Why in News? Iran’s recent attack on Israel has sparked tensions in Middle East and beyond. This escalation has worried regional traders and spook markets.
India’s Trade with Israel vs Iran: India’s trade with Israel has been rising significantly since their diplomatic relations started in 1992, from $200 million(mainly diamonds) to $10.7billion (excluding defence) in 2022-23 witnessing a sharp rise in last four years. India has a trade surplus of $6.13billion. Israel was India’s 32nd biggest trading partner in 2022-23 whereas India is Israel’s 2ndlargest trading partner in Asia and the 7thlargest globally.
Trade with Iran witnessed a contraction in recent years in wake of US sanctions on Tehran, before an uptick in 2022-23 when it increased by 21.77% to $2.33billion. India has trade surplus of about $1 billion.
Foreign Direct Investment (FDI)-FDI inflows from Israel and Iran were $288 million and $1million respectively from 2000 to 2023 making it insignificant for Indian economy. But investment from India to Israel for this period was around US$383 million. Indian companies are marking their presence in Israel through mergers and acquisitions. Whereas India is developing Shahid Beheshti Port’s first phase at Chabahar (Iran), for improved connectivity and trade ties with the Middle East and Central Asia.
Impact of Middle-East Tensions on India- It is unlikely to disrupt crude oil and gas production significantly since major producers like the USA, Russia, and North Sea operators are not in conflict zone, and Saudi Arabia is not involved yet. However, shipping costs may increase resulting in increased crude oil prices as disruption in Red Sea will force traders to switch to longer routes around Cape of Good Hope. Situation in West Asia can become unstable, forcing projects like the Middle East-Europe Economic Corridor (IMEC) to remain on paper for a long time.
