Looking at Iraq-India Relations
In 1978, India’s imports of Iraqi crude oil were set to increase from around 3 million tons to 4 million tons. Today, Iraq remains a key trading partner to India despite dramatic geopolitical shifts.
The most fascinating history is that which cannot be found anywhere on the web. I’ve searched for it in banished corners where the past lingers with a unique musty smell. And that’s why I repeat that if you’re in search of an elusive past, and you end up finding and understanding it, then you’re richer in the present. That’s an unbeatable feeling. To beat the web. That’s gold.
Hello there, Noam here. Today’s post is about relations between India and Iraq. It comes at a very interesting time when the Arab Gulf region is experiencing dramatic shifts in its geopolitical tectonic plates, especially when compared to previous decades. Part of my work is driven by historical events gleaned from old books and my own collection of rare magazines, while the rest by shipping and trade data. Thank you for reading and supporting my work.
One of the many reasons I collect old magazines is because they carry articles about events that are no longer remembered except probably by those who are fired by history and archives. These include a piece titled India and Iraq: Common Outlook by Indian journalist Dilip Mukerjee, published in November 1975 by Iraq Today which used to be issued by the Ministry of Information in Baghdad. In his piece, Mukerjee captured some of the political atmosphere during a period that shaped relations between Baghdad and New Delhi. I previously discussed Iraq’s ties with other countries and powers in the 1970s including the USSR, which you can review here. With respect to India specifically, some like Prithvi Ram Mudiam, author of India and the Middle East (1994), called the 1970s the period of Iraqi-Indo “political honeymoon” as Baghdad and New Delhi formed their closest political and economic ties.
Following a visit to Baghdad in 1975, Indian journalist Mukerjee wrote: “...Both Iraq and India have come to the common conclusion that the only feasible way to ensure rapid economic advance is to adopt the path of planned economic development within the framework of a mixed economy. As a matter of ideological choice as well as economic necessity, both countries assign a leading role to the public sector. Both prefer to maintain national control over national resources by setting strict limits on the participation of foreign capital.” Such “harmonious” political and economic policies and outlooks meant developing mutually beneficial relations.
What I Iearned from Mukerjee’s work was that Indian engineers were working during that period in an area of over 200 sq. km in south west of Iraq’s Rumaila oilfield to develop a new oilfield. Today, Rumaila is Iraq’s most significant source of revenue with an output capacity of around 1.5 million barrels per day (mb/d). It is operated by the Rumaila Operating Organisation (ROO), while BP and PetroChina are lead contractors for the oilfield under the Basra Energy Company Limited (BECL), a joint venture formed in 2021.
In 1972, the year when Iraq nationalized the Iraq Petroleum Company (IPC), Baghdad “agreed in principle” to extend a loan to New Delhi for the construction of the Mathura refinery (commissioned in 1982 and run by the India Oil Company), according to Mudiam, author of India and the Middle East (1994).
In March 1974, then-vice president Saddam Hussein visited India where he met with India’s prime minister Indira Gandhi to discuss various issues, mainly oil supplies. Based on sources shared by Mudiam in his book, the two sides discussed agreements “for securing a loan on soft terms to import 2.8 million tons of crude oil during 1974 and the supply of 112 million tons of crude over ten years after the Mathura refinery became operational.” Gandhi later made an official visit to Iraq in January 1975, as shown in the photo below published by Iraq Today.
Later, in November 1977, Iraq and India signed a cooperation protocol according to which India’s imports of Iraqi crude oil were set to increase from around 3 million tons, worth $125 million that year to 4 million tons in 1978, according to an article by the Middle East Economic Digest (MEED) published in November 1977.
Industrial Projects
In addition to cooperation in the oil sector, Mukerjee wrote in 1974 that there were potential new agreements for combining India’s wealth in iron ore and bauxite with Iraq’s abundant reserves of energy for the production of steel and aluminum. Bauxite is the main ore for aluminum – which is among the key inputs into several technologies considered essential for energy transition nowadays. Although Mukerjee did not name particular projects, the article published by the MEED magazine in November 1977 shows that Iraq that year was expected to receive Indian assistance in developing iron and steel, electronics, machine tools, sulfur, and synthetic fabrics industries. Also, India agreed to establish training and research centers for metallurgy and fertilizers (more on this below).
Various factors have shaped political ties and economic cooperation between Iraq and India. Since it’s difficult to discuss each stage in this post, I decided to focus on the 1970s because that’s the period when relations between the two were firmly established as I noted at the beginning.
One of the explanations as to why the 1970s was a turning point in Iraq-India relations was offered by Mudiam who attributed it to the “similarities in the problems that the two countries encountered during [that] period and their respective national ambitions and aspirations.” Indeed, at that time Iraq was after nationalizing the assets of western oil companies in the country. The Iraq Petroleum Company (IPC), which was a consortium comprising companies like BP, Exxon, Mobil, CFP, Shell, and Partex, had full control over Iraq’s national oil production, and it was eventually nationalized in 1972 as part of Iraqi actions against foreign monopolies. India, in its turn, entered into a brief conflict with Pakistan towards the end of 1971 over what was known at that time as East Pakistan and which later led to the creation of Bangladesh.
Other factors that brought India and Iraq closer included their growing ties with the Soviet Union and the signing of friendship treaties in the early 1970s. In addition to all these, Mudiam said that both Iraq and India were in pursuit of “independent foreign policies” and were opposed to “major power meddling in the Indian Ocean.”
