Energy Security and Geopolitical Tensions

The complexities of geopolitical conflicts, such as the ongoing war in Ukraine and historical events like the Iraq invasion, underscore the unpredictable nature of warfare and its long-term consequences. For India, the burning question is its energy security amid West Asian tensions, given its significant reliance on the region for fuel imports.

India's Dependency on West Asian Energy

• In February, India's crude oil imports were second-highest at 5.22 million barrels per day, with West Asia contributing 51%.
• In March 2025, Gulf nations accounted for 38% of imports.
• Domestic fuel use has shown considerable growth: 
  • Petrol: 6% increase
  • LPG: 8% increase
  • Diesel: 3% increase
• Exports worth $44.4 billion in FY25, mainly through the Suez Canal, have been impacted by Houthi rebel attacks.

Challenges of Crude Oil and Gas Reliance

• Crude Oil: India is 90% dependent on foreign oil.
• Natural Gas: Over 50% of LNG imports, primarily from the Gulf.
• LPG: 66% reliance, mostly from West Asia.

The Strait of Hormuz - A Critical Chokepoint

• Approximately 50% of India's crude oil and 54% of LNG imports pass through this narrow strait.
• Potential blockages could significantly disrupt global supplies.
• Recent conflicts have already stalled shipping, with 55 oil tankers stuck in Iranian waters.
• Vessel traffic dropped by 70% through the Strait of Hormuz.

Strategic Alternatives and Contingency Plans

• If Gulf supplies are disrupted, India can still receive Russian oil, though through longer routes.
• Established payment and insurance channels for post-US sanctions scenarios.
• Russia's floating storage capabilities provide a buffer, with significant barrels stored around the Arabian Sea and other locations.
• However, India lacks sufficient domestic storage for crude oil, LNG, and LPG.
• LPG storage is critically low, with only about 1 million tonnes available.

Financial and Operational Implications

• There is a surge in prices for crude oil, LPG, and LNG, exacerbating economic pressures.
• The cost of maintaining supply chains amid high tanker rates adds to the burden.

The ongoing geopolitical tensions pose significant challenges to India's energy security, emphasizing the need for strategic planning and diversified energy sources to mitigate potential disruptions.