Ajit Ranade: West Asia's upheaval intensifies India's challenges of geopolitics

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Ajit Ranade The Israel-Iran war will make it harder for New Delhi to navigate global turbulence even as an oil flare-up poses a threat. But it could also spur domestic policy changes—in favour trade diversification, for example—that strengthen our economy. The fallout of the hostilities: Over a hundred people already killed, cities plunged into fear, critical infrastructure damaged and diplomacy left in the rubble. Gift this article
The world crossed a dangerous threshold on 13 June. Israel attacked Iran, targeting nuclear facilities, military bases and even residential zones in order to kill top military leaders and nuclear scientists. Israel sees a nuclear-armed Iran as an existential threat and says that Iran's uranium enrichment programme had reached a point where a nuclear weapon was just weeks away.
The world crossed a dangerous threshold on 13 June. Israel attacked Iran, targeting nuclear facilities, military bases and even residential zones in order to kill top military leaders and nuclear scientists. Israel sees a nuclear-armed Iran as an existential threat and says that Iran's uranium enrichment programme had reached a point where a nuclear weapon was just weeks away.
The enrichment, while in violation of Iran's commitment to complying with nuclear safeguards, as noted recently by the United Nations' watchdog, was still nowhere close to weapons grade, as per US experts. Hence Israel's unprovoked attack was a big shocker.
Israel so far had stopped short of full-scale war, preferring sabotage, cyber-attacks and targeted killings. But now Israel has crossed a line of no return for itself, Iran and the world. Iran launched a counter attack with over 200 ballistic missiles. It aimed at more than 150 Israeli targets that included nuclear sites and residential zones.
Also Read: Javier Blas: An Israel-Iran war may not rattle the oil market
The fallout of the hostilities: 130 people already killed, cities plunged into fear, critical infrastructure damaged and diplomacy left in the rubble. This escalation by Israel into war has upended Middle Eastern geopolitics. What was once a high-stakes diplomatic standoff has now escalated into a military confrontation. This will likely spiral up, notwithstanding global voices for restraint.
From a statement of US President Donald Trump, it is obvious that Israel had tacit American support, with all its military might. He has been drawn into making a choice that he would have rather avoided: i.e., choosing between playing peacemaker and backing Israel solidly.
On the other hand, all the Gulf states have condemned Israel's strike. But some like Saudi Arabia and the UAE might be quietly relieved at Iran's weakened position. Riyadh is Tehran's rival in a quest for regional dominance.
China has stayed pointedly silent. Iran is central to its energy security and infrastructure ambitions for the Belt and Road Initiative, but Israel is also a key technology partner. Maybe China wants to position itself as a non-interventionist peacemaker, striking a contrast with unconditional support by the US for Israel, the aggressor. This Middle East distraction for Washington can work to China's advantage, as it gains manoeuvring space to flex muscle on Taiwan and in the wider Indo-Pacific.
Russia had asked for an immediate Security Council meeting and resolution, knowing full well that the US will stonewall it with a veto. Hence its condemnations have lacked force.
The Shanghai Cooperation Organization (SCO), of which India is a member, has condemned Israel's attack, but India has carefully distanced itself from the SCO's common statement. Europe is alarmed by Israel, but not sympathetic to Iran, given the latter's record on enrichment.
These actions of various international players reveal a global system where major powers are acting increasingly based on narrow transactional interests rather than any shared security architecture. It has injected fresh volatility into an already fragile global order.
