Good afternoon, ladies and gents. It\u2019s our final issue of 2025 as we gear up for a long weekend of R&R. Everyone may be packing up and shutting down, but the news cycle showed no signs of respite this week.<\/p>\n
Our top story this afternoon tells the story behind India\u2019s real GDP growth hitting a six-quarter high in 2Q 2025-26, and how it paves the way for MENA to find a safe haven as EMs grapple with currency volatility and high interest rates.<\/p>\n
ALSO- We look at how India\u2019s rice exports face real trouble due to increasing groundwater stress in key producing states, and what that means for key Gulf markets.<\/p>\n
** A QUICK PROGRAMMING NOTE \u2013 EnterpriseAM MENA<>India will be off on Friday, 2 January for the long weekend. We\u2019ll be back in your inboxes at the usual time on Monday, 5 January 2026.<\/p>\n
Watch this space<\/p>\n
<\/a>ENERGY \u2014 India is quietly casting a wider net to shore up oil supplies as Russian sanctions threaten security. India\u2019s key state-run refiner Indian Oil Corporation (IOC) has reportedly bought its first cargo of Colombian Castilla crude from Ecopetrol, Reuters<\/a> reports, citing sources with knowledge of the matter. The shipment is said to be 2 mn barrels for late-February delivery and is part of a contract structure that allows IOC to lift about 12 mn barrels \u2014 roughly six VLCC cargoes \u2014 if it chooses to exercise the option. Neither IOC nor Ecopetrol confirmed the report.<\/p>\n Widening scope: IOC rarely books South American grades due to freight and landed-cost disadvantages, despite having optional purchase arrangements with Mexico, Brazil, and Colombia. India\u2019s imports of Russian crude are expected to fall to about 1.2 mn bbl \/ d in December \u2014 a three-year low, down from 1.84 mn bbl \/ d in November \u2014 as tighter US and EU sanctions on Moscow\u2019s producers and vessels disrupt flows, the newswire added, citing Kpler data.<\/p>\n India\u2019s diversification toward non-Gulf grades does not remove its dependence on Middle Eastern supply. Saudi Arabia, Iraq, Kuwait, and the UAE form the core<\/a> of India\u2019s term-contract volumes of crude. As Russian flows tighten under sanctions, the region\u2019s share has risen to multi-month highs \u2014 OPEC and Middle Eastern suppliers accounted for roughly 51-52% of India\u2019s imports in 2024. Pricing, delivery terms, and contract renewals with Aramco, Adnoc, and other Gulf producers therefore remain strategically significant for Indian refiners.<\/p>\n ALSO \u2014 India is challenging Saudi Arabia's long-standing Contract Price (CP) dominance in the domestic energy market by considering a new LPG subsidy formula. State-run oil giants Indian Oil Corp, Bharat Petroleum, and Hindustan Petroleum signed their first-ever one-year supply contract with US exporters for 2.2 mn metric tonnes per annum of LPG in 2026, Economic Times<\/a> reports.<\/p>\n For years, India has pegged LPG subsidies to the CP benchmark. However, with US imports now covering approximately 10% of India\u2019s annual needs, the country is weighing the introduction of a pricing formula that incorporates US benchmarks.<\/p>\n The rationale: US-sourced LPG is economically viable for India only when the price discount against the Saudi CP is deep enough to offset freight costs \u2014 which are nearly 4x higher than for Saudi shipments. Integrating US pricing into the official formula lends state-run companies a permanent incentive to play Gulf and US suppliers against each other to secure the lowest cost.<\/p>\n And there\u2019s more incentive: The government compensates state-run companies when they sell LPG for households below market rates. A more diversified pricing could reduce India\u2019s subsidy burden if US import prices remain lower than the Saudi CP.<\/p>\n The look ahead: We\u2019ll be watching how Saudi Aramco and other regional exporters adjust prices to protect their market share. Whether this formula revamp succeeds will likely determine if India doubles down on US imports in the long haul.<\/p>\n DEFENSE \u2014 Is India\u2019s recent INR 790 bn (USD 8.7 bn) home defense order<\/a> a potential sales pitch to MENA? India\u2019s approved defense procurement proposals to shore up its domestic defense forces bolster domestic manufacturing giants like Hindustan Aeronautics, Bharat Electronics, and Zen Technologies \u2014 and are throwing a strategic focus on modern battlefield tech such as loiter munitions and drone detection.<\/p>\n Why is this significant? India is in advanced talks to firm up export agreements for the BrahMos<\/a> supersonic missile systems to the UAE, Saudi Arabia, Egypt, Qatar, and Oman. GCC countries, specifically Saudi Arabia, are also looking for \u201ctransfer of technology\u201d partners, and India\u2019s new hardware could potentially fill their requirement for cost-effective, high-accuracy weaponry.<\/p>\n In numbers: India\u2019s defense exports hit a record USD 2.8 bn in FY 2024-25, a 34x increase over a decade. The target is now USD 5.56 bn by 2029<\/a>, with the GCC as a prime target market.