Energy Security at Stake: India and China’s Balancing Act Amid Israel-Iran Tensions

• An Israel-Iran conflict would likely pose significant challenges to India’s energy needs, as it could disrupt oil supplies from the Middle East and increase global oil prices.
• China has no choice but to depend on the Strait of Hormuz and Strait of Malacca and it cannot afford trouble in both places.
• India and China will have to use diplomatic channels within the United Nations or other multilateral forums to call for restraint and prevent escalation.
• While India and China are unlikely to work together to end an Israel-Iran conflict, they might engage in parallel diplomatic efforts, encouraging de-escalation through international forums.

After Iran fired rockets at Israel from its territory, it was a foregone conclusion that there would be a retaliatory strike by the Jewish State^[1] and now that strikes have taken place, India will now have to look at where the chips have fallen. The attack comes just after the conclusion of the BRICS Summit hosted by Russia and one must look at the timing of this attack.

Just before the 2024 BRICS Summit in Russia, India and China reached a meaningful agreement to ease tensions along their disputed Himalayan border, aiming to stabilise their bilateral relationship and enhance collaboration within multilateral forums like BRICS. This understanding followed extensive discussions between Indian and Chinese military and diplomatic officials, focused on reducing troop presence along the Line of Actual Control (LAC)^[2], particularly in eastern Ladakh.

At the summit, Indian Prime Minister Narendra Modi and Chinese President Xi Jinping engaged in formal talks, highlighting the importance of managing border issues while advancing economic cooperation and development within BRICS^[3]. However, while China’s adherence to the agreement remains to be seen, India remains vigilant against any future actions by China in the region.

Implications for India and Counter Measures

An Israel-Iran conflict would likely pose significant challenges to India’s energy needs, as it could disrupt oil supplies from the Middle East and increase global oil prices. Given India’s reliance on Middle Eastern countries (around 40% of its crude oil imports come from the region), any conflict affecting these key routes, such as the Strait of Hormuz or the Persian Gulf, could complicate India’s energy security^[4].

Iran’s proximity to crucial oil shipping routes, such as the Strait of Hormuz, makes it a strategic chokepoint for global oil supplies. Any conflict that disrupts this route would directly impact oil shipments, reducing supply and increasing prices. Also, a spike in global oil prices due to heightened risk premiums and disrupted supplies could strain India’s budget and its projected GDP growth^[5]. Higher prices of crude oil will have a direct impact on the cost of imports, increasing inflation and potentially slowing economic growth.

India will be left with no choice but to increase its oil imports from Russia, which is approximately 40%. However, further geopolitical instability could cause strain on global shipping, insurance, and logistics. This may affect India’s ability to smoothly import Russian oil, as alternative routes or supply disruptions may arise.

But the good news is, in the last ten years India has made substantial efforts to diversify its oil imports both in response to market dynamics and to enhance energy security^[6]. Historically India has been reliant on the Middle East for the majority of its crude oil, but now India has expanded its imports from countries such as the United States, Russia, Brazil, and African nations.

India has also increased imports from countries like Brazil, Mexico, and several African nations, including Nigeria and Angola. These imports do provide a buffer against disruptions in the Middle East. But there is still no question about India’s reliance on crude oil that it receives from the Middle East because that is a geographical reality and logistically the most efficient.

Problems for both but more for China

If Israel and Iran escalate tensions, India will have a strong ally in China to talk to Iran. It must be noted that China is the top buyer of Iranian oil, importing an average of 1.05 million barrels per day (BPD) in the first 10 months of 2023 and the numbers will not be any different in 2024.

China is one of the largest importers of Middle Eastern oil and natural gas, so maintaining open access to the Strait of Hormuz is essential for its energy security and economic stability. China has strong economic ties with Iran and might leverage this relationship to encourage restraint, especially if any escalation threatens the flow of oil and LNG. China is likely to back international diplomatic efforts and, if needed, could work with both the U.S. and Russia to advocate for de-escalation in the Israel-Iran conflict to protect its energy imports.

