US President Donald Trump has ordered a strike on the nuclear sites of a sovereign nation, without provocation, and without the approval of Congress, which is their legislature. Whether he exceeded his authority or not will be debated for long and might perhaps go to court. Even Trump’s right-wing supporters do not want America to be dragged into wars in distant lands. It is unlikely that Iran’s nuclear programme has been destroyed. Does the American bombing mean that the war is over? Will there be an immediate regime change? Of course not. Iran is expected to retaliate. President Trump himself, 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.”
Iran’s government has two choices. Either to capitulate and surrender, which will weaken the position of the 86-year-old Supreme Leader Ali Khamenei, or to be defiant and counterattack, which can be suicidal. Both choices are bad because the Iranian leadership has to choose between humiliation and more damage. It is impossible to predict how this will play out. The Americans have around 50,000 troops present in West Asia and more than a dozen military bases, across countries such as UAE, Oman, Kuwait, Saudi Arabia, and Iraq. The Iranian lawmakers have approved the closure of the Strait of Hormuz which will block substantial oil and gas flow into the rest of the world from the region. This is something Iran has never done and will hurt oil exporters including itself. It will affect a major supply to China, which is currently firmly on Iran’s side. Iran will risk losing diplomatic, moral, and geopolitical support from all oil-importing nations. The other retaliatory action is an attack on the US military bases, by itself or by its proxies such as the Houthis of Yemen.
The economic impact of the war is a flare-up in oil prices, consequent inflation, investor nervousness, and a negative impact on world trade. It must be remembered that the US 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 explains why oil prices did not spike up to 100 or 150 dollars when Israel attacked Iran. Even after America’s bombing and the imminent closure of Hormuz, oil prices are under 100 dollars.
Multiple interests in play
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 currency. The Chabahar port, being jointly developed, is an important part of India’s proposed India Middle East Europe Economic (IMEC) corridor. About 38% of India’s crude oil and 52% of liquefied gas comes through the Strait of Hormuz. The disruption in the supply of LNG can affect the 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 stock, 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 10-dollar sustained increase in oil prices can reduce GDP growth by around 0.3% and increase inflation by 0.4%. 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 its attack on Iran. Even in the United Nations, if there is a resolution to condemn the attacks by both Israel and the US, 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 a ceasefire
in Gaza. A total of 149 countries including
US allies such as Australia, Japan, and the UK voted in favour, while 12 countries including the US and Israel
voted against.
What is 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 record, at odds with India’s historic position of being non-aligned and providing moral leadership.
Operating within the constraints of diplomacy, India has a chance to crystallise and define the foundational values guiding its 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 Iran, are severely testing India’s economic, geopolitical and diplomatic skills, strength and resilience.
(The writer is an economist; Syndicate: The Billion Press)