Iran or Israel? Which country is more important for India, why is New Delhi in a dilemma?
Iran or Israel? Which country is more important for India, why is New Delhi in a dilemma?
New Delhi: The conflict between Israel and Iran is escalating every day. This has increased India's tension for energy security, trade routes and commercial relations. In view of this, Global Trade Research Initiative (GTRI) has recently reached out to the Indian government and advised it to review energy risk scenarios, diversify crude oil sources and ensure strategic reserves of oil.
The report urges the Indian government to ensure that the country's strategic oil reserves are sufficient to deal with any potential crisis. As per a report by GTRI, India, which is not directly involved in Iran-Israel conflict, cannot remain unaffected. The report also recommends promoting diplomatic efforts in the Arabian Sea. India's Trade With Iran, Israel
GTRI has raised an alarm that rising tensions in West Asia are posing a threat to India's energy security, trade routes and commercial relations. The report also highlights that growing Israel-Iran conflict could have a major impact on the economy of India.
It is to be noted that, New Delhi has trade relations with both the countries. In FY- 2024-2025, India exported goods worth USD1.24 billion to Iran and imported USD441.9 billion goods. Trade with Israel is even bigger as It includes exports of USD2.15 billion and imports of SD1.61 billion. India's foreign policy has always been not to be a part of any one group (non-alignment). It wants to maintain its independent relations with both the countries. India's Biggest Concern
As a country with the largest population, India's biggest concern is energy. About two-thirds of crude oil and half of its LNG imports pass through Strait of Hormuz, a narrow waterway that is now threatened by Iran.
The Strait of Hormuz handles about a fifth of the global oil trade.
Notably, India imports over 80 percent of its energy needs. In such a situation, any kind of disruption or halt at the Strait of Hormuz could lead to increase in oil prices, shipping costs and insurance premiums.
GTRI said that the situation could increase the inflation rate, weaken rupee and pose challenges to the government's financial planning.
A significant portion (approx 30%) of India's exports to Europe, North Africa, and the US East Coast traverse the Bab-el-Mandeb Strait. Disruptions to this route could add up to two weeks to transit times, necessitating a longer journey around the Cape of Good Hope and leading to substantially higher freight costs. This will negatively impact Indian exports, including engineering goods, textiles, and chemicals, and increase the price of essential imports. What does India need to do?
GTRI reports rising casualties in an ongoing conflict, further exacerbated by the breakdown of US-Iran nuclear talks. This situation is impacting regional financial markets. GTRI advises India to proactively address potential energy risks by diversifying its oil sources and verifying the sufficiency of its strategic reserves.
A report emphasises the necessity of enhanced military readiness in the Arabian Sea, particularly near vital shipping routes. Simultaneously, it recommends India leverage international platforms like the G20 and the UN to advocate for peace, conflict resolution, and the safeguarding of global trade.
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