KIRAN SHARMA
NEW DELHI — The increasingly escalating Israel-Iran conflict, coupled with the U.S. announcing its bombing of Iran’s nuclear sites on Saturday, puts at risk India’s regional connectivity projects — including one leveraging Iran’s port of Chabahar — and its energy security, experts warn.
“An escalation of conflict in the Middle East puts Indian interests in jeopardy,” Harsh V. Pant, vice president of the Delhi-based Observer Research Foundation (ORF), a think tank, told Nikkei Asia before the American B-2 stealth bombers conducted strikes on three Iranian nuclear sites. Pointing out that New Delhi has “good relations” with both countries, he said, “India’s energy security is linked to the stability in the Middle East. … So India has no interest in the widening of this conflict and the conflict continuing in the region.”
His remarks echo those of the Indian government, which distanced itself from a statement by the Shanghai Cooperation Organization. The security grouping led by Russia and China, which India belongs to, condemned Israel’s military strikes against Iran aimed at halting Tehran’s nuclear program. New Delhi instead urged both Israel and Iran to “avoid any escalatory steps,” and said existing channels of “dialogue and diplomacy” should be used to de-escalate the situation, according to a June 13 statement by India’s foreign ministry.
Sanjay Kumar Pandey, a professor at Jawaharlal Nehru University, said New Delhi disassociated itself from the SCO statement due to its security and military partnership with Israel. The country has “emerged as a very important supplier of military hardware, and perhaps also intelligence.”
“India has to make a difficult choice in the sense that on the one hand there is Israel, which in many ways is a very important military partner, and on the other is Iran, which one can call an important economic partner,” he told Nikkei.
He added that India’s connectivity projects, whether it is Chabahar port in Iran or the International North-South Transport Corridor (INSTC), “are now in a limbo,” while the India-Middle East-Europe Economic Corridor (IMEC) is already shrouded in uncertainty because of the ongoing Gaza war.
Chabahar port, which is on Iran’s southeastern coast facing the Gulf of Oman, gives India access to Afghanistan. The port has allowed companies to operate in Central Asia, bypassing rival and neighbor Pakistan. The INSTC is a 7,200-kilometer multimode network of ship, rail and road routes from St. Petersburg in Russia to the port of Mumbai in India’s west. The IMEC initiative, unveiled by Prime Minister Narendra Modi at the G20 summit in September 2023, is touted as a response to China’s Belt and Road Initiative.
In May last year, India signed a 10-year contract to develop and operate Chabahar port, which is seen as helping New Delhi counter Pakistan’s port of Gwadar, near the Iranian border. The Pakistani port is operated by China Overseas Ports Holding Co. and is part of the Pakistan portion of the Belt and Road Initiative. Under a long-term deal, New Delhi is to invest about $120 million to equip the Chabahar port and has offered Tehran a credit window of $250 million to improve infrastructure around the port.
Pant of the ORF said instability in the Middle East is likely to impede most of these projects. “India’s traditional approach to the region … always comes under strain when such conflicts erupt, and [this one] is no exception,” he said. New Delhi “remains cognizant” of the fact that there is a larger challenge when it comes to balancing its ties in the region, he added.
“The escalating hostilities and rising regional tensions [are] posing direct threats to India’s strategic and economic links” with the Middle East, Ajay Srivastava, founder of New Delhi-based think tank Global Trade Research Initiative (GRTI), said in a note he shared with Nikkei.
In the fiscal year that ended in March, India exported goods worth $1.24 billion to Iran and imported $441.9 million in return. Trade with Israel was even more substantial, with $2.15 billion in exports and $1.61 billion in imports.
“But more critical than these bilateral flows is India’s reliance on the region for energy: Nearly two-thirds of its crude oil and half of its [liquefied natural gas] imports pass through the Strait of Hormuz, which Iran has now threatened to close,” Srivastava said.
“This narrow waterway, only 21 miles (33.8 km) wide at its narrowest point, handles nearly a fifth of global oil trade and is indispensable to India, which depends on imports for over 80% of its energy needs,” Srivastava said, adding that any closure or military disruption in the strait would sharply increase oil prices, shipping costs and insurance premiums, “triggering inflation, pressuring the rupee, and complicating India’s fiscal management.”
Srivastava said the risks became even more immediate on June 15, when Iran fired missiles at Israel’s port of Haifa, which handles more than 30% of its imports and is 70% owned by India’s Adani Ports.
The article appeared in the asia.nikkei