Israel has America's political, military and diplomatic support, whereas no major power is unequivocally with Iran. At most, it has ambivalent, conditional or weak support from various quarters. Non-state actors that could have aided it, such as Hezbollah and the Houthis, have been weakened. Hence, Tehran's resilience will be tested and it might resort to desperate measures. It has threatened strikes on the military bases of Israel's allies. These include US bases.
It has also drawn attention to another lever of high-impact force with a threat to bar the movement of oil through the Strait of Hormuz, from where 20% of the world's oil flows.
Meanwhile the Ali Khamenei administration is facing strong opposition at home, which Israel has sought to exploit.
Instability in West Asia affects India deeply, for the stakes are immediate and structural. Some 60% of India's crude oil passes through the Strait of Hormuz. We have 8 million citizens in the Gulf region. Oil prices above $100 will worsen inflation, widen the current account deficit, hasten the rupee's fall and strain the fiscal deficit. Last year net inbound foreign direct investment (FDI) was almost negligible.
Investors will now adopt a wait- and-watch attitude, thus hurting our growth prospects. New Delhi has to balance its energy security and Chahabar interests in Iran with its tech and defence partnership with Israel. It cannot remain silent on Israel's attack on Iran sovereignty because that would seem like moral abdication.
This is the third such conflict where India finds itself locked in a narrow diplomatic navigation route and forced into a tight balancing act. Can New Delhi publicly and strongly condemn Russia in Ukraine? Can it condemn Israel's ongoing treatment of people in Gaza?
It has to protect its strategic autonomy, while remaining a credible power with aspirations to UN Security Council membership and great power status. India's response reflects preference for non-alignment and quiet diplomacy.
Also Read: Israel's war on Iran to hit Indian workforce
India's foremost priority is the domestic economy, given our vulnerability to commodity prices, oil, exchange rates and investment flows. We cannot count on discounted Russian crude, not least because of the likely US reaction. Our free trade agreement with the UK will kick in next year, and a treaty with the US is uncertain.
The big rate cut by the Reserve Bank surprised the market, but now in hindsight seems like a great pre-emptive strike. A large monetary stimulus will be useful ahead of signs of economic weakening. There is also massive liquidity injection. Prior to the present conflict, the 2025-26 GDP growth estimate of 6.5% was the lowest in four years. It might get worse, along with world growth, as even the World Bank's Global Economic Prospects points out.
India's private sector investment-to-GDP ratio has been stagnating at 10% for a decade. A recent government survey of private sector capital expenditure intentions points to a decline this year. The government will have to keep up public capex to provide a growth impetus, as it has done in the past four years. On FDI, we must think creatively, as we need at least 2% of GDP on a net basis.
New Delhi must revisit its stance on Chinese investment to allow it at least in non-sensitive sectors, such as automotive products (especially electric vehicles), infrastructure and renewable energy. Chinese exports can use Indian value chains.
In the medium term, we need to diversify our energy sources and export markets. Our services export boom must go beyond Western customers. And, of course, we need a great thrust on building human capital, skilling and research.
Paradoxically, the West Asian crisis might be an opportunity for India to emerge stronger with a bigger stature.
The author is senior fellow with Pune International Centre. Topics You May Be Interested In Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

