Hormuz crisis: UAE builds new routes as India turns to US LPG

After the West Asia war disrupted LPG supplies from the Gulf, the US has developed as a much bigger supplier to India, accounting for more than 50% of the country’s LPG imports in the 6 months since the conflict began, up from less than 10% in the previous six months, according to an analysis of LPG shipping data over the past year.

The shift has laid bare India’s vulnerability to disruptions in the Strait of Hormuz, through which a large share of its energy imports traditionally flows. For Gulf economies, including the UAE, the disruption has also shown the need to reduce dependence on the strategic waterway. Speaking at the Hili Forum in Abu Dhabi, UAE Presidential adviser Anwar Gargash said that the UAE is now expanding port capacity along its eastern ⁠coast.

Map showing the Strait of Hormuz between Iran, the UAE and Oman, with the blockade area marked in red. (Source: Google Maps)

“Our energy exports will not be held hostage, nor will our trade and economic activity,” Gargash ​told the Hili Forum in Abu Dhabi.
The UAE has been expanding port capacity along its eastern ⁠coast, as well as developing pipelines, railways and trade routes for alternative corridors, he said.

The move assumes particular importance for India, one of the UAE’s largest trading partners. But the closure of shipping through the Strait of Hormuz has exposed another side of that relationship: India’s heavy dependence on the Gulf for its energy needs.

How the Hormuz closure has affected India

The Strait of Hormuz is critical to India’s energy security. Before the current disruption, around 40% of India’s crude oil imports, 60% of LNG imports and nearly 90% of LPG imports regularly came from West Asia through the waterway.

India imports more than 88% of its crude oil requirement, around 60% of its LPG and about half of its natural gas needs. The scale of dependence means disruption in the Strait quickly feeds into India’s energy supply chain.

LPG has taken the biggest hit. India’s overall LPG imports fell by more than 40% sequentially between March and August, as supplies from traditional Gulf sources were disrupted. Imports from the US nearly quadrupled as Indian buyers turned to suppliers outside the conflict zone.

Following the drop in imports, India raised the price of LPG, petrol, diesel, CNG, and LNG.

US emerges as major energy supplier

The shift has effectively redrawn India’s LPG import map. The UAE, Qatar, Kuwait and Saudi Arabia have traditionally been among the suppliers, but the supply shock has pushed India to source more cargoes from much farther away.

American LPG has emerged as one of the clearest beneficiaries of India’s scramble for alternative supplies. “Washington has been the biggest LPG exporter worldwide even before the crisis, and US propane was already cheaper than Asian supplies before the war,” Abu Dhabi-based energy analyst Natalia Katona said.

With cooking gas supplies a priority, India was prepared to pay the additional freight required to bring LPG from the US, she said.

Katona expects US supplies to remain strong until West Asian shipments normalise.

According to reports by news agency Reuters, the status of Hormuz remains a sticking point in negotiations between the US and Iran, with Qatar and Pakistan mediating efforts to ease tensions. Iran maintains that the strategic waterway is jointly under the jurisdiction of Iran and Oman, a claim rejected by Gulf Arab states.

The UAE said freedom of navigation through the strait could not be used as a bargaining tool and any lasting settlement would need firm guarantees against further Iranian attacks on Gulf states.

The conflict, which began after US and Israeli strikes on Iran on February 28, remains deadlocked. A preliminary ceasefire reached in June has since broken down, with little progress reported in efforts to revive peace talks.