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The ongoing conflict in West Asia is having significant economic and geopolitical repercussions globally, particularly through its impact on oil prices, inflation and political outcomes, according to economist Amartya Lahiri, Professor of Economics at the University of British Columbia.
Speaking on the sidelines of the Kautilya Economic Conclave, Lahiri described the conference as an important platform where policymakers, bureaucrats, politicians and academics can exchange ideas and perspectives on global economic challenges. Discussing the wider economic consequences of the tensions in West Asia, Lahiri said the impact could be massive, particularly because movements in oil prices can affect economies through several channels. Higher energy costs can feed into inflation, with potential consequences for economic policy and politics. Once oil prices start moving, a lot of things get impacted in a first-order way, Lahiri said, adding that inflation can also influence electoral politics. He suggested that the consequences of the conflict could therefore extend beyond the immediate region and have implications for the United States and the global economy. On the possibility of an end to the conflict, Lahiri said predicting a political resolution was difficult, describing it as fundamentally a political question. Lahiri also commented on US pressure on countries such as India over purchases of Russian oil. Referring to the possibility of the US imposing tariffs on countries that continue buying Russian energy, he questioned the sustainability of such an approach, arguing that countries ultimately have to protect their economic interests. He said India, as a relatively poorer economy where economic considerations remain important, needs to source supplies where it can. Lahiri said the Indian government had managed the pressure over Russian oil purchases reasonably well and suggested that threats of extremely high tariffs could eventually encounter practical limits. On the broader debate over de-dollarisation, Lahiri said the process would be difficult because the US dollar remains deeply embedded in the global financial system. While countries may want to reduce their dependence on the dollar, he noted that there is currently no alternative currency with the combination of stability, history and global acceptance required to replace it. Lahiri added that developments in the digital financial space could nevertheless play a role in reshaping aspects of the international monetary system. (ANI)
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