As tensions in the Middle East continue to escalate, India has found itself navigating a complex web of economic, strategic, and security concerns. What began as conflict between Israel and Hamas now risks expanding into a broader regional conflagration involving Iran and its network of allies. India’s significant ties with key Middle Eastern countries mean that the stakes are high for New Delhi. In order to safeguard its interests, India must balance immediate challenges with strategic concerns, focusing on both short-term stability and a resilient long-term approach, writes Rupal Mishra, a participant in the Valdai – New Generation project.
Immediate Challenges
The most immediate and significant impact of the ongoing conflicts in the Middle East for India is in the oil sector, as the region provides a major chunk of India’s oil supplies, with Qatar alone contributing more than half of its LNG imports. Prolonged instability poses a significant risk of worsening India’s fiscal and current account deficits, triggering inflation, increased government subsidies, increased input costs for industries, and a surge in fertiliser prices that may burden the agricultural sector. Moreover, investment strategies from various Arab nations in the Indian economy could encounter significant challenges should the conflict intensify.
Shipping and trade have also been significantly impacted. The attacks launched by Houthi rebels in the Red Sea have resulted in disruptions to shipping lanes, compelling vessels to navigate around the Horn of Africa. The extended route has added approximately 4,575 nautical miles and 12-14 extra days to the journey. This has resulted in a doubling of global shipping rates and an increase in insurance premiums from 0.5% to 2% of the total shipping cost. These challenges have impacted India's low-margin exports, such as textiles and engineering goods, threatening their profitability. Indian exporters have also reported an increasing reluctance among international shipping lines to provide cargo slots, which has been attributed to the rising freight costs.
The safety of nearly 9 million Indian nationals residing in the Gulf is another pressing concern, given that these expatriates are instrumental in enhancing India’s economy via remittances. Escalating the conflict could pose severe risks to their security and potentially reduce remittance flows, a key source of foreign exchange. Additionally, around 900 Indian peacekeepers stationed in Lebanon under the UNIFIL mission face mounting dangers as the conflict intensifies. The ongoing Israeli ground offensive compounds these risks, increasing the uncertainty surrounding the safety of both Indian workers and peacekeepers.
Strategic Concerns
India’s strategic landscape in the Middle East, carefully built over the past decade, faces significant challenges as the ongoing crisis undermines long-term objectives. The diplomatic and economic initiatives which have bolstered India's regional influence now confront serious obstacles as regional dynamics shift and the potential for further conflict escalates.
Among these initiatives are key partnerships such as I2U2 (India, Israel, the UAE, and the US) and the India-Middle East-Europe Economic Corridor (IMEC). I2U2 was established to deepen technological collaboration and encourage private sector investment, leveraging UAE financial capital, Israeli and American technology, and strategic support from Washington. IMEC, on the other hand, was envisioned as a faster alternative to the Suez Canal, providing a route that could cut transit time by 40% and serve as a strategic counterbalance to China’s Belt and Road Initiative. These initiatives aimed to strengthen India’s position and expand its reach in the region. However, the rising tensions between Israel and Iran now threaten to derail these plans.
India's strategic relationship with Iran, exemplified by projects like the International North-South Transport Corridor (INSTC) and Chabahar Port, is another area of concern. These projects are central to India’s aspirations for deeper connectivity with Central Asia and reduced dependency on Pakistan for trade routes. With Iran already facing stringent international sanctions, progress on these initiatives has been sluggish. The intensification of hostilities involving Iran threatens to delay these projects even further, hindering India’s vision for enhanced regional connectivity and economic integration.
Maintaining a balanced diplomatic stance has been a cornerstone of India's Middle East policy, characterised by fostering ties with Israel, the Arab states, and Iran. Historical incidents, such as the 2012 attack on an Israeli diplomat’s wife in Delhi and the alleged involvement of Tehran in the attack, illustrate the delicate nature of this balance. The current crisis, however, presents a more severe challenge. If the conflict widens and more nations become embroiled, India’s long-held policy of non-alignment could face significant strain, testing New Delhi’s diplomatic resilience and its ability to manage relationships on all sides.
Security concerns also extend beyond diplomacy and economic interests to include domestic and regional stability. The Middle East has long been a breeding ground for extremist groups like ISIS and al-Qaeda, whose influence could spill over into South Asia during times of heightened conflict. This risk is magnified by recent pro-Palestine demonstrations in Kerala and the complex religious dynamics in Kashmir. India’s intelligence-sharing and counter-terrorism cooperation with Gulf partners such as Saudi Arabia and the UAE have bolstered regional security. However, continued unrest in the region could shift priorities, potentially diminishing these partnerships and sidelining collaborative security efforts.
India’s position
During a recent discussion, India’s External Affairs Minister Dr. S. Jaishankar outlined India’s nuanced stance on the Middle East conflict. He condemned the October 7th Hamas attack on Israel as an act of terrorism and affirmed Israel’s right to self-defence, emphasising that any military response must comply with international humanitarian law to protect civilian lives. India’s consistent advocacy for a two-state solution underscores its balanced and pragmatic approach. This commitment is reflected in its humanitarian assistance, such as providing essential medical supplies and food aid to Palestine, reinforcing India’s dedication to regional stability.
Ambassador Ranjan Mathai, former foreign secretary and India’s Ambassador to Israel in the 1990s, has also noted that a sustainable solution lies in the two-state approach. He has emphasised that even a decisive military outcome would likely bring only temporary relief, rather than a lasting solution to the conflict. Ambassador Mathai has pointed out that while immediate mediation is challenging due to entrenched positions, a potential pathway could be temporary autonomy for Palestinians, progressing toward full independence.
The limitations of military actions are further echoed by Israel Defence Forces spokesman Daniel Hagari, who observed, “Hamas is an idea... rooted in the hearts of the people- whoever thinks we can eliminate Hamas is wrong.” This highlights that military measures alone can only offer short-term respite.
Strategic analyst C. Raja Mohan emphasises the vital role of moderate Arab states in sustaining regional stability, aligning with India’s interests. He advocates for India to extend political support for the normalisation of ties among Arab states, Iran, and Israel, highlighting the significance of comprehensive peace efforts.
Ultimately, India’s prosperity and strategic interests are closely linked to a stable Middle East. By balancing immediate economic priorities with long-term diplomatic and security strategies and engaging proactively with regional partners, India can navigate these turbulent times with resilience. This multifaceted approach is essential for maintaining influence and fostering peace in a region fraught with challenges.
References:
1. Jaishankar, D. (2024, October 2). India’s twin concerns in the Middle East. ORF America. URL: https://orfamerica.org/orf-america-comments/india-middle-east
2. Khan, F. (2024, October 7). West Asia in Turmoil: Will there be Ripple Effects on India? India Today. https://www.indiatoday.in/global/story/west-asia-in-turmoil-will-there-be-ripple-effects-on-india-2611779-2024-10-05
3. Johny, S. (2024, October 29). Watch: What does the crisis in West Asia mean for India? Video. The Hindu. URL: https://www.thehindu.com/news/international/watch-what-does-the-crisis-in-west-asia-mean-for-india/article68808094.ece
4. Roy, S. (2024, October 2). How India could play a meaningful role in the conflict in West Asia. Indian Express. URL: https://indianexpress.com/article/explained/explained-global/how-india-could-play-a-meaningful-role-in-the-conflict-in-west-asia-9602677/
5. Taneja, K. (2024, August 8). India balances interests amidst Israel-Iran tensions. ORF. URL: https://www.orfonline.org/expert-speak/india-balances-interests-amidst-israel-iran-tensions
