Daybreak - A $4 trillion economy running on 25 days of oil

Episode Date: March 6, 2026

Yesterday, Reuters reported, Indian refiners have rushed to secure prompt cargoes of Russian crude as the war involving Iran disrupts supplies from the Middle East. The crisis has choked traffic through the Strait of Hormuz — a route that normally carries around 40% of India’s oil imports — forcing companies to scramble for alternatives. The shift is striking. New Delhi had spent months cutting back Russian imports under U.S. pressure. But with India holding only about 25 days of crude reserves, the war has quickly exposed how thin that buffer really is. So how did India’s energy strategy end up here, between Russian oil, U.S. pressure, and a war in Iran? Host Snigdha Sharma explains.Tune in.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me. My interruptions, my analogies and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Chabahar doesn't really look like the center of anything. It's just a port on Iran's southern coast facing the Gulf of Oman.

But it is the kind of place that ships have been finding for centuries. A thousand years ago, Al-Biruni, the medieval Persian scholar, wrote that the coast of India actually began here at the old port of what was then called Tis. Dows from India and Oman wrote the monsoon winds into despair, heavy with spices and clothes and textiles from across the Indian Ocean. Centuries later, Marco Polo too passed the same shoreline and found it a rough frontier between worlds. Today, cranes and tankers replaced the wooden ships, but the same trade winds still shaped the fate of nations. India spent the last two decades and $370 million building a modern port at Chhabahar, its only way into Afghanistan and Central Asia without going through Pakistan, a project that Prime Minister

Modi himself called a major strategic win. And now fast forward to January 2020. The directors of India Ports Global Limited, which is the government-owned company running the port, resigned on mass overnight. The company's website was taken down and a government source told reporters, India had no choice but to exit. Six weeks later, the United States and Israel struck Iran, the Strait of Hormuz, through which half of India's oil travels effectively closed. The rupee crashed past 92 for the first 10.

time and nearly 10-lac-craw rupees was wiped off Indian markets in days. And Chabahar, the port that sits outside the street, the one that was specifically valuable because it bypassed all of this, sat empty. And here's what makes this more than a bad week. India only holds 25 days of crude oil reserves, which is a shockingly thin buffer for a $4 trillion economy. And as of yesterday, Reuters reported that 9. 1.5 million barrels of Russian crude are sitting in vessels near Indian waters waiting.

Russia is offering India a lifeline. The same Russian oil that India spent all of 2025 walking away from under American pressure as a part of a trade deal is now the only thing standing between India and an energy crisis. Chabahar, Russian oil, both surrendered, both now desperately needed. So what does this all? say about India's energy security strategy. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nagda Sharma, and I don't chase the news cycle.

Instead, every day of the week, my colleague Rachel Varghees and I will bring you one business story that is worth understanding and worth your time. Today is Friday, the 6th of March. When Russia invaded Ukraine in 2022, India did something that was economically sensible and, crucially, something that Washington quietly. had encouraged. The Biden administration had a problem. If Europe stopped buying Russian oil overnight, global prices would spike, and American consumers would feel it at the pump, and the inflation crisis would happen. The solution was to keep Russian oil flowing into global markets just at

lower prices, which would, in turn, drain Moscow's revenues while preventing a supply shock. India, buying Russian crude oil, which was discounted, served both purposes perfectly. So, the US looked the other way. At times, it even actively nudged India to keep buying. India, on its part, obliged, and Russian crude's share of its imports surged from under 3% before the invasion to around 36% by the financial year 2024-20205, making Russia, India's single largest supplier for three consumers. executive years. India saved and estimated $17 billion compared to buying equivalent grades from

elsewhere. Bob McNally, a former White House energy advisor, put it plainly. Joe Biden went to India after the invasion of Ukraine and begged them to take Russian oil. So India was not really defying the West. It was in fact, in the real sense, doing the West of favor. And then Trump came in. He not only reversed the policy. He refused. used to acknowledge the previous arrangement that had existed. By August 2025, Treasury Secretary Scott Besant was calling India's behaviour profiteering. And Trump went on to impose a 50% tariff on Indian exports as punishment for buying the oil that Biden had encouraged India to buy.

Over the following months, the pressure escalated. Sanctions on Russia's two largest oil producers, Rossneft and Luke oil, made Indian compliance increasingly difficult. By February 26, Trump announced a trade deal and claimed that Modi had agreed to stop buying Russian oil entirely, which is a commitment that India never officially confirmed, but refiners took seriously enough to start steering clear of Russian cargoes. Soon, Russia's share of India's crude oil imports had collapsed from 36% to around 21%, which is the lowest since late 2022.

