India and Saudi Arabia, two of Asia’s economic powerhouses, have historically shared strong commercial ties, particularly in the energy sector. However, in April 2025, the two countries took a decisive step forward, signing a landmark agreement aimed at deepening cooperation in energy security, defence manufacturing, and strategic partnerships.
This article explores the developments, their broader significance, and the relevant legal frameworks shaping this new era of India–Saudi Arabia relations.
Energy Cooperation: Expanding the Partnership
Energy security has always been the backbone of India–Saudi relations. As India’s economy continues its robust growth trajectory, its energy demands are soaring. Saudi Arabia, the world’s largest oil exporter, is crucial in meeting this demand.
Key Highlights of the Agreement
Increased Crude Oil and LPG Supplies
Saudi Arabia agreed to enhance its long-term supply of crude oil and liquefied petroleum gas (LPG) to India, ensuring a stable supply chain amid global market volatility.
Investment in Renewable Energy
Recognizing the global energy transition, both countries agreed to co-invest in renewable projects, particularly green hydrogen and solar energy ventures. This aligns with Saudi Arabia’s Vision 2030 and India’s National Hydrogen Mission.
Strategic Energy Storage
There are discussions on joint development of strategic petroleum reserves (SPRs) in India, strengthening India’s ability to buffer against supply shocks.
Defence Cooperation: Deepening Strategic Ties
Beyond oil, the 2025 agreement marks a shift toward strategic and defence collaboration; this is a significant leap in bilateral relations.
Key Highlights
Defence Manufacturing Collaboration
Saudi Arabia expressed interest in co-developing and co-producing defence equipment with Indian firms, under India’s “Make in India” and “Atmanirbhar Bharat” (self-reliant India) initiatives.
Military Exercises and Training
Expanded cooperation in joint military drills, counter-terrorism exercises, and high-level strategic dialogues between the Indian and Saudi defence establishments.
Defence Technology Transfers
Agreements to facilitate the transfer of critical defence technologies while respecting international export control regimes like the Wassenaar Arrangement (of which India is a member).
Why this development matters
Energy is not just about fuel anymore; it’s about national security, technology transfer, and future-proofing economies. This collaboration positions both countries at the center of the global clean energy transition.
Legal Frameworks Involved
Several legal aspects and frameworks govern the cooperation outlined in the agreement:
Bilateral Investment Treaties (BITs)
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- India and Saudi Arabia signed a Bilateral Investment Promotion and Protection Agreement (BIPA) in 2006.
- Although India has reformed its BIT templates since 2016, the existing agreement still offers investor protections, dispute settlement mechanisms, and legal certainty for Saudi investments in Indian energy and defence sectors.
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Defence Procurement Policies
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- Under India’s Defence Acquisition Procedure (DAP) 2020, foreign direct investment (FDI) up to 74% is permitted through the automatic route in defence manufacturing, with higher stakes requiring government approval.
- Saudi firms or Saudi government agencies investing in Indian defence companies would have to comply with DAP rules, including offset obligations (mandating reinvestment of a portion of contract value back into India’s defence ecosystem).
International Legal Compliance
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- Export Controls: Defence deals must align with multilateral agreements such as the Wassenaar Arrangement on export controls for conventional arms and dual-use goods.
- Energy Contracts: Oil and gas supply contracts would likely be governed under standard international energy law practices — notably the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards for dispute resolution.
- Strategic Energy Reserves: Agreements on sharing and accessing strategic petroleum reserves (SPRs) will involve sovereign immunity waivers and contractual obligations governed by international commercial law.
Counter-Terrorism Cooperation
Cooperation on counterterrorism will be based on mutual legal assistance treaties (MLATs) and international frameworks like UN Security Council Resolutions 1373 and 1540, obligating states to combat terrorism and prevent proliferation of weapons of mass destruction.
Geopolitical and Economic Implications
This agreement signals a major geopolitical shift:
- India positions itself as a reliable partner in the Middle East beyond traditional ties with Iran and the UAE.
- Saudi Arabia hedges its strategic bets by deepening ties with a major Asian democracy amidst shifting alliances in the Gulf.
- It boosts India’s ambitions to become a global manufacturing hub and energy-secure nation.
- It also strengthens regional counter-terrorism frameworks by aligning two major economies against extremist financing and operations.
Conclusion
The April 2025 agreement between India and Saudi Arabia marks not just a transactional deepening of ties but a transformational partnership. By expanding into defence manufacturing, renewable energy, strategic reserves, and joint military cooperation, the two countries are building a resilient, future-ready relationship grounded in strong legal frameworks.
In an era marked by energy transition, defence modernization, and geopolitical shifts, the India–Saudi Arabia partnership is poised to play a pivotal role in shaping the strategic contours of the 21st century.