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Hindustan Times

33 minutes ago

• Hindustan Times

Iran oil doomsday in Hormuz may be more fear than reality: Bousso

, not 55km , in paragraph 8) Iran oil doomsday in Hormuz may be more fear than reality: Bousso * US strikes on Iran spur fear of disruption to Middle East oil exports * Iran able to block the Strait of Hormuz, has tried in the past * Disruptions likely to be met by swift response from US Navy By Ron Bousso LONDON, - U.S. strikes on several Iranian nuclear sites represent a meaningful escalation of the Middle East conflict that could lead Tehran to disrupt vital exports of oil and gas from the region, sparking a surge in energy prices. But history tells us that any disruption would likely be short-lived. Investors and energy markets have been on high alert since Israel launched a wave of surprise airstrikes across Iran on June 13, fearing disruption to oil and gas flows out of the Middle East, particularly through the Strait of Hormuz, a chokepoint between Iran and Oman through which around 20% of global oil and gas demand flows. Benchmark Brent crude prices have risen by 10% to over $77 a barrel since June 13. While Israel and Iran have targeted elements of each other's energy infrastructure, there has been no significant disruption to maritime activity in the region so far. But President Donald Trump's decision to join Israel by bombing three of Iran's main nuclear sites in the early hours of Sunday could alter Tehran's calculus. Iran, left with few cards to play, could retaliate by hitting U.S. targets across the region and disrupting oil flows. While such a move would almost certainly lead to a sharp spike in global energy prices, history and current market dynamics suggest any move would likely be less damaging than investors may fear. CAN THEY DO IT? The first question to ask is whether Iran is actually capable of seriously disrupting or blocking the Strait of Hormuz. The answer is probably yes. Iran could attempt to lay mines across the Strait, which is 34 km wide at its narrowest point. The country's army or the paramilitary Islamic Revolutionary Guard Corps could also try to strike or seize vessels in the Gulf, a method they have used on several occasions in recent years. Moreover, while Hormuz has never been fully blocked, it has been disrupted several times. During the 1980s Iran-Iraq war, the two sides engaged in the so-called "Tanker Wars" in the Gulf. Iraq targeted Iranian ships, and Iran attacked commercial ships, including Saudi and Kuwaiti oil tankers and even U.S. navy ships. Following appeals from Kuwait, then-U.S. President Ronald Reagan deployed the navy between 1987 and 1988 to protect convoys of oil tankers in what was known as Operation Earnest Will. It concluded shortly after a U.S. navy ship shot down Air Iran flight 655, killing all of its 290 passengers on board. Tensions in the strait flared up again at the end of 2007 in a series of skirmishes between the Iranian and U.S. navies. This included one incident where Iranian speedboats approached U.S. warships, though no shots were fired. In April 2023, Iranian troops seized the Advantage Sweet crude tanker, which was chartered by Chevron, in the Gulf of Oman. The vessel was released more than a year later. Iranian disruption of maritime traffic through the Gulf is therefore certainly not unprecedented, but any attempt would likely be met by a rapid, forceful response from the U.S. navy, limiting the likelihood of a persistent supply shock. HISTORY LESSON Indeed, history has shown that severe disruptions to global oil supplies have tended to be short-lived. Iraq's invasion of neighbouring Kuwait in August 1990 caused the price of Brent crude to double to $40 a barrel by mid-October. Prices returned to the pre-invasion level by January 1991 when a U.S.-led coalition started Operation Desert Storm, which led to the liberation of Kuwait the following month. The start of the second Gulf war between March and May 2003 was even less impactful. A 46% rally in the lead-up to the war between November 2002 and March 2003 was quickly reversed in the days preceding the start of the U.S.-led military campaign. Similarly, Russia's invasion of Ukraine in February 2022 sparked a sharp rally in oil prices to $130 a barrel, but prices returned to their pre-invasion levels of $95 by mid-August. These relatively quick reversals of oil price spikes were largely thanks to the ample spare production capacity available at the time and the fact that the rapid oil price increase curbed demand, says Tamas Varga, an analyst at oil brokerage PVM. Global oil markets were also rocked during the 1973 Arab oil embargo and after the 1979 revolution in Iran, when strikes on the country's oilfields severely disrupted production. But those did not involve the blocking of Hormuz and were not met with a direct U.S. military response. SPARE CACITY The current global oil market certainly has spare capacity. OPEC , an alliance of producing nations, today holds around 5.7 million barrels per day in excess capacity, of which Saudi Arabia and the United Arab Emirates hold 4.2 million bpd. The concern today is that the vast majority of the oil from Saudi Arabia and the UAE is shipped via the Strait of Hormuz. The two Gulf powers could bypass the strait by oil pipelines, however. Saudi Arabia, the world's top oil exporter, producing around 9 million bpd, has a crude pipeline that runs from the Abqaiq oilfield on the Gulf coast in the east to the Red Sea port city of Yanbu in the west. The pipeline has capacity of 5 million bpd and was able to temporarily expand its capacity by another 2 million bpd in 2019. The UAE, which produced 3.3 million bpd of crude oil in April, has a 1.5 million bpd pipeline linking its onshore oilfields to the Fujairah oil terminal that is east of the Strait of Hormuz. But this western route could be exposed to attacks from the Iran-backed Houthis in Yemen, who have severely disrupted shipping through the Suez Canal in recent years. Additionally, Iraq, Kuwait and Qatar currently have no clear alternatives to the strait. It is possible that Iran will choose not to take the dramatic step of blocking the strait in part because doing so would disrupt its own oil exports. Tehran may also consider any further escalation fruitless in light of U.S. involvement and will instead try to downplay the importance of the U.S. strikes and come back to nuclear negotiations. In the meantime, spooked energy markets, fearing further escalation, are apt to respond to the U.S. strikes with a sharp jump in crude prices. But even in a doomsday scenario where the Strait of Hormuz is blocked, history suggests markets should not expect any supply shock to be persistent. Enjoying this column? Check out Reuters Open Interest , your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis. Markets are moving faster than ever. ROI can help you keep up. Follow ROI on LinkedIn and X. This article was generated from an automated news agency feed without modifications to text.

