India Weighs Oil, Arms And Outrage: Navigating Foreign Policy Amid US-Iran-Israel Conflict

The United States of America joined the war between Israel and Iran by bombing three nuclear sites in Iran. President Donald Trump used his presidential authority to send stealth bombers, which dropped the bombs. They could not be stopped by Iran’s anti-aircraft defence.

The president ordered the strike on a sovereign nation without any provocation and without the approval of Congress, that is, their legislature. Whether he exceeded his authority or not will be debated for long and might perhaps go to court. Even the right-wing supporters of Trump do not want America to be dragged into wars in distant lands.

The bombs included the so-called bunker busters, weighing nearly 15 kilotons. It is unlikely that Iran’s nuclear programme has been destroyed. Does the American bombing mean that the war is over and peace has commenced in the region? Will there be an immediate regime change? Of course not.

Iran was expected to and indeed did retaliate against the US, though in a muted manner, by firing on US bases in Qatar but after giving notice of its action to the US, a step that actually invited a message of thanks to Iran from Trump himself.

Even earlier, President Trump had, in a speech he gave in Saudi Arabia, said, “The so-called nation builders wrecked far more nations than they built… and the interventionists were intervening in complex societies that they did not even understand.”

For now, it appears that peace is holding out, though the status of the Iran-Israel ceasefire remains unclear. Iranian lawmakers had approved the closure of the Strait of Hormuz, which will blockade substantial oil and gas flows into the rest of the world from the region. This is something that Iran has never done and could hurt oil exporters, including itself. Fortunately, this danger appears to have passed.

The economic impact of war in the Middle East is a flare-up in oil prices and consequent inflation, investor nervousness and a negative impact on world trade. It must be remembered that the USA is now the oil sheikh of the world, producing one fifth of all the crude oil output, a share which is the highest in six decades.

It is also nearly self-sufficient in its energy needs and has become a net exporter. That is the reason that oil prices did not spike up to 100 or 150 dollars when Israel attacked Iran on June 9. Even after America’s bombing and the imminent closure of Hormuz, oil prices are under 100 dollars.

How does all this impact India? In geopolitical terms, India has to do a tightrope balancing act between two nations with which it has good relations. Israel has become a critical supplier of defence and surveillance equipment and technology.

The port of Haifa has an Indian investor and represents a collaboration in infrastructure. India-Israel trade has also increased rapidly and is close to 5 billion dollars. On the other hand, Iran is an oil supplier to India. It was one of the few countries which agreed to export to India in India’s own currency.

The Chabahar port being jointly developed is an important part of India’s proposed India-Middle East-Europe Economic (IMEC) corridor. Thirty-eight per cent of India’s crude oil and fifty-two per cent of liquefied gas come through the Strait of Hormuz. The disruption in supply of LNG can affect delivery of cooking gas to households as well as India’s fertiliser production.

Also, India cannot quickly switch to buying more Russian crude without earning the ire of the Americans. Higher oil prices affect inflation, foreign exchange stocks and the fiscal deficit negatively. It also puts downward pressure on the rupee-dollar rate, which looks likely to slip below 87.

It is estimated that a sustained $10 increase in oil prices can reduce GDP growth by around 0.3 per cent and increase inflation by 0.4 per cent. The stock market sentiment can also take a hit due to investor nervousness.

There is also a moral issue, although geopolitics is increasingly indifferent to any moral aspect. How can an unprovoked attack on a sovereign nation not be condemned? India distanced itself from the joint statement of the Shanghai Cooperation Organisation (SCO), which had condemned Israel for attacking Iran.

Even in the United Nations, if there is a resolution to condemn attacks by both Israel and the United States, it is likely that India will abstain. Even more remarkable was the Indian abstention from voting on the recent United Nations General Assembly’s resolution seeking an immediate, unconditional and lasting ceasefire in Gaza. A total of 149 countries, including US allies like Australia, Japan and the UK, voted in favour, while twelve countries, including the USA and Israel, voted against.

What is then the meaning of India expressing concern at the humanitarian crisis and murderous assault on the people in Gaza when it chooses to abstain from a crucial vote? It is called pragmatic geopolitics because of closer relationships with America and Israel.

But then, it also undermines India’s quest for leadership of the so-called global South. Pragmatism might topple a principled approach in the current situation, but it leaves a blemished track record, at odds with India’s historic position of being non-aligned and providing moral leadership.

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No doubt it is a tightrope walk and a balancing act, but it is also a chance to crystallise and define the foundational values guiding India’s global engagement. The pursuit of strategic autonomy and building domestic economic strength need not justify geopolitical ambiguity bordering on timidity.

The three major conflicts in the world, Ukraine-Russia, Israel-Palestine and now in Iran, are severely testing India’s economic, geopolitical and diplomatic skills, strength and resilience.

Dr. Ajit Ranade is a noted economist). (Syndicate: The Billion Press) (email: editor@thebillionpress.org