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How Syria crisis will impact India and the World

Syria war

Russia called on Syria to hand over its chemical weapons arsenal to international authorities as prelude to the arsenal’s destruction. The Syrian foreign minister immediately “welcomed” the demand. The turn in Russian pomposity was variously depicted as a “stalling tactic” to put off US military strikes and maybe a shift in the world order.

Russia has its own interest in protecting Syria as Russia has a naval installation in Syria, which is strategically important and Russia’s last foreign military base outside the former Soviet Union. Also Russia is a major exporter of military products to Syria.

The twist in the Syria debate originated with apparently offhand remarks by US secretary of state John Kerry. In a London news conference, Kerry said Assad could avoid strikes by surrendering control of “every single bit” of his arsenal to the international community by the end of the week.

Meanwhile the developing economies such as India, which are already facing a weakening currency due to Federal Reserve’s withdrawal of dollar liquidity; will face severe impact if the war occurs. Syria itself produces very little oil, but its’ neighboring countries produce a lot. The fear is that these neighboring countries could get dragged into the conflict, and oil production and export may be interrupted. Iran is one of the Syrian government’s main sources of weapons, while Saudi Arabia (along with Qatar) is arming the rebels.

Many analysts see the Syrian conflict as a proxy war between these two countries. If the oil imports become expensive for the developing country, the current account deficit may shoot up as the demand for oil is inelastic. This would mean a higher inflation, and possibly precipitate stagflation in developing economies such as India.