India’s Energy Security Amid Conflicts

Context: The ongoing conflict in West Asia has highlighted India’s extreme vulnerability to geopolitical shocks, with Brent crude prices hitting $109.03 per barrel.

• This volatility is projected to slow India’s economic growth from 7.4% in FY26 to 6.5% in FY27 while nearly doubling inflation due to energy supply chain disruptions.

AboutIndia’s Energy Security Amid Conflicts:

What is Energy Security?

• Energy security is no longer defined simply by purchasing fuel at the lowest price; it now encompasses resilience, diversification, and theprotection of macroeconomic stability. It involves a country’s ability to maintain a steady supply of energy resources at an affordable price while being capable of withstanding sudden geopolitical or economic shocks.

Key Data & Statistics on India’s Energy Security:

• Import Dependency: India currently imports over 85% of its crude oil needs, with dependency reaching 89.4% in FY2024-25.
• Chokepoint Vulnerability: Approximately 45% of India’s crude imports transit through the Strait of Hormuz, a critical global chokepoint.
• Rising Consumption: India is the world’s third-largest oil consumer, with demand projected to reach 5.99 million barrels per day (mb/d) by 2026.
• Supply Shift: Russia has become India’s largest supplier, accounting for 36% of imports in FY2024-25, up from just 2% prior to 2022.

Current Status of Indian Energy Security:

• High Tactical Flexibility: India has successfully diversified its import basket to include Russia, Iraq, Saudi Arabia, the UAE, and the U.S..

Example: India shifted from 2% Russian oil imports to 36% in just two years to leverage discounted prices during the Ukraine conflict.

• Persistent Structural Risks: Domestic crude production remains low, with only 28.7 million metric tons produced in FY2024-25 against soaring demand.

Example: This low output forces continued reliance on international markets, making the economy sensitive to currency and freight rate fluctuations.

• New Transition Vulnerabilities: The shift to green energy (EVs and solar) is creating a new dependency on critical minerals like lithium and cobalt.

Example: India currently processes less than 5% of its 2035 battery-grade mineral requirements, relying on China for processed rare earths.

Conflicts DisruptingGlobal Energy Security

• Russia-Ukraine War: This conflict exposed the dangers of pipeline-based energy dependence, particularly for gas supplies.

Example: Europe was forced to slash its reliance on Russian gas from 45% to 12% by 2025, prioritizing security over cost.

• West Asia Conflict: Demonstrated the fragility of sea-based transportation and the strategic power of maritime chokepoints.

Example: Tensions in the Strait of Hormuz, which carries 25% of the world’s oil, rapidly transmit price shocks across global markets.

• Maritime Threats in 2026: Heightened tensions in Gulf sea lanes have necessitated military intervention to protect commercial energy assets.

Example: Indian LPG carriers required naval escorts under Operation Sankalp to secure 97,000 metric tonnes of cargo.

• Fragmented Global Markets: Major powers are adapting by aggressive stockpiling and locking in long-term contracts.

Example: Japan has stockpiled 470 million barrels of oil, enough to cover 254 days of national consumption.

Implications of Energy Security Due to Conflicts:

• Macroeconomic Instability: High oil prices directly fuel domestic inflation and slow industrial growth.

Example: India’s inflation is projected to rise from 2.3% to 4.4% in FY27 due to current energy disruptions.

• Strategic Chokepoint Risks: Reliance on specific geographic routes can paralyze supply chains during regional escalations.

Example: With 45% of imports passing through the Strait of Hormuz, any closure there would be real and immediate for India.

• Shift in Bargaining Power: Spare capacity in Gulf nations allows exporters to regain pricing power as global demand fluctuates.

Example: Middle Eastern demand is falling, but their role as swing producers remains vital for high-import nations like India.

• Resource Weaponization: Conflict-driven shifts in mineral processing networks could hinder the global green transition.

Example: China’s control over 91% of rare-earth production poses a long-term risk to India’s solar and battery goals.

Way Ahead:

• Increase Strategic Reserves: Expand larger national oil and gas stockpiles to provide a buffer against short-term supply cuts.
• Enhance Maritime Resilience: Strengthen naval protection for sea lanes and chokepoints to ensure uninterrupted transit.
• Reduce Oil Intensity: Accelerate the transition in the transport sector to lower the overall demand for imported crude.
• SecureCritical Mineral Chains: Develop domestic processing capabilities for lithium and rare earths to avoid new dependencies.
• Leverage Optionality: Maintain a diverse import basket to switch suppliers quickly based on geopolitical developments.