Safety, economy are key concerns for India
The worsening security situation in Iraq, where Sunni terrorists are running amok, poses a serious challenge to India as well. There are two primary areas of concern: First, the safety of Indian citizens trapped in the strife-torn country, and second, the impact of a civil war on oil prices. In the first case, matters have come to a head after New Delhi lost touch with a group of 40 Indian construction workers who were being evacuated from the city of Mosul. It is reported that these workers have been abducted, ostensibly by the Islamic State of Iraq and Syria, which overran Mosul last week. The Union Ministry of Home Affairs has confirmed the abduction. Another group of 44 Indian nurses, mostly from Kerala, are trapped in the central Iraqi city of Tikrit, which too is now controlled by the ISIS. The Ministry of External Affairs in New Delhi is closely monitoring the situation. Apart from coordinating with Iraqi authorities over possible evacuation plans, the Ministry has also set up a 24X7 helpline and dispatched to ground zero Ambassador Suresh Reddy, a seasoned Indian diplomat who has close contacts with different Iraqi groups. It is to be hoped that the Indian citizens caught in Iraq will be brought home safely, and soon.
In the medium to long term, the most debilitating impact of the fighting in Iraq will be felt on the price of crude oil, which not only fuels the Indian growth engine but also the global economy. After Saudi Arabia, Iraq is India's largest oil supplier, and protracted instability in that country is a major concern for New Delhi. As of now, there hasn't been a major fall in Iraqi oil supply as most of the bigger oil fields including the massive Rumaila, which produce about three-fourth of the country's oil, are located in the southern part where Government forces are still in control. But in the north, the ISIS has already vandalised the infrastructure at the Kirkuk oilfield; as a result has been no supply from there since March. Iraq's largest refinery in Baiji, located in the north, came under siege since last week, and was under attack on Wednesday.
Consequently, prices have already risen in response to the current unrest. Compared to $106.88 per barrel at the beginning of the month, the price of the Indian crude oil basket touched $110.54 per barrel on June 13. Given that India imports close to two million barrels of crude oil a day, the impact on the country's import bill will be significant. Moreover, given that Indian oil marketing companies sell fuel in the domestic market at loss-making rates, for which they are subsidised by the Government, the price rise of crude oil will also translate into a heftier subsidy bill for the state. Even if the domestic economy is prepared to absorb these shocks from external sources, as Reserve Bank of India Governor Raghuram Rajan says, there can be no two ways about the fact that the crisis in Iraq comes at a particularly bad time for India. Under the Narendra Modi Government, India is just about beginning to script its economic turnaround with focus on containing inflation and price rise. But out of the blue, and for no fault of New Delhi’s, the Government is now faced with the fallout of rising crude prices, not to mention the prospect of a weak monsoon and wobbly stock markets.