China is a victim of its geography as it is surrounded by an Island chain and not to mention it has been contemplating over the Strait of Malacca which is responsible for around 80% of China’s oil imports. The Strait of Malacca is a vital shipping channel that connects the Indian and Pacific Oceans. It’s a key part of China’s trade and energy security and is considered a lifeline for the country. It was China’s former president, Hu Jintao who coined the term The Malacca Dilemma^[7].

China has no choice but to depend on the Strait of Hormuz and Strait of Malacca and it cannot afford trouble in both places. Russia may be supporting Iran but it is quite dependent on China and now China will have no choice but to lean on Russia and Iran and seek an end to this conflict that has the power to create worldwide economic problems.

Conclusion

Sometimes adversaries find themselves in a situation where collaboration becomes necessary, it often leads to unexpected partnerships and can reshape the dynamics of international relations.

India and China will have to use diplomatic channels within the United Nations or other multilateral forums to call for restraint and prevent escalation. Both countries share an interest in keeping oil prices stable and ensuring uninterrupted energy supplies from the Gulf.

With the newfound agreement at the LAC, India and China could leverage platforms like BRICS, the Shanghai Cooperation Organization (SCO), or G20 to push for peaceful dialogue in the region. These forums provide a neutral ground where both countries can work collectively, albeit indirectly, to encourage stability.

India’s partnerships with Israel and the United States and China’s ties with Iran may complicate direct cooperation. But both nations have vested interests in the region and will have to carefully tread their alliances and avoid appearing aligned against any party. Traditionally India and China avoid taking sides in regional conflicts, especially outside their immediate neighborhood.

But things have changed as both India and China are economic powerhouses, and perhaps their by-standing days are over. The days of non-interference may have come to an end and what better opportunity for India and China to end the Israel-Iran conflict from further escalation?

For India, the India-Middle East-Europe Economic Corridor (IMEEC)^[8] is an emerging geopolitical initiative aimed at enhancing connectivity and trade between India, the Middle East, and Europe. And it simply cannot risk jeopardizing it.

Both countries have high stakes in maintaining stable trade relations across the region. Taking an active role could risk straining relations with other Middle Eastern countries, so both are more likely to pursue indirect means, focusing on diplomatic measures rather than direct intervention.

In sum, while India and China are unlikely to directly work together to end an Israel-Iran conflict, they might engage in parallel diplomatic efforts, encouraging de-escalation through international forums. Their shared interest in regional stability and energy security could lead to a convergence of actions, if not outright collaboration, to address the risks posed by such a conflict.

References:

• _{^[1] https://www.aljazeera.com/news/liveblog/2024/10/26/live-israel-attacks-targets-across-iran-warns-tehran-against-retaliation}
• _{^[2] https://www.thehindu.com/news/national/jaishankar-hails-military-and-democracy-for-india-china-lac-patrolling-agreement/article68800123.ece}
• _{^[3] https://www.bbc.com/news/articles/c3vlxx9pgxwo}
• _{^[4] https://www.livemint.com/news/world/iran-israel-news-india-expresses-concern-following-first-open-israeli-attack-in-iran-exercise-restraint-11729951355132.html}
• _{^[5] https://www.policycircle.org/economy/israel-iran-conflict-india-impact/}
• _{^[6] https://samvadaworld.com/analysis/swiping-the-triad-indias-geopolitical-oil-diplomacy-with-venezuela-in-the-face-of-u-s-tensions/}
• _{^[7] https://gjia.georgetown.edu/2023/03/22/chinas-economic-security-challenge-difficulties-overcoming-the-malacca-dilemma/}
• _{^[8] https://ecfr.eu/publication/the-infinite-connection-how-to-make-the-india-middle-east-europe-economic-corridor-happen/}

Balaji Subramanian

_{Balaji is a freelance writer with an MA in History and Political science and has published articles on defence and strategic affairs and book reviews. He tweets @LaxmanShriram78. Views expressed are the author’s own.}