<\/p>\n <\/a>TRADE & TARIFFS \u2014 India has imposed a three-year import tariff of 11-12% on some steel products to curb cheap inflows, Reuters<\/a> reports, citing a Finance Ministry order. The decision replaces a 200-day provisional 12% levy introduced in April following a sharp rise in imports causing, or threatening to cause, serious injury to the domestic industry. The fees apply to shipments from China, Vietnam, and Nepal, among others, while imports from certain developing countries and specialty steel products such as stainless steel are exempt.<\/p>\n What this means for the GCC trade corridor: The tariffs mean price floors in India are firming up against Turkish, Korean, and Chinese cargoes. This will have an impact on the UAE, Saudi Arabia, and Oman, where steel consumption is tied to industrial buildouts and construction pipelines. India is the world\u2019s second-largest crude steel producer and a significant exporter: iron and steel shipments were worth just over USD 13 bn in FY 2023, and finished steel exports<\/a> came in around INR 590 bn (USD 7 bn) in FY 2023-24, according to trade and government data.<\/p>\n Market reaction: Shares of major producers including Tata Steel, JSW Steel, Jindal Steel, and state-run Steel Authority of India rose on the news as investors expect the longer-term duty will support domestic prices.<\/p>\n Market watch<\/p>\n <\/a>Foreign portfolio investors triggered the largest monthly outflow in five years this month, selling a record INR 143 bn (USD 1.6 bn) in index-eligible Indian bonds in response to a weakened INR and fading expectations of further rate cuts, Bloomberg<\/a> reports.<\/p>\n Good news for Gulf investors? While Western funds dump Indian bonds because they can't hedge the currency risk, Gulf-based sovereign funds with long-term vision may see this as an entry point. Speculative hot money from New York and London may be exiting, but corridor investments could replace it if a US-India trade agreement finally stabilizes the INR in 2026.<\/p>\n Happening this week<\/p>\n #1- India will formally assume the Brics presidency<\/a> on 1 January 2026, taking charge of an expanded grouping that now includes new members such as Egypt, Ethiopia, Iran, Indonesia, and the UAE, with Saudi Arabia invited to join. Under its term, India will chair ministerial meetings and the leaders\u2019 summit, working within a 2026 agenda framed around resilience, innovation, cooperation, and sustainability.<\/p>\n New Delhi is expected to focus on workstreams covering trade settlement, financial cooperation, infrastructure, and energy security \u2014 areas that intersect with Gulf priorities including local-currency mechanisms, sovereign wealth fund participation, and supply-chain links with the wider Middle East. This places India\u2019s presidency at the intersection of Brics\u2019 institutional priorities and the strategic interests of its newer Gulf members.<\/p>\n #2- The India-Australia Economic Cooperation and Trade Agreement<\/a> (ECTA) will go into effect tomorrow, 1 January 2026, and is poised to create a trilateral trade bloc for India, with the infrastructure carrying that growth increasingly being MENA-owned. The ECTA will eliminate remaining tariffs on Indian goods entering Australia, granting zero-duty access for all Indian goods, including pharma, textiles, and gems. The next leg of growth for Indian trade will flow through ports, logistics, and upstream supply chains anchored in the MENA region.<\/p>\n How it works: India\u2019s 2022 CEPA with the UAE creates a low-friction Gulf gateway, with DP World operating key terminals<\/a> across the route, from India\u2019s west coast to Australia. In late 2025, DP World pledged an additional USD 5 bn<\/a> to integrate India's domestic supply chain \u2014 covering rail, cold chain logistics handling, and warehousing \u2014 with its global port network.<\/p>\n Why it matters: A trilateral trade bloc is emerging where MENA serves as the \u201cback office\u201d and logistics manager for the Indo-Pacific \u2014 monetizing trade volumes it doesn\u2019t technically supply or produce. The final 100% tariff removal creates a trade pipe whereby MENA-owned entities own several lucrative sections.<\/p>\n The big story abroad<\/p>\n A couple of stories are making headlines on the last morning of 2025:<\/p>\n #1- Warner Bros Discovery is reportedly leaning toward rejecting Paramount Skydance\u2019s amended USD 108.4 bn hostile takeover bid, despite a personal financing guarantee from Oracle founder Larry Ellison, Reuters<\/a> reports, citing a person familiar with the matter. The board still favors a lower-value USD 82.7 bn merger with Netflix, viewing it as the path of least resistance with fewer regulatory hurdles.<\/p>\n #2- Fed minutes reveal a central bank at a crossroads: Minutes (pdf)<\/a> from the Fed\u2019s December meeting showed a committee deeply fractured over the path for 2026, especially when it comes to the timing and size of the cuts to come. While officials voted 9-3 to lower rates to 3.5%-3.75%, the record shows some members only supported the cut by a \u201cfine balance,\u201d while others argued for a hold.<\/p>\n
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