Iraq turmoil: India should prepare for the worst

  • Hindustan Times, New Delhi
  • Updated: Jun 18, 2014 01:38 IST

With the Islamic State in Iraq and al-Sham (ISIS) capturing key towns in northern Iraq, including Mosul and Tikrit, and the democratically elected Nouri al-Maliki government seemingly clueless about what to do, the prospects of peace and normalcy returning to the war-torn West Asian country in the near future are slim. Even though United States’ President Barack Obama has sent in Marines to safeguard its consulate in Baghdad and has ordered the USS George HW Bush to move towards the Persian Gulf, it is doubtful whether he has the stomach to send troops again to Iraq. Washington is mulling air strikes and is in talks with neighbours, like Iran, to overcome this crisis.

India’s concerns lie mainly in two areas: First, the safety of Indians who are working in Iraq, and second, the probable rise in oil prices if the sectarian violence spreads to the rest of the country and if the US steps in. The uncertainty in the country could see oil prices going northward, adversely affecting India’s economy. The ministry of external affairs should use its clout with Baghdad and the neighbouring countries to secure the safe exit of Indians from Iraq. India’s good ties with Iraq date back to the 1950s and since then economic and cultural ties between the two have grown. The good relations between New Delhi and Baghdad helped India especially during the 1990 Gulf War: Indians in Kuwait could safely exit via Iraq.

If the unrest escalates, it will affect the oil prices, signs of which were seen on Monday when crude prices hit a nine-month high after growing speculation of a US strike on Iraq. After Saudi Arabia, Iraq is the largest supplier of oil to India, with an annual trade of around $20 billion. Reserve Bank of India governor Raghuram Rajan said India was closely monitoring the situation and that the domestic economy is well prepared to face shocks from the external sources. That said, with more than 75% of its oil imported, soaring energy prices will exert pressure on the rupee. A below-average monsoon will affect the summer crops and this will push prices upwards, causing further food inflation. These two factors will have a telling effect on the economy and that’s not good news for the Narendra Modi government, which has made controlling inflation a priority. The Centre, meanwhile, must take all the necessary steps to ensure the safe exit of Indians from Iraq and at the same time figure out ways to tackle a possible rise in oil prices.

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