Paradigm shift in India-UAE relations marks a high point in PM Modi's foreign policy

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Within six months after Prime Minister Narendra Modi's visit to the UAE (he is the first Indian PM to do so after Indira Gandhi in 1981), the Crown Prince of Abu Dhabi, Shaikh Mohammad, visited India last week to strengthen the bilateral relation between the two countries.

Oil storage to boost India's energy security

The two countries signed a slew of agreements in cyber security, space, infrastructure, energy and cultural exchange. One of a landmark deal struck on this occasion will see the UAE's national oil company Abu Dhabi National Oil Company (Adnoc) store crude in India's strategic storage units. In fact, it has also agreed to give two-thirds of this free oil to India, a move which will boost India's energy security.

India-UAE relations

The storage, which is likely to meet India's oil requirement for 10 days, will help her minimise the volatility in global crude prices, even if for a brief stint.

Diversifying trade into other domains like IT, space

Oil accounts for the major part of the trade between India and the UAE, with the latter providing eight per cent of teh former's oil imports (UAE is India third-largest trade partner and the trade between them was worth $60 billion in 2014-15). Given the consistency in their trade relations, both India and the UAE are now aiming to diversifying their trade which has been more oil-centric. The two sides hence have shown interest to work in fields like IT and space. They have also signed a MoU to set up a fund for infrastructure investment worth $75 billion, to take care of the West Asian country's investment in India's infrastructure.

A lot is at stake for Modi as his government pushes for closer economic ties and seeks to draw more investments from the UAE. During his visit last year, the two sides had agreed to establish an UAE-India Infrastructure Investment Fund, setting an ambitious target of $75 billion to support investment in India's infrastructure. Both sides have set up a task force to nudge investments under this fund.

The UAE is also the tenth biggest investor in India. As per the January 2015 figures, the UAE's total foreign direct investment to India was estimated to be just over $3 billion.

UAE's rethinking on stand on terror to help India's strategic security

However, the two countries saw the most significant change in their relations in terms of cooperation in counter-terrorism plans. The UAE, which is known to be pro-Pakistan on terrorism, agreed to cooperate with India on the issue last year. Besides the dissatisfaction over Pakistan's refusal to join the Saudi Arabia-led airstrikes against Houthi rebels in Yemen, Abu Dhabi's transition has perhaps been triggered by the rise of the Islamic State on the question of its traditional stand on religious extremism and terrorism.

On New Delhi's side, this is a big opportunity to turn a trade partner into a strategic one in the important Gulf region.

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