Mains Practice

Context

The 2026 U.S.–Iran conflict has emerged as a critical geopolitical test for BRICS. While the crisis has accelerated efforts toward financial and strategic autonomy from Western systems, it has simultaneously exposed deep internal divisions and institutional weaknesses within the grouping.

Strategic Advantages for BRICS

1. Voice of the Global South

BRICS has projected itself as a major representative of the Global South by:

• Maintaining relative neutrality
• Advocating diplomatic and multipolar solutions
• Criticising unilateral sanctions and military escalation

2. Push for Alternative Payment Systems

Sanctions on Iran accelerated the development of:

• BRICS Pay
• Local-currency settlement mechanisms These initiatives aim to reduce dependence on:
• SWIFT payment systems
• U.S. dollar-dominated transactions

3. Strengthening Non-Western Supply Chains

The crisis encouraged greater coordination between:

• Energy producers (Russia, Iran, UAE)
• Energy consumers (India, China)

to create resilient and non-Western trade corridors.

4. Currency Sovereignty

Regional instability increased momentum toward:

• Local currency trade
• De-dollarisation of energy transactions
• Financial sovereignty within the bloc

5. Growing Global Appeal

Many developing countries increasingly view BRICS as a shield against:

• Unilateral sanctions
• Western economic pressure
• Dollar dependency

Strategic Disadvantages for BRICS

1. Internal Fragmentation

Military tensions involving members such as Iran and the UAE exposed sharp internal contradictions and weakened bloc cohesion.

2. Geopolitical Paralysis

Divergent national interests prevented BRICS from issuing:

• A unified condemnation
• A formal collective response

This highlighted the absence of a common foreign policy framework.

3. Credibility Deficit

The grouping’s inability to:

• Protect Iran diplomatically
• Mediate the conflict effectively

reduced confidence in BRICS as a credible geopolitical alternative.

4. Chair Dependency

The contrast between Brazil’s active 2025 presidency and India’s cautious 2026 approach demonstrated that BRICS outcomes depend heavily on the priorities of the chairing nation.

5. Infrastructure Vulnerability

The conflict threatened strategic connectivity projects such as:

• International North-South Transport Corridor
• Chabahar Port

raising concerns over long-term trade security.

Way Forward for India as BRICS Chair

Institutional Mediation

India can propose a formal Conflict Resolution Mechanism to manage disputes among member states.

Currency Coordination

A common pricing and settlement framework for oil and gas can reduce dependence on the petrodollar system.

Infrastructure Integration

India should accelerate:

• Digital customs harmonisation
• Connectivity through INSTC
• Regional logistics integration

Energy Security Cooperation

An intra-BRICS Energy Security Pact can ensure stable hydrocarbon access during geopolitical crises.

Conclusion

The U.S.–Iran conflict has simultaneously strengthened and weakened BRICS. While it accelerated de-dollarisation and strategic coordination, it also exposed serious institutional and geopolitical limitations. For BRICS to evolve into a credible multipolar platform, it must move beyond symbolic solidarity toward stronger institutional cohesion and conflict-management mechanisms.

The proposal by Iran to impose transit fees on ships passing through the Strait of Hormuz has raised significant geopolitical, legal, and economic concerns. The move comes amid heightened tensions in West Asia and ongoing instability in global energy markets.

Iran’s parliament is reportedly drafting legislation to levy transit tolls that may reach up to $2 million per vessel or approximately $1 per barrel of oil transported through the strait. The proposal has triggered objections from several countries, including Oman, which co-manages the waterway and argues that such levies violate international maritime law.

Strategic Importance of the Strait of Hormuz

The Strait of Hormuz is one of the world’s most critical maritime chokepoints. Located between Iran and Oman, it connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.

Importance

• Nearly one-fifth of global oil trade passes through the strait.
• Major energy exporters such as:
  • Saudi Arabia
  • Iraq
  • United Arab Emirates
  • Kuwait

depend heavily on this route.

Any disruption in navigation through the strait can significantly affect:

• Global oil prices
• Energy security
• International trade
• Maritime stability

Iran’s Justification

Iran argues that prevailing wartime and security conditions entitle it to compensation for ensuring maritime security in the strait.

According to Iran:

• Extraordinary geopolitical conditions override standard transit obligations under international law.
• Coastal states providing security during regional conflicts deserve compensation from commercial shipping traffic.

However, this interpretation remains widely contested.

UNCLOS Provisions on Transit Passage

The United Nations Convention on the Law of the Sea establishes the legal framework governing international maritime navigation.

Free Transit Passage

UNCLOS guarantees all ships and aircraft the right of transit passage through international straits used for global navigation.

