Strategic Autonomy and the Looming Oil Crisis
Kamal Davar May 31, 2019/Commentary
The new Modi government will have to speedily contend with a serious foreign policy challenge on its hands.
That this ordeal comes in the wake of some underplayed serious economy problems currently facing the nation will compound the problems for India which imports over 80 per cent of its burgeoning oil needs.
Thus, if the looming crisis in the Persian Gulf between an arrogant US and an equally defiant Iran does not get resolved peacefully, ominous ramifications await the region, the world and all those nations which import crude oil from Iran.
The genesis of the current crisis between the US and Iran has its roots in the Joint Comprehensive Plan Of Action (JCPOA) which was agreed upon by Iran and six western nations in 2015, led by the US, to curb Iran’s nuclear programme, which boils down to deterring Iran from developing nuclear weapons. But in May 2018, the US, under its mercurial President Donald Trump, chose to renege on this treaty as Trump felt that this was the “worst deal ever negotiated.”
It is also a fact that Iran did not violate any norms of the law as regards this agreement.
Meanwhile, the US allowed some nations, including India, which import oil from Iran a six-month waiver, which ended on May 2, 2019. As a consequence of the US action, oil prices the world over have jacked and soon its adverse effects will be felt in India as inflation will hit the already strained Indian economy. Over a 10 per cent hike in global oil prices has already taken place in the last one month and a crippling escalation in oil prices ahead is well on the cards.
Notwithstanding any US pressure on India, the unalterable fact of Iran’s strategic significance to India in the region remains beyond question. India imported 24 million metric tonnes of crude from Iran in the 2018-19. India was Iran’s second largest buyer of crude last year, while Tehran was the third largest supplier to India after Iraq and Saudi Arabia (11 per cent of a total of India’s oil imports).
Additionally, Iranian crude comes with a longer credit period and cheaper freight owing to Iran’s geographical proximity to India and, thus, Iranian oil remains the best option for India in more ways than one.
Higher oil prices also make the Indian rupee weaker, making imports to India costlier. Importantly, that Iran-India collaboration in the development in the vital Chabahar Port in Iran will give India vital ingress to Afghanistan and the Central Asian Republics cannot be understated.
Meanwhile, the US has rushed the formidable USS Abraham Lincoln carrier-borne Task Force to the Persian Gulf region and undertaken certain prophylactic steps in case war breaks out.
The Iranians, too, have mounted some small-range anti-ship missiles on their warships. Iranian President Hassan Rouhani recently said that his nation is facing acute pressure from international sanctions, dubbing it a “war unprecedented in the history of the Islamic revolution.”
The US has also branded Iran’s elite Revolutionary Guards as a foreign terrorist organisation. A war of words has broken out, with President Trump declaring that if “Iran wants to fight, that will be the official end of Iran. Never threaten the United States again.”
Replying back sternly, Iranian Foreign Minister Javad Zarif retorted that Iranians have stood tall for millennia against aggression and that “economic terrorism and genocidal taunts won’t end Iran.” He added that “never threaten an Iranian. Try respect it works.”
Importantly, even US allies have steered away from of taking any partisan positions with either the US or Iran. Meanwhile, oil-producing nations like Saudi Arabia, Kuwait, Mexico and the US itself have been requested to step up their oil production to cater for Iranian oil shortfalls.
How this oil crisis will shape up to meet global demands is anyone’s guess.
It is a strategist’s nightmare in conjuring up a scenario concerning the ramifications of a war between Iran and the US. The Persian Gulf is easily one of the world’s critically significant strategic waterways through which one-third of the world’s oil is transported.
In the event of a war, Iran will definitely close the vital Straits of Hormuz for commercial shipping purposes, throwing the region’s economy out of shape — an eventuality which, hopefully, should not ever take place.
Preoccupied with its General Election, India, as a major regional player, has so far not reached out to its strategic partner, the US, to impress upon it to defuse the crisis.
Recently, the Iranian Foreign Minister made a trip to India to explain their position to India on the current standoff.
India, however, need not succumb to any US pressures or take sides. India has an adequate financial standing and moral stature to play a peacemaker’s role. India must conscientiously follow the time-honoured policy of zealously guarding its strategic autonomy. Respect for India from nations even adversarial to each other — as in earlier decades — will follow automatically and some of India’s economic tribulations will also get simultaneously addressed.
Let the new government in New Delhi bear in mind Iran’s more than significant strategic value for India in the region.
The author, Lt Gen Kamal davar is a former DGDIA and is visiting Distinguished fellow at TPF.
This article was earlier published in The Tribune.