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By:

Ruddhi Phadke

22 September 2024 at 10:17:54 am

Oil, Missiles and the Gate of Tears

As the Houthis target Saudi Arabia’s energy infrastructure, the widening West Asia conflict raises fresh concerns over global oil supplies and India’s economy. As President Donald Trump struggles to extricate the United States from the increasingly intractable conflict with Iran, the Middle East has become more combustible still. The Houthis, the Yemeni militia once regarded as a peripheral actor in the region’s wars, have opened a new front with remarkable audacity. Over the weekend, they...

Oil, Missiles and the Gate of Tears

As the Houthis target Saudi Arabia’s energy infrastructure, the widening West Asia conflict raises fresh concerns over global oil supplies and India’s economy. As President Donald Trump struggles to extricate the United States from the increasingly intractable conflict with Iran, the Middle East has become more combustible still. The Houthis, the Yemeni militia once regarded as a peripheral actor in the region’s wars, have opened a new front with remarkable audacity. Over the weekend, they launched coordinated strikes involving ballistic missiles, cruise missiles and drones against Saudi Arabia's energy infrastructure, hitting sensitive Aramco facilities in Jazan and Yanbu. The attacks were not merely another salvo in Yemen’s long war but a warning that the conflict is spilling across borders and drawing ever more of the Gulf into its vortex. This is not the first time the Houthis have targeted Saudi Arabia since the Iran conflict erupted. Riyadh and the Yemeni militia have traded blows before, in a rivalry that stretches back more than a decade. Although a fragile truce had tempered hostilities, the recent escalation has shattered any illusion of stability. Last week, the Houthis effectively closed the Bab-el-Mandeb Strait to Saudi shipping, bringing a substantial portion of the kingdom's oil exports to an abrupt halt. The narrow maritime chokepoint linking the Red Sea to the Gulf of Aden is one of the world's most vital trade arteries, carrying nearly 10 percent of global seaborne oil. For Saudi Arabia, it is an economic lifeline, with an estimated three-quarters of its oil exports passing through the strait. By disrupting this route and now striking Aramco's production facilities in Jazan and Yanbu, the Houthis are attacking not only the kingdom’s present oil exports but also its future production capacity. These strategic blows are being delivered with relatively inexpensive ballistic missiles and drones, allowing a lightly equipped militia to inflict outsized economic and geopolitical costs. The anti-ship cruise missile – Al-Mandab, named after the strait itself, can strike targets up to 300 km away. This radar guided missile costs a few hundred thousand dollars. Cheap Weapons Another example is the QUDS - a subsonic cruise missile gifted by Iran. It can travel nearly 150 km and costs just 50,000 dollars to make the missile. Houthis also rely on cheap drones like the SHAHED series. Some of the cheaper variants like SHAHED 131 cost just 10,000 dollars. Experts highlight that the Houthis are hurting the Saudi economy with weapons that cost less than what an average American makes in a year. The Yemeni group says that they are in no mood to stop the attacks. This leaves us with two big questions: Where are Trump’s guarantees and where is Pakistan? The United States has always projected itself as a net security provider, a pitch that was sold to Riyadh for decades. Today, when Saudi Arabia is battling Houthi attacks, the United States is missing. Islamabad is missing in action too. Islamabad has a mutual security pact with Riyadh. An attack on one is to be treated as an attack on the other as per the agreement. When it comes to billion-dollar loans or weapons, Pakistan is usually the first in line. When it comes about keeping promises, Islamabad is nowhere to be seen. Coming back to the Bab-el-Mandeb (which literally translates as the “Gate of Tears”), the name now carries an ominous resonance, especially if that gateway remains closed. For Saudi Arabia, the strait is an economic artery. The kingdom’s prosperity is built on the uninterrupted flow of oil exports, and any disruption to this vital route threatens its economic foundations. Today, Iran has tightened its grip around the Strait of Hormuz, while the Houthis are turning the Bab-el-Mandeb into another pressure point. The conflict is no longer confined to Iran’s borders or its confrontation with the United States. It has spilled into the Red Sea, into the arteries of global commerce, and into the heart of the world’s largest oil-producing region. Impact on India Renewed Houthi attacks on Saudi Arabia, particularly targeting Aramco oil facilities, could have significant economic and strategic implications for India, one of the world’s largest crude oil importers. India imports nearly 85 per cent of its crude oil requirements, with Saudi Arabia remaining among its top suppliers. Any disruption to Aramco’s production or export infrastructure could tighten global oil supplies, leading to a spike in international crude prices. Higher oil prices would increase India’s import bill, widen the current account deficit, and put pressure on the rupee. Costlier crude could also fuel inflation by raising transportation, manufacturing and energy costs, complicating the Reserve Bank of India’s efforts to manage price stability. The attacks also heighten concerns over the security of energy infrastructure and shipping routes in the Gulf. If hostilities spill over to the Red Sea or threaten maritime traffic through the Bab el-Mandeb Strait, shipping insurance premiums and freight costs could rise. This would affect not only crude oil imports but also India’s trade with Europe and West Asia. India also has strategic interests in the Gulf due to the presence of over nine million Indian expatriates in the region, many of whom live and work in Saudi Arabia and neighbouring countries. Escalating conflict could pose risks to their safety and disrupt remittance flows. While India has diversified its crude sourcing in recent years by increasing imports from countries such as Russia, Iraq and the UAE, prolonged instability in West Asia would continue to expose the Indian economy to energy price volatility. The situation underscores the importance of expanding strategic petroleum reserves, diversifying energy imports, and accelerating the transition towards renewable energy to reduce dependence on imported fossil fuels.

