Russia and the Shifting Energy Landscape Amidst Iran Tensions

The escalating tensions surrounding Iran and the potential disruption to shipping through the Strait of Hormuz are reshaping global energy markets. While posing immediate challenges for major Asian importers like China and India, this crisis presents a strategic opportunity for Russia to solidify its role as a key hydrocarbon supplier to Asia. This shift, however, is not without its limitations, as Russia grapples with its own production constraints and infrastructure challenges.

Russia’s Energy Sector: Pre-Crisis Pressures

Prior to the recent escalation, Russia’s energy sector was already under considerable strain following the invasion of Ukraine in February 2022. Western sanctions, Ukrainian attacks on refineries, and fluctuating oil prices – often below $70 per barrel – had begun to erode exports and state revenues. In early 2025, the United States imposed its most stringent energy sanctions to date, targeting producers, refineries, LNG plants, and over 180 tankers and service companies [1]. The European Union also approved a phased ban on Russian gas imports, aiming for a complete halt by the end of 2027 [2].

Even in crude oil exports, Russia faced challenges. Seaborne exports decreased from approximately 4.3 million barrels per day in 2025 to roughly 2.8 million barrels per day in February 2026, as Indian refiners, under U.S. Pressure, sought alternative suppliers [1]. Russian gas production and LNG exports also declined in 2025, and the Arctic LNG-2 project faced difficulties in scaling up.

Hormuz: A Chokepoint and Opportunity for Russia

The Strait of Hormuz, a critical waterway connecting the Persian Gulf to the Indian Ocean, is a vital artery for global energy supplies. Approximately 20% of global oil consumption and 30% of LNG trade pass through this narrow corridor, with the majority destined for Asian markets including China, India, Japan, and South Korea. Recent Iranian strikes and threats have prompted several major shipping firms to suspend traffic, even when the route is formally open.

China and India are particularly vulnerable. China, the world’s largest oil and gas importer, receives about 13% of its crude oil from Iran, and roughly 40% of its total crude imports transit Hormuz. Around 30% of its LNG imports originate from Qatar and the United Arab Emirates, both reliant on the strait. India imports 85-90% of its crude oil needs, with approximately half coming from Gulf suppliers via Hormuz (roughly 2.5-2.6 million barrels per day). It also imports around half of its natural gas demand as LNG, over 50% of which comes from Qatar and the UAE.

The conflict surrounding Iran is detrimental to both countries in the short term, leading to higher prices and increased costs. However, it also compels Beijing and Novel Delhi to reassess their reliance on Middle Eastern oil and gas transported through vulnerable maritime routes. This reassessment creates an opening for Russia.

China: Pipelines and Arctic Routes

Prior to the current crisis, China was already central to Russia’s post-European energy strategy. Moscow has consistently increased crude deliveries to China via the Eastern Siberia-Pacific Ocean pipeline system and through ports like Kozmino, while pipeline gas exports through the Power of Siberia 1 link have grown. [1]

The disruption in Hormuz strengthens the case for diversifying away from Gulf chokepoints, not only through increased domestic production and non-fossil energy sources but also by deepening overland and Arctic energy links with Russia. This supports Gazprom’s plans to expand Power of Siberia 1, as well as the long-discussed Power of Siberia 2 project through Mongolia. Recent agreements to increase deliveries on the “Eastern Route” demonstrate this trend, and the Iran crisis provides Moscow with stronger negotiating leverage on price and volume.

While Russia cannot fully replace Middle Eastern supplies to China in the short term due to limited spare capacity and infrastructure constraints, even partial substitution is significant. If China perceives a sustained risk of disruption in the Gulf, Russian supplies from the Pacific and potential Arctic shipments along the Northern Sea Route become more valuable as hedging strategies.

India: A Fragile Partnership

India’s relationship with Russia as an energy supplier is equally important. Since 2022, Indian refiners have significantly increased purchases of discounted Russian crude, at one point accounting for around 40% of India’s total crude imports [1].

This trend experienced a reversal last year due to U.S. Sanctions and tariff threats targeting specific Indian buyers. Major refiners paused or reduced Russian purchases, and import data showed a shift back to other suppliers. The war on Iran complicates this recalibration. With approximately half of India’s crude imports and over half of its LNG supplies exposed to Hormuz, New Delhi has limited maneuvering room. While U.S. Leverage remains, the cost of ignoring discounted Russian oil has increased.

In the near term, a stabilization, and potentially a renewed increase, in seaborne Russian crude deliveries to India is likely, reversing recent declines. Higher oil prices and freight costs will impact India’s trade balance, but discounts on Russian barrels can mitigate the effects.

Russia’s Long-Term Bet on Asia

For Moscow, the Iran crisis occurs as its energy strategy is already focused eastward. The primary objective is to replace lost European demand by becoming a primary hydrocarbon supplier to China and India, using the resulting revenues to develop new resource bases. This vision relies on new pipelines to China, large-scale field developments in Eastern Siberia and the Arctic, an expansion of LNG plants, and the development of the Northern Sea Route into a year-round export corridor.

Higher and more predictable flows to Asian buyers facilitate the financing and economic justification of these projects. While Russia cannot fully replicate the Middle East’s role due to sanctions, technology limitations, and domestic bottlenecks, a prolonged Iran war that undermines Gulf supplies could make Russia a more attractive option, potentially influencing decisions on projects like Power of Siberia 2 and long-term LNG contracts.

Europe is unlikely to return to Russian energy, prioritizing diversification and decarbonization. Asia remains the only realistic anchor for Moscow’s energy future. Whether Russia capitalizes on this opportunity depends on the war’s trajectory, the effectiveness of sanctions, and the energy transition policies in Beijing and New Delhi. While the geopolitical risk is centered in the Gulf, the most significant shifts in energy relationships are unfolding in Asia.