Thus, coastal states cannot:

• Suspend transit passage
• Arbitrarily restrict navigation
• Levy charges merely for passage

Charges Permitted Only for Services

Coastal states may impose fees only when they provide specific services such as:

• Pilotage
• Towing assistance
• Port facilities These charges must:
• Be directly linked to the service provided
• Apply equally to all vessels without discrimination

Territorial Sovereignty Limitations

Although coastal states exercise sovereignty over territorial waters, this sovereignty is limited in international straits due to the principle of uninterrupted navigation.

Oman’s Opposition

Oman has rejected Iran’s proposal, arguing that:

• International agreements prohibit unilateral transit levies in international straits.
• The Strait of Hormuz functions as a globally shared maritime route.
• Free navigation is essential for global trade and energy stability.

Oman’s position aligns with the broader international interpretation of UNCLOS.

Distinction from Artificial Canals

UNCLOS differentiates natural international straits from man-made canals.

Artificial Waterways

Canals such as:

• Suez Canal
• Panama Canal

may levy tolls because:

• They are artificial constructions
• Maintenance and operational costs require financial recovery

In contrast, natural straits governed by transit passage rules generally cannot impose such charges.

Implications of the Proposal

Global Energy Markets

Additional transit fees could increase shipping and oil transportation costs, potentially raising global crude oil prices.

Maritime Security Concerns

The proposal may heighten tensions in the Gulf region and increase risks to international shipping routes.

Legal and Diplomatic Disputes

The issue could trigger disputes regarding interpretation of UNCLOS and freedom of navigation principles.

Impact on India

As a major oil-importing country heavily dependent on Gulf energy supplies, India could face higher import costs and energy security concerns if tensions escalate.

Conclusion

Iran’s proposal to levy transit fees through the Strait of Hormuz highlights the growing intersection of geopolitics, maritime law, and energy security. While Iran cites security-related justifications, UNCLOS strongly protects the principle of free transit passage through international straits. The development underscores the strategic importance of maintaining open and stable maritime routes for global trade and energy flows.

The visit of South Korean President Lee Jae-myung to India and his meeting with Prime Minister Narendra Modi at Hyderabad House marks a significant step in strengthening the India–South Korea Special Strategic Partnership. Several agreements were signed across trade, technology, maritime, and cultural cooperation.

Background of Relations

India and South Korea established diplomatic relations in 1973, which were elevated to a

Special Strategic Partnership in 2015. The relationship is driven by:

• Strong trade and investment ties
• Technological collaboration
• Defence cooperation
• Presence of Korean companies like Samsung and Hyundai

The partnership aligns India’s Act East Policy with South Korea’s New Southern Policy.

Key Areas of Cooperation

1. Political & Strategic
   • Convergence in Indo-Pacific vision
   • Cooperation in global governance reforms
2. Defence & Technology
   • Joint production like the K9 Vajra-T
   • Collaboration in AI, semiconductors, and shipbuilding
3. Cultural Relations
   • Historical link through Queen Suriratna (Ayodhya)
   • Rising popularity of K-pop and Indian cinema

Key Outcomes of the Meeting

Trade & Economy

• Target to increase trade from $27 billion to $50 billion by 2030
• Revival of CEPA upgrade negotiations
• Launch of:
  • India–Korea Financial Forum
  • Industrial Cooperation Committee
  • Economic Security Dialogue

Digital & Industrial Partnership

• Launch of India–Korea Digital Bridge
• Cooperation in AI, IT, and SMEs
• Establishment of a Korean Industrial Township in India Maritime Cooperation
• Framework for shipbuilding and maritime logistics
• Supports India’s Maritime India Vision 2030 Multilateral Alignment
• South Korea joins:
  • International Solar Alliance
  • Indo-Pacific Oceans Initiative
• Shared stance on global conflicts and institutional reforms

Cultural Diplomacy

• Launch of Mumbai Korea Centre
• India–Korea Friendship Festival (2028)

Challenges

• Persistent trade deficit for India
• Slow progress in CEPA negotiations
• Need for infrastructure in shipbuilding
• Implementation gaps in MoUs
• Geopolitical uncertainties affecting supply chains

Way Forward

• Fast-track CEPA to improve market access
• Build semiconductor and critical tech supply chains
• Attract Korean FDI into manufacturing corridors
• Strengthen maritime cooperation under Sagarmala
• Enhance people-to-people exchanges

Conclusion

The recent engagement reflects a shift toward a technology-driven, future-oriented partnership. With shared democratic values and complementary strengths, South Korea emerges as a key partner for India in ensuring economic resilience and strategic stability in

the Indo-Pacific region.

Why in News?

India and New Zealand have signed a comprehensive Free Trade Agreement (FTA) aimed at boosting bilateral trade, investment flows, services cooperation, and strategic engagement in the Indo-Pacific region. The agreement marks another major step in India’s renewed push towards bilateral trade partnerships after opting out of the Regional Comprehensive Economic Partnership (RCEP).

What is a Free Trade Agreement (FTA)?

