Political Instability in the Middle East – Consequences on Indo – China Economy

Dr. Dhiraj Vij
21 Min Read

AbstractIndia has maintained robust relations with Iran and other major oil-producing nations in the Arab world since gaining independence. Despite the adoption of the New Economic Policy in 1991, India has carefully balanced its trade between the United States of America and Iran or Iraq, recognizing the importance of geo-strategic positioning, energy resources and petroleum products.

The cooperation and trade relations between India and Iran have been significant, with both nations fostering warm ties. This relationship has deepened since China’s adoption of its ‘open door policy’ in 1978, which facilitated increased trade opportunities.

However, recent actions by the Trump administration, such as withdrawing from the meticulously negotiated Nuclear deal with Iran and NATO’s assertive military actions in Iraq resulting in civilian casualties, have heightened tensions. The killing of Iranian General Qasem Soleimani in early 2020 further exacerbated the situation. In addition, stringent economic sanctions imposed by the United States on Iran and other Middle Eastern states have caused a surge in petroleum and energy prices in India and China, adversely impacting their economies.

In response, India and China are actively engaging in diplomatic efforts through various channels, including dialogue with the United States and European nations, to mitigate geopolitical instability and aggression. Both countries recognize the severe economic ramifications of escalating tensions and are working towards diffusing the situation to safeguard their economic interests as emerging global powers..

Keywords: Nations, Diplomatic, Relations, Cooperation, Instability.


India, the seventh largest country by area and the second most populous, proudly stands as the largest democracy globally. Throughout its history, India has embraced an open-door policy, welcoming people and cultures from around the world. Tolerance, co-existence and respect for diverse faiths and races have been fundamental tenets of Indian civilization. With the world’s fifth largest military expenditure and the second largest armed force, India holds a significant position in global defense. Economically, it ranks as the sixth largest by nominal rates and the third largest in terms of purchasing power parity. As a nuclear power with a No-First Use doctrine, India maintains a stance of responsible nuclear deterrence. India’s trajectory as a developing global power and potential superpower is evident through its growing international influence and assertive presence in global affairs. Embracing a foreign policy of neutrality and non-involvement, India seeks to foster peace and stability both with its neighbors and on the international stage. This approach reflects India’s commitment to maintaining amicable relations while actively engaging as a leader in the global community.

China, officially the People’s Republic of China (PRC), is the world’s most populous country and it is also one of the largest countries by total area. China’s political system was based on monarchies, beginning with the Xia dynasty. The monarchy system came to an end in 1912 with the Xinhai Revolution, when a republic replaced the last monarch of the Qing dynasty. The Chinese Civil War led to the division of territory in 1949, when the Communist Party of China established the People’s Republic of China, a unitary one-party sovereign state on Mainland China, while the Kuomintang-led government retreated to the island of Taiwan. The political status of Taiwan is still in dispute. China interacts with foreign nations and expresses its political, economic, and cultural strengths, weaknesses, and values. As a great power and emerging superpower, China’s foreign policy and strategic thinking are highly influential. China officially claims it unswervingly pursues an independent foreign policy of peace. The fundamental goals of this policy are to preserve China’s independence, sovereignty, and territorial integrity, create a favorable international environment for China’s reform and opening up and modernization of construction, and to maintain world peace and propel common development.

The Middle East region comprises the Arab countries of the Arab League, spanning North Africa and West Asia. This vast area extends from the Atlantic Ocean in the west to the Arabian Sea in the east, and from the Mediterranean Sea in the north to the Horn of Africa and the Indian Ocean in the southeast. With a combined population of approximately 422 million people, the Arab world holds significant geopolitical and cultural importance. Established in 1945, the Arab League was founded to represent the interests of Arab nations globally and to pursue the political unification of Arab countries under the banner of Pan-Arabism. In addition, the League includes four observer members: Brazil, Eritrea, India, and Venezuela. It actively participates as an observer in various international and regional organizations, including the Non-Aligned Movement, the African Union, the United Nations, and has attended numerous ASEAN summits.

The Organization of Islamic Cooperation and its desire in the contemporary world are to enjoy their freedom, territorial integrity and sovereignty. This group of nations, with its economic might, can influence the international economic structure, as many nation-states’ economies largely depend on the oil or petroleum products that they import from the oil-producing states of West Asia.

