The Arab Israeli Conflict: An Indian Standpoint
BY BHAVYA SINGH / OCTOBER 5, 2022
Oil and the Swiss Canal, two of the most vital commerce items in the world, are produced on Arab territory. Therefore, the conflict between the Arab countries and Israel has a large influence on the entire world economy including India.
ne of the darkest periods in Indian politics and economy is thought to have been the infamous emergency of 1975. On the 25th June, 1975, president Fakhruddin Ali Ahmed declared an emergency on account of ‘internal disturbance’ in the country. So far, there have been three situations of emergency in India, the 1962 Indo-China war, the 1971 Indo-Pakistan war and the 1975 Emergency, which is the only one declared on account of ‘internal disturbance’ and till date remains the most controversial and debated.
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Indira Gandhi was positioned as a dominant prime minister when she won the elections of 1971. She led a successful war against Pakistan in 1971 and her government very evidently centralised authority which meant that the centre had major control over the state and cabinet ministers. After 1971, due to the Indo-Pakistan war, the economy was going through an extremely difficult phase which resulted in a very high inflation rate (which was over 25% at the eve of emergency according to India Today) and steep rises in price of essential commodities. As the Indira Gandhi government became a centralised power, corruption among the government officials became prevalent which added to the existing crisis because of which extensive protests and student strikes were prevalent in the country. Massive protests began in Gujarat
Illustration by Unknown via Pinterest
between 1973 and 1974 as there were corruption allegations against the chief minister at the time, Chimanbhai Patel , who had to resign and the state government was dissolved.
Amidst the uprising movement and another set of protests in Bihar, Raj Narain, a socialist candidate from the 1971 Uttar Pradesh Elections won a case against Indira Gandhi on 12th June 1975 in the Allahabad High Court and the court proclaimed the Lok Sabha seat of Indira Gandhi as null and void. Indira Gandhi then approached the supreme court and the latter withdrew her voting privileges among other things, but she was still to retain her seat as the Prime Minister until the following hearing. Followed by these incidents of political unrest, monsoons failed in 1972 and 1973, most parts of the country facing droughts which resulted in shortage of food grains and further increased their prices. All these circumstances led to the declaration of the emergency. The after effects of the 1975 emergency adversely affected the human, democratic and fundamental rights of citizens. Many opposition leaders including Moraji Desai, JP Narayan, LK Advani and Charan Singh were arrested, Lok Sabha elections were delayed, and 24 organisations including RSS and Jamaat-e-Islami were banned. The central government was also allegedly controlling the news and imposing press censorship.
Protests and movements against the central government were drastically curbed. Even some leaders from the Congress who spoke out against Indira Gandhi were detained. The constitution’s guarantees of fundamental freedom and rights were suspended. As a result, this 21-month span is referred to as India’s darkest hour by many.
Even though the political aspects widely induced the enforcement of the emergency, there is another aspect which was responsible for aggravating the political unrest, and this aspect was the economic conditions that prevailed after the Indo-Pakistan war.
Even though the political aspects widely induced the enforcement of the emergency, there is another aspect which was responsible for aggravating the political unrest, and this aspect was the economic conditions that prevailed after the Indo-Pakistan war. The state of a country’s economy can become a major basis of civil agitation. When the economic conditions prosper, there is little to no chance that the citizens would protest against inflation or deteriorated earning conditions. Apart from the major setback that the Indian economy faced due to the Indo-Pakistan war, there was also an external oil shock that hit the economy during 1973 due to the Arab-Israeli conflict. Oil prices globally went on to increase by 300%.
The conflict between the Arab nations and Palestine on one side and Israel along with the US, France, and Britain on the other side serves as a great instance depicting just how sensitive a country’s economy is to the global geo-political situations.
Both these incidents almost crippled the Indian Economy: they aggravated the problems of middle class people who were now facing persistently rising inflation and extremely high prices. This disturbance in the economy induced political unrest, where there were massive protests against the central government as the civilians blamed the government for the continuous economic crisis. This is how the adverse effects of the Arab-Iraeli conflict suddenly hit the Indian economy and influenced the Emergency of 1975. The conflict between the Arab nations and Palestine on one side and Israel along with the US, France, and Britain on the other side serves as a great instance depicting just how sensitive a country’s economy is to the global geo-political situations.
The first Arab-Israeli war broke out when the Arab countries attacked Israel in 1948 to protest against the Israeli declaration of independence. This war came to a standstill with the 1949 armistice agreements, a set of agreements signed between Israel and neighbouring Egypt, Lebanon, Jordan, and Syria to formally end the official hostilities of the 1948 Arab-Israeli war. The second Arab-Israeli war was fought in 1956 between the French, British, and Israelian armies against Egypt.
