When Indonesia recently signaled that it could monetize transit through the Straits of Malacca, it heralded a fundamental shift in how maritime geography is used or misused.
What Indonesia is discussing in Malacca, Iran has already demonstrated in Hormuz, although it has yet to formalize the agreement. This may prompt other countries to do so in the future.
Critical sea trade crossings are no longer considered safe and neutral. Instead, they are increasingly seen as assets that can be fixed, valued or used.
Until recently, India’s energy policy focused primarily on sources of supply, diversification of crude imports, contract negotiation and managing price volatility. Now, a more compelling structural constraint imposed by the ongoing Gulf conflict is not where the energy comes from, but how it can reach India.
The fact is that a large part of India’s trade and energy flows depend on sea lanes that it neither controls nor can unilaterally secure. This also applies to most other countries.
About 50% of India’s crude oil and almost 90% of its LPG and LNG imports pass through Hormuz. About 50% of its crude imports come from countries near Hormuz, making it India’s single biggest energy vulnerability.
Overall, 16% of India’s global trade, which includes imports of energy, petrochemicals and fertilizers, as well as its exports to Gulf markets, is linked to countries near the Strait of Hormuz.
Since the closure of the strait, India is routing 70% of its crude imports through alternative but longer sea routes, including the Arctic and Baltic. This includes West African and Russian crude oil. But this will be economically unsustainable in the long run.
India has a large exposure to Malacca-related trade. While India’s crude imports are not heavily dependent on the Strait of Malacca, more than a third of its global trade, particularly with Southeast Asia, passes through the Strait. Malacca is India’s trade artery, while Hormuz is its energy lifeline.
This situation has created a type of dependency that is qualitatively different from supplier dependency. Suppliers can diversify. Roads, especially chokepoints, cannot be easily replaced and diversification offers limited protection to large importing countries like India.
The Straits of Malacca and Hormuz are immediate examples. If transit through such critical trade corridors is subject to taxation or regulatory control, the impact on a country’s economy is not marginal, but systemic. Not only will costs increase with such unpredictability, but exposure to political decisions beyond India’s control is bound to increase.
This development will also expose a gap in India’s strategic position. In India, energy policy and maritime policy are two different fields, with little overlap. The first is treated mainly as a commercial and economic issue; the latter is more of a security function focused on territorial defense and regional presence.
In a choke point sensitive situation, this distinction becomes inapplicable. Trade policy must be aligned with maritime security. India may not lack strategic clarity or purpose, but it will most likely struggle to coordinate and align institutions across the centre, states and markets
A second implication concerns the limits of India’s current foreign policy approach. The problem is not who India buys from, but whether it can move the goods without disruption or extra cost. This requires political influence over, or at least credible engagement with, countries that are geographically close to these routes.
Such transit dependence will seriously test India’s policy of strategic autonomy. Nations may not be forced, but they can be forced to consider the interests of those who control critical routes.
A third issue is the lack of path diversification in India’s energy strategy. While India originates from a vast geography, not enough has been done to develop alternative corridors. INSTC, Chabahar and BIMSTEC mainly help in the movement of goods, not in the transit of energy.
What can India do in the future? The options are limited, but important. India can reduce its exposure to bottlenecks by borrowing more from the West, Russia and Africa. It can rely more on land and multimodal corridors and invest more in regional connectivity.
But the most sustainable answer for India lies in reducing the share of energy that currently passes through long sea routes. Developing domestic electrification of transport and expanding renewable generation capacity and non-fossil baseload directly reduces exposure to choke point risk and, more importantly, converts external dependency into internal capacity.
Further, if India can strengthen its buffer mechanisms and strategic reserves, it can at least provide greater resilience to market volatility, even though it is powerless to address transit constraints.
Indonesia’s position in the Straits of Malacca may or may not translate into a short-term policy. However, it introduces a new layer of strategic risk. India will need to think more holistically – bringing together energy, trade and maritime security as it plans for both the near term and the future.
Raghu Gururaj is a retired Indian ambassador and former foreign service officer
