The Iran War Damaged U.S.-India Ties

Get audio access with any FP subscription. On June 12, Indian External Affairs Minister S. Jaishankar phoned U.S. Secretary of State Marco Rubio to register a “strong protest” about the killing of three Indian seafarers by U.S. strikes in the Gulf of Oman on June 9. The sailors were aboard the Palau-flagged tanker Settebello, which the United States said “violated the ongoing blockade” on Iranian-linked shipping. With the United States and Iran signing a peace deal this week, it seems likely that the diplomatic fractures between Washington and New Delhi will outlast the Iran war. On June 12, Indian External Affairs Minister S. Jaishankar phoned U.S. Secretary of State Marco Rubio to register a “strong protest” about the killing of three Indian seafarers by U.S. strikes in the Gulf of Oman on June 9. The sailors were aboard the Palau-flagged tanker Settebello, which the United States said “violated the ongoing blockade” on Iranian-linked shipping. With the United States and Iran signing a peace deal this week, it seems likely that the diplomatic fractures between Washington and New Delhi will outlast the Iran war. Rubio’s public response to Jaishankar was remarkably unyielding. Asserting that U.S. forces “will continue to take all necessary measures to enforce maritime security and counter hostile threats in the region,” Rubio offered neither apology nor regret for the deaths. He made no commitment to adjust the rules of engagement and didn’t provide assurance to India, a strategic partner of the United States, that such an incident wouldn’t be repeated in the future. The diplomatic friction came as Indian Prime Minister Narendra Modi publicly thanked U.S. President Donald Trump for offering Modi congratulations about becoming India’s longest-serving premier—and as the two sides finalized preparations for a bilateral meeting between the leaders on the sidelines of the G-7 summit in France this week. When asked about the deaths of the Indian sailors after the two leaders met on Wednesday, Trump replied, “We love all of those people.” He praised Modi but made no substantive announcements on bilateral ties and sidestepped a question about the Quadrilateral Security Dialogue, or the Quad. Such dissonance seems to define India-U.S. affairs today. Beneath the pretenses of a rock-solid partnership, the strategic trust between New Delhi and Washington has suffered a rupture. Rubio’s trip to India in May showed that while Washington projects nonchalance, New Delhi is navigating an environment where it sees its strategic autonomy as constrained by its most important Western partner. Two primary factors underscore the deterioration in these ties since the Iran war began, which won’t be undone when the war ends. The first is the destabilizing economic crisis that the conflict unleashed within India. The second is the political cost that Modi now faces after staking his reputation on partnership with the Trump administration. There is an incompatibility in the two countries’ strategic goals that may persist after Trump’s second term. In India, the economic consequences of the Iran war have been immediate and structural. The country imports nearly 89 percent of its domestic oil consumption, making it uniquely vulnerable to disruptions to global supplies. When crude oil prices spiked, it fueled high domestic inflation and undermined the purchasing power of the Indian public. The disruptions to the Strait of Hormuz also left India with an acute deficit in imported fertilizers and cooking gas. This energy and supply shock was compounded by a decline in remittances from Indian expats working in the Middle East, where instability has also disrupted local economies. As these inflows diminished, India’s export sectors faced contraction due to rising insurance premiums for maritime freight and disrupted supply chains. Two years ago, Indian officials boasted of the country soon becoming the world’s third-largest economy; now, it has fallen to sixth place. The crisis made the Indian rupee the worst-performing currency in Asia, triggering substantial capital flight. Foreign investors have withdrawn record volumes of capital from Indian equities and debt markets, seeking safer assets in places such as Taiwan and South Korea. This economic downturn comes alongside an expanding fiscal deficit, constraining the government’s ability to engage in public capital expenditure or provide relief to the affected sectors. The economic architecture that India hoped would project its national power has instead become highly vulnerable to shocks generated by the Trump administration’s unilateral decision-making. The war in Iran has also created political liabilities for Modi, whose authority rests on showing India’s strength. The strikes that killed the Indian sailors brought the human cost of the conflict directly to the public. This latest loss of life was preceded by an incident where the United States torpedoed an Iranian vessel

The Iran War Damaged U.S.-India Ties

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