Published 13:54 IST, January 9th 2020
Iran-US conflict: Here's what it means for India
Given India's interests in maintaining a strong relationship with both Iran & the US, a balancing act may be imperative both geopolitically & economically
- India News
- 4 min read
On Wednesday, US President Trump addressed the media claiming there were “no casualties” due to the Iran strike on US bases in Al-Asad and Erbil in Iraq. This was in retaliation for the US killing General Qassem Soleimani. But the conflict doesn’t seem to have de-escalated with information about two rockets hitting the Green Zone in Iraq’s capital of Baghdad coming in. But why should India be concerned about the US-Iran conflict? Here is why:
US exemptions to India may be hit
The strain in US-Iran relations has already affected India in the past when the US refused to renew exemptions from sanctions given to eight countries, including India. This was done in order to put pressure on Iran to curtail its nuclear weapons programme.
Now, with Iran official backing out of the nuclear deal, US might increase pressure on countries like India which have cordial relations with Iran.
Price of crude oil likely to impacted
India is the third largest consumer of oil and the US-Iran conflict is likely to hit crude oil prices in India. A stable gulf region means ease in crude oil imports at competitive rates. It would also mean smooth access and trade with Iran for oil.
The military confrontation in Iran and Iraq at present is likely to drive crude oil prices up which will have a direct and chain impact on inflation, and subsequent monetary decisions of India.
A hike in crude oil rates would weigh heavy on the ordinary consumer who is likely to see an increase in petrol and diesel.
Chabahar project in jeopardy
The US-Iran conflict could have a negative impact on the Chabahar project which is crucial to India from a geopolitical standpoint.
The Chabahar port provides a route to Afghanistan and Central Asia. The port is being jointly developed by India with Iran and Afghanistan, and tensions in the region may cause the project to be parked or, in the least, may slow down the pace in which the port is developed.
In fact, even last year, further development of the port which ends any dependence of Pakistan for trade with Afghanistan was stalled owing to the US-Iran tensions. External Affairs Minister Dr. S Jaishankar had personally met Iran’s Iranian Foreign Minister Javad Zarif, on December 22, 2019 to discuss acceleration of the project.
US-Iran may attempt to coerce India to take a side
Given Indian interests in maintaing a strong relationship with both Iran and the US, it is important for the country to play a balancing act in the current conflict.
This balancing act may become tougher with the US trying to draw India to its side and Iran calling for Indian intervention. The US President Trump has been saying Gen Soleimani was responsible for terrorist plots in Delhi. Meanwhile, the Iranian Ambassador to India Dr. Ali Chegeni said Iran would “welcome any Indian peace initiative for de-escalating its tensions with the US”.
Indian exporters trading with Iran may take a hit
India and Iran have a strong trade relationship which dates back to 1961. This relationship involves India exporting textiles, food, agricultural products, electrical goods, hardware, handicrafts, and various other products. Instability in Iran due to the US-Iran conflict will have a direct impact on the Indian exporters who depend on dealings with Iran.
The trade mechanism between Iran and India is a rupee-denominated bilateral trade mechanism, and this means of payments is fast depleting possibly leading to possible payment blocks in the future.
Reports indicate that India-Iran trade has already seen a decline in April-November of the fiscal year to 79.4%, which is a fall to $3.5 billion from $17 billion.
(Picture courtesy: PTI)
Updated 17:06 IST, January 9th 2020
