War does not resolve an issue. It leaves behind a tale of untold miseries across nations, as the celebrated Urdu poet Sahir Ludhianvi asserted over five decades ago.
His prophecy holds today more than ever. The exacerbating and calamitous war between the United States, Israel and Iran has triggered an unprecedented global economic crisis in West Asia. The geopolitical drama produced by power dynamics unfolding thousands of kilometres away from India is bracing for sapping New Delhi, the world’s fourth-largest economy.
India looks to the Gulf for its energy needs and the remittances from a vast workforce resident in West Asia keep its economy afloat. If this conflict continues to intensify, India could face a double jinx.
Energy crisis
India is the world’s third-largest consumer of crude oil and heavily relies on imports to meet its ever-increasing energy requirements. More than 80 per cent of India’s gas and up to 60 per cent of its oil sail through the Strait of Hormuz, which Iran uses as a bulwark against US aggression, and its short passage provides Iran with a decisive tactical advantage. Its control thwarts the US and Israel military adventure.
The Strait of Hormuz is recognised as one of the world’s most crucial maritime chokepoints that defies superior technological advancements. A significant share of India’s crude oil imports passes through this narrow passage connecting the Persian Gulf to global shipping routes. Any escalation in hostilities involving Iran and its regional adversaries inevitably leads to volatility in oil prices, as markets react to fears of supply disruptions. Most shipping insurers have cancelled war risk coverage for tankers in the Strait.
Then on Wednesday, March 25, a Thai ship heading to India was attacked, drawing criticism from New Delhi. Hotels and restaurants in India are already weighing closure and people are queuing to stock up on LPG (cooking gas) cylinders amid fears of a shortage, even though the government assures the public it has approximately one month’s supply in storage.
Such is the panic, however, that the government has gone as far as to invoke emergency measures to discourage hoarding, urging people to remain calm. Iran has invoked the right to self-defence to justify the retaliatory attacks and has used the strait as leverage in an attempt to end the war. The International Energy Agency’s (IEA) move on Wednesday to release a record 400 million barrels of crude oil has failed to stabilise oil prices.
“India’s energy security will be impacted significantly, as it relies on West Asia for a substantial portion of its energy requirements,” said Harsh V Pant, vice president of the Observer Research Foundation think tank in New Delhi.
“Energy markets are already volatile, and costs are rising, which could eventually translate into broader economic and inflationary pressures,” he said.
Indian expats in the Gulf
Another dimension that cannot be overlooked or ignored is the presence of a large Indian diaspora in the Gulf region.
India is also worried for some 9.1 million of its citizens who work in the Gulf Cooperation Council (GCC) countries – the United Arab Emirates (UAE), Saudi Arabia, Qatar, Oman, Kuwait and Bahrain. They send home some USD 50 billion in annual remittances.
Their remittances constitute a vital source of foreign exchange and play an important role in supporting households across India. If geopolitical tensions disrupt economic activity in the region or create security risks for expatriate workers, remittance flows could be affected, placing additional strain on India’s external finances.
Evacuation possibility for India?
If the war escalates beyond control, India could be faced with the huge challenge of evacuating its people, who form the largest expatriate community in most Gulf nations. Thousands of Western expats have already left or been evacuated by their countries, but the sheer scale of the Indian population makes it a logistical nightmare.
Some 35 million expats live in the Gulf countries, which have emerged as major economic and aviation hubs in addition to the oil wealth. Of them, 9.1 million are from India – almost double the 4.9 million Pakistanis who rank second.
However, India’s Ministry of Foreign Affairs has set up a special control room to monitor the situation and respond to queries. In contrast, embassies and consulates have set up round-the-clock helplines to assist Indian nationals in need. Indian embassies have also enabled the return of stranded Indian passengers through commercial flights and non-scheduled flights.
India’s stance
India’s main opposition, the Congress, has criticised the government for its silence on the killing of Iran’s Supreme Leader Ayatollah Ali Khamenei. India has not issued any statement on Khamenei’s killing, though its foreign secretary visited the Iranian Embassy in New Delhi to sign a condolence book after several days of the tragic event.
Meanwhile, New Delhi has condemned the Iranian attacks on the Gulf nations, with which it has close economic ties with.
India’s dependence on Middle Eastern oil will remain significant, though it may need to seek alternative sources if the conflict extends. Russian oil is an option.
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