India could play an important peace-maker role in the US-Iran conflict, taking big and perhaps welcome change from its hitherto standoffish foreign policy in such issues. But whether it wishes to or not remains to be seen.
The US assassination of a serving Iranian army general and the Iranian retaliation in the form of missile attacks on two US bases in the Middle East poses a massive diplomatic challenge for India's Narendra Modi government. India is close to both the US and Iran and any escalation of this conflict will adversely impact its economic and strategic interests.
Firstly, India is the world's largest remittance economy, with inflows of $80 billion in 2018; more than 60 per cent of this comes from the Middle East. This conflict can potentially impact this large inflow and adversely affect India's economic progress. Secondly, the spike in oil prices following the killing of the Iranian general has already led to a sharp rise in retail oil prices in India. Any further rise in crude prices will impact India's balance of payments numbers and almost certainly fuel inflation and prolong the ongoing economic slowdown. Thirdly, India also needs the Chabahar port in south eastern Iran to ship goods and other materials to Afghanistan and Central Asia bypassing Pakistan. A US-Iran conflict can unravel much of the strategic gains that have accrued to New Delhi so far from this port. Fourthly, if the conflict escalates to war, India's carefully cultivated and close relationships with Saudi Arabia, UAE, Israel and even the US could come under serious pressure, especially in a Donald Trump invoked “you are either with us or against us” atmosphere - which he is very capable of.
India has clear economic, strategic, and historic civilisational ties with Iran and the entire Middle Eastern region. It also has deep concerns over terrorism and especially state sponsored terrorism having been a victim for many decades. India could, therefore, play an important peace-maker role, should the conflicting parties see fit, and importantly if India so wishes. This would, in fact, be a big and perhaps welcome change in India's hitherto standoffish foreign policy in such issues.