The Pulse | Economy | South Asia

India’s Hormuz Dilemma Is Not Yet Over

New Delhi, which supports UNCLOS, is reportedly uncomfortable with Iran’s plan to levy a toll on every ship that passes the Strait of Hormuz.

On the evening of April 7, local time in Washington, D.C., the international community welcomed a conditional two-week ceasefire between Iran and the U.S., which restores limited passage through the Strait of Hormuz — the key transit point for roughly 20 percent of global oil and liquified natural gas shipments.

Shipping volume through the strait declined significantly following the outbreak of hostilities between the U.S., Israel, and Iran on February 28, which in turn contributed to soaring oil prices. Following the announcement of the “re-opening” of the strait, Brent crude — the international benchmark for oil prices — fell by 15.5 percent to $92.28 a barrel, the biggest one-day drop since April 2020, when the COVID-19 pandemic began.

India’s Ministry of External Affairs (MEA) issued a statement welcoming the ceasefire while reiterating New Delhi’s expectation that “unimpeded freedom of navigation and global flow of commerce” would prevail through the Strait of Hormuz. For a country heavily dependent on oil imports from countries in the Persian Gulf, with ships crossing the strait to enter the Arabian Sea to reach India, free, open and secure sea lanes of communication are an existential necessity. A ceasefire, albeit transitional, could provide temporary relief to Indian consumers through stabilizing energy prices and supply chain disruptions. Reopening of the strait is good news, especially for the 16 Indian vessels still stuck in the Persian Gulf.

However, India’s energy supply woes stemming from high oil import dependence are far from over. Lingering uncertainty over the durability of the ceasefire and lack of clarity on the terms and conditions for transit imposed by Iranian authorities have led to an interesting paradox. In the first 24 hours of the ceasefire announcement, according to global ship-tracking firm Kepler, no oil or gas tankers have passed through the strait. Only four dry cargo ships passed through the strait, down from a daily average of ten the week before, when fighting was on in full force, dimming hopes for immediate respite for the stranded Indian ships and seafarers.

At the diplomatic level, India is among the few countries that have directly engaged with Iran to ensure the safe passage of its vessels through the Strait of Hormuz amidst ongoing hostilities. At least 8 Indian flagged ships have crossed the strait since February 28, through close coordination with Iranian authorities and support from Indian Navy ships. Foreign Minister S. Jaishankar has clarified that India has no “blanket agreement” with Iran to secure safe passage for the ships, and that ship movement was being addressed on a “case-by-case” basis.

Meanwhile, Tehran has on multiple occasions indicated that the strait was open to “friendly nations,” including India. Notably, this coincides with New Delhi’s decision to purchase Iranian oil, its first since May 2019 when it halted oil trade due to U.S. sanctions pressure. Amidst reports suggesting that some vessels are paying as much as $2 million to cross the waterway without coming under fire, the MEA has dismissed........

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