unlikely in the near term. The logistical and financial complexities of establishing a new global reserve currency are substantial, and the dollar’s dominance remains firmly intact. For more information on the implications of de-dollarization, see the Council on Foreign Relations’ analysis.
Gulf States Re-Evaluating Security Guarantees
The Saudi-Pakistan defense pact isn’t occurring in a vacuum. It’s part of a broader trend of Gulf states reassessing their security arrangements in light of perceived waning U.S. commitment to the region. Rashmi Garg, a senior portfolio manager at Al Dhabi Capital, noted a growing perception that the U.S. may not honor its security promises as consistently as in the past, particularly following events like the strike inside Qatar. This has prompted Gulf nations to seek alternative partnerships and bolster their own defense capabilities.
However, this doesn’t necessarily translate into a wholesale abandonment of the U.S. So far, the economic relationship between Gulf states and the U.S. remains largely stable. As Garg points out, the tariff picture has been “fairly benign,” and overall trade relations remain positive. The situation warrants monitoring, but a complete rupture in ties appears unlikely in the immediate future.
India’s Proactive Gulf Diplomacy
India is also actively strengthening its ties with Gulf nations, recognizing the strategic importance of the region. Recent discussions between India’s Commerce Minister Piyush Goyal and UAE officials regarding the UAE-India Comprehensive Economic Partnership Agreement demonstrate this commitment. The UAE, like Saudi Arabia, is a major supplier of crude to India, providing approximately 400,000 barrels per day as of June, according to Kpler data. This proactive diplomacy underscores India’s understanding that diversifying its energy sources and fostering strong regional relationships are crucial for its long-term energy security.
Oil Price Outlook: Temporary Spikes, Not a New Normal
Despite ongoing geopolitical tensions, experts remain skeptical of a sustained surge in oil prices. Manpreet Gill, chief investment officer at Standard Chartered Wealth Management, predicts that any price increases will likely be temporary, with WTI futures remaining near $65 per barrel. This suggests that the market has already factored in much of the geopolitical risk, and that underlying supply and demand dynamics will continue to exert a stronger influence on prices.
The key takeaway is this: while the Saudi-Pakistan defense pact represents a significant geopolitical development, it’s unlikely to fundamentally alter India’s access to Saudi oil in the foreseeable future. Economic pragmatism and the pursuit of national interests will continue to drive energy trade, even as the global landscape shifts. The real story isn’t about choosing sides, but about navigating a more complex and multipolar world.
What impact do you foresee from the evolving geopolitical dynamics in the Middle East on global energy markets? Share your insights in the comments below!
