When Indonesia recently signaled that it may monetize transit through the Strait of Malacca, it heralded a fundamental shift in how maritime geography is being used or misused.
What Indonesia is deliberating in Malacca, Iran has already demonstrated in Hormuz, though it has not yet succeeded in formalizing the arrangement. This may well push other nations to do so in the future.
Critical sea trade passages are no longer deemed safe and neutral. Instead, they are increasingly viewed as assets that can be regulated, priced, or leveraged.
Until recently, India’s energy policy primarily focused on sources of supply, diversifying crude imports, negotiating contracts and managing price volatility. Now, a more structurally binding constraint imposed by the ongoing Gulf conflict is not where the energy comes from, but how it can reach India.
The fact is, a large share of India’s trade and energy flows depends on sea routes that it neither controls nor can unilaterally secure. This applies to most other countries as well.
About 50% of India’s crude 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, comprising energy imports, petrochemicals and fertilizers, as well as its exports to Gulf markets, is tied to nations near the Strait of Hormuz.
Since the strait’s closure, India is routing 70% of crude imports via alternative but longer sea routes, including through the Arctic and Baltics. This includes West African and Russian crude. But this will be economically unsustainable in the longer run.
India has a large exposure to Malacca-linked trade. While India’s crude imports are not heavily dependent on the Strait of Malacca, more than a third of its global trade, especially with Southeast Asia, transits through this strait. Malacca is India’s trade artery, while Hormuz is its energy lifeline.
This situation has created a kind of dependence that is qualitatively different from a supplier dependence. Suppliers can be diversified. Routes, especially chokepoints, cannot be easily substituted and diversification offers limited protection to big importing countries like India.
The Straits of Malacca and Hormuz are immediate examples. If transit through such critical trade corridors is subject to taxes or regulatory control, the impact on a country’s economy is not marginal but systemic. Not only will costs rise 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 posture. In India, energy policy and maritime policy are two distinct domains, with little overlap. The former is handled largely as a commercial and economic issue; the latter is more as a security function focused on territorial defense and regional presence.
In a chokepoint-sensitive situation, that distinction becomes unworkable. Trade policy must be aligned with maritime security. India may not lack strategic clarity or intent, but will most likely struggle to coordinate and align institutions across the center, 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 goods without interruption or additional cost. That requires political influence over, or at least credible engagement with, the countries that are geographically proximate to these routes.
Such transit dependence will seriously test India’s policy of strategic autonomy. Nations may not be coerced, but they could be compelled to factor in the interests of those who control critical routes.
A third issue is the absence of route diversification in India’s energy strategy. While India sources from a wide geography, not enough has been done to develop alternative corridors. The INSTC, Chabahar and BIMSTEC help primarily with the movement of goods, not energy transit.
What can India do going forward? Options are limited, but relevant. India could possibly reduce exposure to problematic chokepoints by sourcing more from the West, Russia and Africa. It can rely more on overland and multimodal corridors and invest more in regional connectivity.
But the most sustainable response for India lies in reducing the share of energy that actually passes through long maritime routes. Development of domestic electrification of transport and expansion of renewable generation and non-fossil baseload capacity directly reduce exposure to chokepoint risk and, crucially, convert external dependence into domestic capacity.
Further, if India can bolster its buffer mechanisms and strategic reserves, it can at least provide greater resilience against market volatility, even though it is powerless to handle transit constraints.
Indonesia’s position on the Strait of Malacca may or may not translate into near-term policy. Even so, it introduces a new layer of strategic risk. India will need to think more holistically — bringing together energy, trade and maritime security, while planning for both the near term and the future.
Raghu Gururaj is a retired Indian ambassador and former foreign service officer
