Oman, India show the benefit of ‘economic statecraft’ 

Oman and India recently signed a Comprehensive Economic Partnership Agreement that will offer duty-free access to over 98 percent of India’s exports to Oman. Bilateral trade between the two countries reached $10.6 billion in 2025. More than 6,000 India-Oman joint ventures operate in Oman. Outward foreign direct investment from India to Oman is $675 million. This latest agreement aims to increase bilateral trade and promote India’s exports of textiles, engineering goods, pharmaceuticals, and agricultural goods. India will offer tariff liberalization of almost 77.8 percent of its total tariff lines, which involves more than 94 percent of imports from Oman by value. India will cut tariffs on select goods, such as dates and petrochemicals, from Oman. The recent development in the region is the classic example of adopted effective economic statecraft policy. 

In his 1985 book “Economic Statecraft,” David Baldwin reevaluates the effectiveness of economic statecraft and other forms of economic techniques. The “statecraft” is the foreign policy tool used by the state holders with the aim to influence other global actors. Economic statecraft includes all economic tools that are used in foreign policies.  There are forms of positive economic statecraft — so-called “carrots”: financial aid, investments, subsidies for exports and imports, favorable tariff discrimination — and negative forms, referred to as “sticks”: embargos, boycotts, license denial, blacklisting, tariff increases, and freezing assets.  Highlighting their significance, Baldwin argues that “economic techniques usually cost more than propaganda or diplomacy and thus tend to have more inherent credibility.” 

Earlier, in 1945, Albert Hirschman published a book, “National Power and the Structure of Foreign Trade,” that examined the role of trade in economic relationships between states. The importance of trade is that “ it (the trade) conducted between country A, on the one hand, and countries B,C, D, etc., on the other hand, is worth something to B,C, D, etc, and that they would, therefore, consent to grant A certain advantages — military, political, economic — in order to retain the possibility of trading with A.” Andreas Grimmel and Viktor Eszterhai examine the Belt and Road initiative as a case study of China’s economic statecraft, and compare the effect of Baldwin’s “classical” exercise of economic statecraft which is engaged at a specific dimension of actor’s behavior with Hirschman’s policy, which aims to make countries adapt their policy objectives themselves, primarily voluntarily, with the aim to match those of the economically influential state more commonly. 

Signing new trade deals became a vital pillar 

Dr. Diana Galeeva

The uncertain and challenging geopolitical global landscape leads to the diversification of geopolitical allies. Oman and India prioritize their economic statecraft as the key strategic policy in this process, which is relevant to the comparison of propositions of Baldwin and Hirschman. In general, signing new trade deals became the vital pillar of India’s economic statecraft strategy — either to overcome negative forms of economic instruments, following Baldwin’s argument, or to indirectly influence other countries, adopting the argument of Hirschman. Signing the agreement comes at a vital time when the US government applies “sticks” against India by imposing a 50 percent tariff on Indian goods. At the same time, by signing over 15 trade agreements and with ongoing talks with the EU, Chile, and New Zealand, India’s policy helps to boost its influence across the world. 

Oman is also taking advantage of the economic statecraft policy as it allows it to diversify its international partners. According to a 2025 report by the World Bank, entitled “Global Economic Prospects,” the economies of Oman and the GCC countries are undergoing deep transformations amid fluctuating oil revenues, shifting global economic dynamics, and climate change. Qasim Al-Maashani focuses on the current Oman economic landscape, and argues that the sultanate has conducted important fiscal reforms aimed at reducing the public deficit and managing debt. To attract foreign direct investment and boost non-oil industries, the sultanate launched privatization initiatives and public investment programs. Oman has free trade agreements with the US, Singapore, and Australia. Oman has developed a Vision “Oman 2040” program that targets foreign direct investment net inflow percentage of gross domestic product (10 percent), non-oil share of GDP (more than 90 percent), real GDP growth (5 percent), and real GDP per capita (increase by 90 percent). 

India’s policy helps to boost its influence 

Dr. Diana Galeeva

The UAE also concluded a trade agreement with India in February, 2022. There are already positive signs of this pact: Since signing the deal, India-UAE bilateral trade has grown from $72.8 billion to $100 billion. The UAE adopts the economic statecraft policy primarily by using “carrots.” For example, the UAE has many CEPAs in force, including with Indonesia, Israel, Turkey, Cambodia, Malaysia, New Zealand, and Kenya. It aims to strengthen its economic ties by signing trade agreements with Chile, the Philippines, and Ukraine, which means it will continue adopting the policy of economic statecraft in the future. Meanwhile, India will maintain its interests in building the strategic dialogue with the Gulf, while evaluating benefits of this policy; it is in negotiations with Qatar to conclude an agreement soon. 

India and Oman are prioritizing “economy” rather than relying on “military” power resources. As Baldwin explains: “Military techniques, of course, usually entail higher costs and even more credibility, but their costs may be too high.” He further writes that “compared to other techniques of statecraft, economic measures are likely to exert more pressure than either diplomacy or propaganda and are less likely to evoke a violent response than military instruments.” He concludes: “They are not merely inferior substitutes for force but first-best policy alternatives.” Indeed, it seems the winning policy within the current realities of international affairs is reliance on economic statecraft, primarily on “carrots.” The most effective way to find the absolute “win-win” is to sign trade deals, as it allows the economy to diversify and gives international partners the opportunity to indirectly influence each other. 

• Dr. Diana Galeeva is an academic visitor to the Center of Islamic Studies at the University of Cambridge.