Oil, Blood, And Broken Pipelines: The True Cost Of The American War On Iran
Washington is burning the global rulebook to ash in Tehran. Meanwhile, India is scrambling for Russian crude while its own diaspora and energy security are caught in the crossfire.
The American-Israeli war on Iran arrived at India’s doorstep when an American submarine torpedoed and sank an Iranian warship, IRIS Dena, which had left after taking part in a naval exercise hosted by India off the Vizag coast. It was attacked off the Sri Lankan port of Galle, and Sri Lankan efforts have rescued 80-odd personnel who were aboard the Iranian ship, sailing far away from the combat zone in the Persian Gulf.
The esteem in which Washington holds New Delhi is evident from this brazen attack on a ship that was where it was because it had chosen to accept India’s invitation and taken part in a multi-nation naval exercise, MILAN, along with ships from the US, Australia, Japan, South Korea, Russia, France, Germany, the UAE, and the Philippines.
In a defiant show of autonomy from standard interpretations of strategic autonomy, India has so far refused to condemn this attack on its guest.
Hormuz Chokehold
The attack on Iran commenced on February 28, and so far, there is little clarity as to how long it will continue or what constitutes America’s war aim. So far, the US president has neither confirmed nor denied the likelihood of sending in troops to finish off the rest of the clerical regime, after its head had been chopped off by way of precision missile attacks that had destroyed the building in which the Supreme Leader, Ayatollah Ali Khameini and senior functionaries, including the defence minister and commanders of the Revolutionary Guards Corps were conferring.
If Israel and the US refuse to place boots on the ground, the chances of a regime change in Tehran are limited, even if there is widespread popular resentment against the incumbent clerical regime. This is for two reasons: the deep entrenchment of the repressive machinery of the state controlled by the regime, and the tendency for public sentiment to rally around the flag at the time of an attack by an external enemy.
The result of the Iranian regime staying in place and fighting back against the attack is a continued blockade of the Strait of Hormuz, through which much of the oil from the Gulf petrostates flows to the rest of the world.
While some of the oil from Saudi Arabia could be transported via pipeline to a port on the Red Sea, far away from the Persian Gulf, the exit from the Red Sea to the Arabian Sea faces another choke point, at the Bab-al-Mandab, where Iran’s clients, the Houthis, who control Yemen, could stage a blockade. Oil from Abu Dhabi could flow through the Abu Dhabi Crude Oil Pipeline that runs for some 400 km to a port on the Gulf of Oman, which leads on to the Open Arabian Sea. But the capacity of these pipelines is not enough to evacuate all the oil that Saudi Arabia and Abu Dhabi produce.
LNG is stuck altogether, with Qatar cut off by the blockade of the Strait of Hormuz. India could experience shortages of natural gas. Hopefully, this should accelerate the lethargic moves underway to gasify India’s most abundant domestic fuel, coal.
Russia’s War Dividend
The US would be forced to wind down its dislike of Russian oil. If economies like India and China do not buy Russian crude, and tap African and American sources away from those of the choked-off Persian Gulf, relied on by Europe and Japan, crude prices will shoot up much more than the 15% rise in Brent Crude and the 19% rise in WTI, the American benchmark.
Since the ordinary Americans’ reaction to elevated pump prices would hurt the Republicans in the midterm elections slated for November, the US is likely to turn a blind eye to the tapping of Russian crude by India.
Russia is already benefiting in another way as well. The supply to Ukraine of assorted munitions would dry up for the time being, as these get used up in the Middle East, either by the US or its closest military partner, Israel, or will be used to replenish depleted stocks before their supply resumes to Ukraine.
Times To Step Up R&D Spending
India faces inflation directly from higher energy prices and from the depreciating rupee. India’s exports to the Gulf Cooperation Council countries stand disrupted, and exports to other destinations routed via Dubai and other ports also stand disrupted. The lives of the large Indian diaspora working in West Asia and sending remittances back home stand endangered, as Iran uses its retaliation against US-Israeli strikes to make the war regional, rather than being confined to Iran.
American unilateralism and disdain for even its NATO allies pokes wide holes in the American nuclear umbrella, in which many of its allies in Europe and East Asia have so far taken cover. If that umbrella seems entirely notional, many of these middle powers would choose to own their own nuclear weapons. The attack on Iran is an attack on the Nuclear Non-Proliferation Treaty (NPT) as well.
India has been pussyfooting around a clear stand on the attack on the sovereignty of a fellow member of the BRICS grouping, thanks to its reliance on the US resources in its strategic face-off against China. The attack on Iran and the sinking of an Iranian ship that India had hosted recently make it clear that India must be able to rely on its own technological capability to achieve strategic parity with China.
As missiles go off in West Asia, India must step up its R&D efforts and spending, back home.
Rethinking GDP Numbers
India has a better, improved set of numbers to measure its economic output, GDP, changing the base year from 2011-12 to 2022-23. The goods and services produced and consumed in India have changed since 2011-12, and the new series captures the change. It also entails methodological upgrades, such as better reconciliation of data gathered from the production side and from the expenditure side.
Two sets of deflators are used to iron out the effect of price difference and measure real growth, with the final output prices getting their own deflator and inputs getting their own deflator.
While these methodological refinements are welcome, they result in growth rates that fluctuate less. However, as per the new series, the absolute size of India’s nominal GDP is smaller than under the old series.
The AI Control Question
The US military uses advanced artificial intelligence (AI) in its work. Anthropic has been a leading supplier of the AI tools deployed by the US armed forces, directly and through the company, Palantir.
However, recently, it fell foul of the US establishment by insisting that its tools cannot be used for mass surveillance at home or for determining strike targets without a human in the decision-making loop. Both would, in the normal course, be considered ethically commendable stands. But the US Department of War has deemed these condemnable and designated Anthropic a supply chain risk, making it difficult for any company that does business with the US government to make use of Anthropic tools.
This episode raises interesting questions about how much control the government can or should exercise over business, and whether the US system is all that different from China’s. Assorted lobbies are wrangling with these questions in the US right now. India Inc should pay attention.
