India eyes closer energy ties with Iraq after Red Sea disruptions

In the wake of the escalating crisis in the Red Sea region, India is reportedly considering boosting its crude oil imports from Iraq as part of its strategic efforts to ensure a stable and secure energy supply. The potential disruption to global oil trade routes due to the crisis has prompted Indian officials to explore alternative sources to meet the country's growing energy demands.For a seamless flow of crude oil, India is betting on the Strait of Hormuz, a crucial passage through which most of the commodity is exported from Saudi Arabia, Iran, the UAE, Kuwait, and Iraq, for Asian buyers, sources said.
The Strait of Hormuz, located between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. It is the world's most important oil passage because large volumes of the commodity flows through the strait. According to the International Energy Agency (IEA), about 20 million barrels of oil, which is around 20 percent of global supply — transit each day through this strait. It is also the route for around a quarter of the global liquefied natural gas (LNG) trade.
After the outbreak of the Russia-Ukraine war, India had stepped up oil imports from Moscow since they were offering heavy discounts. Given the cheaper supply, Moscow has taken over the top spot in India's crude oil imports, followed by Iraq and Saudi Arabia, according to information.India’s crude imports from Russia increased around 3 percent in December 2023 from the previous month, per data from energy cargo tracker Vortexa. The jump comes after a month-on-month decline in supply from Moscow in October and November. The decline in inbound shipments were seen amid narrowing discounts on Russian oil and payment issues faced by refiners as cost of the oil surpasses the price cap imposed by the G7 nations. Meanwhile, the traditional crude oil suppliers — Iraq and Saudi Arabia — provided 1 million and 65,000 barrels per day (bpd) of crude, respectively, to India in December. India’s total import of crude oil in December was 4.44 million bpd.
Oil Minister Hardeep Singh Puri told news agency Reuters,that while he is concerned over the disruptions in the Red Sea, the minister is "cautiously optimistic" that they will be resolved.Since the outbreak of the Israel-Hamas war in October, the Red Sea has been in the news for periodic attacks on commercial vessels by the Houthi rebels of Yemen, raising concerns about its impact on global maritime commerce. The strait is crucial for 30 percent of global container traffic and 12 percent of global trade. About 80 percent of India's merchandise trade with Europe passes through this route.Due to the attacks, shipping costs have risen for Indian firms as leading freight companies take the longer route around Africa to reach the west, or wait at nearby ports for safe passage through the Suez Canal.
India is the world's third-largest importer and consumer of oil, and imports over 80 percent of its needs. The country also exports a significant amount of petroleum products to Europe, which has reportedly declined substantially in January (thus far) owing to rising tensions in the Red Sea.

(Ira Singh, Asstt Editor, Gandhinagar)