Huffington Post : What The U.S. Strike On Suleimani Means For India

Citing the need for “decisive defensive action to protect U.S. personnel abroad,” President Donald Trump authorized a lethal airstrike against the commander of Iran’s elite IRGC Quds Force, Maj. Gen. Qassim Suleimani, at the Baghdad airport last week. The surprise attack sharply escalated tensions between the U.S. and Iran in the Persian Gulf, a region that supplies nearly a quarter of the world’s oil.

One of the few capitals that enjoys close ties to both Washington and Tehran, New Delhi issued a statement expressing “deep” concern over the rise in hostilities, urging restraint from all sides.

India has significant interests in the region, which is a major source of energy exports to the South Asian giant as well as a growing source of other trade and investment.

What does the American strike on Suleimani mean for India?

The country’s economy will feel the most immediate impact in the short term given India’s status as one of the world’s largest oil consumers.

Until last May, India was the second largest purchaser of Iranian oil, but U.S. sanctions have forced India to diversify its supply to include other countries in the region. Predictably, oil prices surged and Indian shares tumbled in response to reports of Suleimani’s death, and again after Iran’s retaliatory strike against an Iraqi military base housing U.S. personnel earlier this week.

The price of Brent oil, the international benchmark, rose nearly 4% (past $68 a barrel) following news of the initial strike. The increase was the single largest since September, when ten armed drones successfully targeted Saudi Arabia’s state-owned Aramco oil refinery and temporarily disrupted production in an unprecedented attack.

West Texas Intermediate, the American oil benchmark, also rose more than 3%. The Indian crude oil basket has averaged approximately $64 a barrel for preceding financial year.

Share value of India’s biggest energies companies, including Hindustan Petroleum (HPCL), Bharat Petroleum (BPCL), Indraprastha Gas (IGL), the Indian Oil Corporation (IOC), and Reliance Industries, all dropped following news of the Iranian commander’s killing.

The drop in oil prices reflects concern in some quarters that tensions in the Middle East will persist for the foreseeable future, potentially disrupting oil supply and even triggering inflation at a time when India’s economy is struggling to recover from a recent slowdown.

The uncertainty surrounding Iran’s response to Suleimani’s death motivates these fears. American sanctions have dramatically curtailed Iranian oil exports in recent months, forcing the world’s major consumers of Iranian crude, like India, to secure imports from other producers throughout the region, including Iraq, Saudi Arabia, Kuwait and the United Arab Emirates.

Experts warn that any one of these countries could be the target of Iranian retaliation as regional tensions spike, jeopardizing oil production or threatening energy supply routes, particularly the Straits of Hormuz through which a majority of the crude oil and liquefied natural gas from the region travels to Asia. India’s recovery would acutely be disrupted under such a scenario.

But other observers stress that India’s economy—and overall energy security—may be less vulnerable to growing instability in the Gulf than short-term metrics suggest.

Gas prices across India, for example, quickly stabilized following the September Aramco strike, which resulted in an actual, albeit temporary, disruption of oil production. This was attributed to the fact that the current supply of crude oil in the global market far exceeds demand, and India has secured considerable energy imports from countries beyond the Gulf. These factors would ostensibly help New Delhi mitigate the economic repercussions of growing instability in the region to some degree.