Takshashila Issue Brief - Implications for India from West Asia’s War

Published on 4th October, 2024.

In the aftermath of the deadly Hamas attack on Israel on 7 October 2023, the Israeli Defence Forces have conducted near-continuous military operations in Gaza for a year that have resulted in the deaths of an estimated 41,000 Palestinians. Yemen’s Houthis and Lebanon-based Hezbollah have also joined the hostilities, resulting in drone, rocket and mortar attacks on Israel. 

In late September 2024, Israel employed airstrikes to eliminate much of Hezbollah’s top leadership, including Secretary General Hassan Nasrallah and his successors. These attacks were preceded by intelligence operations meant to disrupt the organisation’s functioning.   

Israeli strikes on Iranian officials believed to be aiding these organisations have led Iran to mount two direct attacks on Israel. The first of these, on 13 April, 2024 involved an estimated  300 drones and missiles, most of which were intercepted by American, Israeli, British, French and Jordanian forces. The most recent attack on 1 October involved about 180 ballistic missiles. Once again, US-led forces were able to intercept the majority of these missiles. Israel has nevertheless vowed to retaliate against Iran. 

In recent years, India's foreign policy in West Asia has been aided by a convergence of interests among its three most important partners: the UAE, Saudi Arabia, and Israel. While this has come at the expense of India’s ties with their common rival Iran, it has helped Delhi widen and deepen economic and military ties with the three countries. Any expansion of the ongoing war presents potential risks for India, either by worsening ties with Iran or by reducing the convergence between its three key partners. 

India’s interests in Israel

India and Israel have a robust defence relationship, which is reflected in the sheer volume of military trade between the countries. Between 2012 and 2022, India was Israel’s largest defence importer– having purchased $2.9 billion in defence goods, including but not limited to UAVs, smart munitions and air defence systems. Companies from both countries also have several joint ventures, facilitating technological collaborations. While Israeli exports do not make up a majority of India’s arms, the two countries have co-produced arms as well.  Israel is at the forefront of developments in high-tech sectors such as semiconductors and cybersecurity making it a valuable partner for India’s security ambitions. This is reflected in MoUs between the countries to advance cooperation in these areas. 

Additionally, India has had significant bilateral trade with Israel, which reached $10.1 billion in FY 2022-23, excluding defence. While the trade relationship is significantly smaller than India’s trade with the Gulf, it is of strategic importance since it is mainly in the high-tech and defence sectors. India’s trade with the gulf is largely in the form of crude oil and energy with very limited defense-related imports.

India’s interests in the Gulf

India’s interests in the Gulf region are multifaceted. Firstly, India relies heavily on energy imports from the region.  IN FY 2022-23, India’s largest supplier of crude oil was Iraq (at $33.6 billion) followed closely by Saudi Arabia (at $29.1 billion) and then Qatar. Overall, the Gulf region accounted for as high as 57% of India’s crude imports and 74% of its natural gas imports amidst decreasing imports from Russia. In the last several days, the effects of the conflict in the Middle East have already been felt in India, with rising oil prices. For example, WTI crude futures prices skyrocketed from $1.09 per barrel to $70.92 per barrel. India will likely face rising oil prices in the coming weeks if conditions worsen. 

In addition to oil, bilateral trade between India and the Gulf Region is also one of India’s major interests. Trade from the Gulf countries constitutes one-sixth of India’s total trade. Moreover, India’s largest diaspora populations reside in the Gulf– with some of the largest international migration corridors being between India and the Gulf (with 3.47 million Indians in the UAE and 2.5 million in Saudi Arabia). Remittances from Gulf countries also significantly contribute to India’s economy. In FY 2020-21, 29% of India’s remittances came from just five Gulf states. Additionally, there are trade routes and projects like the IMEC (The India -Middle East-Europe Economic Corridor), which are at risk of being affected by the conflict.

India’s interests in Iran

India’s relationship with Iran has weakened significantly as a result of diminishing opportunities and strategic divergences. In a notable success, New Delhi and Tehran signed an agreement earlier this year that allows India to operate out of the strategically significant Chabahar port for the next decade.

Historically, India has relied on Iran for crude oil and energy imports. In recent times, US sanctions on Iran have restricted Indian imports from Iran, but the potential for ties between the two remains. There have been speculations that the United States will impose sanctions on Iranian exports after the missile strike on Israel on October 1.

Furthermore, Iran’s continued support for groups like Hamas and Hezbollah is at odds with India’s aversion towards violent non-state actors and its ties with Israel. In addition, Iran’s growing proximity with China, reflected in a 25-year strategic cooperation agreement signed in 2021, adds to the drift between India and Iran.

The Responses from the UAE and the Saudis

Both states have refrained from strong statements until recently. However, following the attacks on Hezbollah’s leadership, Saudi Arabia condemned Israel in a statement by Prince Faisal bin Farhan Al-Saud, who said the kingdom categorically rejects "all crimes perpetrated by Israel against the kindred Palestinian people”. A few days later, the UAE expressed its support for Lebanon and its sovereignty in a statement– despite having been relatively quiet for the last several months. 

India’s Response

Following Iran’s most recent missile attack on Israel, the Ministry of External Affairs (MEA) issued a travel advisory for Indian nationals– requesting them to avoid any non-essential travel to Iran. Prime Minister Narendra Modi also tweeted about a phone call with Israeli PM Netanyahu and spoke of “recent developments” condemning terrorism.  

After Israeli forces killed an Indian national working in Gaza for the UN in May, the Indian government only made a cautious statement that did not include calls for an investigation. Most recently, on October 3, the MEA made a statement which said India was “deeply concerned at the escalation of the security situation in West Asia and reiterate our call for restraint by all concerned and protection of civilians. It is important that the conflict doesn’t take a wider regional dimension and we urge that all issues be addressed through dialogue and diplomacy,".

Potential Repercussions for India

The ongoing war is a stress test for India’s West Asian foreign policy. The stressors primarily emanate from three sources. The first is that the war has raised the diplomatic costs of India’s relationship with Israel. If Israel suffers international isolation, the war could impact important bilateral ties in defence and high technology. 

The second stressor is the potential friction between Israel on the one hand and the UAE and Saudi Arabia on the other. Continued fighting and civilian fatalities could hurt these ties, potentially undermining the key assumption underpinning India’s strategy towards West Asia - that of an alignment between two Gulf monarchies (the UAE and Saudi Arabia) and Israel. Such developments could also force India to return to the more transactional and equidistant foreign policy it pursued in the 1990s and 2000s. A hands-off policy is likely to reduce Indian influence in the region by limiting its economic engagements and military ties with its three key partners.

The third stressor is Iran. Delhi will have to ensure its ties with Tehran do not deteriorate in ways that could impinge on Indian interests. There is also the risk that hostilities spread to the waters of the Persian Gulf, the route for much of India’s energy imports. While this could be a devastating outcome, it remains unlikely at the moment, since Iran’s actions thus far have been more calibrated than reckless.

Given these complex realities, India’s approach to the region must remain cautious yet flexible. It must retain some distance from Israel’s actions but must be ready to move swiftly if alignments in the region change. Delhi must also continue to make it clear to all parties that it wishes hostilities end at the earliest so the region can return to more productive endeavours. 

This has been adapted, condensed and updated from https://takshashila.org.in/research/the-techno-economic-impact-of-the-israel-hamas-war

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