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Prevailing oil politics in West Asia and concerns for India

By Sudhanshu Tripathi - posted Thursday, 18 December 2014


The oil embargo of 1973 and 1974, during which oil prices quadrupled, and the oil crisis of 1978 and 1979, when oil prices doubled, graphically illustrated how vulnerable the needy countries had become to the foreign producers of oil. The oil crises of the 1970s had an unanticipated side-effect. As a result of increasing supplies and declining demand, oil prices fell from $35 a barrel in 1981 to $9 a barrel in 1986.

The sharp slide in world oil prices was one of the factors that led Iraq to invade neighbouring Kuwait in 1990 in a bid to gain control over 40 per cent of West Asian oil reserves. Consequently, the western industrialised nations were quick to react. In 1990, the UN Security Council approved a commercial, financial and military embargo on Iraq. The Iraqi Government responded by declaring the annexation of Kuwait as its province. On November 29, 1990, the Security Council passed a resolution authorising the use of any means necessary to free Kuwait.

A military force led by the US attacked Iraq to free Kuwait. The war led to a clash in the oil market between the owners of the resources and the users in the industrialised world, paving the way for the fresh emergence of the oil politics in the world. The world oil markets, however, gained a global political dimension. On April 23, 2002, the Iraqi President again called upon the Arab states to cut their oil exports by half and ban sales to the US, a retaliatory measure for Washington's support to Tel Aviv against Palestine. As part of a broader embargo against the US and Israel, Iraq unilaterally declared the suspension of its oil exports for the next 30 days. The oil market, drained of two-million barrels of Iraqi oil a day, might not have significantly affected prices, but it did create the political tension that was significant in an already vitiated atmosphere.

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Oil as a political weapon

When oil was used as a weapon for the first time in 1973, it had a dramatic and lasting effect on the global economy and on the economies of the Western states. As a weapon of economic embargo, no one could deny its success, quadrupling the price of the world's major commodity in a short period of just few days. Today in the West Asian region, it is widely accepted that "Economics has taken priority over politics… co-operation has replaced confrontation".

Concerns for India

Indeed, India has important political, economic and security stakes in the peace and stability of West Asia. In fact, India is heavily dependent on energy supplies from the Gulf region. Energy imports from the region constituted around 63 per cent of India's total oil imports in 2012-13. The region is the leading trading partner for India with a total trade of around US$ 200 billion in the same year. Around seven million Indian passport holders live in the region and they form another important symbiotic link between India and the region.

The absence of a robust security bulwark and deep rooted intra-regional conflicts raises concerns about the viability of regional security in West Asia. There is a realisation that India should start getting involved in the regional security of West Asia by helping create a regional security bulwark which may deter the outside interference in the region. Further, India forms a part of India's extended neighbourhood.

The present political transformation in the region as well as the realisation of India's rise in stature as an emerging regional power has necessitated a fresh look at this geo-strategically important region. Already, this region accounts for the largest trade volumes for India overtaking India's trade with China. The six Gulf Cooperation Council (GCC) countries for instance constitute India's largest socio-economic partner, as manifested by the following facts. Over 50 per cent of flight connections between India and the world are between India and the GCC countries.

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It is also significant that the remittances from the region are just about equal to what India pays for its oil purchases from the Gulf. Though the economic leg of India-Gulf relationship remains strong the political leg is not as strong and promising as it ought to be. There are number of concerns that demand rethinking and fresh approach by India towards this region.

For the small Gulf States, their security is their Number One priority. In exchange for the oil, they shop for their security. These smaller states live in a tense zone next to "tough and expansionist neighbours." India is making a mistake like the Western countries of viewing the region through the prism of only "oil" and "gas" while ignoring its rich cultural, diverse and historical relations which has been reduced to mere economic business and remittances issues. The Arab Gulf states view Iran as a destabilising force which India does not consider. Also they do not like India's growing strategic relations with Israel.

Obviously, the Arab Gulf is seeking India's larger and greater role in the region. Politically, relations were strong with Egypt, Syria and Algeria, thanks to the policy of non-alignment and pro-Palestine stand that India adopted right after Independence in 1947. Given India's historical and cultural ties, expectations from India are high. Despite India's increasing dependence on West Asian oil, its approach towards this region has to transcend beyond the energy focused policy maintained so far.

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About the Author

Dr Sudhanshu Tripathi is Professor at UPTROU, Prayagaraj (UP), Bharat (India).

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