The aftermath event of 7th October, 2023 and the war episodes followed it, created a tense and unpredictable turmoil of instable environment in West Asia. The Persian Gulf and the Arabian peninsula, with the most important natural gift and economically important resource (Oil), has not only pushed the region to a unceasing regional conflict, but, has also caught the predatory “Neo-Colonial” eyes of West-US economic policies, which has also made the region a heaven of skyscrapers and futuristic cities, as well as, hell of destructions, sufferings, and magnate of global conflicts. India, being the third largest oil importer country globally, with a major share of oil imported from West Asia, has raised the bar of concern for India’s economy and its stability.
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Although, over the past months, it has been noticed, a policy and strategic shift of oil import from West Asia to Russia, to maintain the stability of price and economy, but, the ongoing Russia-Ukraine War and the “Love Triangle” of Economic war of U.S.A-Russia-China, have intensified the concern.
Moreover, according to the report published by Reuters, India’s oil import from West Asia was 44 percent between April-September, 2023. With, World Bank prediction on India’s Development (Fiscal growth rate) to come down to 6.3 percent compared to 7.2 percent of previous predicted growth rate, due to the intensified global conflicts in West Asia alone.
Can Oil price create Inflation in India?
With the estimates documented by Reserve Bank of India (RBI), a jump in oil price can make inflation soar. To be precise, 10 percent jumps in Oil price can likely lead to 30 point inflation and 15 point decline in growth rate.
The instability of oil price due to the Israel-Hamas conflict and lurking for an alternative nation to import oil from (which is likely to cost expensive) can slow down the growth of India and might also cause devaluation of the Indian Rupee in the international market (for exchange rate) which might worsen the balance of payment.
Due to heavier sanctions imposed upon Russia, aftermath of Russia-Ukraine conflict. The import of oil from Russia comes at an expensive cost. With, nearly 35 percent of Oil imported from Russia by India, followed by Iran and Saudi Arabia with 21 percent and 18 percent respectively.
How West Asia’s conflict is affecting global oil market
Twenty percent of the global oil supply comes from West Asia alone; the conflict in the region does not only affect the economy of the states involved, but, also disrupts the global supply of oil. And with the dramatic entry of Yemen (through Houthis) in creating tension on Red Sea through blockades, has not only intensified and pushed the region into a more darker episodes of wars and conflicts, but, has also affected the 12 percent of International merchandise trade passing.
Red sea being the most important and strategic transit point for global trade, the tension of Yemen-Israel proxy conflict has also affected the global route for transportation, forcing ships to take else route with heavier transportation costs.
India’s trade relies on the Red Sea route for approximately 25 percent of exports and 14 percent of imports with Western world and African states. The conflicts have disrupted back up 25 percent of cargo ships passing through the Red Sea.
The Claws of Persian Lion: Iran’s Role in Oil Price Volatility
Iran, with production of over 3 million barrel of crude oil per day, makes it the fourth largest oil producer state within the Organization of Petroleum Exporting Countries (OPEC). And, the tension of possible conflict between Iran and Israel has led to breach crude oil price at 90 US Dollar per barrel, which is the highest since October, 2023. The International Energy Agency (IEA) warns that escalating conflicts in West Asia could further increase oil prices, leading to global inflation and market instability.
Though, India shares a very stable and friendly relation with both Israel and the Arab World and also with Russia and Ukraine. But, India is still not immune to the effects of these conflicts. Apart from the oil prices, there also lies the factor of humanitarian crises and refugees left behind after the conflict.
According, to the reports documented by United Nation, in a press, it clearly states that 85 percent (1.9 Million) of the total population of Gaza have been forcefully displaced. With every escalation of possibility of more intensified conflict in the region, it leaves behind a larger section of population to be displaced and creates humanitarian crises for the World. Such aftermath impact slows down the development and growth rate of the region as well, creates new challenges to be faced and solved by the World.
Conclusion: Seeking Stability through Alternative Oil Sources
In conclusion, the West Asia conflict involving Israel and Hamas has not only affected global trade but is also slowing down the growth rate of the India’s economy. Although, the shift of oil import from West Asia to Russia, has maintained the price stability (temporary solution). However, still there is a large share of oil imported from West Asian States. In addition, the conflicts in Democratic Republic of the Congo cannot be over locked either, since, it involves two Arab States name; Saudi Arabia and United Arab Emirate (though both denied their involvements in any possible ways or even as a proxy supporter). Moreover, with both Russia and West Asia being in constant or ongoing conflict, the long-term stability is uncertain with Israel’s fresh conflict in its Northern border with Lebanon. Therefore, in the light of the situation, considering alternative source likes Columbia or Venezuela might be a strategic move for India to ensure more stable oil imports in the future.
(All thoughts and views expressed are the author’s own.)