Iran-Israel Conflict: What's at Stake for India as West Asia Crisis Escalates?

For one, 'oil supply will be greatly impacted if Israel retaliates,' experts tell The Quint.

Security in West Asia hangs by a thread due to the latest stand-off between traditional rivals Israel and Iran.

If the conflict should spill over into a region-wide conflagration, the ramifications for India's economy cannot possibly be overstated, experts opine.

The latest escalation in the conflict has been marked by unprecedented strikes conducted by Iran in Israeli territory on Saturday, 13 April, in retaliation against Israel's 1 April attack on the Iranian consulate in Damascus which killed over a dozen people – including top Iranian officials.

Several countries which share cordial ties with both Iran and Israel, including India, have called for an immediate de-escalation so that the conflict does not turn into a full-blown war.

The Ministry of External Affairs (MEA) had said a day after Iran's strikes that the conflict must be solved through "dialogue & diplomacy". India had also issued an advisory last week urging citizens not to travel to either of the countries.

As the situation stands currently, Israeli Prime Minister Benjamin Netanyahu is caught between a rock and a hard place. If he decides not to retaliate, he risks looking weak especially at a time when the country is involved in a fierce battle with Hamas. If he does retaliate, he risks turning the entire West Asian region into an arena of tumult – which would have grave consequences for the world.

The Quint explains what's at stake for India – and the importance of Israel and Iran in India's foreign policy calculus.

What's at Stake for India?

There are three major areas where India's interests could me hampered:

1. Oil import

At a time when the oil market remains volatile over the Israel-Hamas and Russia-Ukraine wars, India needs to maintain good relations with its major oil exporting partners.

India is the third-largest consumer of crude oil in the world and imports 85 percent of its total requirement. Hence, any major disruption in the country's oil trade will not only impact supply but will also have adverse effects on its foreign exchange reserves and the value of the rupee.

"The Gulf region is the principal source of energy for the international order – particularly within Asia," Talmiz Ahmad, former Indian Ambassador to Saudi Arabia, Oman and the United Arab Emirates (UAE), told The Quint.

"India, China, Japan, South Korea, Indonesia, Malaysia and several other countries obtain their energy from Gulf countries. Each of these will be impacted very seriously because alternatives are unlikely to be available."

Talmiz Ahmad

The strikes by Iran had caused the global benchmark Brent crude to go over $90 a barrel, and experts say that it is likely to go up further.

"Oil supply will be greatly impacted if the Israelis retaliate and fire at Iran's oil installations," geopolitics expert Lt General Kamal Davar (retd) told The Quint, adding, "India can ill-afford the economic fallout of this conflict."

2. Maintaining a delicate balancing act

Further, there is also the question of India's balancing act between Israel and Iran, and whether it will be able to maintain its closeness with both countries throughout the conflict.

While some feel that New Delhi will have to maneuver its position delicately, others feel that this is not a big reason to worry. According to Ahmad, for instance, each relationship India has in West Asia exists in a separate silo and does not impinge on each other.

"India's approach to West Asia is based on two principles: the relationship is bilateral and transactional. Bilateral in the sense that each relationship stands on its own merits, and that merit is provided by the relationship being transactional – which means that it is based on mutual advantage."

Talmiz Ahmad

India's diplomatic tact in this area was also seen during the Russia-Ukraine war, where it not only managed to maintain good relations with both Moscow and Kyiv but also escaped sanctions imposed by the US on countries importing Russian oil and military equipment.

3. Concerns for the Indian diaspora

Another major factor behind India's insistence on de-escalation is concern for the security of the vast Indian diaspora spread across West Asia. According to the Ministry of External Affairs, over 66 percent of the estimated 1.34 crore Non-Resident Indians (NRIs) in the world live in Gulf countries.

Hence, any flare-up triggering a third Gulf War will severely impact the physical and economic security of Indians in the region.

"Indians in West Asia are among the biggest contributors of foreign exchange in the world among diaspora groups," Lt General Davar told The Quint. "Should the conflict escalate, they may move back to India resulting in the loss of a fair amount of foreign exchange remitted by them."

Will Iran's Seizure of Ship with Indian Crew on Board Impact Ties?

India had become personally embroiled in the conflict at the very outset after Iran's Revolutionary Guards Corps seized an Israel-linked ship with 17 Indian crew members on board near the Strait of Hormuz on 13 April.

Following the seizure, External Affairs Minister S Jaishankar had called his Iranian counterpart Amir Abdollahian to express concerns over the crew's health.

However, experts say that the seizure is not likely to dent the strong ties between India and Iran.

"Diplomatic relationships are not easily damaged. Indian officials prefer to handle tricky situations through diplomatic channels rather than taking extreme measures. This approach has consistently been India’s stance," Sujata Ashwarya, professor of international relations at Jamia Milia Islamia, said while speaking to The Quint.

Furthermore, the seizure of the Israel-linked ship came after constant warnings issued by Iran to the US over the latter's seizure of several ships on the grounds that they were carrying Iranian oil – which is subject to sanctions by western countries.

"This arrest of this ship is in keeping with Iran's broad interests. My own impression is that Iran will treat these Indian sailors with great care and attention, and that they will be returned to India very rapidly," Talmiz Ahmad said.

The MEA had taken to X on Thursday, 18 April, to say that one of the Indian cadets on board the ship – a woman named Ann Tessa Joseph from Kerala's Thrissur – had already landed in Cochin.

Setting a similar precedent, Qatar had on 12 February released eight former Indian naval officers who had been imprisoned in August 2022 and sentenced to death over alleged spying charges.

Importance of Israel & Iran in India's Foreign Policy Calculus

There are a number of factors that make both Iran and Israel strategically crucial for India to maintain its position in global power dynamics. Hence, it cannot afford to alienate either of the two countries by taking sides in the conflict.

Iran is located between the Persian Gulf and the Caspian Sea – two major trade routes, and serves as a gateway for India to Afghanistan and other Central Asian countries: Uzbekistan, Kazakhstan, Kyrgyzstan, Tajikistan, and Turkmenistan.

If relations were to turn sour with Iran, India would have to depend overwhelmingly on Pakistan for trade with Central Asia – a compromise New Delhi is simply not willing to make. Efforts are also ongoing to revive the Chabahar Port, which is key to India's trade with Central Asia.

Further, Iran has been a significant oil exporter to India and accounted for almost 11 percent of New Delhi's total oil import bill before 2019. However, India stopped importing Iranian oil after being pressured by the then Donald Trump-led US government during its withdrawal from the Joint Comprehensive Plan of Action.

Moreover, Tehran has consistently supported New Delhi on a number of contentions issues. For instance, despite the anti-India stance taken by the Organization of Islamic Cooperation (OIC) regarding the sovereign status of Jammu and Kashmir, Iran is one of the few Islamic countries which has consistently supported India's policies in the erstwhile state.

Israel, too, is a pivotal partner for India's economic prosperity. Ever since India developed diplomatic relations with Israel, annual trade between the two countries has risen from $200 million in 1992 to over $10.8 billion in 2022-23. In the last five years alone the bilateral trade figures have more than doubled.

Israel is the second largest defence supplier to India, just after Russia, and a major investor in India's energy sector, research and development and other significant areas.

Further, since he came to power in 2014, Prime Minister Narendra Modi has enjoyed extremely close relations with Israeli PM Netanyahu. In 2017, Modi became the first Indian PM to visit Israel, marking the affirmation of a new dawn in ties between the two countries.

India has also consistently abstained from voting on resolutions at the United Nations condemning Israel's "annexation" and "prolonged occupation" of Palestinian territory.