Iraq and India: Energy Trade Relations

Statement of the Problem

The economic openness is the reality of today’s developed world. The asymmetrical distribution of resources and factor of production has required the economist and social scientists for mutual interaction and trade cooperation for the development of the global economy. The trade and economic cooperation between the two countries is more important these days because of the essential for formulating a feasible and beneficial strategy for the development of the both countries. The bilateral trade and Economic Cooperation between Republic of Iraq and Republic of India are unique. The trade and other related relationships between India and Iraq have its own significance for the economic development of both these countries. Both countries have been traditionally collaborative and had strategic and friendly relations. India has supported a free, democratic, pluralistic, federal and united Iraq [1]. India-Iraqi ties flourished only after India had started cultivating. Iraq, in bilateral terms on the basis of mutuality of interests in the political sphere and complementarities interests in economic sphere subsequently. It is significant to note that Iraq was one of the few countries in West Asia with which India had established relations very early at the embassy level [2]. However, India’s economic cooperation with Iraq was stronger than other west Asian countries due to its geographical location and natural resources. The looming threat of wars in Iraq had continuous uncertainty and a negative impact on India’s as well as global trade markets. India’s trade with Iraq tremendously weakened during war periods [3]. But India’s focus on a strengthened and multi-faceted relationship with new Iraqis an outcome of the significant changes in the political and economic relations between two countries. India’s has been cooperating continuously with Iraq on the road to recovery in the post Saddam Iraq. Indo Iraq economic cooperation was slow Initial Stage of Post Saddam Government. With the democratically elected government of Iraq in year 2005, it received a strongly re-boost to restart trade and cooperation with India. India actively supports the ongoing reconstruction efforts in Iraq [4]. Both countries Explore cooperation in e-Governance during Deputy Foreign Minister of Iraq, Mr Labeed Majeed Abbawi, visited India on 17-22 May, 2011. Indian business applied for contracts for restart trade and cooperation. Since there is revival in potential for Indo-Iraqi trade and commerce, a number of steps have been taken at the policy level that can positively impact Indian companies looking to do business with Iraq. At a broad strategic level, a Memorandum of Understanding (MoU) has been signed in 2013 between Iraq’s Ministry of Foreign Affairs and India’s Ministry of External Affairs to update and discuss bilateral and international relations of interest.

The two countries are looking to enhance the energy trading relationship, which forms a significant part of overall trade between India and Iraq. The government of India has proposed that it should be ‘strategic partnership’, which could include aspects like oil exploration, petrochemical complexes and fertiliser plants. To this extent, Iraq and India have signed MoU on Cooperation in the field of Energy to make further progress in the relationship in the sector. India aims to change the nature of the relationship with Iraq on energy from a buyer-seller one into one with equity partnership. Iraq and India have also signed MoU on Water Resource Development and Management that looks to cooperate and share expertise in the field on national and international levels [5]. Such as Indian business applied for contracts for reconstruction projects to coalition provisional authority and more recently the activities of Iraqi business in India have been growing rapidly [6]. However Project exports are perhaps the most significant factors in India’s economic relations with Iraq as well as other gulf countries. They are significant not only for their trade generating effect but also for a different kind of interaction they render possible in India’s external relations [7].

Today in the globalised world the economies of Iraq have assumed a new economic as well as strategic importance for India. The economic reforms in India resulted becoming one of the fastest growing economies of the world. The growth of India’s economy has stimulated growth in the industrial sector. The higher growth in India’s industrial sector has further resulted in significant rise in energy demand. As India is not self sufficient in its energy requirement, major portion of her energy demand is fulfilled by Iraq petroleum imports. Thus in a situation of growing industrial output and demand for energy, India’s dependence on Iraq would significantly increase. Presently Iraq has become second largest supplier of oil to India only after Saudi Arabia. Thus the trade relations between India and Iraq are very crucial for the growth of Indian economy. It was reported that in India crude oil imports account for more than 96 Percent of her total imports from Iraq. This makes India to face severe deficits in her trade balance with Iraq. But the emergence of rich market of Iraq offered opportunities to India for balanced bilateral trade in 2012. Iraq requires India’s exports in terms of more goods, items, instruments and equipments and more investment in infrastructure, agriculture, machinery, power, healthcare and telecommunication. India’s former Commerce and Industry minister Anand Sharma promised him to encourage Indian businessmen to explore business opportunities in Iraq [8]. India is appearing to correct this deficit with new investment opportunities, specifically in the energy sector, in one of the fastest growing economies in the region. India is also looking to counter the growing presence of China in Iraq. Beijing has already invested heavily in various projects around Iraq, and has even built its own airport near the Iran-Iraq border from where it ferries its workers to various oil fields in the southern part of the country [9]. In the immediate future, India is looking at increasing its import of Iraqi crude and a senior minister in the Iraqi government has offered to up his country’s oil exports to India by as much as 30 per cent. That Indian oil companies shifted from Iranian to Iraqi oil in 2011-12. In recent year, bilateral trade between both the countries accelerated through Indian government maintained the huge demand of Iraqi crude oil. On the other hand Tubes & pipe of iron & steel products; Meat of bovine animals, frozen products and Indian basmati rice has found good markets in Iraq, overtake US long gained rice market since 2010. The market for exporting basmati rice would increase due to Iraq’s preference for the products and on the other hand Indian market provides a cheaper imports option. An important step to foster stronger economic bilateral ties between countries took place in an interactive session on certification of goods and exports potential of Iraq, organised by federation of Indian export organizations (FIEO) in April 2012 in New Delhi. Hussein Ali Rajab, the commercial councillor, embassy of Iraq, felt that India exports to this market should increase from $ 750 million to about $ 3 billion by 2015. It is directed that all Indian goods imported to Iraq must be certified by their designated inspection agency so that the buyer can release their goods in Iraq. The previous year, Indian tea exports suffered a setback as more than 200 containers of Indian tea that were being exported to Iraq were barred and returned due to quality issues. Indian steel firm Jindal saw won a 25 year contract to build and run a factory for manufacture oil and gas pipelines in south Iraq. This $ 198 million deal was part of Iraqi efforts to revive its long deserted industrial sector. As part of Indian effort in infrastructure development in Iraq, reliance Globalcom, in projects collaboration with Iraqi telecommunications and post company (ITPC), launched the al-Faw cable landing station (CLS) for providing telecom service in the country. It is set to enhance internet speed for Iraqi domestic consumer. But presently, demand of India’s Indian productto Iraq and mutual business ties temporarily declined due to Iraqi political climate insurgency [10].

