Introduction
07 October 2024 marked one year since Hamas stormed into Israel from the Gaza Strip, killing more than twelve hundred people. Israel’s response has killed more than forty-one thousand Palestinians in Gaza. Israel has invaded Lebanon, where it is battling Hezbollah. One year later, West Asia is in a precarious state. Israel and Iran are on the brink of all-out war.
As we read this, war is still raging in the Gaza Strip, the hostages have not been returned, millions of Palestinians live in inhuman conditions and the hostilities between Israel and Hezbollah in Lebanon are resulting in bloodshed and devastation.
As Israel continues to grapple with the loss of its aura of inviolability following the Hamas attack, Iran is struggling to maintain influence as its proxies in Gaza, Lebanon and Yemen suffer heavy losses. Both countries know that an all-out war would be catastrophic, yet neither side wants to back down.
The rapidly escalating tensions have raised the fear of a conflict that threatens to push the region into deeper crisis, with grave economic and geopolitical fallouts. This situation has significant ramifications for India.
India- Israel Relations
India and Israel have forged closer cooperation in number of fields, specially defence, information technology, agriculture, renewable energy, and pharmaceuticals.
India and Israel have already joined hands for joint innovation in agriculture, water and digital health, through the India-Israel Global Innovation Challenge. This partnership can expand to shape a startup corridor or bridge, that brings together their respective national innovation communities.
Greater involvement of their militaries, innovation ecosystems and corporations will undoubtedly help in maintaining the upward trajectory of this partnership between the two countries as they work to protect each other’s interests in a turbulent region.
Expanded ties with Israel constitute a critical element of Indian power play. This remains a priority for India, even as it has advanced ties with other regional powers such as Saudi Arabia, Egypt, and the United Arab Emirates. With the entire region thrown into turbulence, the future of the cooperation hangs in an uncertain balance.
Ties with Iran
India and Iran share a millennia-long history of interactions. The contemporary relationship draws upon the strength of these historical and civilisational ties, and continues to grow further marked by high-level exchanges, commercial cooperation, cultural and robust people-to-people ties.
Shia clerics and scholars often receive theological training at seminaries in Iran, especially in the city of Qom. These seminaries maintain close contacts with the Indian Shia community. This is in addition to the holy cities of Najaf and Karbala visited by Indian Shias.
India’s relations with Iran are also commercial, as major investments are at stake at Chahbahar Port and Bandar Abbas, as amplified in the succeeding paras.
Certain analysts have posited that India’s efforts to strengthen its relationship with Israel may have come at the cost of its support for Palestine, an issue that has recently assumed renewed significance.
Trade Routes
Turbulence in the region and continuing US sanctions on Iran have already delayed the critical India-Iran Chahbahar Port project that seeks to connect India with both Afghanistan and the Central Asian markets. The Chahbahar Port acts as a gateway to Afghanistan and Central Asia and is important since Pakistan does not allow land transit to Indian goods.
The North-South Trade Corridor (NSTC), a 7200 km sea, road, rail transit corridor connects India-Iran–Azerbaijan-Russia and Europe. It was developed as an alternative to the Suez Canal. The current route facilitates movement of cargo from Mumbai (India) to Bandar Abbas (Iran) by sea, from Bandar Abbas to Bandar-e Anzali by road, from Bandar-e-Anzali to Astrakhan, a Caspian Port in Russia, by ship, and from Astrakhan to other parts of the Russian Federation and further into Europe by Russian railways.
The NSTC was operationalised in June 2022 when the first cargo left Russia’s Caspian Sea port zone of Solyanka in Astrakhan, and reached Nhava Sheva in Navi Mumbai. But the Ukraine War and tensions in West Asia are a setback to its progress.
The Iran-Israel war could also impede the progress of the India-Middle East-Europe Corridor (IMEEC), which was announced last year during the G20 meeting. The IMEEC plan comprises an Eastern Corridor connecting India to the Gulf region and a Northern Corridor connecting the Gulf to Europe. It will include a ship-rail-road transit network.
Israel is a critical part of this corridor with Haifa port, one of the largest ports in the Eastern Mediterranean serving as a trans-shipment hub for Europe. India’s Adani Group is involved in the development of this port. The IMEEC will therefore potentially provide opportunities for more Indian Companies to expand their presence in the Middle East. All these economic corridors have been adversely affected by the ongoing conflict(s).
Shipping Lines
The Strait of Hormuz located between Oman and Iran, connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea is the world’s most important trade transit chokepoint. Bulk of India’s crude flows through this which along with the Red Sea is critical to global trade. In case of any disruption, oil supplies from West Asia will be affected.
The inability of ships to transit a major chokepoint, even temporarily, can create substantial supply delays and raise shipping costs. The Red Sea is another choke point which connects the Arabian Sea to the Suez Canal.
