Energy Under Pressure: Hormuz Disruption and India’s Pivot Back to Russian Crude

Why in News ?

Amid disruptions in oil flows through the Strait of Hormuz due to escalating West Asia conflict, the Indian government and public sector refiners are considering increasing imports of Russian crude to maintain supply continuity.

India had recently reduced purchases of Russian oil during trade negotiations with the United States. However, with Hormuz shipments effectively suspended, abundant Russian supplies in Asian waters could help offset potential shortages.

Background and Context

India’s Structural Oil Dependence

India is the world’s third-largest crude oil consumer and imports over 88% of its oil requirements.

• Around 2.5–2.7 million barrels per day (bpd) of India’s crude imports pass through the Strait of Hormuz.
• This accounts for nearly half of total imports.
• Major suppliers include Iraq, Saudi Arabia, UAE, and Kuwait.

India also imports a significant portion of its natural gas from West Asia, much of which transits Hormuz.

Strategic Importance of the Strait of Hormuz

The Strait of Hormuz is a narrow maritime corridor between Iran and Oman connecting the Persian Gulf to the Arabian Sea.

• It handles nearly one-fifth of global petroleum trade.
• A substantial share of global LNG shipments also transit through it.

Following statements from the Islamic Revolutionary Guard Corps (IRGC) regarding closure threats, traders and shipping companies suspended movement to avoid insurance and conflict risks. This has turned the Strait into a geopolitical flashpoint with global economic implications.

Russian Crude as an Alternative

• With Hormuz shipments disrupted, India may increase purchases of Russian oil.
• Following Western sanctions after the Ukraine conflict, Russia redirected crude flows to Asian markets, including India.
• Approximately 10 million barrels of Russian crude are reportedly available in floating storage across the Indian Ocean and Arabian Sea.

Changing Import Patterns

• India imported around 1.1 million bpd of Russian crude in February — lower than the 2025 peak of over 2 million bpd.
• Loadings for Indian ports fell to 0.7 million bpd in February, down from last year’s 1.7 million bpd average.

This earlier reduction provides flexibility to scale up Russian imports if Middle Eastern supply disruptions persist.

India’s Immediate Energy Cushion

Indian refiners currently hold:

• Over 10 days of crude oil inventories
• About one week of fuel stocks
• Approximately one week’s supply in strategic petroleum reserves

These buffers provide short-term insulation against supply shocks.

Alternative Sourcing Options

India can accelerate spot purchases from:

• United States
• West Africa
• Latin America
• Russia

Russian crude in floating storage offers logistical convenience and quicker supply turnaround.

LPG and LNG: Key Vulnerabilities

While crude oil has buffers, liquefied petroleum gas (LPG) and liquefied natural gas (LNG) pose greater risks.

LPG

• India imports 80–85% of its LPG requirements.
• Most shipments originate from Gulf countries via Hormuz.
• Strategic reserves for LPG are limited.

LNG

• Around 60% of India’s LNG imports transit through Hormuz.
• Spot cargo availability is limited.
• Storage buffers are comparatively thin.

A prolonged disruption could therefore affect cooking gas supply and industrial gas consumption more severely than crude oil.

Significance of the Development

1. Energy Security Stress Test

The disruption underscores India’s heavy reliance on West Asian energy corridors.

2. Strategic Diversification Imperative

Reinforces the need for diversified sourcing — geographically and politically.

3. Geopolitical Balancing

Increasing Russian imports could complicate India’s diplomatic balancing between Western partners and Moscow.

4. Inflationary Risks

Global oil price spikes could fuel domestic inflation and widen the current account deficit.

5. Supply Chain Realignment

Encourages long-term rethinking of energy trade routes and procurement strategies.

Broader Implications for India

• Macroeconomic Stability: Oil price volatility directly impacts fiscal deficit and currency stability.
• Foreign Policy Calculus: Energy procurement decisions influence diplomatic equations with US, Gulf nations, and Russia.
• Strategic Reserves Policy: Highlights need to expand and diversify strategic petroleum reserves.
• Energy Transition Urgency: Strengthens case for renewable energy expansion and green hydrogen development.

Challenges and Way Forward

Challenges

• Prolonged Hormuz closure could escalate global oil prices.
• Shipping insurance premiums may surge.
• LNG and LPG shortages could affect households and industry.
• Diplomatic sensitivities in shifting trade alignments.

Way Forward

• Expand strategic petroleum reserves.
• Diversify LNG contracts beyond Gulf suppliers.
• Enhance domestic gas production and renewable energy adoption.
• Strengthen maritime security cooperation in the Indian Ocean.
• Institutionalise long-term energy hedging mechanisms.