Happy New Year… um?

by Manoj Ladwa

Sir David Attenborough’s “moment of crisis,” and Greta Thunberg’s ongoing campaign to shake the world’s most powerful into acting faster on climate change, highlights that there are other priorities to President Trump’s conflict with Iran that must not be relegated, writes India Inc. Founder & CEO Manoj Ladwa.

Highlights:

  • The US assassination of a serving Iranian army general and the Iranian retaliation poses a diplomatic challenge for India’s Narendra Modi government.
  • India’s possible de-escalating role here should not be underestimated.
  • If only Trump had expended a fraction of the vigour and money addressing the issue of climate change, the world would be that much safer for all its citizens.

The shutters are opening up to a new year and a new decade.  But the first few days have regrettably set an uncomfortable tone with Trump’s conflict with Iran, the tragic downing of the Ukranian airline, and the horrendous bush fires in Australia.  Renowned naturalist and broadcaster Sir David Attenborough whilst launching a new year-long BBC series ‘Our Planet Matters’ has described the issue of global warming as having reached a “moment of crisis,” amplifying the message by young Greta Thunberg’s inspired high-profile campaign. Whilst India has a critical interest in addressing climate change it will also be concerned for its immediate interests in the Middle East.

India’s balancing act

The US assassination of a serving Iranian army general and the Iranian retaliation in the form of missile attacks on two US bases in the Middle East poses a diplomatic challenge for India’s Narendra Modi government. India is close to both the US and Iran and any escalation of this conflict will adversely impact its economic and strategic interests. Unlike most other nations, choosing one side over the other is also not an option as ties with both Washington and Tehran each have their own diplomatic and geo-political dynamic that New Delhi cannot afford to turn its back on.

Fuelling an already challenged situation

At a time when the world should ideally be discussing global security challenges like climate change, the current situation in the Middle East will be very worrisome to India. India is the world’s largest remittance economy, with inflows of $80 billion in 2018; more than 60 per cent of this comes from the Middle East. This conflict can potentially lead to an exodus of Indian (and foreign) workers from the region and disrupt this massive inflow. This will have adverse consequences to India’s already challenging economic picture.

Then, the spike in oil prices following the killing of the Iranian general has already led to a sharp rise in the basket of crudes that India buys. This has led to an increase in retail oil prices in India. Any further rise in crude prices will adversely impact India’s balance of payments numbers, increase prices across the board in India, fuel inflation and could also force the Reserve Bank of India to raise interest rates. This double whammy will prolong the ongoing economic slowdown.

A geo-strategic price

India also needs the Chabahar port in south eastern Iran to ship goods and other materials to Afghanistan and Central Asia bypassing Pakistan. This is not only an economic imperative; it is an important strategic initiative vis-à-vis Pakistan for which India has expended considerable money and diplomatic capital. Any disruption on this front will lay to waste years of hard effort.

If the conflict escalates to war, India’s painstakingly built relationship with the US could take a hit. Donald Trump, who is not known to lay any great store by nuanced diplomacy, could well invoke the “you are either with us or against us” doctrine to try to force India (and other fence sitters) to take sides. Though the balance of convenience would lie in India choosing to go with the US, the geostrategic price of any diplomatic break with Iran would be incalculably high.

And finally, three of Iran’s greatest regional adversaries – Israel, Saudi Arabia and the United Arab Emirates – are also India’s very close allies. Ties with Israel are critical for India’s security while the latter two are also important suppliers of oil to India. They also host the largest numbers of Indian expatriates in the Middle East and each government has committed about $100 billion investments to India. A major regional conflict involving the US and Iran could challenge Indian Prime Minister Narendra Modi’s carefully cultivated relationships with the leadership of these two countries.

As an aside, if only Trump had expended a fraction of the amount of vigour and money addressing the issue of climate change (which his administration seems to be in denial of), the world would be that much safer for all its citizens. The crisis in the Middle East also opens up a tiny window of opportunity for India. Being friendly to both the US and Iran, it can attempt to use its diplomatic muscle to bring about, if not a rapprochement then, at least an end to the current round of hostilities. India’s possible role here should not be underestimated.  It has every interest to broker peace.

Manoj Ladwa is the Founder and CEO of India Inc. publishers of India Global Business magazine.

About the Author: Manoj Ladwa