Why US-Iran conflict spells big trouble for India

The top commander of Iran’s elite Quds Force, General Qasem Soleimani, was killed in a US airstrike at Baghdad airport in the early hours of January 3, 2020. General Soleimani was arguably Iran’s most powerful military commander and the architect of expanding Tehran’s influence in Iraq, Lebanon, Syria and Yemen. The assassination of the Iranian military commander has triggered the threat of a conflict in the West Asian region with serious consequences for the region and the world.

Escalating conflict in the region

The Iraqi government has taken this act of the US as a violation of its sovereignty. A special session of the Iraqi Parliament held on January 5, 2020, passed a non-binding resolution calling for US troops to leave and at the same time putting an end to the agreement signed between US and Iraq under which Washington sent forces to Iraq four years ago to help fight against the Islamic State (IS).
These developments clearly signal the fragility of Iraq-US relations at a time when internal political and security situation within Iraq is already critical.

In Iran, public sentiment is running very high. The scale of Iranians gathered on the streets of Tehran for the funeral of Suleimani is said to have exceeded even that for Ayatollah Ruhollah Khomeini in 1989. Iran’s Supreme Leader Ayatollah Ali Khamenei has vowed “vigorous revenge” against the US. Iran also declared that it would no longer abide by any of the restrictions imposed by the 2015 nuclear deal. What is uncertain at this stage is how and when Iran will avenge the killing of Soleimani.

US-Iran relations are now at their lowest point since the Iran Hostage Crisis in November 1979. There are conflicting statements coming from US President Donald Trump. While justifying the killing by stating that this was done to ‘stop the war, not start the war’, he has also gone on to threaten Iran saying that the US would hit 52 Iranian sites, including cultural sites, if its citizens or assets are attacked by Iran.

What does this mean for India?

New Delhi’s response to the developments been to emphasise restraint on all sides. Foreign Minister S Jaishankar held a telephonic conversation with Javad Zarif of Iran and Mike Pompeo as well as the foreign ministers of Oman and UAE on January 5.

India has every reason to be concerned. New Delhi’s stakes are very high in the region given its energy supplies, its economic and trade ties, remittances and finally welfare and security of 9 million Indians who live in the Gulf region. Should there be a war and instability in the region evacuating Indians would be a major challenge for the Indian government.

Escalating oil prices and economic cost of war in the region will be very high for New Delhi. India meets 83 per cent of its crude requirement through imports. The Persian Gulf region alone accounts for 70 per cent of India’s crude oil imports.

More importantly, two-thirds of India’s oil and half the LNG supplies pass through the Strait of Hormuz. Any disruption in tanker movement due to conflict in the West Asian region will lead to a surge in global oil prices thus impacting India as well.

On January 6, US-Iran tensions pushed crude oil prices to a three month high of over $70-per-barrel. The rupee surged to a two-month high of 72 against the dollar while gold prices crossed Rs. 41,000 per 10gm. All these developments show it’s going to be tough going for India at a time of an economic slowdown.
Iran is also considered India’s gateway to Eurasia and an important partner in maintaining peace and stability in Afghanistan. India-Iran-Afghanistan trilateral cooperation has manifested in the form of agreement on developing the Chabahar port as to facilitate connectivity between India and Eurasia. This project could be hampered if US-Iran tensions escalate further.

In terms of the economic cost for India, its trade with Iran in basmati rice, and in tea with the West Asian countries, can have negative impact in case of a conflict. The All India Rice Exporters Association (AIREA) has already asked exporters not to undertake any shipment of rice till situation improves.
The Gulf Cooperation Council (GCC) countries are major trading partners of India. India’s trade with just UAE and Saudi Arabia stands at more than US $100 billion. In case Iran decides to target these two allies of the US, India’s interests could be hit.

At the political and strategic level, New Delhi can’t overlook the dominant position of Iran in the region. From India’s point of view, it is important to ensure that regionally it retains its close cooperation with the dominant regional players like Russia and China in this critical moment. There is growing strategic and economic engagement between Iran-Russia and China. Both Russia and China along with Iran have signalled a joint message about their close cooperation in the security arena by launching a joint naval exercise of four days starting on December 27, 2020 in the northern part of the Indian Ocean and the Sea of Oman.

Under these circumstances, there is no option but for India to take more active diplomatic initiative to de-escalate the crisis in the Persian Gulf region. India close ties with Iran and Gulf countries on the one hand and its relationship with regional heavyweights, China and Russia, and close partner, the US, on the other hand places it in an important position in this unfolding situation.

(Meena Singh Roy is Research Fellow and Coordinator, West Asia Centre, IDSA)

Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.