Every time, war has hit the Middle East, India has had to pay a heavy price. The 1973 Yom Kippur War, the Organization of the Petroleum Exporting Countries embargo and resultant oil shock may have hurt a lot of countries in the world, but it struck a devastating blow to India.
The second oil shock, that of 1979, a consequence of Iran’s Islamic Revolution that not only overthrew the monarchy but severely disrupted its oil industry, was of a lesser intensity though it persisted through an eight-year period of the subsequent Iran-Iraq war.
The 1990 crisis, following Iraq’s invasion of Kuwait, did not last too long, though it did cause disruption across the country. But for India, it brought up a new worry. New Delhi had to authorize one of the largest airlifts in history to ferry out more than one lakh Indian nationals from Kuwait.
Since then, Indian interests in the middle-eastern region have been two fold—assured supply of oil and security of its nationals working in the region. Some 70% of our oil supplies come through the Persian Gulf, up to three million of Indian nationals work there, sending back an estimated $20 billion (Rs88,120 crore) annually. In addition, scores of Indian companies, such as Ashok Leyland, the Essar Group and the Tata Group are active in the region. Because of the Pakistani blockade, countries such as Iran are our most convenient way of accessing Central Asia and Afghanistan. By any measure, the area is vital to our national interests and well-being.
The last oil shock was somewhat indirectly a product of the 2003 US invasion of Iraq. It sent prices spiralling from some $25 a barrel in early 2003 to over $60 in 2005. For once, India was not too severely affected, cushioned as it was by its good macroeconomic position and forex reserves.
The big question that comes to mind as we watch the slowly unfolding confrontation between Iran and the United States is this: What will be the nature and duration of the next oil crisis?
One thing is certain, it will not be like the last one, or the ones before. India was able to send its civil aviation fleet and rescue its citizens in 1990. This time round, things may not be that easy. Saudi Arabia stepped up oil production in 1979, but it could not quite make up the drop in production. In any case, today there are questions about how much excess capacity Saudi Arabia has to overcome any disruption in Iran. More germane is the fact that any US strike on Iran could potentially be met by an Iranian counter-strike on oil facilities across the Gulf on the Saudi peninsula, thus disrupting the entire region’s oil exports.
This is the reason why stability is an important component of India’s regional policy. As part of this policy, New Delhi is trying to get both Washington and Tehran to back off a bit from their confrontation over the latter’s nuclear programme. India’s stand, as articulated by external affairs minister Pranab Mukherjee in Tehran earlier this month, was, first, that the issue should be resolved at the International Atomic Energy Agency (IAEA) in Vienna, rather than at the United Nations Security Council in New York. Second, while Iran had the right under the Nuclear Non-Proliferation Treaty to the full nuclear cycle, the same treaty requires that it needed to do more to provide a clear accounting of its nuclear activities to IAEA.
Indian officials feel that a lot of the problem arises from the atmospherics of the relationship between the US and Iran. Memories are long in the region, and while the Iranians have not forgiven the US for the 1953 coup that led to the consolidation of the monarchy, the Americans have not forgiven the Iranians for occupying their embassy and holding their diplomats hostage in 1979-80.
Indian officials say that New Delhi accepts Iran to be a key factor in stability in the Gulf. A look at the map of the region and the figures for the world’s oil production and gas reserves suggests it could hardly do otherwise. But no matter how you look at it, it is clear that something dramatic needs to happen to prevent the slide towards a US-Iran war. Face is important, whether in Tehran or Washington. So, there is need for the other parties—Russia, China, the European Union and even India—to see if they can do something to “pre-negotiate” a solution where the US and Iran take steps that appear to be concessions to the other, even though they have been quietly agreed to in advance.
Manoj Joshi keeps a close eye on geopolitics from his perch as the strategic affairs editor of Hindustan Times. You can respond to the column by writing to email@example.com