Egypt wanted to nationalise the Suez Canal, a vital global trade route, which falls in their country’s territory. Prior to this, the Suez Canal was owned by the British and the French who were scared that Egypt might block it. The Suez Canal is the sole route that connects Europe to the Persian Gulf. Egypt also violated the armistice agreement and blocked the Israeli ships from the Suez Canal. It also started blocking traffic in Tiran, a narrow waterway that connects Israel to the Red Sea and the Indian Ocean.
Approximately, 12 % of all global trade is done through the Suez Canal, and the most important of them is the oil that is traded from the Arab countries to Europe and India.
Illustration by Аma Flickerdoll via Pinterest
Approximately, 12% of all global trade is done through the Suez Canal, and the most important of them is the oil that is traded from the Arab countries to Europe and India. Back then, India was a close ally to the Arab nations due to its large dependency on oil imports from them and stood its stance even after strong protests from the western nations. India played an important role in peacekeeping between the Arab and Israeli powers. After the victory of Israel in the succeeding wars, it was left in sole possession of Jerusalem. However, Egypt blocked the Suez Canal for a period of 8 years, from 1967 to 1975. It shook the entire world
economy, was responsible for the 1973-74 recession and stagflation in the US, and also influenced the Emergency of 1975 in India.
By this time, the Arab nations had already formed the Organisation of Petroleum Exporting economies (OPEC), and the power of the Arab nations in the global economy was realised by the whole world as they leveraged it from oil exports. In the fourth Arab-Israeli war, the US supported Israel and the Arabs on the other hand intentionally decreased the production of oil and quadrupled the prices of oil in 1973 and an oil embargo was set against the USA.
The prices of oil went from 2.90 USD a barrel to 11.60 USD a barrel. In India, oil constituted about 20% of the export revenue at that time. After the oil shock, it increased to about 40% of the export revenue. This Oil shock also led to stagflation in the US economy and devaluation of the dollar. According to the International Monetary Fund, the suspension of the Bretton Woods system which is a temporary suspension of dollar’s convertibility into gold and freedom of other countries to use any method of currency exchange except for pegging it to gold, was announced for the first time in 1971.
It is important to understand the sensitive position of India during this period, as we were close allies to both Arabs and Israel. Even before the major establishment of our diplomatic relations with Israel, Israel thoroughly supported India during the 1971 Pakistan war. Presently India is the largest buyer of fighter planes and weapons from Israel with orders worth 1 billion USD per year. According to the Embassy of India, India’s bilateral trade with Israel stood at 7.8 billion USD which included space and agricultural technologies, diamonds, and chemicals (excluding weaponry) as of 2021-2022. However, India is still heavily dependent on the Arab nations for its oil and petroleum requirements. As the conflict between Palestine and Israel is still ongoing, a single diplomatic misstep from India’s side could drastically affect the economy and defence of the nation.
Illustration by Linn Fritz via Pinterest
A similar geo-political situation can be observed in India’s stance in the Ukraine and Russia conflict. Russia is a long-term ally of India constituting military, space, and diplomatic relationships. However, India also has extensive trade relations with Ukraine and the European Union with more than 17 bilateral trade agreements between India and Ukraine. The effects of the Russia Ukraine crisis are still persistently leading to inflation and an increase in oil prices in the country. As Russia is prevented by the USA from accessing its foreign exchange reserves, it will lead to a default by Russia on its external debt and will adversely affect its economy. It in turn affects the global economy, as Russia is a major supplier of aluminium, oil, and other commodities; it will lead to higher commodity prices and a disrupted supply chain. On the same, our External Affairs minister, S. Jaishanakar recently noted, “Of course, we're encouraging countries not to purchase additional energy supplies from Russia. Every country is differently situated and has different needs and requirements. But we're looking at allies and partners not to increase their purchases of Russian energy."
Both the Arab-Israeli war and the Russia-Ukraine conflict proves how closely related geopolitics is to the economy and defence of a country.
The relationship between Israel and Palestine till date remains extremely conflicted. A ceasefire as of May 2021 has been agreed to by the Palestinian militant group Hamas and the Israelian army, but the disputes in Jerusalem, Gaza and Tel Aviv are active since. India’s position in both conflicts remains extremely fragile. It has to pertain to the geo-political view that our global trade relations serve the best to our nation's interest, without explicitly supporting or protesting the actions of these countries while maintaining a diplomatic image.
As a pragmatic step, PM Narendra Modi has implemented the policy of de-hyphenation which simply means that India will have individual relationships with two countries which will not be affected by the countries’ relationships with each other. However, a single diplomatic miscalculation by India can lead to sudden and adverse effects on the Indian economy.
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Keywords
1975 emergency, suez canal, inflation, civil agitation, oil shock, economic crisis, Arab-Iraeli conflict, armistice agreements, global trade ,OPEC, Bretton Woods system, trade relations,de-hyphenation ,diplomacy
References
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