Over $46 Bn Trade To Middle East Likely To Be Affected, Freight Charges Up 15-20 Pc

The immediate impact on bilateral trade with Iran and Israel remains modest with $1.2 billion in exports and $441.8 million in imports with Iran, and $2.1 billion in exports and $1.6 billion in imports with Israel. But a wider regional escalation could threaten India’s much larger trade with the broader West Asian region, which includes Iraq, Jordan, Lebanon, and Syria, where Indian exports total $8.6 billion and imports stand at $33.1 billion, as per the data of GTRI.

Mineral fuels, oils, cereals, basmati rice, coffee, meat, pharmaceuticals, textiles, electrical equipment and plastics are exported to these markets. India buys crude oil, wool, aluminium and derivatives, iron and steel, fertilizers, phosphates and phosphoric acid from these countries.

Iraq, Iran, UAE, and Kuwait use the Strait of Hormuz for crude shipments and closure of the strait can put pressure on crude prices. However, according to Ajay Sahai, director general of FIEO, the closure may not hit India’s crude and gas availability much as India has diversified its supply chain. “India is buying 2.2 billion barrels from Russia and 2.1 bbd from the Middle East. It is also buying oil from the US, Brazil and West Africa. Availability may not be a problem, but the prices going up along with higher freight charges will hit India’s fiscal position.

According to him, the freight charges have already gone up by 15-20 per cent in the past few days of tensions. Insurance premiums are also likely to go up. The detour taken through Cape of Good Hope to the US and Europe will further add to the costs.