A far-off war has suddenly become a part of India’s economic fabric. What happens in the Middle East immediately influences the world, despite India being far away from the region. However, through strong ties, this distance is erased very quickly. All of India’s vital energy supply lines, as well as almost all of its international trade routes, are located in this area. Additionally, millions of Indian workers and businesses operate in the region. Thus, any instability in this region will have a direct impact on India’s domestic stability. The markets react immediately, the policymakers respond immediately, and the danger increases exponentially moment-to-moment. Furthermore, an escalation of conflict (even if only small) will have rippling effects across many different parts of the country.
Therefore, India cannot just passively watch what happens in the region; it spends time tracking developments in the region closely and preparing for potential disruptions. This exposure is created because India is structurally dependent upon the economy of the Middle East to survive. Foreign policy is shaped through continuous strategic adjustments, with a balance of engagement, caution & preparation (for potential salvation). Ultimately, the cumulative effects of all these behaviours and actions affect not just diplomacy between the countries, but the everyday economic decisions being made throughout India. Thus, India will always be linked to the outcome of stability in the region.
Energy dependence tightly binds India to regional developments
A sizable portion of crude oil imported into the country comes from Middle Eastern oil producers. The country also relies heavily on natural gas, which is sourced from countries around the world, including the Middle East. These sources rely upon a few main maritime pathways for transport; one of the most significant routes is the Strait of Hormuz, which is one of the most critical chokepoints for global oil transportation. If there is any disruption to the flow of oil through the Strait, it will lead to immediate concerns about the supply and price of oil.
As a result, fuel price increases will lead to an increase in inflation in many other sectors of the economy, including transportation, agriculture, manufacturing, etc. Thus, the economic stability of any country must maintain the smooth flow of energy supplies. Though India has made increased diversification in energy supply sourcing over the last few years, a continued large reliance on Middle Eastern energy sources persists. Therefore, India would be forced into a position where the economic stability of the country would quickly be negatively impacted due to a prolonged conflict in the Middle East.
Diaspora presence and trade routes expand India’s vulnerability
India has millions of its citizens working and living throughout the region, sending a substantial amount of money home regularly in the form of remittances. Conflicts impact both their safety and livelihood directly, requiring governmental planning for quick evacuation and protection of Indians in these conditions. These types of operations require active coordination and diplomacy by all parties involved.
Additionally, India relies heavily on shipping through regional waterways for trade. Sensitive maritime shipping corridors regularly allow for trade flows between India and the rest of the world; disruption to these corridors creates delay at shipyards, significantly driving up shipping costs. Also, during times of instability, shipping insurance premiums tend to increase. Therefore, both importers and exporters have added operational costs during these types of periods. Ports in the region handle large volumes of trade normally; therefore, disruption will lead to a more significant disruption of economic activity. Thus, India must protect both its citizens and its trade interests to minimize exposure during a time of crisis. This dual exposure leads to greater vulnerability to any type of strategic crisis.
Middle East India Geopolitics Complicate Strategic Response
The ongoing conflicts in the Middle East involve a multitude of global and regional players; therefore, the resulting alignments significantly influence the broader geopolitical calculations. Moreover, India is presently engaged in an active diplomacy with multiple competitors (e.g., Iran, Israel, and the Gulf states), making it necessary to balance its diplomatic positions very carefully. However, rapid escalations in tensions will make balancing diplomatic positions more difficult for India.
In addition, security services are monitoring the risk associated with such regional instability, as these unstable environments have proven conducive to terrorism and the exploitation of local populations. Accordingly, domestic security vigilance is heightened during periods of overall instability. Defence planners will also re-evaluate their overall preparedness, as well as their maritime security strategies. As India attempts to adequately secure its economic and strategic sectors, its response to any given crisis will require the coordination of multiple policy decisions across its various agencies of government.
Middle East India Economic Shocks Force Policy Adaptation
Often, a regional war will lead to immediate disruption to the global economy through a significant increase in oil prices and a negative reaction in global financial markets. Additionally, during extended conflicts, currencies exhibit increased volatility. In light of these factors, policymakers will modify their existing strategies to stabilise domestic conditions. India is actively managing its reserves and diversifying its import channels. At the heart of India’s response strategy remains extensive diplomatic engagement with various stakeholders throughout the region. Communicating with many regional stakeholders on an ongoing basis, India is actively pursuing stability, safety of access, and continuity of supply. This approach illustrates India’s pragmatic and flexible approach to foreign policy. Rather than withdrawing from or increasing engagement in the war, India will safeguard its interests through a series of carefully assessed strategic acts.
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