A Free Trade Agreement is a pact between two or more countries to reduce or eliminate tariffs, quotas, and non-tariff barriers on trade. FTAs seek to promote economic integration by improving market access for goods and services, encouraging investments, and facilitating smoother trade procedures.

India has increasingly used FTAs as a tool to strengthen economic diplomacy and integrate with global supply chains. Recent agreements with the UAE, Australia, Mauritius, the UK, Oman, and EFTA countries reflect this strategy.

Key Features of the India–New Zealand FTA

1. Tariff Liberalisation and Market Access

The agreement provides preferential or duty-free access for a wide range of Indian exports to New Zealand. Sectors expected to gain significantly include:

• Textiles and garments
• Pharmaceuticals
• Engineering goods
• Agricultural products
• Information technology services

This enhanced market access is expected to improve India’s export competitiveness in a developed economy and create new opportunities for Indian manufacturers and exporters.

2. Investment Commitments

New Zealand has committed investments worth nearly $20 billion in India over a defined period. The investment is expected in sectors such as:

• Infrastructure
• Renewable energy
• Food processing
• Technology and innovation

These inflows can support India’s long-term economic growth objectives, improve capital availability, and contribute to industrial expansion.

3. Services Sector Opportunities

India possesses a comparative advantage in services exports, particularly in IT, healthcare, education, and professional services. The FTA includes provisions facilitating:

• Easier movement of professionals
• Improved visa and work access
• Cooperation in education and skill development

Indian IT professionals, healthcare workers, teachers, and consultants are likely to benefit from greater opportunities in New Zealand.

4. Agricultural Trade and Safeguards

Agriculture remains one of the most sensitive components of the agreement. New Zealand is globally competitive in dairy and agricultural exports, raising concerns among Indian farmers and dairy cooperatives.

To address these concerns, the agreement is expected to include:

• Calibrated market access
• Tariff safeguards
• Phased liberalisation
• Protection mechanisms for sensitive sectors

This reflects India’s attempt to balance trade liberalisation with domestic livelihood concerns.

5. Regulatory Cooperation

The FTA promotes mutual recognition of standards and regulatory cooperation. Such measures can:

• Reduce non-tariff barriers
• Simplify export compliance
• Improve ease of doing business
• Enhance customs efficiency

This is especially important because non-tariff barriers often remain major obstacles even after tariff reductions.

Strategic and Geopolitical Significance

Strengthening Indo-Pacific Engagement

The agreement deepens India’s engagement with Indo-Pacific economies and aligns with its broader strategic vision of a free, open, and inclusive Indo-Pacific.

Diversification of Trade Partnerships

India has sought to diversify trade ties beyond traditional markets like the US and EU. Closer economic cooperation with New Zealand strengthens India’s economic footprint in the Pacific region.

Alternative to RCEP

After withdrawing from RCEP in 2019 due to concerns regarding trade imbalances and protection of domestic industries, India has preferred bilateral trade agreements with carefully negotiated safeguards. The India–New Zealand FTA reflects this calibrated approach.

Economic Impact of the Agreement

Boost to Bilateral Trade

India–New Zealand trade volumes have historically remained modest despite strong diplomatic ties. The FTA is expected to substantially increase:

• Merchandise trade
• Services exports
• Bilateral investments

Support to Manufacturing

By improving export access and attracting investments, the agreement supports initiatives such as:

• Make in India
• Production Linked Incentive (PLI) schemes
• Export-led manufacturing growth

Technology and Innovation Partnerships

Cooperation in renewable energy, agritech, digital technology, and research can help India gain access to advanced technologies and innovation ecosystems.

Employment Generation

Higher exports, investment inflows, and industrial growth may contribute to:

• Job creation
• Skill development
• Expansion of MSMEs and startups

Challenges and Concerns

Dairy Sector Competition

New Zealand’s strong dairy industry could challenge Indian dairy producers, particularly small farmers and cooperatives.

Utilisation of FTAs

India has often faced low utilisation rates of existing FTAs due to:

• Lack of awareness among exporters
• Complex compliance procedures
• Infrastructure bottlenecks

Ensuring effective implementation will therefore remain crucial.

Trade Deficit Risks

If imports rise faster than exports, India could face trade imbalance concerns similar to those experienced under earlier trade arrangements.

Domestic Industry Adjustment

Certain domestic industries may require:

• Policy support
• Skill upgradation
• Competitiveness enhancement

to adapt to increased global competition.

Conclusion

The India–New Zealand FTA represents an important step in India’s evolving trade strategy. By combining market access, investment commitments, services cooperation, and strategic engagement, the agreement has the potential to deepen economic integration between the two countries.

At the same time, careful implementation, protection of sensitive sectors, and improved utilisation mechanisms will determine the long-term success of the agreement. If effectively

leveraged, the FTA can strengthen India’s ambition of becoming a global manufacturing, services, and export hub while enhancing its strategic presence in the Indo-Pacific region.

