In the first deal of its kind, the United Arab Emirates have signed a deal to store crude oil in India's massive new storage terminal. In return, India can claim up to 2/3 of UAE oil stored there, for free.
This is a win/win for both nations. India gains not only a major customer for its gigantic new oil storage facilities, it also gets a massive amount of free oil that it can tap anytime it wishes. The UAE, which is running out of places to store its crude production, gets to pay in-kind for more storage, and this storage is safe from instability in the Persian Gulf.
Modi's New BFF
The deal, which is dependent on getting a VAT exemption from Indian authorities, is just the latest in a series of recent agreements between Delhi and Abu Dhabi. The central banks of the two nations have agreed to a currency swap agreement, where contracts and commerce between the two can be freely converted from UAE dirham to Indian rupees, and vice versa.
A total of seven agreements were signed between the UAE and India last week, further cementing the ties of their strategic partnership. In addition to the "oil for storage" deal, expansion of military cooperation between the two nations, including cooperating in fighting Daesh and arms purchases by the UAE from Indian defense contractors; infrastructure investments by UAE companies in India; labor laws protecting Indian workers in the UAE; and even a joint mission to Mars!
The closeness of the relationship between the two countries was illustrated by the warm reception which greeted Shaikh Mohammad Bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi, upon his arrival in India to sign the agreements.
Squeezing the Persians
This extensive cooperation between India and the UAE has additional benefits for Abu Dhabi: supplanting Iran as a major trading partner to India. The UAE gets a storage point for its oil safe from Iranian interference, and a non-US defense partner. The UAE and Indian National Security Councils are in regular communication, and their respective navies have joint exercises. The possibility also exists for the UAE to finance defense purchases in oil. The Indians gain assurances for the well being of their citizens who travel to the UAE to work, and an accommodating supplier of crude.
Oh, and did we mention the 3.6 million barrels of free oil? FREE OIL!
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