The Print

33 minutes ago

• The Print

Will Russia & China back Iran after US strikes? They're quiet, calculating allies

The Russian foreign ministry, in a wordy statement , condemned American strikes on 'several nuclear facilities in the Islamic Republic of Iran.' Russia even reiterated its previous statement – that the US attack stood in 'violation of international law, the UN Charter, and relevant resolutions by the UN Security Council, which has consistently and unequivocally deemed such actions unacceptable.' How does this play out for powers like Russia and China, which have continued to speak out against any military action? In March this year, Russia, China, and Iran jointly stated that Tehran's nuclear programme is 'exclusively for peaceful purposes, and not for the development of nuclear weapons.' Israel's Operation Rising Lion seemed to be an independently led series of strikes against Iran. But after six bombers flew 18 hours to attack three nuclear sites in Iran, Israel's action now seems to have been part of a broader deception strategy—which the United States utilised to dismantle Iran's nuclear programme. In its call for peace, Russia further demanded 'an immediate end to aggression and for stepping up efforts to bring the situation back onto a peaceful, diplomatic track.' Russia's position on the crisis remains standard—calling for peace, negotiations, and diplomacy as effective channels for a resolution. Meanwhile, no part of Russia's statement claims direct intervention in the crisis, which must come as no surprise. Although a strategic partner of Iran, Russia's offerings have been more implicit, such as supporting Tehran's civilian nuclear programme or defence exports. While the Kremlin itself is fighting a war next door, it may still offer to play the role of a cardinal peacebroker between the US and Iran—and prove to be the most effective of all. Russia remains the best-suited friend for Iran in the present crisis. Moscow stands as Iran's most strategically placed partner in the region. It not only possesses deep regional expertise but has operated militarily and diplomatically across the Middle East for decades. And if Iran is to receive any meaningful backing against the US and its allies, it can come only from a capable nuclear power like Russia. A most unlikely situation. Meanwhile, as Iranian foreign minister Abbas Araghchi proceeds to meet President Vladimir Putin, Russia could project a few probable security guarantees on Iran's behalf. This could include assurances against regime-change operations—an option President Donald Trump has openly considered on his social media—recognition of Iran's sovereignty and right to self-defence, and possible military non-aggression agreements brokered through multilateral channels. As for the United States and its allies, Russia may push for Iran's recommitment to nuclear limits under renewed international supervision, ending any proxy attacks on American and allied forces and perhaps securing more regional support for Iran. Aside from peace brokerage, Russia can offer its military-technical cooperation—which can include upgrading Iran's advanced air defence systems, sharing real-time satellite surveillance data to help Iran monitor US troop movements or detect incoming attacks, and providing space surveillance support. But what about this conflict's likely impact on Russia? It's less of a blow and more of an opportunity. As global crude oil prices surge, Moscow might return as the most reliable oil exporter globally. Second, there will likely be reduced American attention toward the Black Sea, Eastern Europe, and the Arctic—which are fundamental to the Kremlin's strategic vision for the region. It has also restored Russia's position in the global power lexicon, which had weakened after the Ukraine war. Also read: Trump tried to belittle India, but his Iran gamble has handed Modi unexpected diplomatic space China's response China, too, has condemned the attack, citing violation of the UN charter and international law. While this seems to be the standard response, Tehran values solidarity. China, however, would not directly engage in the conflict for two big reasons. First, Beijing likes to maintain strategic ambiguity over military risks and prefers to exert influence through diplomacy, economic leverage, and other indirect means. Directly confronting the US—whose prominence, mainly in terms of naval presence, has only grown—offers little advantage. Second, China's primary concern is energy stability. Direct involvement in a Gulf conflict would jeopardise its vital oil imports. While disruptions to Iranian oil exports would undoubtedly impact China, any direct military involvement would force Beijing to undertake a substantial and risky reconfiguration of its broader energy import strategy with other Gulf partners—which would be risky and unaffordable. However, there are other possible ways for Beijing to support Iran. While China avoids overt arms transfer to hot zones, it can covertly share technology that may include missile guidance technology, drones, cyber tactics, and so on. There was a strong role of space technology in the US's attacks on Iran, allowing it to strike nuclear bases with precision and without being detected. China could covertly offer limited space technology to support Iran, which Russia is also likely to offer. As permanent members of the United Nations Security Council, Russia and China possess significant diplomatic influence that they can jointly utilise to advocate for Iran's position and pressure the UN to take meaningful actions. Meanwhile, the effectiveness of this diplomatic support against America's non-concessional stance on Tehran's nuclear ambitions remains to be seen. But both Russia and China are well-positioned to lead global efforts through multilateral institutions such as the UN and the International Atomic Energy Agency. They can push for an international recognition of the potential radioactive and humanitarian consequences of further escalation, and urge a shift from punitive frameworks to preventive diplomacy. Rishi Gupta is a commentator on global affairs. Views are personal. (Edited by Zoya Bhatti)

