Examine how sanctions regimes on Russia and Iran are reshaping India's crude oil sourcing strategy. What are the risks of over-concentration on a single supplier?

Q. Examine how sanctions regimes on Russia and Iran are reshaping India's crude oil sourcing strategy. What are the risks of over-concentration on a single supplier? (15 marks, 250-350 words)

India imports close to 87% of the crude it consumes, a dependence the Parliamentary Standing Committee has flagged as a structural energy-security vulnerability [1]. Sanctions on Russia and Iran have therefore not merely altered prices — they have redrawn India's sourcing map.

How sanctions are reshaping sourcing - Discount-driven pivot: the post-2022 Western price-cap regime on Russia made discounted Urals crude attractive; Russia rose from under 2% of India's basket to its largest single supplier, crossing half of monthly imports at the 2026 peak. - Alternative payment rails: settlement shifted largely to yuan, insulating the trade from dollar-clearing risk but routing it through a China-linked channel. - Chokepoint de-risking: renewed Iran–US hostilities around the Strait of Hormuz forced rerouting — about 70% of crude now arrives outside the Hormuz route, up from roughly 55% [2]. - Widened basket: sourcing expanded to nearly 40 countries, with record UAE volumes and Venezuela's entry as a significant supplier [2]. - Thin buffers: strategic reserves of 5.33 MMT at Visakhapatnam, Mangaluru and Padur cover only about 9.5 days of crude needs [3].

Risks of over-concentration on one supplier - Eroding bargaining power — discounts narrowed sharply through 2026, with import value rising far faster than volume [4]. - Secondary-sanctions exposure for Indian refiners, insurers and shippers on financial and shipping channels. - Single-point supply shock: one sanctions tightening could strand a majority of the basket overnight. - Strategic cost: yuan-settled dependence advances China's currency-internationalisation goals and dilutes India's image as an autonomous balancer. - Fiscal and BoP volatility, since crude dominates the import bill [4].

India's basket is thus wider in breadth yet deeper in concentration — diversification of names without diversification of risk. The durable answer lies in expanding strategic reserves toward IEA-comparable cover, spreading long-term term contracts across the Gulf, Africa and the Americas, and cutting import intensity through ethanol blending, EVs and green hydrogen — advancing both SDG-7 and genuine strategic autonomy.

(~320 words)

Sources: 1. Standing Committee Report Summary — Review of Policy on Import of Crude Oil, PRS Legislative Research — ~87% import dependence; concentration risk and diversification recommendation 2. PIB, Ministry of Petroleum & Natural Gas — "70% of India's Crude Imports Now Routed Outside Strait of Hormuz" — Hormuz rerouting (70% vs ~55%) and expansion to ~40 supplier countries 3. PIB — Strategic Crude Oil Reserves (ISPRL) — 5.33 MMT SPR at three sites, ~9.5 days of crude cover 4. Petroleum Planning & Analysis Cell (PPAC), Snapshot of India's Oil & Gas Data — crude import volumes, values and oil import bill trends