Iraq crisis: Is India prepared to foot high crude oil bills?

For India, the Iraq crisis could have serious consequences as the Middle-eastern country is the second largest supplier of crude oil to India. If the Iraqi military fails to prevent the Islamic State of Iraq and the Levant (Isis) fighters from taking over Baghdad and run over southern Iraq, the global crude oil market will see some serious upheavals. Thus, New Delhi can little afford to be at ease. “If the Isis moves south, the crude oil can spike to $150-160 a barrel. The oil market is fundamentally volatile. Opec produces 60 percent of the global crude output. But it is redrawing itself with sanctions in member nations like Iran and Syria. There are serious geo-political upheavals in the Middle East. Saudi Arabia cannot fill the gap if the crude supply from Iraq is disturbed,” Shell India, former chairman, Vikram Mehta told CNN-IBN during a panel discussion. [caption id=“attachment_1575441” align=“alignleft” width=“380”]  India can’t afford to ignore the crisis in Iraq AFP[/caption] The Hindu, associate editor, Strategic Affairs, Atul Aneja agreed that the situation in the southern oilfields is key to the whole crisis. “The game changer would be the southern oilfields of Rumaila, Majnoon and Halhfaya oilfields. If the crude oil price reaches $150-$160 a barrel, India would be badly hit. The identity of Iraq has diminished greatly. The Shias, Shunnis and the Kurds are all trying to assert themselves. We had a good relationship with Iran but that got affected due to external pressure. We need to have an independent energy policy,” said Aneja. Former deputy national security adviser Leela Ponappa hoped that the government would understand the gravity of the situation. “This is a serious crisis going on Iraq. Iraq itself never stabilised after two Gulf wars. The government needs to prepare for a very serious situation. Iran is the fulcrum of the entire situation in Middle East. But we had hiccups in our relationship with Iran. India needs to have good relationship Sudan, Mozambique, Vietnam and Russia for our energy security,” Ponappa said. BJP, energy cell, national convener, Narendra Taneja sounded more optimistic. “Southern Iraq and Iran, which borders the region is a Shia majority area. The good thing is the Shia community is supporting the government. But we don’t need to press the panic button as yet. The government is already taking some steps and that includes conservation too. Whatever is happening in Iraq, India can do very little to control it. Having said that the Centre is putting a contingency plan in place,” Taneja said. The former chief of Shell India felt that energy is a very tricky area for the new government at the Centre. “Energy and oil pricing is a government’s deepest dilemma. This can’t be resolved by completely losing track of the market. Crude price has to be aligned with the market. The subsidies have to be cushioned by the exchequer. The oil firms cannot bear the brunt of it. There is no substitute but the price of oil has to be market-oriented at this juncture. If the southern oil fields in Iraq are hit, it would dramatically affect Iraq’s export capabilities. The Centre has to do something to scale back subsidies. The government can no longer undermine the balance sheets of public sector oil firms and must pump in money for exploration and production of hydrocarbon assets,” Mehta said. Ex-petroleum minister Mani Shankar Aiyar felt that the Centre is fast running out of options. “If all oil-producing Asian nations come together, then the situation can be handled better. Having said that when prices of petroleum products shoot up exponentially, the government would have to take exponential measures to protect its citizens. The window of opportunity is fast closing for the BJP government. Fear is the conflagration between Shia and Sunni would eat up the whole of the Middle East,” Aiyar said.