India’s Energy Security During the West Asia Crisis: Key Lessons

GS Paper III: Energy Security

Context: The conflict in West Asia severely disrupted global oil markets, posing a major challenge for India, which imports nearly 90% of its crude oil. Despite this vulnerability, India managed the crisis more effectively than many developed and developing economies through prudent energy and diplomatic strategies.

Historical Perspective

• 1973 Oil Crisis: The 1973 global oil shock severely impacted India by triggering high inflation, sharply increasing the country’s oil import bill, and putting immense pressure on its foreign exchange reserves.
• 1991 Balance of Payments (BoP) Crisis: By 1991, India’s foreign exchange reserves had fallen to a level sufficient to finance only three weeks of imports. Facing a severe external payments crisis, India was compelled to pledge its gold reserves and seek financial assistance from the IMF, leading to the initiation of major economic reforms.
• Current West Asia Crisis: The recent conflict in West Asia once again threatened global energy security by causing:
  • Crude oil prices surge beyond $120 per barrel.
  • LPG import costs exceed ₹1,600 per cylinder.
  • Shipping insurance premiums to rise sharply due to heightened geopolitical risks.
  • Supply disruptions through the Strait of Hormuz, a critical global oil transit route.

These developments raised concerns that India could face a sharp rise in inflation and significant economic instability.

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India’s Performance

Compared to other countries, fuel price increases remained relatively moderate.

Approximate increase in petrol prices:

Diesel prices rose by around 8%, while domestic LPG prices remained comparatively stable.

Why Did India Perform Better?

• Strong Diplomatic Relations: India’s balanced and pragmatic foreign policy enabled it to maintain strong ties with Iran, Saudi Arabia, the UAE, and other Gulf Cooperation Council (GCC) countries. These diplomatic relationships ensured the continued supply of crude oil even during the crisis, highlighting the critical role of diplomacy in safeguarding India’s energy security.
• Diversification of Oil Imports: To reduce its dependence on the Gulf region, India diversified its crude oil imports by increasing purchases from Russia, the United States, Nigeria, Angola, Brazil, and Venezuela. This diversified sourcing strategy minimized supply disruptions and enhanced the resilience of India’s energy supply chain.
• Ethanol Blending Programme: India’s Ethanol Blending Programme (EBP) reduced the consumption of conventional petrol by blending ethanol with fuel. This lowered the country’s dependence on imported crude oil, reduced the oil import bill, and contributed to greater energy security while promoting cleaner fuel usage.
• Expansion of Renewable Energy: The rapid expansion of solar and wind energy reduced India’s reliance on fossil fuels and diversified its energy mix. Increased renewable energy capacity strengthened long-term energy security and improved resilience against fluctuations in global oil prices.
• Strategic Petroleum Reserves (SPR): India’s Strategic Petroleum Reserves (SPR) at Visakhapatnam, Mangaluru, and Padur acted as a strategic buffer during supply disruptions. These emergency reserves ensured the availability of crude oil during periods of geopolitical uncertainty and enhanced the country’s preparedness against external energy shocks.
• Whole-of-Government Coordination

Multiple agencies worked together:

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Key Lessons

• Energy Security Requires Strong Diplomacy: Energy security is not determined solely by domestic production but also by effective diplomatic engagement. 
  • Maintaining stable relations with major energy-producing countries is essential to ensure uninterrupted energy supplies during geopolitical crises.
• Diversification Enhances Energy Resilience: Reducing dependence on a single region or supplier by diversifying crude oil imports minimizes the impact of geopolitical conflicts, supply disruptions, and price volatility, thereby strengthening India’s energy security.
• Build Strategic Energy Buffers: Expanding Strategic Petroleum Reserves (SPR) and accelerating the adoption of renewable energy sources such as solar and wind can improve India’s resilience against external energy shocks and reduce long-term dependence on imported fossil fuels.
• Ensure a Whole-of-Government Approach: Effective management of external crises requires close coordination among ministries, energy companies, security agencies, and diplomatic institutions. A coordinated governance framework enables timely decision-making, efficient resource allocation, and better crisis response.
• Continue a Multi-Aligned Foreign Policy: India should continue its policy of multi-alignment by maintaining constructive relations with all major regional and global powers. A balanced foreign policy protects India’s long-term strategic, economic, and energy interests while preserving its strategic autonomy.

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