6 min readMay 4, 2026 06:23 AM IST First published on: May 4, 2026 at 06:20 AM ISTFatih Birol, executive director of the International Energy Agency (IEA), said last month that “we are facing the biggest energy security threat in history”, worse than the aggregate impact of the crises sparked by the Yom Kippur War of 1973, the Iranian Revolution of 1979 and the Russia-Ukraine conflict that began in 2022. He should know, as the organisation he heads was established as a result of the Yom Kippur War. The latter triggered the quadrupling of crude oil prices ($2.90/bbl in October 1973 to $11.90 in January 1974) and a global recession. In its aftermath in January 1974, US Secretary of State Henry Kissinger invited the leaders of the Western world to a conference in Washington, DC. Kissinger’s objective was to create a mechanism by which Western countries could counter the cartel of the Organisation of Arab Petroleum Exporting Countries (OAPEC) and manage and mitigate future supply disruptions. The IEA was the outcome of this conference.Fifty-two years on, in the wake of the closure of the Strait of Hormuz, India should lead a call for the petroleum-importing countries of Asia to create a similar institution, but with a broader threefold purpose. One, to safeguard the rights of individual member countries to free and unencumbered navigation passage through the maritime straits in Asia; two, to counter the pricing power of Middle East exporters through the lever of their aggregate purchasing strength; and three, to harness the complementary technical, financial and human assets of members to accelerate the pace of the green energy transition. Such an institution could be called the Asian Energy Collaborative Compact (AECC).AdvertisementThe closure of the Strait of Hormuz has had a dual impact on Asian oil-import-dependent countries. It has led to an energy shortage and highlighted the risks of exposure to maritime chokepoints. The closure has trapped 13 million barrels of petroleum (and its derivatives) in the straits. The bulk of this quantity (approximately 85 per cent) is destined for the Asian markets. As a result, a number of Asian countries are currently facing an energy-supply crisis. The Philippines has declared a national energy emergency; Japan has cut back on ferry and bus services, and India has rationed the supply of LPG to commercial establishments. China has also put the brakes on domestic consumption, although the impact has been buffered by substitute supplies from Russia and a drawdown of stocks from its strategic reserves.Beyond this physical constraint, the closure has alerted countries to their vulnerability to other nautical chokepoints. Aside from the Strait of Hormuz, their energy supplies have to cross the Strait of Malacca and, further east, the Taiwan Strait and the South China Sea. These maritime passages are in the high seas and under the UN Convention on the Law of the Sea, also referred to as the “constitution of the oceans”, all ships are assured the right of “innocent passage”. The Iranian action has breached this right and created a precedent that compels reflection on the counterfactual. What if the Strait of Malacca (through which 60 per cent of all seaborne trade to and from East Asia passes) were choked? What if the flow of merchandise traffic through the Taiwan Strait and/or the South China Sea were impeded by regulatory restrictions and/or tolls? What pipeline configurations, over land and under water, might enable countries to create supply lines that avoid exposure to such blocks?These concerns are common to most Asian countries irrespective of their political system, ideology or stage of economic development. They can and should therefore be discussed conjointly. The AECC could provide a forum for such discussions.AdvertisementThe “Asian Premium” (the price differential between the price paid for crude oil by Asian countries to Middle Eastern exporters and the North Sea benchmark price) ranged between $3 and $6 per barrel before the start of the conflict. It widened to $60 per barrel after the start of the bombing. It has come down since, but the initial increase warrants the question: Was the steepness of the hike in prices, freight rates and insurance premiums due entirely to tightening supply and inelastic demand? Or was it also because of asymmetric bargaining, that is, the fact that Asian importers failed to leverage their aggregate purchasing power?you may likeKissinger convened the leadership of the Western world in January 1974 to counter OAPEC. My suggestion is that AECC should be set up to secure a similar objective. It should develop mechanisms that, whilst not impeding a country’s ability to trade independently, enable the members to negotiate collectively to secure better supply terms and reduced freight and insurance costs. In addition, AECC should provide real-time market intelligence on supply disruptions, infrastructure incidents and geopolitics. This information is currently provided by the IEA, but Asia should have its own bespoke agency. IEA has a Western skew as it works under the OECD’s umbrella.The exit of the UAE from OPEC is further evidence of the fractured relationships amongst the Gulf oil exporters and the terminal volatility of the international petroleum market. It deepens the urgency for Asia to shift away from fossils towards renewables. Most, if not all, Asian countries have a green energy strategy in place, and some have made impressive progress. But no country has successfully scaled up renewables to dominance in its energy consumption basket. The question arises: How can this shift be accelerated? One proposition that prima facie seems fanciful would be for Asian countries to leverage their green assets (technology, finance, mineral and metal resources, human talent) to identify and tackle areas of overlapping interests regarding the green transition. The proposition is fanciful because, unlike the IEA, Asian countries do not share a common political ideology or system. But the region does have a common purpose in decarbonisation and energy security. So, in its third role as an energy think tank, AECC should research how best the complementary assets of its members can be combined to generate a positive-sum green outcome.The writer is chairman and distinguished fellow, CSEP Research Foundation