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Modi govt’s major tool to save India from US-Iran conflict’s fallout – 2020 Budget

India, which enjoys cordial relations with both Iran and US, must delicately balance its stressed economy as global events spin out of control.

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As tension rises in the Middle East over the assassination of top Iranian commander Qassem Soleimani and Iran’s subsequent missile attack on US bases in Iraq, countries on both sides of the Gulf are likely to enter a long period of turmoil. India, which enjoys cordial relations with both Tehran and the White House, must delicately balance its stressed economy as global events spin out of control.

New Delhi has started well, asking the two countries to exercise restraint while expressing deep concern over the rising tension. China and Russia, too, have voiced similar concerns and hope that Iran and the US will not allow the situation to escalate any further.

But the one area where the Narendra Modi government will have to put its best minds to use is the economy – or, more specifically, the Union Budget, for which discussions and brainstorming have already begun.

Also read: India wants US-Iran tensions to de-escalate, MEA says in touch with key players

Beyond oil

Over the years, New Delhi has diversified its relations with the Gulf region and moved beyond mere oil trade. This includes defence partnerships, joint naval drills, anti-piracy patrols, and promoting the idea of ‘free and open’ sea lanes of communication.

Foreign Minister S. Jaishankar has pointed out as much, saying oil trade is only one aspect, albeit an important one, of the ongoing crisis. India has a huge workforce in the region, the airspace is vital for travel and transportation, and, above all, we have a stake in regional stability.

In short, India has every reason to be concerned. It must also do its diplomatic best to strike a balance between Iran and the US. In the past, it has in principle rejected offers from the US to join military operations in the Gulf, especially in Iraq, much to the US’ dislike but with appreciation from the Gulf states.

Also read: The risk of nuclear proliferation (and war) is growing

Iran-US in tangle

The US has imposed fresh sanctions on Iran following the punitive attacks carried out by Tehran in retaliation to Soleimani’s killing in a drone attack. The powerful commander of the Quds Force (Holy Army) of the Islamic Revolutionary Guard Corps (IRGC), which itself is part of the Iranian Armed Forces founded under the orders of Ayatollah Khomeini in 1979, was singularly responsible for building up the Shia militant force in the region, supporting Hezbollah, and convincing Vladimir Putin to send Russian troops to Syria. Little wonder, then, that Qassem Soleimani was the prime target of the US.

Iran kept the promise to retaliate and carried out ballistic missile attacks, calling it the “weakest” of the options available, indicating that more attacks on US assets in the region and outside could follow. The US has a large number of military establishments from the western end of the Indian Ocean to the Eastern end of the Indo-Pacific, including about 293 deployable warships. Any one of these could be targeted by Iran, which would escalate the conflict to full-scale war.

But, interestingly, Iran’s Foreign Minister Mohammad Javad Zarif tweeted immediately after the missile strike on US bases in Iraq that Tehran does not seek escalation or a war, but will defend itself against any aggression from the US. This variance in approach could be interpreted either as an attempt to de-escalate the situation or send confusing signals to the US.

Since the success of the 1979 Iranian Revolution and overthrowing of the Shah of Iran, Iran’s control over the Persian Gulf has passed into the hands of the theocratic Islamic State apparatus, which considered it a religious obligation on the part of Tehran to develop what it visualised as independent security architecture in the region.

Also read: US killing Soleimani has made it much tougher for Pakistan than India

Nations watch India’s role

The statement from the Iranian side welcoming mediation by New Delhi should be indicative of the mood in Tehran. India has consistently increased its engagements with Iran over the years. Prime Minister Narendra Modi visited Tehran in May 2016 and signed a tripartite agreement between India, Iran, and Afghanistan, facilitating the development of Chabahar Port and agreeing to invest $500 million.

Beijing has taken note of New Delhi’s attempt to counter its base in Gwadar Port in Balochistan as part of the China–Pakistan Economic Corridor (CPEC) project. Iran has evolved as a fulcrum for countries that want to forge an anti-access strategy to keep the US away from the region and its rich oil resources. Even as the US was persuading allies and friends to stop all economic activities with Iran, China, Russia, and Iran conducted a joint naval exercise in November in the Indian Ocean near the Gulf of Oman, a sensitive zone connecting the Strait of Hormuz, through which almost one-fifth of the world’s oil is transported.

The ongoing strife in the Middle East will, in all likelihood, force Finance Minister Nirmala Sitharaman to rework the Budget proposals. There could be increased suggestions and attempts to tighten the common man’s belt further. It is important for the Modi government to reach out to every source of advice, help, and cooperation and try for a non-partisan and consensus approach in these difficult times.

The author is a member of the National Executive Committee of the BJP and former editor of Organiser. Views are personal.

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  1. As a matter of fact, India no longer enjoys “ cordial “ relations with Iran. When sanctions began to bite, their Foreign Minister visited India, urging it to keep buying oil. It was a desperate cry for help, tapping into the emotions of an old friendship. We were in election mode. He was told, India would take a suitable decision, “ in its commercial interests “ after the new government was installed. The Iranians are now willing to offer China a stake in Chabahar, although they already have Gwadar next door. Personally I think both ports will be duds, although not as much as Hambantota. So there is a lot for our diplomats to chew over, not just in relation to Iran. For the record, it has spoken out on Kashmir as well.

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