India’s expatriate in Iraq, once substantial has dwindled to almost nothing. In response to high levels of violence, the Indian government in 2004 banned labour brokers from hiring people for Iraq. This ban was for six months and then was extended from time to time. The extended period of the ban was valid up to April 30, 2010 based on the recommendation of the ministry’s Gulf division. it had been decided not to extend the ban beyond April 30,2010. On 4 May 2010 Indian government lifted the ban on grant of emigration clearance for Indians wishing to travel to Iraq but cautioned that people should take care of their security while working or visiting the oil-rich country. After that Indians can now legally travel to Iraq for work [11]. Lots of Indians (both legal and illegal migrants) came to Iraq via United Arab Emirates (UAE) and other gulf countries in the past 5 years [12].More than 80,000 Indians are living in Iraq despite an earlier government advisory against travel to the country that has been in turmoil since Saddam Hussein was ousted [13]. The lifting of the ban was termed a step towards normalization of relations between India and Iraq [14]. Indian Migration to Iraq got disturbed in June 2014 due to political as well as economic crisis in Iraq [15].

[1] Annual Report 2011-12,Ministry of Overseas, GOI

[2] Ajay N Jha, “Indo-Iraq Relations: 1947-86: Need For Fress Iniciatives,” in West Asia and India’s  Foreign Policy, ed. Verinder Grover( New DElhi: Deep & Deep Publications, 1992), pp 437-461.

[3] Ibid

[4] Opcit 1

[5] “Opportunities for India in Iraq’s restructuring,” Spacesence News. Feb 06, 2014. http://www.spacesense.in/news/13 (accessed June 2014, 27).

[6] Azhar Muhammad, “Indo-Iraq Economic Cooperation in Post Saddam Period,” Journal of WestAsian Studies (Deptt. of West Asian Studies, AMU, Aligarh) Vol.23 (2009): pp 148-161.

[7] Girijesh C Pant, “India-Gulf Economic Relations: A Profiles,” in West Asia and India’s Foreign  Policy, edited by Verinder Grover (New Delhi: Deep and Deep Publications, 1992) p 65.

[8] “Iraq Calls for Balanced Bilateral Trade With India,” Outlook, FEB 29, 2012. http://www.outlookindia.com/news/article/Iraq-Calls-for-Balanced-Bilateral-Trade-With-India/753569 (accessed June 12, 2014)

[9] Kabir Taneja, “India looks for larger presence in Iraq,” June 22, 2013. http://www.sunday-guardian.com/business/india-looks-for-larger-presence-in-iraq (accessed June 21, 2014).

[10] Sonia Roy, “Iraq” In Persian Gulf 2013: India’s Relations With the Region, by P.R. Kumaraswamy, pp 115-17. New Delhi: Sage Publication, 2014.

[11] “India lifts ban on travel to Iraq,” The Siasai Daily, May 4, 2010. http://www.siasat.com/english/news/india-lifts-ban-travel-iraq-0 (accessed May 23, 2014).

[12] “Working in Iraq not worth the risks, says Indian worker in the country,” IBNLive, June 16, 2014. http://m.ibnlive.com/news/world/working-in-iraq-not-worth-the-risks-says-indian-worker-in-the-country/479447-2.html (accessed August 2, 2014).

[13] “India lifts ban on travel,” The Siasat Daily, May 4, 2010http://www.siasat.com/english/news/india-lifts-ban-travel-iraq-0 (accessed May 23, 2014).

[14] Himanshi Dhawan, Ban on Indians travelling to Iraq lifted, January 9, 2010. http://timesofindia.

indiatimes.com/india/Ban-on-Indians-travelling-to-Iraq-lifted/articlehow/6025044.cms(accessed June 21, 2014)

[15] “Indian faces the Iraq test,” The Hindu, June 21, 2014. http://www.hindu.com/opinion/editional/India-faces-the-Iraq-test/articles6134195 ece (accessed July 12, 2014).