Israel-Iran Tension: How much loss does India suffer due to the fight between two friends?

India is trapped in the Middle East crisis. On one hand it has close relations with Israel, on the other hand it has historical relations with Iran. Will India's trade interests be affected by the increasing tension between our two friends?

Ongoing dispute between Israel and Iran

The dispute between Israel and Iran is increasing. After Iran's attacks, Israel has also retaliated. It is being claimed that Israel has carried out this attack with cruise and ballistic missiles on cities having nuclear sites in Iran.

Both Israel and Iran are considered friends of India. In such a situation, the question arises that how much loss can India suffer due to a fight between two friends? Can this tension affect the Indian economy?

According to reports, trade between India and Israel has doubled in the last five years. It will reach $10.77 billion in 2022-23. India especially buys defense technology, advanced agriculture technology and other cutting-edge products from Israel. Due to this trade, strong political and strategic relations have been formed between the two countries.

On the other hand, India's trade with Iran has decreased. Due to continuous US sanctions on Iran, trade has become difficult, making it difficult for India to buy Iranian oil. Iran was once a major supplier of crude oil to India.

What is a matter of concern for India?

The increasing tension in the Middle East is a big challenge for India. This may increase tension not only in the Middle East but at the global level. Increase in tension can have a negative impact on global markets as well as local traders. It is important for India to maintain balance in its relations with Iran and Israel. This is why India has also tried to reduce tension through its diplomatic efforts.

Instability in both the countries could lead to increase in oil prices, disruption in trade and cascading effect on the Indian economy. To protect its interests, India will have to proceed with utmost caution in this volatile region.

How much trade is there between India and Israel?

India established diplomatic relations with Israel in the year 1992. Since then trade between the two countries has continued to grow. In 1992 the business was about 200 million dollars. Now it has increased to $10.7 billion in the financial year 2022-23, which does not include weapons.

Trade between the two countries has doubled in the last four years. Increase from $ 5.56 billion in 2018-19 to $ 10.7 billion in 2022-23. A growth of 36.90 percent was observed in trade between 2021-22 and 2022-23. India's exports in 2022-23 were worth $8.45 billion, while imports from Israel stood at $2.3 billion. That means India got a trade surplus of 6.13 billion dollars.

In the first ten months (April to January) of the financial year 2023-24, there was a trade of $ 5.75 billion between India and Israel. In 2022-23, India's total trade of $1167 billion with Israel was 0.92%. That year Israel was India's 32nd largest trading partner.

India mainly exports precious diamonds, special fuel for aircraft, Basmati rice, T-shirts and wheat to Israel. During 2022-23, only diesel and diamonds accounted for 78 percent of the total exports. At the same time, India imports space equipment, diamonds (diamond trade between the two countries is important), potassium chloride, machinery and their parts, turbojet engines with a thrust of more than 25 kilo Newtons from Israel.

How much trade is there between India and Iran?

The trade between India and Iran has reduced significantly in the last few years. In 2018-19, the trade between the two countries was 17 billion dollars, which decreased to 4.77 billion dollars in 2019-20 and to 2.11 billion dollars in the next year 2020-21. However, it increased slightly to $2.33 billion in 2022-23. That year Iran was still India's 59th largest trading partner. 

In 2022-23, India sold goods worth $1.66 billion to Iran, while bought goods worth only $0.67 billion from Iran, which means India got a lot of profit. So far (April to January 2024), this year's trade has reached only 1.52 billion dollars. Overall, Iran's share in India's entire trade is very low, only 0.20 percent. India mainly sent food items like meat, milk, ghee, onion, garlic and canned vegetables to Iran. India imported methanol, oil products, gas, apples, dates and almonds from Iran.

Will the price of petrol and diesel increase?

India is the third largest oil importer in the world. We are dependent on foreign countries for about 85 percent of our consumption. However, the Israel-Iran dispute has not yet had any significant impact on global oil prices. 

Finance Minister Nirmala Sitharaman said in an interview to CNBAC Awaaz, the central government is fully prepared to reduce any impact on the Indian economy due to the tension between Iran and Israel. As the situation continues to change, decisions will be taken keeping in mind the interests of India. Due to increasing tension in the Middle East, import of crude oil may become expensive for India, due to which India's import bill may increase. However, there has not been a huge rise in the prices of crude oil yet. After the sanctions imposed by western countries, India started importing oil from Russia.

Why does India not import oil from Iran?

India is the third largest oil consumer in the world. Till 2018-19, Iran was the third largest supplier of crude oil to India. At that time, India used to buy oil worth $12.1 billion from Iran every year. 

But in June 2019, the then US President Donald Trump imposed sanctions on Iran regarding its nuclear program. Due to these restrictions, India could not buy oil from Iran in US dollars, so business came to a halt. The result was that Iran, which was the world's 9th largest oil selling country in 2018, came down to 71st place in 2021.

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