The World This Week | Iran war reshapes geopolitics and US foreign policy, Trump turns to Section 301 tariffs, Spain withdraws envoy from Israel

Meanwhile, diplomatic rifts have deepened in view of the conflict: Spain has permanently withdrawn its ambassador from Israel.

As the war in West Asia crosses the two-week mark, the trade blockade in the Persian Gulf and the deepening global energy crisis have triggered tectonic shifts in the US’s foreign policy. In a way, the shift has also offered insight into the country’s domestic political landscape and, more importantly, exposed flaws in Washington’s strategic calculus.

With the Trump administration sending mixed signals about the status of the conflict and the White House failing to articulate a clear objective behind its campaign against Iran, the prospect of peace remains elusive.

On the other hand, the Islamic Republic elected Mojtaba Khamenei to succeed his father, the late Supreme Leader Ayatollah Ali Khamenei, on March 8. The mid-level cleric, known for his close association with the Islamic Revolutionary Guard Corps, has vowed to keep fighting and has threatened to open “other fronts” in the war. This only adds to the uncertainty surrounding the conflict, leaving no clear timeline for a ceasefire or de-escalation.

There are no clear victors in the conflict, with Washington (and its allies) and Tehran targeting each other’s strategic assets across the region – including oil reserves and refineries – and thinning out their military resources.

The current situation

The conflict, which began on February 28, has claimed over 2,000 lives so far. At least 1,300 fatalities were reported in Iran. In a Pentagon briefing on Friday, US Defense Secretary Pete Hegseth said the US and Israel have struck over 15,000 targets on Iranian soil since the start of the conflict. Aside from the attacks on Iran’s military and strategic assets, the duo has been actively pursuing a strategy of skimming off Tehran’s top leadership in a bid to force regime change by boosting confidence among dissidents.

In the first half of January, the Islamic Republic witnessed the largest anti-regime uprising since its founding. It was followed by a brutal crackdown, with reports indicating approximately 30,000 fatalities.

Hegseth reiterated his Department’s strategy to continue bombarding the Islamic Republic. This came shortly after US President Donald Trump said the US was going to be hitting Iran “very hard over the next week”.

It marks a sharp U-turn from what the US President said earlier: On Monday, Trump said that the “war is very complete.” But that was before Mojtaba Khamenei announced that Iran would continue its assault on US assets and allies in the region.

Lebanon reported 687 deaths till Friday as it witnessed a fresh Israeli bombardment campaign triggered by Iran’s proxy Hezbollah firing rockets at Tel Aviv last week.

In the three weeks following Trump’s Board of Peace meeting, the world now faces three major conflicts, with the one in Ukraine receiving a fresh stimulus as the US waives off sanctions on Russian oil.

At least a hundred more fatalities were reported across West Asia. The total number of Indians killed due to the war has gone up to five. There are nearly one crore Indian citizens living in the Gulf nations.

A new finish line

The White House’s messaging on the conflict has been confusing enough: No clear objective, rationale, or status update. But we can read between the lines here: It’s about who makes the last move – and establishes dominance.

From Washington’s point of view, the conflict’s rationale ostensibly revolved around three core issues:

• No breakthrough in negotiations on Iran’s nuclear enrichment programme (although Oman’s Foreign Minister Badr bin Hamad Al Busaidi stated that Tehran had conceded to much of Washington’s demands).

•  A need for regime change, which does not seem to be in sight.
• Iran’s ballistic missile programme.

Interestingly, during the Pentagon briefing, Hegseth said the US President “holds the cards.” Considering that Trump’s comments on the conflict’s status have oscillated between “We’ve already won” and “We’ve got to finish the job” (on the same day, March 11), the White House’s primary objective at the moment may be to assert that it is Trump who calls the shots and declares the war over.

The war will last till one side gives in and stops firing.

Choking energy supply

Since the war began, Iran has pursued a strategy of choking trade through the Strait of Hormuz – the transit for more than a fifth of the world’s oil and gas supplies – triggering the energy crisis.

On Friday, the Associated Press reported that at least 19 commercial vessels were attacked or damaged in the Persian Gulf and surrounding areas since the start of the conflict. Tehran has been targeting fuel tankers and related assets in the region using drones and ballistic missiles to pressure US regional allies to persuade Washington to end its assault.

To combat soaring energy prices and shortages, the International Energy Agency (IEA) announced that it would release 400 million barrels of oil. The US also announced a 30-day sanctions waiver for Russian crude, providing relief to Moscow amid the ongoing war in Ukraine.

