The geopolitical landscape of the Middle East and West Asia has been shaped by a series of prolonged conflicts that have had profound implications not only for the region but also for countries like India, which rely heavily on trade and energy supplies from this area.
The new wave of tension erupted following Iran's launch of approximately 200 ballistic missiles towards Israel on Tuesday evening.
From the Iran-Iraq War of the 1980s to the ongoing civil wars between Israel and Hamas and Iran, these conflicts have disrupted trade routes, driven up oil prices, and created economic challenges for nations dependent on the stability of the region. A timeline of these conflicts show how they have impacted India's trade below.
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1980-1988: Iran-Iraq War
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Conflict: A prolonged and brutal war between Iran and Iraq.
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Impact on India: The war caused significant disruptions in oil supplies, leading to increased oil prices. India, heavily reliant on oil imports from the region, faced higher import bills and energy costs. This period saw a steep decline in trade and commerce between India and the warring nations.
1990-1991: Gulf War
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Conflict: Iraq’s invasion of Kuwait and the subsequent intervention by a U.S.-led coalition.
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Impact on India: The conflict led to a sharp rise in oil prices and necessitated the evacuation of over 170,000 Indian nationals from Kuwait. The increased oil prices strained India’s economy and trade balance. The war also precipitated the 1991 Indian economic crisis, with a swelling oil import bill and slumping exports.
2003-2011: Iraq War
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Conflict: The U.S.-led invasion of Iraq to overthrow Saddam Hussein.
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Impact on India: The war disrupted trade routes and increased oil prices. India’s exports to Iraq, which had been a significant market, were severely affected. The conflict further diminished India’s commercial ties with Iraq.
2011: Syrian Civil War
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Conflict: An ongoing conflict involving the Syrian government, opposition forces, and extremist groups.
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Impact on India: The war disrupted trade routes and increased logistics costs. India’s oil investments in Syria were abandoned due to security concerns. The conflict also led to increased transit costs and disrupted merchandise imports.
2014: Yemen Civil War
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Conflict: Conflict between the Houthi movement and the Yemeni government.
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Impact on India: The war disrupted shipping routes through the Red Sea, affecting India’s trade. Increased freight costs and delays impacted the import of essential goods and exports. The conflict also led to significant disruptions in India’s trade with Yemen.
Recurring: Israel-Gaza Conflicts
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Conflict: Multiple conflicts between Israel and Hamas in Gaza.
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Impact on India: These conflicts led to increased oil prices and disrupted trade routes. India’s exports to the region were affected, and logistics costs increased. The ongoing conflicts have also impacted India’s ambitions of playing a bigger role in global trade.
2023-2024: Recent Escalations
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Conflict: Renewed conflicts involving Israel, Hezbollah, and Iran.
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Impact on India: Significant disruptions in trade, increased logistics and insurance costs, and decreased exports to affected countries. The Red Sea route, crucial for India’s trade could face severe disruptions.
Think tank Global Trade Research Initiative stated that the conflict is already hurting India's trade with countries like Israel, Jordan, and Lebanon.
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Economic Implications for India
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Oil Dependency: India is one of the largest importers of oil, sourcing about 85% of its crude oil needs from abroad, with a significant portion from the Middle East. Fluctuations in oil prices directly impact India’s trade balance and inflation rates.
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Trade Diversification: The conflicts have prompted India to diversify its trade partners, reducing dependency on volatile regions. This includes increasing trade with the U.S. and other non-Middle Eastern countries.
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Strategic Partnerships: India has sought to strengthen strategic partnerships with countries in the Gulf Cooperation Council (GCC) to ensure energy security and enhance trade ties, evidenced by initiatives like the India-UAE Comprehensive Economic Partnership Agreement (CEPA)
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