Energy Security After Hormuz Disruption

Context

The Strait of Hormuz disruption has revealed just how vulnerable Asia is to energy supply disasters, and the need to forge a regional energy security alliance.

Key Highlights

• In the 21st century, energy security has been raised as a geopolitical issue of paramount concern.
• In a recent report on the world energy security, published by Fatih Birol of the International Energy Agency, the world is being confronted with the largest threat ever to the energy security of the world.
• The recent Hormuz upheaval, which has witnessed much of the received global oil flowing through it, has led to shocks to the supply across Asia, which intensifies the need to act collectively as a region.

Effects of Hormuz Disruption in Asia

• Energy supply crisis:
  • Almost 13 million barrels of oil shipments were disrupted, with approximately 85 per cent destined to Asia.
• Economic disruptions:
  • Such nations as Japan decreased transport facilities, and India rationed LPG supplies.
• Rising costs:
  • The price of freight, insurance and crude oil shot up.
• Exposure to chokepoints:
  • Relyance on marine routes such as:
    • Strait of Malacca
    • South China Sea
    • Taiwan Strait

Why an Asian Energy Alliance is Needed

1. Taking over Maritime Energy Routes.

• Promote freedom of navigation according to international standards such as UNCLOS.
• Avert crises at crucial sea routes to trade, including energy supply.

2. Collective Bargaining Power

• The prevailing dominance of the oil-exporting organisation, such as the Organisation of Petroleum Exporting Countries.
• Reduce the Asian Premium (premiums paid by the Asian importers due to higher oil prices).

3. Energy Transition Cooperation

• Regional strengths in pools:
  • Technology
  • Finance
  • Critical minerals
• speed up the transition to renewable energy and lessen the reliance on fossil fuels.

Proposed Institutional Framework: Asian Energy Collaborative Compact (AECC)

• Inspired by:
  • Formation of the IEA after the Yom Kippur War.
• Core Functions:
  • Live power asset market knowledge.
  • Coordinated response to provide an alternative to the disruption of supplies.
  • Joint negotiation mechanisms.
  • Green transition has the support of research and policy.

Regional Cooperation Obstacles

• Political differences in political systems and political interests of Asian countries.
• Geopolitical conflict in such areas as the South China Sea.
• Institutional inability to integrate as compared to the West.
• Reliance on foreign suppliers within the Middle East.

Way Forward

• India’s leadership role:
  • India, being one of the largest major energy importers, could be at the forefront of diplomatic efforts.
• Strengthen regional dialogue:
  • Exploit mechanisms such as ASEAN+ and multilateral platforms.
• Diversify energy sources:
  • Grow and build in strategic petroleum reserves and alternative supply tubes.
• Invest in renewables:
  • Chadron solar, wind, hydrogen and battery technologies.
• Build resilient infrastructure:
  • Construct pipes and other logistics to avoid chokepoints.

Conclusion

• Hormuz disruption can be regarded as an eye-opener as far as the energy vulnerability of Asia is concerned.
• An integrated network such as AECC can help ensure that Asia is not a passive participant in the consumption decision of energy.
• The ultimate resilience does not only lie in the ability to secure supplies but also in the ability to switch to the systems of sustainable or diversified energy.

Source: The Indian Express

Prelims PYQ

Q. Between India and East Asia, the navigation-time and distance can be greatly reduced by which of the following? (2011)

1. Deepening the Malacca straits between Malaysia and Indonesia.
2. Opening a new canal across the Kra isthmus between the Gulf of Siam and Andaman Sea.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

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