Chokepoints emerging as new hurdle for global trade flows: Report

New Delhi, May 21 (IANS) 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

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