Ships passing through the Red Sea region have been attacked by Iranian-backed Houthi rebels from Yemen. This resulted in re-routing of ships and increased insurance costs. Re-routing of ships entails going around the Cape of Good Hope and then reaching the European and North American markets. The Red Sea conflict has already increased insurance costs by 30 percent besides lengthening the freight journey time by two-three weeks.
Crude Oil
The tensions have led to rise in crude oil prices. The Reserve Bank of India (RBI) has projected crude oil prices for the country’s basket at $85 per barrel in FY25.
The worry for the Indian Government is, the price fallout of any disruption in Iran’s oil supply lines or damage to its oil assets. As there is talk of Israel wanting to target Iran’s oil infrastructure in case of further escalation. Though India no longer imports Iranian crude but a disruption of Iranian crude will drive up the prices.
Iran’s oil industry plays a critical role in the world’s energy markets. It has the world’s third largest oil and second largest natural gas reserves. According to a Morgan Stanley report, a $10 per barrel increase can impact consumer prices by 0.2 to 1.4 percentage points across Asian economies.
In India it is said that the Consumer Price Index (CPI) rises to 0.5 percentage points for each $10 per barrel increase in oil prices. The increase in cost impacts India’s import bill, worsening the trade deficit and putting pressure on the rupee. A weaker rupee will make imports costlier, adding to inflationary pressures.
Higher oil prices, especially diesel, increase transportation and production costs, spiking inflation. This could hurt consumer demand and lead to higher prices of goods and services across the Indian economy.
India’s net oil import bill is projected to increase to between $101 billion and $104 billion in the current fiscal year, up from $96.1 billion in 2023-24. Any escalation in the Iran-Israel conflict could further drive up the value of these imports, which will directly impact consumer prices.
Air Travel
The West Asia crisis is complicating travel plans. Air India has cancelled flights to and from Tel Aviv, citing safety concerns, while carriers like Vistara and IndiGo, along with several international airlines, are avoiding Iranian airspace.
The re-routing of flights can mean longer flight paths and higher costs for airlines operating to and from Europe and West Asia. For airlines, diversions add to fuel costs and heighten airfares. The other worry is that escalation of conflict will lead to a rise in prices of aviation turbine fuel. These price surges can impact travel affordability. It is also bound to impact global air traffic, including from India, especially at a time when large sections of the Indian diaspora will be homebound due to winter holidays in Europe and North America.
Diaspora
India has many citizens living in this region. They are spread from Israel, Lebanon across the Gulf and in Iran. India has a large diaspora in Israel of around 97,467. Of this more than 18,000 Indians work mainly as caregivers and agricultural workers. India also signed an agreement for 1,500 Indians to be to be employed as construction workers. The first batch is already in Israel. There is also a sizable population of Indians in Iran. In case of an Israel-Iran war, their safety would be at stake.
Import/Export
Trade with Iran dipped to under $2.33 billion in FY23 from $17 billion in FY19. Experts believe that a direct conflict involving Iran could make India’s trade with Tehran even more difficult. Major Indian exports to Iran include rice, tea, sugar, pharmaceuticals, manmade staple fibers, electrical machinery, and artificial jewelry. While major Indian imports from Iran consist of dry fruits, inorganic/organic chemicals, and glassware apart from crude which we have now stopped purchasing.
About 25 percent of Basmati rice exported from India is sent to Iran, but the uncertainty has worried Basmati rice farmers, as the big exporters and millers have reduced the quantum, they earlier used to buy in the grain markets and the price of Basmati 1509 variety has fallen to ₹ 2700 per quintal compared to ₹ 3500 per quintal last year.
Similarly, Israel-India trade, the export of petroleum products, diamonds, and chemicals and imports of precious stones and fertilizers has taken a hit.
UNIFIL
On 10 October 2024, the UN Interim Mission in Lebanon (UNIFIL) reported that an Israel Defense Forces (IDF) tank had fired at an observation tower at the mission’s headquarters, causing it to collapse and injuring two peacekeepers. The attack was strongly condemned by UNIFIL and co-signed by 34 countries including India.
With 903 soldiers, India has the third-largest number of troops in UNIFIL after Indonesia and Italy.
Defence Cooperation
The military implications of the current conflict are also very significant. Increased military activity could lead to greater instability across West Asia, particularly if other regional powers get involved. Enhanced military readiness in the region might also require India to reconsider its own security postures.
The India-Israel relationship received a significant boost in 1999, during the Kargil Conflict. Israel supplied mortars, ammunition, and laser-guided missiles, which added precision and lethality to the Indian military campaign. The Israeli assistance remained unwavering including provision of satellite imagery. Consequently, defence and security cooperation emerged as an anchor of the bilateral relationship.
India has been consciously diversifying its defence supplies away from Soviet origin equipment. Israel is now among the top arms exporters to India.