The United States of America’s airstrike on January 3rd, 2020, which killed General Qassem Soleimani outside Baghdad airport in Iraq, sent shockwaves across the world. General Soleimani, as the leader of the Quds Force within Iran’s Revolutionary Guard Corps, held immense power in the Middle East region. He played a pivotal role in Iran’s defense and regional strategies against the US-led NATO forces. His assassination by US forces was viewed by Iranian officials and the Iranian public as a direct attack on Iran’s national security and sovereignty. The repercussions of this event reverberated throughout the global economy and the landscape of international politics, prompting significant transformations. The tensions between the United States of America and Iran escalated rapidly following the assassination. Iran’s declaration to retaliate sent tremors across the world, especially when Iranian Supreme Leader and Commander-in-Chief Ayatollah Khamenei openly vowed to avenge the killing of General Soleimani with all the nation’s might. He emphasized that Iran would choose the time and place for retaliation, warning of a “harsh revenge” against the perpetrators. Iran’s strategic geographic position, regional alliances, and military capabilities provide it with a wide array of options to respond to what it perceives as US aggression.

Tehra responded fiercely by launching attacks on American bases, assets and forces in the Middle East region, demonstrating its resolve with full force. Also, Iran has signaled its willingness to revive its nuclear program, raising serious concerns internationally. In response, the Trump administration announced plans to further tighten its grip on Iran by imposing stricter economic sanctions on Iranian leaders and high-ranking officials.

Recognizing the military imbalance against the United States, Tehran resorted to aggressive posturing but also sought to manage public sentiment by directing attacks on North Atlantic Treaty Organization (NATO) bases in the Middle East region, according to Iranian media and government sources. This move was aimed at building international pressure on President Donald Trump and the US administration, especially during an election year when the United States would elect a new president in November 2020. Tehran understood that leveraging international debates on the Trump administration’s foreign policy decisions could increase both international and domestic pressure on Trump, which Iran sought to exploit to its advantage. The political and economic instability that ensued after Soleimani’s assassination undermined the prospects of a diplomatic victory for the Trump administration. Even two months after the US administration’s decision to kill Soleimani, US security agencies and NATO remain vigilant regarding Iran’s network of armed forces and proxy groups across the hostile Middle East region.


The world has witnessed serious consequences resulting from various incidents that have disturbed the stability of the Central Asian region. Several significant cases directly involve the perturbation of peace and stability in the Middle East. These include the assassination of the powerful Iranian General Qassem Soleimani, as well as major actions such as the drastic increase in United States-led NATO forces’ attacks on terrorist establishments and the recapture of territory from ISIL or ISIS (Islamic State of Iraq and Syria). Additionally, the assassination of the commander of this terrorist organization, Abu Bakr al-Baghdadi, in October 2019, and the potential aggression from Israel, coupled with the historical conflict between Israel and Palestine, have contributed to the region’s instability.

Also, the Arab world experienced instability following the brutal murder of United States-based Arab-born journalist Jamal Khashoggi, who was critical of Saudi Arabian rulers, in Istanbul, Turkey, in 2018. Furthermore, the involvement of Russian forces in Syria and numerous other misadventures in the Middle East region have been reported over the past two years, serving as immediate sources significantly responsible for the instability in the already turbulent region.

The Middle East stands as one of the most unstable regions globally, with little prospect for change in the near future. The grim reality is that there are minimal chances for any positive developments in the region. This instability stems from a multitude of factors, including ongoing conflicts and tensions, economic failures, corruption, demographic pressures, geopolitics, violent extremism, terrorist activities, internal civil strife and continuous external security threats and sanctions imposed by international organizations like the United Nations and the United States of America. The Middle East’s vulnerability to turbulent incidents is profound, and any misadventure in the region carries significant consequences for the world at large. Furthermore, such incidents have serious ramifications for the economies of the world’s two most populous and rapidly emerging economic powers, India and China.


