When Indonesia recently signaled that it may monetize transit through the Straits 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, fertilizers, and its exports to Gulf markets, is tied to nations near the Hormuz Straits.
Since the closure of the Strait of Hormuz, India has been routing 70% of its crude imports via alternative, longer sea routes (the Arctic and the Baltic). This includes West African and Russian crude. But this will be economically unsustainable in the long run.
India has a large exposure to Malacca-linked trade. While India’s crude imports are not heavily dependent on 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 supplier dependence. Suppliers can be diversified and oil contracts can be renegotiated. However, oil routes, especially choke-points, 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. Transit itself becomes subject to political and economic negotiation.
Structural hurdles posed by transit choke-points
Firstly, this development will expose a gap in India’s strategic posture. Addressing this challenge requires a shift in how policy is organized. Trade, energy, and maritime security can no longer be treated as separate domains. Trade flows are increasingly dependent on maritime conditions, and policy must reflect this reality. Economic planning needs to incorporate route risk alongside price and supply considerations, while maritime strategy must account for the protection of economic flows, not just traditional security threats.
This integration is not easy, particularly in a federal democracy like India. Responsibilities are distributed across multiple ministries, and coordination between the centre and states adds another layer of complexity. Ports, logistics, and coastal infrastructure often fall under state jurisdiction, while maritime security is a central responsibility. Aligning these elements requires institutional mechanisms that can bridge these divides.
This is also where India’s current foreign policy approach faces limits. Continuous hedging and multi-alignment have enabled India to maintain flexibility across competing blocs. This has worked well in managing supplier-side risks, allowing India to engage with a wide range of partners like the Gulf states, Russia, Iran, Venezuela, Nigeria, etc., without formal alignment. However, hedging is less effective when the constraint shifts from suppliers to transit routes, because then 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.
India has begun making investments in port infrastructure, expansion of domestic refining capacity, and efforts to build strategic petroleum reserves, all of which contribute to resilience. There are also attempts to develop alternative connectivity corridors, such as the International North-South Transport Corridor and the use of Chabahar port. Regional initiatives involving Myanmar and Southeast Asia aim to improve overland and coastal connectivity.
The development of island territories such as the Andaman and Nicobar Islands, and proposals for a transshipment hub in Great Nicobar, offer additional strategic options. Their proximity to the western approaches of Malacca allows for better monitoring of maritime traffic and enhances India’s presence in a critical region.
However, these alternatives are limited in scale and can be characterized as supplementary routes rather than substitutes for existing maritime corridors. Crucially, they do little to reduce dependence on Hormuz for energy imports. As long as a significant share of India’s oil comes from the Gulf, that choke-point remains unavoidable.
What can India do going forward?
India could possibly reduce exposure to problematic choke-points by sourcing more from the West, Russia, and Africa. It can rely more on overland and multi-modal 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 base-load capacity directly reduce exposure to choke-point 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 better resilience against market volatility, even though 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. For India, responding to this requires more than incremental adjustments. It calls for a more integrated approach by linking energy planning with maritime strategy and economic policy with geopolitical assessment.
