India and the US – Iran escalations –
India is directly affected by the ongoing tensions between the US and Iran. Iran used to be one of India’s main suppliers of Oil and Gas. However, due to the economic sanctions imposed on Iran by the US and US pressure on countries like India to curb their economic ties with Iran. India is buying less Oil and Gas from Iran. This in turn has a negative impact on Iran’s economy, further economically isolating it. The danger of conflict between the Iran and the US has an economic impact on India as conflict in West-Asia and the Persian Gulf could lead to the disruption of energy supplies to India, thus negatively affecting the Indian economy which is already suffering due to the economic slowdown. Another major factor is India’s partnership with Iran and Afghanistan over the Chabahar Port which is located in southeastern Iran, on the Gulf of Oman. There is also a domestic political risk to India as Iran is a Shia Muslim nation that is a staunch opponent to Israel with whom India has very good ties. Conflict between Iran and US will lead to the Indian Shia community expressing its strong support for Iran. Under the current administration of President Donald Trump, the US has exerted a maximum pressure policy on Iran.
Iran does not have that kind of spare wealth and nor is it a destination for the Indian Diaspora. Its value does lie in its vast oil and gas resources as well as its geopolitical location and market potential. It provides the route through which India, blockaded by Pakistan, can fulfill its Eurasian ambitions. The Chabahar project provides a route to Afghanistan and Central Asia, while the International North South Transportation Corridor (INSTC) gives us overland access to Russia and Europe. In many ways, it can be our own Belt and Road Initiative. There is political congruence, too, between New Delhi and Teheran in our hard-line position against the Taliban in Afghanistan. In the 1990s, Iran and India joined hands in helping Ahmed Shah Massoud and the Northern Alliance against the Pakistan-backed Taliban. Today, as the US readies for a pullout there, the Islamist group and its mentor Pakistan appear poised to once again become the dominant force in Afghanistan.
India, the world’s third-biggest oil consumer, meets more than 80 per cent of its crude oil requirements and around 40 per cent of its natural gas needs through imports. Although successive governments have talked about firm measures to boost India’s oil security, the country’s domestic oil and natural gas production have been slowing down in the past few years, making the country even more import-dependent. India imported 207.3 million tonne of crude oil in 2018-19, and 4.5 million barrels a day in the April-November period of calendar year 2019. Moreover, India’s import dependency based on consumption has increased to 84.5 per cent compared to 83.3 per cent a year ago in the same period. The country spent $111.9 billion on oil imports in 2018-19, up from $87.8 billion in the previous fiscal year, according to the oil ministry’s Petroleum Planning and Analysis Cell (PPAC). However, India came out largely unscathed from the sanctions on Iran. In order to compensate for the loss of crude from Iran, India resorted to importing more from the US and Venezuela, even as it continued its imports from traditional suppliers such as Saudi Arabia and Iraq. In fact, crude imports from the US rose 72 per cent in the five months to September 2019.
Even if India’s economy were on a more stable footing, conflict in the region would be dangerous. But the current tensions, coming as they do when the Indian economy seems poised on a precipice, should be even more alarming for policymakers. Thus India will be negatively impacted by the ongoing tensions between the US and Iran from economically as well as domestically.
