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

Region.


- India has consistently advocated restraint to ensure that the situation does not

escalate further.


- 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:-

1)Political issues

2)Economic 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

to Iran.


- Countries like Oman and Qatar have offered to act as mediator and have rejected

by Iranians.


- India has understanding with Saudi Arabia, UAE and Iraq that they will ensure

supplies.


- 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:-

1) Hydrocarbons

2) Evacuation.


- A block emerging of Turkey, Qatar, Libya etc. which Pakistan manage to cultivate

well.

- 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.


Conclusion

- 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.

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