West Asia escalation can put India’s energy security to the test

As the attack by America and Israel on Iran enters its third day, the world is torn between incomprehension and comprehension.

What happens next in the war theatre is anyone’s guess. How long will the battle last? Can Iran inflict enough damage for the US and Israel to withdraw? If it lasts long, what will it mean for West Asia? Might Israel or Saudi Arabia establish dominance over the region? What happens to smaller kingdoms like Qatar, Bahrain and Kuwait — and to the economic zones of Dubai and elsewhere? Will they continue to attract capital?

Even as these questions remain impossible to answer, comprehension is dawning elsewhere.

For countries in the Global South, and especially India, the attack on Iran collapses several anxieties into one moment: energy dependence laid bare, international law treated as optional, and economic power concentrating in fewer, more unaccountable hands. Oil prices may spike, yes. But the deeper shock is political. It is about sovereignty, about climate pathways that may now be derailed, and about whether developing countries will be pushed yet again into choosing sides in someone else’s war. 

The energy question

As of this moment, most attention has focused on oil prices. “WTI crude oil futures rose more than 6% to above $71 per barrel on Monday, the highest in over eight months, after earlier surging as much as 10% as unprecedented joint US and Israeli strikes on Iran sharply escalated tensions across the Middle East,” wrote Trading Economics.

They will rise higher yet. Between tankers turning back before the Strait of Hormuz, the prospect of wider war in West Asia, and profiteering by the oil industry, crude prices might rise by as much as 50% in the coming days.

 

 

 

Both disruptions to supply and spikes in crude prices will exact a heavy price on countries. Take India. It sources 40% of its oil through the Strait of Hormuz — and over 50% of its oil, 60% of its LNG, and 80% of its LPG from West Asia. For this reason, the US and Israeli attack on Iran is one more reminder of the country’s energy dependence in general — and on West Asia in particular.

The short-term picture is impossible to predict. Diversification of petroleum sources is easier said than done. In part because India’s oil purchases are large — the country is the third-largest consumer of crude oil in the world. Finding an equivalent amount of crude, LPG or LNG from other markets is not easy, especially with the US proscribing further oil purchases from Russia, one of the biggest petroleum producers in the world. 

 

 

That leaves India with oil producers like the USA, Canada and Venezuela but, as CarbonCopy has said earlier, much of this oil is very expensive by the time it reaches India, which will result in the government and oil companies selling it at a loss.

The country’s other option is to work harder on energy independence. Which means continued reliance on coal, and a redoubling of effort on coal gasification and renewable energy (RE), especially solar. Each of these, however, comes with large challenges.

Coal is intensely polluting. As for coal gasification, while India aims like China (it, too, uses coal gasification as a hedge against oil exports) to convert 100 million tonnes of coal into syngas by 2030, large questions abound there. While the country is seeing commercial-scale coal gasification projects, adding up to about 25-30 million tonnes, these are mostly being set up by industrial plants for their own use. A wider scaffolding that can accelerate adoption of syngas (and other byproducts) is still missing.

For this to happen, India has to start building large-scale coal gasification utilities that produce syngas and then supply it to industries located around them.

Renewables come with their own challenges. India’s RE supply chain — be it for photovoltaics or EVs — is highly dependent on China. The country, as we know, leads the world in everything from critical mineral stockpiles to RE technology to manufacturing capacities.

India has to build its own capabilities in the RE sector to achieve meaningful energy independence. For this to happen, the country has to invest in R&D, source critical minerals more aggressively, and redo the design of its broken RE markets so that it can add RE faster.

Other countries sourcing oil from West Asia will have to contend with similar questions.

These, however, are relatively long-term questions, hinging substantially on how long the war in West Asia will last.

Yet larger questions lie elsewhere.

Pax Americana, redux

What the world is seeing right now is a fight between those who defend the global rule-based order, imperfect as it was, and those who want to do away with it — and profit from the deregulation that follows.

Iran was attacked even though its talks with the US, over Tehran’s nuclear ambitions, were making headway. The two sides planned to resume negotiations after consultations in their countries' capitals, with technical-level discussions scheduled to take place this week in Vienna. And then, taking everyone by surprise, Israel and the US attacked Iran.

This is an extraordinary moment. Much has been written about how, in the run-up to their invasion of Iraq, the US lied to the UN Security Council about Iraq’s WMD (Weapons of Mass Destruction) stockpile. This time around, both multilateral bodies like the UN and institutions in the US like the Congress have been entirely bypassed. “Article 1 of the Constitution gives Congress, not the president, the power to declare war,” wrote NPR, adding: “Party leaders from both chambers, as well as the Intelligence committees' leadership — were notified by the White House shortly before the attack.”

Ignoring international law has become a familiar script. Israel has persisted with it in Gaza. Trump captured a head of state — Nicolas Maduro of Venezuela — this January. Thereafter, unaccountable bodies like the Board of Peace have been created.

“We warned you,” tweeted Francesca Albanese, the United Nations Special Rapporteur on the Occupied Palestinian Territories. “The wholesale destruction of Gaza was not an exception, it was a blueprint to crush anyone who opposes the plutocratic imperialism embodied by US/Israel and their global allies. Act now: defend int'l law from lawlessness, before the rupture becomes irreversible.”

Endgame

Energy insecurity is just the start. 

If the world enters a future where the US dominates the West; Israel (or Saudi) eyes West Asia; China lords over Asia; and Russia rules the Caucasus, will smaller countries willingly become vassal states? If they, instead, decide to invest more in their defences, the world will see an accompanying drop in expenditure on decarbonisation and climate action — and possibly, a new nuclear race.

The world has seen such rejection of hegemons in the past — the rise of the Non-Aligned Movement is one instance — and it remains to be seen how countries respond this time around. Can they, as economist Joseph Stiglitz has suggested, isolate the US, and boost trade between themselves? In essence, what the world needs is two fights — one to protect (and improve) the global rule-based order; the other to curb concentration of economic power and protect democracies everywhere.