Lateral upgrade to ailing annihilation

Updated: Oct 21, 2024

Lateral upgrade to ailing annihilation

Being the first person from the private sector to be appointed as chairperson of Securities and Exchange Board of India (SEBI) as part of the government’s lateral initiative, Madhabi Puri Buch also holds the honour of being the first woman to hold the top post as capital market regulator.

But the laurels that the former private sector banker enjoyed in her earlier stint with ICICI Bank, was marred with allegations that she and her husband were having a stake in offshore entities, which were used to artificially inflate shares of Adani group companies.

Terming the allegation as `character assassination, Buch clarified that all disclosures have already been furnished and the fund in question did not invest in any securities involving the Adani group.

When it rains, it pours. This allegation was subsequently followed by Congress Party allegation that Buch had received salary and post-retirement benefits from ICICI Bank after she quit the private sector bank.

In its clarification to the stock exchanges, ICICI Bank asserted that the payments made to Buch were purely retirement benefits after her exit from the bank and they were neither salary nor employee stock options.

Prior to these allegations, Buch tenure at SEBI was all about bringing in quick reforms on operational issues by changing the format of consultation paper to bring in larger responses digitally. Being data savvy, the rationale of her decisions were democratic based on big data analysis derived from the responses received to the consultation papers.

Further she bifurcated the duties of the SEBI staff between operations and enforcement, which were done by the same persons earlier. Having worked for the private sector in the capital market domain space, Buch had a better understanding of the subject compared to officers from the administrative service in the past that reflected even in her orders as a whole-time director at SEBI before becoming the chairperson. As a whole time director at SEBI, her orders on adjudication issues were more directional to the capital market space, according to experts in the compliance space. She was also quick to revamp the old provisions of the 90s at SEBI.

Being tech and data savvy, Buch enhanced regulatory surveillance and detection of market manipulation, insider trading and fraud while also emphasizing on strengthening corporate governance by introducing stricter rules for independent directors and enhancing disclosures for related-party transactions.

To put in perspective, the annual report of the capital market regulator in the just concluded financial year revealed that the number of investigations related to insider trading jumped to 175 in 2023-24 from 85 in the preceding year while probes related to front running jumped over three times to 83 from 24 in the preceding year.

Transparency in mutual funds by implementing measures to protect retail investors along with tightening norms for initial public offers, particularly in the SME platforms were some of her other positive initiatives including confirmation of denial of any market rumours within 24 hours for the top 100 listed companies which will be extended to top 250 companies from December 1. However increased transparency and compliance with tightening regulations led to increased operational costs for the market participants and hence faced resistance from certain quarters. Born in 1966, Buch completed her primary education in Mumbai and graduated with specialization in Mathematics from Delhi and later obtained a management degree from Indian Institute of Management, Ahmedabad. In between, she got engaged to Dhawal Buch, a director at a consumer goods multinational at the age of eighteen and got married at the age of 21.

Besides ICICI Bank, Buch also worked as a lecturer at a college in England, worked at Greater Pacific Capital in Singapore and ICICI Securities as its CEO. She also worked as executive director on several private sector companies and as a consultant for New Development Bank (Brics Bank).

What now remains to be seen, is whether Buch, who survived the 26/11 terror attack when she along with her husband, was attending a meeting at Taj, be able to overcome the current ordeal. Keeping fingers crossed for the times to come.

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