In an interview with CSIS (Babel: Translating the Middle East podcast) in December 2022, C. Raja Mohan, who’s a senior fellow at the Asia Society Policy Institute, noted that after 1973, and as oil supplies became vital, New Delhi engaged with the oil producers of the region, but mostly “on a mercantilist basis”.
“There was no real strategic relationship with the Gulf,” Mohan said. But this has all changed now amid a new order that is bringing India, US, and some Arab Gulf states into an alliance. Earlier this month, leaders of the US, India, Saudi Arabia, the UAE, France, Germany, Italy and the EU announced at the G20 summit in India what the White House called “a Memorandum of Understanding committing to work together to develop a new India-Middle East-Europe Economic Corridor.” This corridor, which has been interpreted as a rival to China’s Belt and Road Initiative, will seek to connect Europe, the Middle East, and Asia with a railway linked through ports.
Iraq, however, is not part of this grouping.
As my readers know by now, I dive into my collection of historical papers to form my own understanding/view of some events in the region, and to write like this. I‘ve learned that back in 1977, and as Iraq was willing to increase oil exports to India, New Delhi was planning to participate in various development projects in Iraq, including railways. According to the article carried by MEED in 1977, there was a project called Iraq’s railway program whose cost was more than $1,800 million. India’s Railways Minister at that time, Madhu Dandavate, invited Iraqi railways experts to visit India to review the section of the railway New Delhi was supposed to construct. MEED said that the railway that was under discussion back then was “presumably the Al-Qaim to Baghdad line” which was supposed to be connected to phosphate mines located in Akashat in Al Anbar province in western Iraq.
“India has long been interested in this project, which will be needed to carry phosphate to, and fertilizers from, the plant at Al-Qaim,” wrote MEED. Back then, the plant was being built by Sybetra, a Belgian company. For more on the Akashat plant, I recommend this article published by The National last year: Iraq scrambles to regrow its once world-leading fertiliser industry.
Fast-forwarding to the present, many things have changed in the region due to Iraq’s wars, international sanctions on the country before the US-led invasion and later the rise of ISIS. However, India and Iraq, which share historical ties, have maintained bilateral relations.
According to the Indian Embassy in Baghdad, although the 2003 invasion had an impact on India’s economic and trade relations with Iraq, they have been steadily growing since 2010 mainly due to crude oil imports.
Bilateral trade in FY 2021-2022 stood at $34.33 billion, accounting for around 3.32% of India’s total foreign trade, according to the Indian Embassy (for more see the chart below on India’s bilateral trade with Iraq).
Current Crude Oil Trade
Since I started tracking global oil flows in 2017—when I was working for ClipperData (now Kpler) — I developed an interest in tracing crude oil exports from Iraq to China and India, Asia’s giant oil consumers. I wrote data-driven analyses about Iraq’s market shares in these two markets vis a vis other producers, such as Iran and Saudi Arabia. These included a piece I published on Forbes.com in 2020 as Iraq’s exports to India in April that year saw one of their largest month-over-month declines due to the pandemic ( by 230,000 b/d). Though a monthly decline in Iraqi flows is not uncommon, it came years after Iraq had cemented its position as India’s No 1 supplier, surpassing Saudi Arabia. The COVID19-related lockdowns in India sapped crude oil purchases as refiners curbed runs. This led some Indian companies to issue force majeure notices to Iraq’s Oil Marketing Company (SOMO) to cancel some oil cargoes that were supposed to be lifted as per contract. Those were critical times for Iraq’s oil-dependent economy.
Iraq’s main oil clients are India and China, two key markets that drive global oil demand. According to the International Energy Agency (IEA), India is expected to surpass China in terms of global year-on-year growth in 2027. With respect to crude imports from Iraq, India imported an average of 895,000 b/d during the first 8 months of this year compared to an average of around 1 million b/d for the same period last year ( see chart below).
Russia’s invasion of Ukraine in February 2022 has triggered dramatic shifts in global oil flows. In the Indian market, Russia has become the main oil supplier due to its heavily discounted barrels. For instance, the price of Iraqi crude to India stood at an average of $76.19/barrel in February while Russian cargoes averaged $72.14/barrel, according to Bloomberg.
The changes in flows have been incredible, as shown in the chart below, with Russian barrels undercutting traditional suppliers like Iraq. The increase in imports of Russian crude started in April 2022 and climbed over 2 million b/d in May 2023 before flows started declining in July due to various factors, including a lower Russian discount and refinery maintenance.
Despite the changes in the Indian oil market, Iraq remains a key supplier. In June, Iraq’s Minister of Oil Hayan Abdul Ghani visited India for the 18th Iraq-India Joint Commission Meeting for Economic and Technical Cooperation. The two sides discussed matters related to trade and economic cooperation, hydrocarbon trade, crude oil sourcing, infrastructure upgrading, upstream investment in Iraq, and other issues, according to a statement posted on India’s Minister of Petroleum and Natural Gas Hardeep Singh Puri’s Twitter account.
“India as a major oil consumer [and] Iraq as one of the biggest oil producers in the world have significant synergies,” Puri said.
My post for today ends here. Thank you for reading it. I will be writing more on India-Iraq relations, so make sure you are subscribed to THE CHOKEPOINT. Until then, have a good journey.