How is the current standoff between the USA and Iran affecting India’s energy security? (2019, 15 Marks)
Energy security, in New Delhi’s own formula, means availability, affordability and sustainability. Its classic rule is Winston Churchill’s, quoted by Daniel Yergin: “safety and certainty in oil lie in variety and variety alone.” The standoff that followed the US exit from the JCPOA in May 2018 tested that rule, because India imports about 85% of its crude and most of it comes from or through the Gulf.
How the standoff hit India in 2018–19
- Loss of a favoured supplier. Iran was a leading supplier and still shipped about 23.5 million tonnes in 2018–19, roughly a tenth of India’s crude, on terms no Gulf seller matched: 60-day credit, free shipping and insurance, and partial rupee payment through UCO Bank. India’s sanctions waiver lapsed on 2 May 2019, and Iranian imports fell to zero.
- Costlier substitutes. Replacement barrels from Saudi Arabia, Iraq, the UAE and the US cost more and came without credit.
- Chokepoint risk. Attacks on tankers off Fujairah (May 2019) and in the Gulf of Oman (June 2019), and the Abqaiq strike in September 2019, raised freight, insurance and price volatility. The Navy launched Operation Sankalp in June 2019 to escort Indian ships.
- Stranded assets. Talks on the Farzad-B gas field, discovered by an Indian consortium, broke down, and Iran later gave it to a domestic firm. Chabahar, India’s gateway to Central Asia, survived only on a US exemption justified by Afghan relief, revoked in September 2025.
- Lost autonomy. As in 2012, when India cut Iranian purchases under pressure from Hillary Clinton, energy choices were being set in Washington. In Robert O. Keohane and Joseph S. Nye’s terms, India was not merely sensitive to the standoff but vulnerable: it had no cheap way to escape its costs.
How India adapted
- Diversification towards Iraq, Saudi Arabia, the US and later Russia.
- Strategic reserves at Visakhapatnam, Mangaluru and Padur, though they hold only about nine to ten days of imports against the IEA’s 90-day benchmark.
- Hedging diplomacy: staying engaged with Tehran while deepening energy ties with Washington.
The standoff turned into war, 2025–26
The US–Israeli war on Iran from 28 February 2026, following the twelve-day war of June 2025, showed the risk was real. Before it, about 45% of India’s crude, half its LNG and 90% of its LPG passed through Hormuz. Iran restricted the strait, Brent rose above US$100, and LPG ran short at home; a US threat (January 2026) of a 25% tariff on Iran’s trading partners kept Iranian barrels politically costly. India raised the share of crude arriving from outside the strait from about 55% to 70%, drew on more than 40 suppliers, escorted ships under Operation Urja Suraksha, and was on Iran’s permitted-passage list. A mediated truce has repeatedly broken down, and talks continued in late September 2026.
Conclusion
The standoff cost India its cheapest supplier, raised prices and risk premia, and exposed a thin reserve. Diversification protected the barrel but not the chokepoint or the cylinder. Real energy security needs larger reserves, sanction-proof payments and a faster renewable transition, not just a longer supplier list.