After China’s rare earth minerals export restrictions and Iran’s blockade of the Strait of Hormuz, chokepoints in international trade have become a hot topic. Never mind that the biggest chokepoint in the world economy has long been the US stranglehold through the threat of sanctions.
Martin Wolf has an excellent oped that illustrates the importance of the Strait of Hormuz.
I have used it as an opportunity to do a deep dive into chokepoints using Claude AI.
Among maritime routes, the Strait of Malacca stands out as the most important chokepoint in terms of sheer volume. The Panama Canal is critical for the US.
The table below maps each chokepoint across eight dimensions. Note that the Turkish Straits punch above their weight. While it carries only 3% of global seaborne trade, that includes around 20% of global wheat exports from Ukraine, Russia, and Romania, making them a food security flashpoint. The Taiwan Strait is classified as "critical (latent)", with 40% of the world's container fleet passing through it, and any escalation would instantly cascade through semiconductor and electronics supply chains globally.
This is a list of alternative routes and their respective detour costs. As can be seen, there is no viable alternative to Hormuz for Gulf states. A closure is modelled to push oil prices to $120–150/bbl.
Among companies, ASML (monopoly in EUV lithography machines), TSMC (64% of global pure play foundry, and almost all 3 nm and 5 nm), and Nvidia (92% of data centre GPUs) are standout corporate chokepoints. China, for materials and several inputs to manufacturers globally, stands out as the foremost national chokepoint. However, the mother of all chokepoints may perhaps be the SWIFT money transfer system controlled by the US.
There are nine corporate chokepoints. The Western chokepoints tend to be policy-leveraged through export controls and sanctions. The Chinese chokepoints are leveraged through state-controlled industrial policy and export licensing.
The hardest substitutability problems aren't the ones with the highest market shares, but those with the longest replacement timelines. ASML and heavy rare earths both require over ten years to replicate at scale.
Let’s now examine India’s external vulnerabilities. India’s most acute dependencies are in the sectors of energy & fertilisers, pharmaceuticals, critical minerals & battery materials, and electronics & semiconductors, with China being the chokepoint country in all but the first.
In defence, while India’s dependencies have grown more diversified, the vulnerabilities are widely known. The hidden defence vulnerability is naval gas turbines from Ukraine's Zorya-Mashproekt, and rare earth magnets used in radars and missile guidance - both of which sit on geopolitical fault lines.
The pattern of leverage shows a sharp dichotomy: India's strategic vulnerability is concentrated in two countries - China (electronics, pharma APIs, rare earths, critical minerals processing, batteries) and Russia (oil, defence, fertilisers) - while its geographical chokepoint exposure sits at Hormuz, Bab el-Mandeb, and Malacca. The most acute vulnerabilities feature single companies as well: TSMC for advanced chips, CATL for batteries, Saudi Aramco/ADNOC for Gulf oil.
So how can these vulnerabilities be mitigated?
The table below has the proposed diversification measures categorised into three: short-term (focused on supplier diversification, strategic stockpiles, and emergency tariff calibration), medium-term (activate PLI schemes, trade agreements, and government-to-government deals (Saudi DAP 5-yr contract, Argentina lithium, Australia rare earths), and long-term (aim for genuine strategic autonomy).
In conclusion, like any other economy today, small or large, India cannot eliminate dependencies. But it can change the politics of dependency by making suppliers compete and by retaining genuine substitutes for each input. The most successful precedent is the SIPRI defence data showing Russia’s share collapsing from 72% to 36% in just a decade, achieved through sustained policy effort and friend-shoring.
