The situation in Iraq has not set off alarm bells in India yet. Officials do not anticipate imminent disruptions to oil supplies from the West Asian state, which holds the second largest oil reserves in the world.
India is monitoring the overall situation in Iraq, which official sources said was quite manageable right now. There is no cause for alarm, they told The Hindu on Tuesday.
Earlier, Finance Secretary Arvind Mayaram told presspersons that there were reasons to hope that the “Iraqi crisis will blow over.”
The sources pointed out that fighting was yet to engulf Iraq’s southern energy hub, which produced two-thirds of the country’s crude, including the giant oil fields of Rumaila, West Qurna-2 and Majnoon. The Shia majority in this area, with close ties to Iran, was expected to pose a stiff resistance to fighters from the Islamic State of Iraq and Syria (ISIS), who are posing a significant challenge to the authority of the Nouri al-Maliki government.
The Bloomberg news agency reported that Kurdish forces had moved into Kirkuk to protect the nucleus of the Iraqi oil production in the north from possible intrusions. However, Islamist fighters have established control over the northern Baiji refinery, which has a daily output of 3,10,000 barrels.
Saudi Arabia is at the top of the tree in oil production, but Iraq is India’s second largest oil supplier, meeting 20 per cent of its demand. The Financial Times quotes an estimate by Barclays as saying that a $10-per-barrel rise in the price of crude would shave 0.5 percentage points off India’s growth rate.
As the threat from ISIS escalated, the U.S. is beefing up its forces in the Persian Gulf. The American naval presence in the Persian Gulf has been strengthened with the presence of an aircraft carrier and two other warships.
Analysts say that concerns over the situation in Iraq have heightened because the infighting in Libya and sanctions against Iran have already imposed significant pressures on global oil supplies. Daily supplies from Libya have dropped to 1,80,000 barrels in May, the lowest since September 2011.