In comparison, the 32-nation coalition had released 182 million barrels from its emergency reserves in 2022 – after Russia was slapped with sanctions for its invasion of Ukraine.

Multidimensional crisis in India

Owing to the closure of the Strait of Hormuz, New Delhi is grappling with a multidimensional energy crisis, with rising concerns about LPG costs and supply echoing through Parliament and airlines announcing fuel surcharges.

LPG crisis: Approximately 60 per cent of India’s LPG is imported, and about 90 per cent of those shipments pass through the Strait. The conflict has caused panic in Indian households, with consumers queuing up to purchase cylinders.

The price of a 14.2 kg domestic cylinder in New Delhi rose to Rs 913 from last month’s Rs 853 – a Rs 60 rise.

The government invoked emergency powers under the Essential Commodities Act this week to direct Indian refiners to maximise liquefied petroleum gas (LPG) production and ensure that all the gas is supplied solely to domestic LPG consumers and not used to produce petrochemicals.

It has also introduced a 25-day inter-booking period to prevent hoarding, and several states have launched raids on hoarders.

India is the world’s third-largest consumer of crude oil and depends on imports to meet over 88 per cent of its oil requirement.

Around 2.5-2.7 million barrels per day (bpd) of India’s crude imports — accounting for around half of the country’s total oil imports — have crossed the Strait of Hormuz in recent months. This oil is mainly from Iraq, Saudi Arabia, the UAE, and Kuwait.

While the US has waived off sanctions on Russian oil in stranded tankers at sea, New Delhi is looking to diversify its sources.

A few days after a couple of crude oil tankers bound for India crossed the Strait of Hormuz, Iran has reportedly allowed two India‑flagged LPG tankers to pass through the waterway. This came as EAM S Jaishankar spoke to his Iranian counterpart Abbas Araghchi.

India’s largest airline, IndiGo, said it will start levying fuel surcharges ranging from Rs 425 to Rs 2,300 on domestic and international flight tickets from March 14.

While announcing the introduction, the airline said the measure has been taken due to the significant surge in fuel prices. Aviation Turbine Fuel (ATF) accounts for nearly 40 per cent of an airline’s operational costs.

Air India and Air India Express also announced fuel surcharges on March 10.

Despite Iran’s losses, its strategic partners, Russia and China, are emerging as the silent winners of the conflict, benefiting from a war in which they are not belligerents.

Sanctions waiver for Russia

The global energy crisis has tipped the scales in Moscow’s favour, quite significantly. Although the new conflict has diverted Tehran’s drone supplies from the Ukrainian front, Russia has received a temporary but consequential sanctions waiver from Washington.

Mid-term madness: With the US mid-term election approaching, the Trump administration is keen on retaining Republican numbers in the House and Senate.

Notably, public support for the US’s military intervention in Iran is only 41 per cent, the NYT reported. In comparison, 76 per cent of Americans approved of the decision to go to war with Iraq in 2003, according to a poll taken the day after the conflict began. It fell to 43 per cent by the end of the war.

Although Trump’s campaign received a green light last week from both Houses of Congress, this military venture is off to a bad start.

Trump rode a wave of anti-interventionist sentiment into office, criticising the Biden administration’s investment in the war in Ukraine and arguing that the White House should focus on domestic issues first. The entanglement in Iran represents the exact opposite of his election promises.

According to a New York Times report, the cost of war for the US had exceeded $11.3 billion in the first six days alone.

Now, to contain the fallout from the energy crisis and cushion the blow to the American economy, the administration has temporarily waived sanctions on Russian oil, specifically oil in vessels already at sea.

Moscow’s oil revenue stream: According to a Financial Times report, Russia is estimated to have earned around $150 million a day in extra oil revenue since the Strait was blocked. Leveraging the shortages, Moscow has also stopped giving discounts to countries.

Around 130 million barrels of Russian crude were estimated to be on ships at sea as of early March.

At noon on Friday, Benchmark Brent crude was around $100 per barrel, almost 37 per cent higher than nearly $73 per barrel just before the US and Israel launched military strikes on Iran on February 28. Hence, Moscow stands to gain billions from this new relief.

Before the sanctions waiver, the US had been pressuring India to abandon Russian oil imports – applying punitive tariffs of 25 per cent in addition to the 25 per cent reciprocal tariffs – in a bid to isolate Moscow. Trump and his aides singled out New Delhi, asserting that the purchases were fueling the war in Ukraine.

