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Maneesh Aggarwal asked: What will be the effect of Unrest in Middle East over Chinese investments in that region and over Indian interests?

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  • Prasanta K. Pradhan replies: Chinese investments in the West Asian and North African (WANA) region would certainly be hampered because of the continuing protests. China is also worried like any other countries who have invested in the region as the situation is undoubtedly discouraging for the investments. China is a major investor in the region where its companies have invested in big petroleum and construction projects. But, the protests have forced them to temporarily cease their operations in some places. For instance, China has evacuated over 35,000 of its nationals working in various projects in Libya and has decided to halt all its investments activities in the country. It has also decided not to make new investments until the situation stabilises. Similarly, China has investments of over US$ 600 million in Egypt, and there are more than a thousand Chinese companies operating in the country. There were reports that the Chinese companies faced some difficulties in their operation during the protests in Egypt. But as the political instability in the region subsides, the investment scenario should improve. Thus, the present obstruction is temporary in nature and it would gather momentum as the protests settle down.

    India is heavily dependent on the Gulf region for energy supplies. Any major political crisis in the region would disrupt the oil production and supplies thus leading to an increase in oil prices. It would be more serious if disruption in the oil supply were to take place in the strategically important Strait of Hormuz. Apart from oil, India shares huge non-oil trade relations with these countries. India’s non-oil trade with the WANA region amounted to $120.75 billion in 2009-10. The total non-oil trade with the six GCC countries alone amounts to $84 billion. Any prolonged political crisis would certainly hinder trade between India and the region. Similarly, it would also be detrimental to the interest of Indian companies which have invested in the region. The safety and security of the five million strong Diaspora in the Gulf would be a major challenge for India. Problems would aggravate in the event of a need to evacuate nationals.