How Israel-US war over Iran threatens $50 billion in Indian remittances | US-Israel war over Iran news

As the United States-Israeli war over Iran completes two weeks, which has sparked a global energy crisis, Iran’s retaliation threatens to drag the rest of the Middle East into the conflict.

The Strait of Hormuz, through which about 20 to 30 percent of global crude and liquefied natural gas (LNG) passes, is effectively closed due to conflict, sending crude prices soaring and disrupting oil and gas supplies.

From Southeast Asia to Pakistan, the ripple effects of war are being felt across Asia and beyond.

But one country in particular could face a double whammy if the conflict escalates: India, the world’s fourth-largest economy, relies on the Gulf for its energy needs and for the transportation of a vast workforce in the Middle East.

We unravel how war is bleeding India’s economy.

Lack of energy

More than 80 percent of India’s gas and 60 percent of its oil pass through the Strait of Hormuz, which connects the Gulf to the Gulf of Oman and the Arabian Sea and is currently at the center of Iran’s retaliatory tactics against the US and Israel. By threatening all shipping, Iran has effectively closed the strait — leaving Gulf oil producers with no sea route to deliver oil and LNG.

Most ship insurers have canceled war risk coverage for tankers in the Straits. Later, on Wednesday, an attack took place on a Thai ship which was going to India, and it was criticized by India.

Hotels and restaurants in India are already closed and people are queuing up to collect LPG (cooking gas) cylinders amid fears of shortages, even as the government has assured the public that it has about a month’s supply. Even so, the government is alarmed enough to invoke it Urgent measures to discourage hoarding, urging people to remain calm.

Iran invoked the right of self-defense to justify the retaliatory attack and used the Strait as leverage in an attempt to end the war. More than 1,300 civilians have been killed and property damaged across Iran amid US-Israeli strikes.

Iran’s tactics appear to be working, as stocks have fallen and oil prices have risen, reaching around $120 a barrel on Sunday, settling at around $100 this week, up another $40 from before the war began. This week, Iran’s Islamic Revolutionary Guard Corps (IRGC) said it would not allow “one liter of oil” to pass through the strait and warned the world that oil was expected to reach $200 per barrel.

A move by the International Energy Agency (IEA) on Wednesday to release a record 400 million barrels of crude oil failed to stabilize oil prices.

“India’s energy security will be significantly affected, as it depends on the Middle East for a substantial part of its energy needs,” said Harsh V Pant, vice president of the Observer Research Foundation think tank in New Delhi.

“Energy markets are already volatile and costs are rising, which could ultimately translate into broader economic and inflationary pressures,” he said.

Indian diaspora in the Gulf

India is worried about the nearly 9.1 million citizens working in the Gulf Cooperation Council (GCC) countries – United Arab Emirates, Saudi Arabia, Qatar, Oman, Kuwait and Bahrain. They send home about $50 billion annually.

If the war is prolonged, says Pant, “it will lead to loss of remittances…part of which will help balance the trade balance”.

“This will harm the broader financial soundness of the Indian economy. India’s hopes of continuing high growth rates will be harmed,” Pant said. “It’s not just a question of energy security — it’s a question of economic security.”

Several Indian blue-collar workers and professionals across the Gulf have told Al Jazeera they fear losing their jobs if the war escalates further. Several oil and gas firms have suspended operations amid the Iranian attack.

“I don’t think this will continue as I support my family with this job,” the Indian construction worker, who chose to remain anonymous, told Al Jazeera.

“Every Indian who works in the Gulf brings at least four to five people back home. Forty to 50 million Indians directly benefit from their employment in the Gulf,” former Indian ambassador to Saudi Arabia Talmiz Ahmed told Al Jazeera.

Another concern is the physical safety of people amid the expanding Iranian offensive. Several Asian workers, including Indians, have been among those killed in Iranian attacks across the Gulf.

Can India relocate nine million citizens?

If the war escalates out of control, India may face a major challenge of relocating its people, who form the largest expatriate community in most of the Gulf countries.