Before February 28, India’s Russian oil imports were expected to average 800,000 to 1 million barrels per day (bpd). Imports have surged to about 1.5 million bpd in the first 11 days of this month, according to ship-tracking data from Kpler.

How is China benefiting?

China has steadily risen over the past few decades, building a naval fleet that now outnumbers the US in vessel count. With its eyes locked on Taiwan and unimpeded access to the Pacific Ocean, Beijing has been displaying aggressive manoeuvres in the South China Sea.

Owing to this, Washington has diverted its attention to East Asia as the next frontier of great power politics. Notably, the Pentagon’s defence strategy, released this January, downplayed Russia’s relevance in the geopolitical landscape, while reaffirming Beijing as a competent rival.

Focus diverted and resources stretched: Before the war with Iran, the US began diverting vast amounts of assets to West Asia. The Lincoln Carrier Strike Group was moved from the South China Sea to the region.

The New York Times reported that the US also moved its Patriot missiles and THAAD system from South Korea – the only East Asian ally hosting the advanced missile defence system, deployed by the Pentagon to counter North Korea’s missile threat.

With resources stretched across West and East Asia, the US is unable to posture itself in what it regards as a priority theatre.

Trump makes advances in the tariff front

In an attempt to retain the power to impose tariffs without congressional approval, the Trump administration has launched an investigation under Section 301 (b) of the Trade Act of 1974 against more than a dozen countries, including India and China.

The move was made citing structural excess capacity and overproduction in certain manufacturing sectors.

The United States Trade Representative (USTR) said it will open dockets for submission of written comments on March 17, and the Section 301 Committee will convene public hearings on May 5.

What is Section 301?

Section 301 allows the USTR to investigate and take action against unfair trade practices. The agency must complete an investigation within 12 months.

Tariffs on imports from China imposed under Section 301 during Trump’s first administration in 2018 remain in effect. Unlike other tariff authorities, this section is unlikely to be overturned by the US Courts or involve Congress.

Since the US Supreme Court struck down the bulk of his global duties – imposed under the International Emergency Economic Powers Act (IEEPA) – in late February, Trump reintroduced a 10 per cent blanket duty using a separate legal provision – Section 122 of the 1974 Trade Act.

Defiant about utilising what he once called the “most beautiful word in the dictionary,” Trump and his administration said they would pursue alternate legal routes to impose tariffs.

Section 122, however, allows the US President to institute tariffs of up to 15 per cent for 150 days. Notably, a coalition of two dozen states sued Trump last week over these duties.

With the tariffs set to expire on July 27, Section 301 will allow Trump to institute duties as early as May, meaning New Delhi could face fresh trade hurdles. And, unlike the Section 122 duties, Section 301 offers the US President the ability to adjust tariffs up or down, country-by-country.

We discussed in detail all the legal provisions available to the Trump administration in a previous article in the World This Week series.

The USTR noted that India’s solar module sector “is plagued by excess capacity, including that India’s current module manufacturing is nearly triple the annual domestic demand.”

In late February, the US Commerce Department imposed a 126 per cent blanket duty on Indian solar products amid an anti-subsidy investigation. The Department said the US’s solar imports from India were valued at $792.6 million in 2024, a more than nine-fold increase compared with 2022 levels.

Between 2021 and 2024, over 90 per cent of India’s solar photovoltaic module exports were shipped to the US, data from India’s Commerce Ministry showed.

Spain permanently withdraws its ambassador from Israel

The diplomatic relations between Spain and Israel reached a new low on Tuesday as Madrid permanently withdrew its ambassador to Israel in view of the US-Israeli strikes in Iran.

The position of ambassador has been entirely terminated, according to an announcement in Spain’s official gazette. The country’s Foreign Ministry said its embassy in Tel Aviv will be led by a charge d’affaires for the foreseeable ‌future.

The two countries have been at odds since 2023, when Israel launched its campaign in Gaza.

Israel’s embassy in Spain has been run by a chargé d’affaires since last May, after Tel Aviv summoned its ambassador in protest at Spain’s decision to recognise a Palestinian state.

Last September, Spain’s ambassador was summoned back amid a row over Madrid’s measures banning aircraft and ships carrying weapons to Israel from using its ports or airspace during Tel Aviv’s offensive in Gaza. Israeli Foreign Minister Gideon Sa’ar called the move antisemitic.

As early as November 2023, after Israel started its campaign in response to the October 7 terror attacks by Hamas, Spanish Prime Minister Pedro Sanchez said that he doubted Israel was respecting international humanitarian law, given the number of casualties among civilians in the Palestinian enclave.

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