Home >News >India >India wary as tensions spiral in its ‘extended neighbourhood’

Heightened tensions in the Gulf after the assassination of Iranian commander Qassem Soleimani, who headed Iran’s elite Quds Force, have exposed India’s stakes and vulnerabilities in the volatile region.

India considers the region as part of its “extended neighbourhood", housing some 7 million expatriates remitting an estimated $40 billion to India, besides being a major source of oil.

Iraq, where Soleimani was killed by a missile fired from a US drone, and whose parliament over the weekend voted to demand that the US troops leave the country, is India’s largest supplier of fuel. Saudi Arabia and the United Arab Emirates (UAE) are two of the other top sources of fuel for India.

Analysts say these are two major reasons why India could be affected if and when Iran retaliates against the US. India’s economic engagement with the Middle East region is about $200 billion in remittances, inward investments and trade, according to one estimate.

“India will be badly hit" if tensions spiral further, said Dilip Sinha, a former foreign ministry official who has dealt with Iran, as well as Pakistan and Afghanistan. “India has goodwill in the area but beyond that we do not have too many cards to play," Sinha said. The fissures, religious and sectarian, run deep and the rise of religious fundamentalism and hyper-nationalism has complicated matters, he said.

On Sunday, Indian foreign minister S. Jaishankar spoke to his Iranian counterpart Zavad Zarif and US secretary of state Mike Pompeo, as well as the foreign ministers of Oman and the UAE. “Had a telephonic discussion with Secretary of State @SecPompeo on the evolving situation in the Gulf region. Highlighted India’s stakes and concerns," Jaishankar said in a Twitter post on Sunday. On Monday, Jaishankar also spoke to the foreign ministers of Jordan and Qatar.

The flurry of telephone calls came on the back of a statement by the Indian foreign ministry on Friday calling for restraint and underlining the need for “peace, stability and security in this region".

“India’s equity is its vulnerability. What the US has done is devoid of consideration for friends and allies. We have no leverage with the US or Iran. What we can do is express concern, advise restraint and hope for the best," said former foreign secretary Kanwal Sibal.

Of immediate concern for India is the price of oil, given that New Delhi imports more than 80% of its requirements. A Reuters report on Monday said Brent crude futures rose to $70.06 a barrel, while US crude climbed to $64.22.

“The risk of further escalation has clearly gone up, given the direct attack on Iran, Iran’s threat of retaliation and Trump’s desire to look tough, posing the threat of higher oil prices," Reuters quoted Shane Oliver, chief economist at AMP Capital, as saying.

India’s gross domestic product grew at a mere 4.5% in the September quarter and there are concerns that high fuel prices could adversely impact economic recovery. India does not import oil from Iran because of a new set of sanctions that came into effect in May, any unrest in the volatile region could impact exports from countries such as Saudi Arabia given that most of the oil is transported through the Straits of Hormuz, a narrow waterway carrying a fifth of the world’s traded oil, that Iranian officials had in April threatened to block. India had deployed naval assets in the region to protect its supplies in the wake of mine attacks on oil tankers in the region.

A secondary worry, said officials, is that tensions between Iran and the US could impact India’s trade with the region that now stands at $78 billion (from Gulf Cooperation Council member countries Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain, and Oman), according to April-November figures from the Indian commerce ministry.

The rise in tensions also poses a hurdle to India’s plans to develop Iran’s Chabahar port. The port was to help India trade with landlocked Afghanistan and Central Asia bypassing Pakistan. A reimposition of US sanctions on Iran last year has deterred Indian companies from investment in the project, despite India obtaining a carve-out from US.

With tensions rising over an impending Iranian retaliation, Indian companies “may not be willing to show interest there", said a person familiar with the matter.

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