Recent developments highlight growing defence cooperation between India and Germany, as India’s Ministry of Defence called for stronger defence industrial partnerships during interactions with German parliamentarians in Berlin. This reflects the deepening strategic ties between the two countries amid evolving global security dynamics.

About Germany

Germany is a major European nation located in Central Europe, playing a key role in global politics, economy, and security.

• Capital: Berlin
• Location: Central Europe
• Maritime Boundaries:
  • North Sea (Northwest)
  • Baltic Sea (Northeast) Neighbouring Countries Germany shares borders with:
• North: Denmark
• East: Poland, Czech Republic
• South: Austria, Switzerland
• West: France, Luxembourg, Belgium, Netherlands

Geographical Features of Germany

1. Climate

Germany experiences a temperate climate, with moderate seasonal variations, making it suitable for agriculture and human settlement.

2. Major Mountain Ranges
   • Alps (in the south) – highest peaks and tourism hub
   • Bavarian Highlands – rolling uplands with forests

3. Important Rivers

7

• Rhine River – crucial for trade and navigation
• Danube River – originates in Germany and flows across Europe
• Elbe River – supports ports like Hamburg

4. Lakes
   • Lake Constance – largest freshwater lake linked with Germany

5. Natural Resources

Germany has diverse mineral resources:

• Lignite (brown coal)
• Hard coal
• Natural gas
• Iron ore
• Copper, nickel, potash, uranium

Strategic Importance of Germany

• Economic Powerhouse: Largest economy in Europe
• Industrial Strength: Advanced manufacturing and engineering
• Geopolitical Role: Key member of EU and NATO
• Transport Hub: Dense network of rivers, roads, and railways

India–Germany Defence Cooperation

The recent call for enhanced defence industrial collaboration reflects:

• Technology Transfer: Joint development of advanced defence systems
• Make in India Boost: German expertise supporting Indian manufacturing
• Strategic Alignment: Shared interests in Indo-Pacific stability
• Diversification: Reducing dependence on traditional defence partners

Germany’s technological capabilities combined with India’s growing defence market create strong potential for long-term collaboration.

The India-Australia Economic Cooperation and Trade Agreement has completed four years since its signing in 2022, marking a significant milestone in bilateral economic and strategic relations between India and Australia. The agreement has substantially expanded trade, investment, mobility, and strategic cooperation between the two Indo-Pacific partners.

Key Achievements of ECTA

The agreement has accelerated bilateral trade and improved market access for businesses in both countries.

• India’s exports to Australia more than doubled, reaching $8.5 billion in FY 2024-25.
• Total bilateral merchandise trade touched $24.1 billion, with Indian exports registering nearly 8% annual growth.
• Australia granted 100% duty-free access to Indian exports, while India offered preferential tariff access on over 70% tariff lines.

The agreement has particularly benefited sectors such as pharmaceuticals, textiles, engineering goods, gems and jewellery, and IT services.

Sectoral Benefits

Trade and Industry

• India gained cheaper access to Australian coal and critical minerals, improving domestic manufacturing competitiveness.
• Bilateral safeguard mechanisms allow temporary suspension of concessions to protect domestic industries against import surges.

Pharmaceuticals and IT

• Australian regulators can fast-track approval of Indian medicines by recognising reports from trusted global regulators.
• Elimination of double taxation on offshore income of Indian IT firms is expected to save nearly $200 million annually.

Education and Mobility

• More than 1 lakh Indian students in Australia benefit from extended post-study work rights.
• Doctoral graduates can stay and work for up to four years after completion of studies.

Organic Trade

• A Mutual Recognition Arrangement (MRA) facilitates seamless trade in organic products through mutual recognition of certification systems.

Broader India-Australia Relations

India-Australia ties were elevated to a Comprehensive Strategic Partnership in 2020. Both countries share strong convergence in the Indo-Pacific region and cooperate closely within the Quadrilateral Security Dialogue framework.

Key defence engagements include:

• AUSINDEX (Naval Exercise)
• AUSTRAHIND (Army Exercise)
• Ex-Pitch Black (Air Force Exercise)

The Indian diaspora in Australia has expanded to nearly 9.76 lakh people, becoming the second-largest and fastest-growing migrant community in the country.

Challenges

Despite growing cooperation, some issues remain:

• Visa restrictions faced by Indian professionals.
• Concerns related to human rights discourse.
• Activities of certain diaspora-based extremist groups.

Conclusion

ECTA has emerged as a transformative agreement strengthening economic integration, strategic trust, and people-to-people ties between India and Australia. As both countries pursue resilient supply chains and a free, open, and inclusive Indo-Pacific, the agreement is

expected to deepen bilateral cooperation further in trade, technology, education, and security.