In 2000, India and Israel signed their first defence deal for the purchase of the Barak-1 surface-to-air missile system. Defence equipment purchased by India consist of the Phalcon airborne early warning and control system (installed on Russian IL-76 aircraft), an array of UAV systems including Heron, Searcher II, and Harop, as well as surface-to-air missile systems such as Spyder and Barak, air-to-surface missiles such as Popeye I and II, Spike anti-tank guided missiles and a host of sensor systems.
The Indian Army operates Medium Altitude Long Endurance (MALE) Heron drones for extended surveillance with real-time imagery along with Israeli sensors, hand-held thermal imaging devices, and night vision imaging equipment to check militant infiltration from Pakistan on the line of control and in counter-insurgency operations.
In February 2019, Indian Air Force used the Spice 2000 guided bombs in an aerial raid targeting a terrorist training camp at Balakot in Pakistan following the suicide attack on an Indian Paramilitary convoy in Pulwama.
Indian Special Forces are equipped Israeli assault rifles such as Tavor, Galil, Negev machine guns, and the B-300 man-portable anti-tank weapon system.
Israel’s active engagement in the Indian Government’s Make in India initiative underscores the significance they place on the Indian market. Israel’s defence industry is currently establishing fruitful partnerships with India’s private sector to boost domestic production. Israeli defence giants IAI, Elbit Systems, and Rafael Advanced Defense Systems have partnered with Indian companies Bharat Forge, Tech Mahindra, Adani Defence and Aerospace, and Tata Advanced Systems to manufacture advanced sub-systems and homeland security systems.
The production of the Drishti-10 Starliner a MALE UAV, is symbolic of the thriving India-Israel defence cooperation. The drone is an Indian-made version of Israel’s Elbit Systems cutting-edge Hermes-900 UAV. Produced by Adani Defence and Aerospace, the drone is likely to be inducted in the Indian Navy later this year, significantly boosting the intelligence, surveillance, and reconnaissance capabilities across the Indian Ocean Region.
In 2020, the Adani Group launched an additional facility for assault rifle manufacturing in Kanpur. This facility is slated to produce around a dozen types of guns with Elbit Systems.
Besides co-production, both sides have also explored the co-development of defence technologies. The successful development of the Barak-8 missile defence system by IAI and India’s DRDO stands as a major achievement of this collaboration. This system, offered as land and maritime variants, is a formidable air defence system. In another project, IAI is partnering with Hindustan Aeronautics Limited to convert previously used Boeing-767 civilian aircraft into aerial refueling tankers for the Indian Air Force.
In 2022, during the visit of Israeli Defence Minister Benny Gantz, India and Israel signed the India-Israel Vision on Defence Cooperation agreement to put together a comprehensive 10-year road map to identify new areas of defence technology collaboration.
The escalating tensions no doubt are much wider than a mere Israel-Hamas and Hezbollah showdown and as Israel looks inwards to cater for its defence needs, the affect will be visible in Israel’s defence exports to India.
Conclusion
The current Iran-Israel conflict engulfs the entire West Asia region which has openly affected global politics and the global economy. As a victim of cross-border terrorism from Pakistan for several decades, India understands the consequences of terrorism not being tackled head-on. Therefore, it unequivocally condemned the Hamas terrorist attack and expressed its solidarity with Israel. At the same time, India has maintained that Israel has an international obligation to observe humanitarian law and underlined that the only viable path out of the current quagmire is a “two-state solution.”
The Indian position is also reflective of the domestic divisions that have arisen vis-à-vis the Israel-Hamas hostilities: Some groups have defended Israel’s right to self-defence against terrorism, whereas some have castigated the Israeli response for causing humanitarian catastrophe in the Gaza Strip.
The Prime Minister clearly stated at the ASEAN Summit on 11 October. The conflicts going on in different parts of the world are having the most negative impact on the countries of the Global South. Everyone wants that whether it is Eurasia or West Asia, peace and stability should be restored as soon as possible.
ABOUT THE AUTHORS
Maj Gen VK Singh, VSM was commissioned into The Scinde Horse in Dec 1983. The officer has commanded an Independent Recce Sqn in the desert sector, and has the distinction of being the first Armoured Corps Officer to command an Assam Rifles Battalion in Counter Insurgency Operations in Manipur and Nagaland, as well as the first General Cadre Officer to command a Strategic Forces Brigade. He then commanded 12 Infantry Division (RAPID) in Western Sector. The General is a fourth generation army officer.
Major General Jagatbir Singh was commissioned into 18 Cavalry in December 1981. During his 38 years of service in the Army he has held various command, staff and instructional appointments and served in varied terrains in the country. He has served in a United Nations Peace Keeping Mission as a Military Observer in Iraq and Kuwait. He has been an instructor to Indian Military Academy and the Defence Services Staff College, Wellington. He is a prolific writer in defence & national security and adept at public speaking.
