Who could benefit from a war with Iran and who could lose?

 Who could benefit from a war with Iran and who could lose?

 

There are rarely any winners in war, and ordinary people pay the heaviest price.

Some countries around the world are expecting severe economic consequences due to disruptions in global energy markets and supply chains, but the chaos has created strategic opportunities for some.

The dramatic consequences of the US and Israel’s war against Iran are emerging for the region and the world. The war has destabilized Gulf countries and forced millions of people to flee their homes in the Middle East.

Consumers and businesses far from the battlefield are facing rising costs, driven by soaring oil prices and disruptions to maritime traffic in the Gulf, especially around the Strait of Hormuz.

So which countries stand to lose the most in this war, and which ones stand to gain.

 

Russia

 

Iran is a key ally and military partner for Russia. The death of Ayatollah Ali Khamenei is a diplomatic setback for Moscow. It came after the ouster of Bashar al-Assad in Syria and the capture of Nicolas Maduro in Venezuela by US forces.

However, the tensions in the Middle East could give Russia an edge in its war in Ukraine, as US military assets are now somewhat diverted from Moscow.

Nicole Grevsky, an assistant professor at the Centre for International Studies at the Paris Institute of Political Studies, told the BBC that “the reduction in the Patriot missile and interceptor stockpile is beneficial for Russia because it limits Ukraine’s options in the arms market.”

Experts say Tehran now needs far more Shahid drones, but this is unlikely to have much of an impact on Russian capabilities in the Ukraine war.

Hanna Note, Eurasia director of the Center for Nonproliferation Studies in the United States, says that “During a certain stage of the beginning of the Ukraine war, Russia was relying on Iran for defense cooperation. At that time, Iran provided Shahid drones. Importantly, the technology and licenses for the production of these drones were also provided.”

“Now we are at a stage in the Ukraine war where Russia does not need Iran. Russia can produce Shahid drones on its own.”

Iranian Shahid Drone

Meanwhile, Iran has closed the Strait of Hormuz, which has halted oil and gas shipments and raised prices. This could provide financial relief to Russia as the Ukraine war has put pressure on its economy.

Russia’s federal budget depends on oil exports at $59 per barrel, but now the price of crude has risen to around $120 per barrel for some time.

As major oil-exporting countries in the Gulf are cutting their production, Russia could increase oil exports to key markets like China and India.

“India was pressured to reduce its purchases of Russian oil earlier, but now the US has given it permission to buy Russian oil again, at least for the next month,” says David Fife, chief economist at Argus, a global energy and commodity market intelligence company.

“There are also talks to ease some of the sanctions on Russian oil to resolve some of the issues.”

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China

The war with Iran has not had a dramatic impact on China, but it could still face pressure.

Iran accounts for only about 12 percent of China’s crude oil imports, according to the Center on Global Energy Policy.

Moreover, China has stored enough oil for several months and can easily get help from Russia after that.

But according to Fife, China’s “export-oriented industrial sector” will be affected.

Exports, i.e. all the goods and services that China produces, make up about 20 percent of China’s gross domestic product (GDP), and they have become a major driver of the economy.

Disruptions to maritime traffic in and around the Strait of Hormuz are not a major problem for China, but access to the Atlantic Ocean is crucial for Chinese goods heading west.

On the other side of the Arabian Peninsula, the Bab al-Mandab Strait, which connects Asia, Europe and Africa, has also been the target of attacks by Yemen’s pro-Iranian Houthi militants.

“It is very likely that Red Sea traffic will be severely affected again because long-haul cargo ships from Asia that want to enter the Atlantic will have to turn around South Africa and the Cape of Good Hope,” Fife told BBC News.

“It comes at a high cost,” says Neil Quilliam, a Middle East expert at Chatham House, a London-based think tank. “It adds 10 to 14 days to the journey and, depending on the cargo, costs around $2 million extra for a typical ship.”

Philip Shetler-Jones of the UK’s Royal United Services Institute told BBC News that a war with Iran could also provide China with diplomatic opportunities.

Chinese President Xi Jinping will continue to project his image as a stable and understandable world leader, in contrast to US President Donald Trump.

And the dispute could also be an opportunity for Beijing to "look for clues" on how Trump might respond to other sensitive issues, including Taiwan, a sovereign island claimed by China.

 

Emerging economies

Southeast Asian countries, which are heavily dependent on Middle Eastern oil and gas, are set to be hit hard by the war. Some of them have already implemented drastic austerity measures to cushion the economic impact as quickly as possible.

Diesel prices in Vietnam have risen by 60% since the start of the war and the government has asked people to work from home where possible.

In the Philippines, which imports about 95% of its crude oil from the Middle East, civil servants are now working four days a week, except for those in emergency services.

Similar restrictions have been imposed in Pakistan, except for banks. Work-from-home orders have been issued where possible and university classes have been moved online.

In a televised address, Prime Minister Shehbaz Sharif said it was crucial to conserve the country’s fuel reserves and distribute them carefully.

In Bangladesh, the government is grappling with panic buying. After long queues at petrol stations, rationing was introduced, with cars allowed 10 litres a day and motorbikes only 2 litres.

Farmers around the world rely on fertiliser to provide nutrients to the soil, help crops grow and make them more resilient to weather. Any disruption could also threaten global food security.

“Thirty per cent of the world’s urea, the main raw material for making fertiliser, passes through the Strait of Hormuz,” Quillam told BBC News. “Urea comes from petrochemicals, which are made by refining crude oil. So if you take 30% of urea off the global market, it will have a major impact on global food security.’

After the attacks on its facilities, Qatar Energy, one of the world’s largest gas exporters and a producer of urea for fertilizer, had to declare force majeure, an emergency measure that allows companies to temporarily halt production and deliveries.

“You could see the impact on food security and inflation within six to nine months,” says Quillam. “It may not be immediately apparent, but as crops are affected or farmers have difficulty getting fertilizer, we will see the long-term impact.”