Thousands of Western migrants have already left or been displaced from their countries, but the sheer size of the Indian population makes it a transport nightmare. About 35 million expatriates live in the Gulf countries, which have emerged as a major economic and aviation hub with oil wealth. Of them, 9.1 million are from India – almost double the number of second-placed Pakistanis of 4.9 million.

Ahmed, a former Indian ambassador, said, “There is no way, in a war situation, any country, including India, can evacuate nine or 10 million people.”

His message to Indians in the region: “In good times we stand shoulder to shoulder with our Gulf brothers; in bad times we stand shoulder to shoulder with them.”

However, Ahmed pointed out that India had successfully evacuated nationals in previous conflicts, including the 1991 Gulf War, when he was India’s Consul General in Jeddah. Around 200,000 Indian nationals were displaced from Kuwait in 1990 when Iraq invaded the Gulf nation.

Ahmed also recalled the contingency plans the Indian embassy in Saudi Arabia – he was ambassador to Riyadh at the time – had in place after the US invasion of Iraq in 2003. “Very quietly, we have arranged everything – buses, tents, blankets and cooking arrangements. We are fully prepared to take several thousand people if they cross the border,” he said.

“The important thing is that we’re ready.”

India’s Ministry of External Affairs has set up a special control room to monitor and respond to queries related to the situation, while embassies and consulates have set up 24-hour helplines to help Indian nationals in need. Indian embassies have enabled repatriation of stranded Indian passengers by commercial flights and non-scheduled flights.

What are India’s interests?

Pant of the Observer Research Foundation said that regardless of how the war plays out, “India’s dependence on Middle Eastern oil will remain significant, although it may have to look for alternative sources if the conflict widens”.

“I think Russian oil is definitely an option. There is also engagement with the US on the energy question,” he said. “In the last decade India has been buying energy from the US and the role of the US has grown.”

India’s main opposition Congress party has criticized the government for its silence on the assassination of Iran’s Supreme Leader Ayatollah Ali Khamenei. India has not issued any statement on Khamenei’s killing, although its foreign secretary visited the Iranian embassy in New Delhi to sign a condolence book.

Meanwhile, New Delhi condemned Iran’s attack on the Gulf countries, with which it has close economic ties.

“When the targeted assassination of foreign leaders does not receive the clear protection of sovereignty or international law from our country and abandons impartiality, it raises serious doubts about the direction and credibility of our foreign policy. Silence is not neutral in this context,” Congress Parliamentary Party President Sonia Gandhi wrote in a newspaper column.

Prime Minister Narendra Modi’s government has faced criticism for refusing to condemn the sinking of an Iranian warship by a US submarine while it was returning home from a military exercise organized by India. The ship was off the coast of Sri Lanka when it was torpedoed.

India subsequently provided shelter to a second Iranian warship that joined the hosted exercise. And on Thursday, Modi spoke to Iranian President Masoud Pezheshkian – his first conversation since the start of the war.

Further, the opposition and Modi critics have also questioned the timing of the Prime Minister’s visit to Israel, days before the US-Israeli attack on Iran. India is the largest buyer of Israeli arms. Analysts say Modi’s visit to Israel has lent legitimacy to Prime Minister Benjamin Netanyahu, who is facing an International Criminal Court (ICC) arrest warrant for alleged war crimes in Gaza.

“Netanyahu, the most corrupt Israeli leader in recent memory, knows his political survival depends on two things: the continuation of the war in the Middle East and the stamp of legitimacy from foreign leaders. In this case, Trump offered the former, while Modi obliged the latter,” wrote Srinath Raghavan, author of Indira Gandhi and The Years.

However, Pant supported the government’s foreign policy stance.

“In the last few years, India’s equities with Arab states and Israel have grown so much that India-Iran relations have found it difficult to match that scale,” he told Al Jazeera.

“India is responding to ground realities … India’s interests are dominated by the Arab world and its relationship with Israel rather than Iran.”