India presently stands as one of the few nations in the world that enjoys warm and cordial relations with both the United States of America and Iran. Since the adoption of the New Economic Policy in 1991, India has witnessed remarkable growth and development in its economic ties with the United States. Both countries, as the world’s largest and oldest democracies, have forged a strategic partnership aimed at mutual benefit and countering Chinese aggression in the 21st century. Despite the complexities surrounding political and economic dynamics with Tehran, both India and the United States recognize the strategic importance of their relations with Iran. The recent surprise attack on Iranian General Soleimani has further heightened tensions between the United States and Iran in the Gulf region, an area renowned for its oil supplies across the world, particularly to India and China. Iran holds significant importance as an oil exporter to India, playing a vital role in meeting New Delhi’s growing energy demands. India has been one of Iran’s top oil buyers, importing 23.5 million tonnes in 2018-2019. However, faced with Washington’s decisions to reduce Iran’s crude oil imports, India had little choice but to comply. In response, India and the United States entered into a Strategic Energy Partnership, affirming the strategic significance of India’s energy needs. This partnership has become a cornerstone of the bilateral relationship, fostering meaningful engagement between the two nations.

The recent attack on General Soleimani resulted in a drastic reduction of oil imports from Iran, significantly impacting the Indian economy. Moreover, instability in the Middle East region consistently affects the economic partnership between India and China, given their reliance on oil and energy supplies from this area. China, too, is a major importer of Iranian crude, but due to aggressive US policies and sanctions against Tehran’s oil imports, Iranian crude exports to China have also decreased over the past year. This surge in petroleum products and other energy commodities in India and China has led to severe consequences for the economies of both major global economic powers.

The decision to reduce the import of Iranian oil is indeed temporary and in the long run, New Delhi must reconsider its stance to protect its strategic autonomy in decision-making. It should not be construed that India has completely abandoned Iran and its crude oil exports. Instability, a hostile environment, and constant United States interference in the affairs of Arab countries have proven to be important factors in reshaping the dynamics of the Indo-China economic partnership. Both Asian powers require frequent and uninterrupted oil and energy supplies from Middle Eastern nations without external intervention. Furthermore, developments in this region not only impact Afghanistan and Pakistan but also India’s counterterrorism efforts. However, recent instances of misadventures in the Middle East and persistent political and economic instability have made it challenging for both India and China to sustain their crude oil requirements. Considering their large populations and the competitive global economic environment, both states must explore alternative and dependable options to meet their energy needs.


The recent Arab uprisings have underscored that one of the primary sources of regional instability in the Middle East originates from the domestic environment of native states. This instability not only affects the region but also has broader implications, inviting foreign intervention and exacerbating regional and international tensions. New Delhi and Beijing share concerns about the safety and well-being of their millions of citizens in the Middle East, as well as the potential economic fallout from any escalation in the near future, which would have a drastic impact on their already distressed economies.

New Delhi is particularly apprehensive about the tense situation in Afghanistan and closely monitors the implications of the future course of action between the United States and Iran. This includes the planned pullout of US-led NATO forces from Afghanistan within the next 14 months, as per the peace agreement signed between the United States and the Taliban in February 2020, following years of dialogue and negotiation. Similarly, China seeks stability in the Middle East, understanding that peace translates to less economic shock and enables the Chinese leadership to focus on its ambitious economic projects. To protect its interests, New Delhi must navigate its relationships with Washington, Iran, Saudi Arabia, Israel, Iraq, the United Arab Emirates and other strategic partners in the Middle East region diplomatically. This involves balancing its geo-strategic and economic needs while fostering constructive engagement with all stakeholders. Overall, India will closely monitor every development in the region with deep concern and earnestly hope that the situation does not escalate further.


Dr. Dhiraj Vij

[Dr. Dhiraj Vij has earned his degree of Ph.D. in Political Science from Amity Institute of Social Sciences, Amity University (Noida, UP, India). He holds a Bachelor’s Degree in Political Science (Hon). from the University of Delhi and completed his Master’s Degree in Political Science from Indira Gandhi National Open University. He is a National Eligibility Test (NET) qualified Assistant Professor in Political Science.
His research interests include Foreign Policy, International Relations, Geo-Political Affairs and Indian Government and Politics. His academic achievements are complimented by wide range of publications of research papers
and a chapter based on geo-political relations of India with other states in reputed journals. He has also thoughtfully presented research papers in several national and international conferences and seminars. He has actively contributed in publishing articles in core areas of bilateral relations between India & China, economy, political & geo-political affairs in national and international web-portals. He has been involved in teaching different courses of political science domain to undergraduate students at university level and is committed towards contributing to research work encompassing political and international relations.]


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