HOW WILL INDIA SURVIVE THE OIL ‘ONSLAUGHT’!

The worst fallout of the ongoing war—halted for a while—between Israel/US and Iran is on the oil market. It is oil which is the blood in the veins on which the whole world runs. With Iran blocking the Straits of Hormuz, through which one-fifth of the world’s oil passes, and Yemen’s impact on Bab Al Mandeb, cracks in the global oil economy have come out in the open.

The OPEC Schism: UAE vs. KSA

The United Arab Emirates (UAE), a long-time protégé of the Kingdom of Saudi Arabia (KSA), has declared its intention to walk out of OPEC, the epic oil body largely controlled by KSA.

The Conflict: The UAE no longer wants to stick to allocated production quotas.
The Motive: The UAE seeks to more openly embrace Israel and the US as part of the I2U2 (Israel, India, USA, and UAE).
The Backstory: KSA originally sent the UAE to open an embassy in Israel to “test the waters” for diplomatic relations. However, full normalization for KSA is stalled following the conflict in Gaza.

The UAE now aims to produce 5 million barrels of oil a day. This move is expected to cause oil prices to fluctuate daily, providing an advantage to the US and Israel while undermining OPEC’s control.

Impact on India’s Aviation Sector

India, an active member of I2U2, is feeling the “oil heat.” The Federation of Indian Airlines (FIA)—representing Air India, SpiceJet, and IndiGo—has warned that soaring fuel prices are making operations unsustainable.

Operational Strain: Flights are being re-routed due to increased costs, especially on long-haul routes.
Potential Shutdowns: The industry faces sudden delays, rescheduling, and the possibility of operational shutdowns.
Fuel Shortage: Indian airlines are facing an utter fuel shortage and uneven price hikes, which may result in a collapse of the aviation industry given the high volume of traffic.

The Rise of the China-Iran Axis

While the West faces instability, China and Iran have devised ways to bypass maritime chokepoints:

The Railway Corridor: A 10,400 km railway freight corridor under the Belt and Road Initiative (BRI) now connects Xi’an, China, to Tehran.
Efficiency: This land-based link reduces transit time from 40 days (by sea) to about 15 days.
Economic Alliance: In 2021, Iran and China signed a $400 billion market and military agreement. China currently consumes roughly 80% of Iranian oil, keeping the Iranian economy afloat while filling its own massive strategic reserves.
De-dollarization: Iran is selling oil to China in Yuan to undermine the US Dollar, aligning with the broader Russia-China campaign for a BRICS currency.

Supply Chain Disruptions

According to The Economic Times, jet fuel exports from KSA, Qatar, UAE, Kuwait, Bahrain, and Oman fell from 19.6 million barrels in February to just 4.1 million barrels for March and April combined. This loss is equivalent to roughly 20,000 round-trip flights between New York (JFK) and London (Heathrow).

“The global economy may be pushed to a multi-currency failure if this oil market implodes or explodes.”

Geopolitical Posturing and War Risks

The situation is further complicated by internal US politics and international alliances:

US Leadership: US President JD Vance has claimed that the Pentagon misled Donald Trump regarding the prospects of war with Iran.
Weapon Shortages: Despite a shortage of weapons, US posturing suggests a potential conflict over oil routes is still possible.
Diplomatic Shields: Iran’s Foreign Minister, Abbas Araghchi, was recently received by Vladimir Putin in Moscow, signaling that Russia and China stand solidly behind Iran.

Conclusion

The move by the UAE to distance itself from OPEC after half a century signals a potential “curtains down” for the organization. As nations move to sell oil at discounted prices and bypass traditional chokepoints, the world faces a scenario reminiscent of the 2020 oil price crash—this time driven not by a pandemic, but by a shadow war over gold, the dollar, and energy.

Note: The writer is a former UP State Information Commissioner and writes on international issues.