INDIA’S WORLD : January 6, 2020
WEST ASIA CRISIS & INDIA
The tensions between Iran and USA is leading to another crisis in the West Asian
- India has consistently advocated restraint to ensure that the situation does not
- Approximately to 8-9 million Indians work in various countries in the West Asia
and a region is also a significant source of oil and gas for India.
- Now, there are number of events that led to degree most striking has been the assassination of general Soleimani, head of Quds Force by US drone attack, Iranian retaliation is almost inevitable.
- India imports almost 70% of its oil imports & most of its natural gas from Persian
Gulf area while now India has many alternative sources largely in Africa.
- Iran’s economy is not in good shape because of sanctions by US, which led to
depression in oil prices. China is their single largest buyer, who is their ally in Global Area.
- Globally, oil prices have barly rose about 3 to 4 dollars after the crisis.
- There are two major issues:-
- Unlike Gulf countries, Iran has a salience on both sides, it abuts the Middle East and
also joins Asian-Pacific(Afpack) region.
- Iran and US, both at different points exercise strength.
- When the strike happened there was 4% hike in the oil prices it came down
subsequently but if US can target foreign country’s military officer on a friendly country’s airport anything is feasible.
- Actions of Soleimani in Syria and Iraq had given him larger than life image where
he had actually managed to counter outfits like Islamic states effectively.
- From India’s point of view it is very dangerous proposition. Today, imports from
Iran are zero, but from Persian Gulf we are getting large chunk of oil and natural gas.
- Iran has capacity to create turbulence at any moment.
- Besides oil and natural gas, India is the largest destination for global remittances
almost 85 billion dollars are coming to India annually and more than 50% of this comes from Persian Gulf.
- Any turbulence in this region the expatriates will run away the first thing and that will be a big dent in one of our Foreign Exchange Reserves because that’s a consistent source of income, contributes almost 2.6 % of our GDP.
- Iran is critical for India because access to Afghanistan and Central Asia is available
- Countries like Oman and Qatar have offered to act as mediator and have rejected
- India has understanding with Saudi Arabia, UAE and Iraq that they will ensure
- If Iran or other ports of world decides to stop supplying us but that but that
assumes that the straits of Hormuz remain open. However there are large number of large number of African countries who offered in the past.
- Oil price have gone up immediately after strike, there was 3.61% increase and it
had reached around 68.
- It is an upward trend and if there is a retaliation or counter retaliation this will
spike again and this has to be seen against the background of a cut in production. - OPEC and Russia have agreed only on 6 December so, both in terms of supply sides and the geopolitical risks the pointer is for upward increase in the oil prices. Current account deficit is going to increase because $1 increased means something like a hit of 1.6 billion dollar.
- India has enough equity on both sides of the Gulf and Washington, the government
will have better appreciation.
- Iranian crude was cheaper for India and ideally most suited for Indian refineries. - Turbulence will create two major issues:-
- A block emerging of Turkey, Qatar, Libya etc. which Pakistan manage to cultivate
- Trump is fundamentally and isolationist and he believes that wars like Afghanistan
are just simply a waste of blood and treasure as far as us is concerned.
- Our policy cannot be necessarily linked to what third world countries do, we
have no comments on American policy. - India needs to setup engagement with Iran.