Relevance : GS Paper II
Theme of the Article
By destabilising regions that supply oil and gas, US is keeping Rising Asia off-balance.
Introduction
The geography, politics, security and stability of West Asia over the past century have always been about oil.From the First World War till the Second Gulf War, it was about Western powers securing access to oil.
The recent shift
Over the past decade, with the US becoming self-reliant on the energy front, the focus of US policy has shifted to retaining control over the sources of supply, and not just ensuring its supply.
Oil supply disruption and Asian Economy
- While the trans-Atlantic nations, especially the US, no longer depend on Gulf oil, Asian economies, including China, Japan, South Korea and India, depend critically on Gulf oil.
- India’s dependence on imported oil has risen sharply over the past decade, and now exceeds 90 per cent of its domestic consumption.
- Due to destabilising of regions of the world that supply oil and gas, the US is throwing sand into the engine of Asian economic growth, keeping Rising Asia off-balance.
- US hostility towards Venezuela and Iran is having the effect of imposing constraints on the supply side at a time the market for oil was shifting from being a sellers’ market into becoming a buyers’ market.
- Decline in oil consumption and the increased use of renewables had begun to ease demand pressures, but geopolitics has intervened to once again destabilise the market. The countries most hurt are India, China and several developing countries.
- Having reinforced US influence within the Arab Sunni world, the US has been seeking to secure control of the Shia Islamic world — including Iraq, Syria and Iran. Saudi Arabia, the United Arab Emirates, Iraq, Iran and Kuwait are the major oil exporting nations that increasingly sell their oil to Asian economies, including China, India, Japan, Korea and the ASEAN economies.
- Regime change in Venezuela is also impacting the supply of oil.
What lies ahead for India?
- Many countries may appreciate Trump’s trade policy action against China because they have all been saddled with a persistent imbalance in their trade with China.
- However, bringing energy into play will not be acceptable to most economies, especially those like India that are now excessively dependent on imported Gulf oil.
- Nor, indeed, can India afford to support any policy of containment against China that would also end up hurting India.
- Be it hydrocarbons or nuclear, any denial of access to new sources of energy or any increase in the cost of energy can only hurt India’s growth prospects as much as it would hurt China.
- India could suffer collateral damage as a consequence of US policy of the geo-economic containment of China.
- Indian diplomacy will, therefore, have to ensure that economic actions being taken by the US aimed at hurting China do not end up hurting India also. Hence, India has a stake in ensuring peace and stability in the Persian Gulf.
- Sure, India can diversify its sourcing of oil and reduce its dependence on Iranian oil, as it has done before, but the problem of rising cost will remain. The destabilisation of the Persian Gulf will impact prices even before it impacts supply.
- If US is insensitive to India’s concerns, India will have to seriously rethink its foreign policy options since sustaining high economic growth with low inflation is a fundamental developmental priority and a key strategic objective.
Conclusion
Turmoil in Persian Gulf will hurt India’s economy. Delhi must rethink policy options if US ignores its concerns.