The Hindu

35 minutes ago

• The Hindu

Markets slump on heightened tensions in Middle East; Sensex drops 500 points

Stock market benchmark indices Sensex and Nifty tumbled on Monday (June 23, 2025), as intensifying tensions in the Middle East after the U.S. bombed three major nuclear sites in Iran unnerved investors. After losing over 900 points in day trade, the 30-share index recovered some lost ground to close with a loss of 511.38 points or 0.62% at 81,896.79. During the day, it tumbled 931.41 points or 1.13% to 81,476.76. The 50-share NSE Nifty dropped 140.50 points or 0.56% to 24,971.90. The U.S. bombed three major nuclear sites – Fordow, Natanz and Isfahan – in Iran, directly engaging itself in the Israel-Iran conflict. From the Sensex pack, HCL Tech, Infosys, Larsen & Toubro, Mahindra & Mahindra, Hindustan Unilever, ITC, Tata Consultancy Services and Maruti were the biggest laggards. In contrast, Trent, Bharat Electronics, Bajaj Finance and Kotak Mahindra Bank were among the gainers. In Asian markets, South Korea's Kospi and Japan's Nikkei 225 index settled lower, while Shanghai's SSE Composite index and Hong Kong's Hang Seng ended higher. European markets were trading lower in mid-session. U.S. markets ended mostly lower on Friday (June 20, 2025). Global oil benchmark Brent crude climbed 0.49% to $77.39 a barrel. 'Last Friday (June 20, 2025), markets buildup in anticipation of easing Middle East tensions, following the U.S. announcement of a two-week window to deliberate its involvement in the Israel-Iran conflict. However, the unexpected U.S. airstrike on Iran's nuclear facilities over the weekend disrupted those expectations, triggering a sharp rise in crude oil prices and leading to consolidation in the domestic equity market,' Vinod Nair, Head of Research, Geojit Investments Limited, said. 'Despite the initial setback, the market recovered some of its losses, supported by gains in capital goods and metal stocks, as fears of an immediate oil supply disruption remained low,' he added. Foreign Institutional Investors (FIIs) bought equities worth ₹7,940.70 crore on Friday (June 20, 2025), according to exchange data. On Friday (June 20, 2025), the 30-share BSE Sensex surged 1,046.30 points or 1.29% to settle at 82,408.17. The Nifty climbed 319.15 points or 1.29% to 25,112.40.