How Israel-US war on Iran puts $50bn in Indian remittances at risk

As the United States-Israeli war on Iran completes two weeks, it has triggered a global energy crisis and threatened to pull the rest of the Middle East into the conflict.

“As the United States-Israeli war on Iran completes two weeks, it has triggered a global energy crisis, even as Iran’s retaliation threatens to pull the rest of the Middle East into the conflict”

Al Jazeera

The Strait of Hormuz, through which some 20 to 30 percent of global crude and liquefied natural gas (LNG) pass, has effectively been closed because of the conflict, sending crude prices soaring and disrupting oil and gas supplies.

Al Jazeera

Most shipping insurers have cancelled war risk coverage for tankers in the strait, and a Thai ship heading to India was attacked, drawing criticism from India.

Iran has invoked the right to self-defence to justify the retaliatory attacks and its Islamic Revolutionary Guard Corps (IRGC) said it would not allow "one litre of oil" to pass the strait, warning the world to expect oil to reach $200 per barrel.

The conflict has driven oil prices sharply higher and strained global energy supplies, with crude reaching nearly $120 a barrel on Sunday before settling at about $100 this week, roughly $40 more than before the war began.

The International Energy Agency's move on Wednesday to release a record 400 million barrels of crude oil has failed to stabilise oil prices.

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Indian officials and analysts warn that the disruption will significantly affect India’s energy security because more than 80 percent of India’s gas and up to 60 percent of its oil pass through the Strait of Hormuz.

Harsh V Pant, vice president of the Observer Research Foundation think tank in New Delhi, said rising costs could translate into broader economic and inflationary pressures and hurt India’s growth prospects.

India faces a second major risk from the war because about 9.1 million Indian citizens work in Gulf Cooperation Council (GCC) countries and send some $50bn in annual remittances home.

“As the United States-Israeli war on Iran completes two weeks, it has triggered a global energy crisis, even as Iran’s retaliation threatens to pull the rest of the Middle East into the conflict”

Al Jazeera

Several Indian workers and professionals in the Gulf told Al Jazeera they fear losing jobs as oil and gas firms have shut operations amid the Iranian attacks, and several Asian workers, including Indians, have been killed in the attacks.

Talmiz Ahmad, a former Indian ambassador to Saudi Arabia, said every Indian who works in the Gulf supports at least four to five people back home and that 40 to 50 million Indians directly benefit from Gulf employment.

If the war is prolonged, analysts including Pant say it could result in the loss of remittances and hurt India's wider economic robustness.

India is confronting diplomatic and logistical challenges: thousands of Western expats have already left or been evacuated from Gulf countries, and Ahmad warned there is no way India could evacuate nine or 10 million people in a war.

India’s Ministry of Foreign Affairs has set up a special control room and embassies and consulates have round-the-clock helplines, while missions have enabled returns via commercial and non-scheduled flights.

Al Jazeera

Politically, New Delhi has not issued a statement on the killing of Iran’s Supreme Leader Ayatollah Ali Khamenei, though its foreign secretary visited the Iranian embassy to sign a condolence book, and India has condemned the Iranian attacks on Gulf nations.

The government has faced criticism from the opposition over silence and over Modi’s recent visit to Israel days before the US-Israel attack on Iran, and commentators linked that visit to support for Israeli Prime Minister Benjamin Netanyahu; Srinath Raghavan wrote that "Netanyahu, the most corrupt Israeli leader in recent memory, knows that his political survival depends on two things: the continuation of war in the Middle East and the stamp of legitimacy from foreign leaders. In this instance, Trump gave the former, while Modi obliged with the latter."

Harsh V Pant defended India’s stance, saying India's equities with Arab states and Israel have grown and that India is reacting to ground realities.