India had to replace those barrels with something else. And Trump's preferred answer was Venezuelan oil. India would buy the oil from US and Venezuela instead. In fact, the US government even gave reliance industries a general license to buy oil from Venezuela directly. But in practice, Venezuela barely produces a million barrels a day at full stretch. Even if all of it went to India, it would not replace Russia. So Venezuela was more like a concept and not a supply chain fix.

So India turned back to where it had always been more comfortable. The Gulf, Saudi Arabia, Iraq and the UAE. By February 26, India's import of Middle Eastern crude rose to roughly 55%. Saudi Arabia reclaimed its position as India's top supplier. And this looked like a diversification. It had the structure of a diversification, multiple countries, multiple national oil companies and decades of established relationships. But, and this is a big but, all of these suppliers shipped through one exit point, the straight

of Hormuz. And as India cut Russian imports, which move via the Sews Canal and the Red Sea, entirely bypassing the Gulf, its exposure to Hormuz did not stay the same. It grew. From roughly 41% of India's crude oil transiting through Hormuz in 2020, to over 52% by early 2026. Basically, every barrel moved away from Russia was a barrel moved towards Hormuz. And then there was Chabhar, the port that sits outside the strait entirely.

And it was one asset specifically designed to reduce exactly this kind of dependency. India had spent two decades and like I told you, $370 million building it. It was the only route into Central Asia without going through. Pakistan. But when the US secondary sanctions threatened to cut India port global off from the dollar system, India backed down. Now, important to note here is that India did pay Iran the contracted fee afterwards, maybe as a signal that it planned to come back when the pressure eased. But this tactical pause seems to be moving more in the direction of permanent after the bombs began falling on Iran. So here is the pattern. India cut Russian oil.

because Washington changed the rules. India shifted to the Gulf because it was the only viable alternative at scale. India withdrew from Chabahar because sanctions made the cost too high. Each decision was made in response to real external pressure and each had internal logic. But no one appears to have asked what these decisions look like when you put them all together. No one ran the scenario where Russia shrinks,

Hormuz exposure rises and Chabahar goes dark and then something happens in the Gulf. And this raises the harder question, the one that goes beyond energy entirely. Is this a coordination failure, a political failure, or something more structural about how India makes foreign policy decisions when three different pressures are pulling it in three different directions all at once? Stay tuned for more on this. Yesterday morning, two Russian crude oil tankers began docking at Indian ports. The Odun, at Paradeep in the Udisha coast and the Matari at Vadinar in Gujarat. Together, that is around 1.5 million barrels of Russian Ural's crude.

A third vessel, the Indri, was heading towards Singapore in the Arabian Sea earlier this week, and now it has made a sharp turn north towards India. All three were previously headed to East Asia and all three changed course after the Strait of Hormuz effectively closed and all three are sanctioned, blacklisted. by the United Kingdom and the European Union that happened last year. So essentially what's happened is that India signed a trade deal partially premised on winding down Russian oil purchases. And now, sanctioned Russian tankers are quietly talking at our ports

and there is no announcement from the government yet. Which leads us to the buffer. The government this week said that India holds 25 days of crude oil stocks, which is commercial inventory sitting in refinery. tanks. There is also a dedicated underground strategic petroleum reserve or SPR, three caverns at Vashaka Patnam, Mangalore and Padur. Add everything together, SPR, commercial stocks and products, the total comes to 74 days. But this number needs context. Japan, for example, holds reserves equivalent to roughly 230 days of consumption. China has built coverage of at least 96 days. The IEA or the

International Energy Agency's minimum standard for any major oil importing nation is 90 days. India, the world's third largest oil consumer, sits below that floor and a significant chunk of its 74 days is working inventory inside refineries, not emergency-locked strategic oil. The dedicated SPR caverns alone can cover only 9.5 days. The history here matters. The idea of building strategic reserves was first raised after the Gulf War of 1990 when India had three days of stocks. The Vajpay government proposed a formal solution in 1998. Phase one was not completed until 2016 and phase two was approved in 2021 and remains unbuilt. So across two and a half decades in multiple economic booms, emergency oil storage kept being pushed to the next budget. So where does

that leave India now. Going back to Russian oil openly risks the US trade deal, the tariff relief and the diplomatic capital that has been spent over the last year. Staying away means running short of crude with no ready alternative at scale. The Gulf is a conflict zone right now. Venezuela does not have the volume. American crude does not match Indian refinery specifications at scale. What was supposed to replace Russian supply has not materialized and the crisis arrived. before it could. So, at this point, India is managing the wreckage of having foreclosed most of its options over the last one year or so.

Each decision logical at the time, all of them compounding into the same corner. A country's energy strategy gets tested in reality when multiple pressures come together. And right now, they have. And India, unfortunately, does not look to be doing too well. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of a subscriber-only offerings and a full subscription offers daily, long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the Ken.com and click on the red subscribe button on the top of the website.

Today's episode was hosted and produced by my colleague, Snitha Sharma, and edited by Rajiv CN.