After the signing of the MOU, tensions between the U.S. and Iran have flared up again: the U.S. military launched strikes against Iran citing an attack on a Singaporean cargo ship, while Iran retaliated by striking U.S. military bases. How should we assess the current situation?

3. Armed forces supersede the secular administrative system, forming a 'state within a state': The Imperial Japanese Army's General Staff wielded overwhelming power over the civilian cabinet; Iran’s Islamic Revolutionary Guard Corps (IRGC) operates with independent finances, monopolizes energy infrastructure, maintains a comprehensive domestic defense industry, controls media narratives, and runs an extensive overseas proxy network—making it a massive, self-contained interest group operating independently of the civilian government. The administrative system is unable to supervise its economic or military activities. 4. Public opinion and extremist sentiment hijack top-level strategic decision-making: Militant, ultranationalist rhetoric from junior officers in the Imperial Japanese Army pressured the central government; Similarly, hardline factions within the IRGC and radical religious sentiment among the Iranian populace continuously exert pressure on leadership. Once an external attack occurs, frontline units readily issue extreme public statements—and even semi-official media outlets rush to fabricate false reports of decisive victories or imminent war (e.g., the recent fabricated battle report from Sirri Island), forcing senior leadership into reactive escalation. Here’s Bao Bao’s analysis: This crisis will prompt major oil-importing countries to adopt institutionalized, long-term policies to permanently reduce their reliance on Persian Gulf crude oil. The root cause lies entirely in the IRGC’s unrestrained, radical actions: repeated threats to blockade the Strait of Hormuz, warnings of intercepting commercial vessels, and sustained support for regional armed groups—all generating persistent geopolitical risk. As a result, the entire maritime corridor has become a chronic source of volatility for global energy markets. Importing nations have now realized that uncertainty along this supply route is endogenous and structural—not merely temporary or conflict-driven. Ad hoc risk mitigation is no longer sufficient; such vulnerability must be formally embedded into national energy security frameworks. 1. Core Asian importers have already implemented binding reduction plans (institutional constraints): Japan: Pre-crisis, 94% of Japan’s crude oil came from the Middle East, with over 90% transiting the Strait of Hormuz. Following this crisis, Japan introduced mandatory policy measures: starting in July, all procurement plans deliberately bypass the Strait, locking in long-term supply contracts with U.S., Alaskan, and Russian Far East sources. Its share of Middle Eastern imports will decline annually and will not revert to previous high-dependency levels. India: The Indian government has directed state-owned refineries to enforce mandatory procurement diversification, mandating that Middle Eastern crude imports fall from nearly 60% today to under 45% by 2030. India is expanding purchases from Russia, Brazil, Venezuela, and Canada, while simultaneously increasing pipeline-sourced crude from Saudi Arabia and the UAE—reducing seaborne orders originating directly from the Persian Gulf. China: The National Development and Reform Commission (NDRC) is advancing the Multi-Dimensional Energy Corridor Expansion Project, aiming to reduce the share of Middle Eastern crude imports within five years. China is leveraging stable land-based pipelines—including the China-Russia, China-Kazakhstan, and China-Myanmar lines—to divert flows, while scaling up long-term supply agreements with Brazil, Angola, and the U.S. Refineries’ internal procurement evaluations now incorporate a 'single-region supply risk weight,' imposing enterprise-level caps on Persian Gulf crude purchases. 2. Europe and the U.S. are likewise cementing policies to reduce dependence on Middle Eastern oil: The EU previously sourced 40% of its crude from the Middle East. In response to this crisis, it has explicitly ruled out raising its Middle Eastern import share, instead relying long-term on North Sea, West African, and U.S. crude as primary supplies. Chemical firms are concurrently adjusting raw-material supply chains, cutting purchases of Gulf-origin crude. The U.S., with high domestic production, further weakens global dependency on Persian Gulf supply by securing long-term export agreements with Atlantic Basin producers. 3. Complementary dual-system approach: sourcing diversification + transport route diversification—dual-track strategy to lower Persian Gulf weight: Supply-side (long-term procurement systems): National refiners implement multi-regional quota-based procurement, capping purchases from any single oil-producing region to avoid concentration risk in the Gulf;

India has seized three Iranian oil tankers—simultaneously betraying two major allies. Which side suffers deeper damage?

Turning to U.S.-India trade: bilateral trade exceeds $130 billion—nearly double Russia-India trade volume. India’s exports to the U.S. alone total over $87 billion, approaching ten times its exports to Russia. Thus, for India, access to the U.S. market matters far more than cheap Russian oil. Oil can be sourced anywhere; losing Russian oil merely means forfeiting a modest arbitrage opportunity. But losing the U.S. market could severely wound India’s economy. Under Trump’s coercive pressure, India has lost room to straddle both sides—and has consequently abandoned Russian oil. As for its betrayal of Iran, one phrase sums it up: 'plastic brotherhood.' Last year, following India’s defeat in the India-Pakistan air war, Prime Minister Modi urgently sought new strategic partners—and turned to Iran. During his visit, the two sides signed numerous cooperation agreements, and Modi pledged $500 million to help develop Iran’s Chabahar Port. Chabahar is Iran’s strategic gateway to the Indian Ocean—its importance to Iran needs no elaboration. India’s intentions were equally transparent: to ally with Iran against Pakistan and compete with China’s Gwadar Port investment in Pakistan. At the time, relations were exceptionally warm—so much so that Iran regarded India as a quasi-ally, hoping India would lend crucial support. But what happened? Within mere months, when U.S. naval fleets surrounded Iran’s coastline, India not only failed to assist Iran—it became a U.S. accomplice, seizing Iranian oil tankers on the high seas. This abrupt about-face was quintessentially Indian. For Iran—already in dire straits—this development is nothing short of adding insult to injury. Beyond India, Malaysia also seized two Iranian tankers, even transferring one to Indonesia—which promptly sold both vessel and cargo outright. This means Iranian tankers now face exclusion across the entire Indian Ocean and through the Strait of Malacca. Selling oil has become significantly harder, further straining Iran’s fragile economy. That said, India’s imports of Iranian oil were never substantial to begin with. So while India’s betrayal hurts Iran, the deeper wound falls on Russia. Since the outbreak of the Russia-Ukraine conflict, Russia has effectively lost its massive European customer base. Today, Chinese and Indian buyers absorb most of its oil exports. At its peak, India imported roughly 2 million barrels per day of Russian oil—accounting for nearly 40% of Russia’s total oil exports. Yet over recent months, India has steadily reduced purchases: January’s daily average dropped to 1.1 million barrels. Now, the situation has worsened. Though India has not officially announced a full cutoff, India’s ‘Big Three’ refiners—Indian Oil Corporation, Bharat Petroleum Corporation, and Reliance Industries—have collectively canceled all Russian oil purchase orders for March and April. Effectively, India is slamming the door shut on Russian oil. For Russia—engaged in active warfare—this is the worst possible news. In January alone, Russia’s oil-and-gas revenue plummeted to $5.1 billion—the lowest since the pandemic.

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Indian Oil to Trim Middle East Oil Imports Under Annual Deals Amid Iran War

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