The Crisis in The Strait of Hormuz and How It Affects India

First of all, what happened in the Strait of Hormuz and why is it such a big concern amongst countries?

In December 2011, the European Union led by France pushed for a new round of sanctions against the Islamic Republic of Iran in light of the recent IAEA report of Iran’s nuclear program which states that Iran is moving towards acquiring capacity to build a nuclear weapon.

In retaliation, Iran announced naval exercises in the Persian Gulf and the main objective of the exercise was to simulate a shut-down of the Strait of Hormuz. Statements made by the commander of the Iranian navy, Habibollah Sayyari, escalated the situation further when he said that blocking the strait would be ‘as easy as drinking a glass of water’.

Image via Wikipedia

They also threatened action against the 5th fleet of the US navy which is stationed in Bahrain. They warned the US aircraft carrier not to move into the Persian Gulf otherwise there would be serious consequences.

The situation became tense. World oil prices went up by 2%. Britain and France send their warships into the Persian Gulf in order to keep the strait open.

Thankfully, the situation did not go too much out of hand with Iran’s vice President publicly stating that they will not be shutting the strait and that they were committed to the security of the Strait of Hormuz and the Persian Gulf in general. The naval exercises come to an end and the situation is partly defused. But this does not mean that countries can now rest in peace.

In this scenario, the most affected nations would be the Islamic Republic of Iran, the Persian Gulf states namely, Qatar, Kuwait, Saudi Arabia, UAE, Oman, Bahrain and Iraq; and also the United States whose 5th Fleet is stationed in Bahrain and also having various military assets all over the Persian Gulf including the Al-Udeid base in Qatar, Al Dhafra in UAE and other bases.

Then finally comes the countries who depend on these countries for oil namely, China, India, Japan and other South east Asian nations. What are the implications in case the Strait shuts down, especially in the context of India?

It is important to understand that countries like India and China rely on this region for its energy. Most of their oil comes there. When the crisis took place, the world oil price rose by 2%. This would mean a corresponding increase in the oil prices in India which is already quite high compared to other countries.

India’s stand in the middle east becomes jeopardized because of the fact that India maintains cordial relations with both Iran and the Arab countries. India buys oil from both parties and it becomes really hard to pick sides. If India were to negotiate between the crisis, India’s objective would be to stick to a very neutral stand and get it resolved peacefully, even if it believes that one side is wrong.

If the Strait gets blocked, neither Iran nor the Arabs will be able to supply India with oil. And since a block would take weeks or even months to clear, India would be in jeopardy. This is not to say that India will not get oil at all. The Arabs may try to get the oil shipped from the Red Sea and then onwards to India, or India can seek other sources from other oil-producing countries.

But it can be a guarantee that the cost associated with re-routing the oil routes or bringing oil from other countries is going to be very expensive. This will retard the growth of the country for sometime to come.

So what should India do in this regard?

First of all, India should try and invest in alternate routes where the oil can be transported at a cheaper cost. For example, there is a pipeline that connects Abu Dhabi from the western coast of UAE to Fujairah which is on the eastern coast of UAE and completely bypassing the Strait of Hormuz from where it can be shipped to various countries. The pipeline already exists, but it needs to be expanded and therefore Indian investment can prove handy here. In fact, if there is more investment, the oil can be extended to Oman which can be used to transport oil at a much cheaper rate.

India must be prepared to tackle a scenario where the Strait could be blocked. India must be able to send its ships and other teams to ensure that the strait is opened. In case it is blocked due to the sinking of a ship, India must be prepared to help the forces in the region and remove the blockage.

India must also identify new sources of energy all over the world and establish deeper ties with them. Central Asia especially is a good place to engage with. Indian diplomacy must go a long way in order to attract more partners who we can count on. At the same time, diplomacy must be used in order to pacify both the Iranians and the Arabs in order to prevent them from becoming overly hostile to each other and thereby escalating tensions.

India has a lot of work to do in order to ensure its energy security. Unfortunately, its engagement in the region has not been so strong and it needs to work on that if it needs to keep up with countries like China, Japan and South Korea when it comes to national development.

Copyright © 2012 Ashwath Komath