Chokepoints emerging as new hurdle for global trade flows: Report
New Delhi, May 21
After Iran demonstrated that it can exploit its geographical advantage to use the Strait of Hormuz as a chokepoint and monetise transit through the narrow waterway by charging a fee on ships, the trend appears to be spreading, with Indonesia sending a signal that it is contemplating similar steps to raise revenue from the Strait of Malacca.
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, according to an article in India Narrative.
About 50 per cent of India's crude and almost 90 per cent of its LPG and LNG imports pass through Hormuz, making it India's single biggest energy vulnerability. Since the closure of the Strait of Hormuz, India has been routing 70 per cent 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, the article points out.
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.
If transit through critical trade corridors such as Hormuz and Malacca 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, the article observes.
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.
The development of island territories such as the Andaman and Nicobar Islands, and proposals for a trans-shipment 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.
The article points out that India could possibly reduce exposure to problematic choke-points by sourcing more oil 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, the article explains.
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, the article added.
— IANS
Reader Comments
Finally someone is talking about this seriously! I've been saying this for years - our over-reliance on imported oil is a ticking time bomb. 50% of our crude going through Hormuz is terrifying. Move to EVs and domestic solar/wind is the only way forward. But we need to do it fast! 🇮🇳
I appreciate the strategic thinking here. The Great Nicobar trans-shipment hub idea is brilliant. But we need to be realistic about timelines. Infrastructure projects in India take decades. Meanwhile, we need to diversify our energy sources NOW. Russian crude is a temporary fix, not a permanent solution. And what about our domestic coal? Can we not invest more in clean coal tech?
This is a global problem that needs global solutions. Imagine if every country with a chokepoint starts charging tolls. The price of everything will skyrocket. India needs to play smart - invest in alternative corridors like the IMEC and the North-South corridor. Also, why isn't there more talk about nuclear energy? We have the technology.
👏 This article is spot on! We've been complacent for too long. Indonesia's move is a strategic game-changer. We need to start building our own tanker fleet and secure long-term contracts with alternative suppliers. Also, the government should incentivize domestic exploration. The Andaman and Nicobar plan is good, but what about developing our own shipbuilding industry? We must be self-reliant.
Interesting but concerning. I work in shipping and we've all been watching this trend with nervousness.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.