Iran, the Gulf strategy to circumvent the Hormuz blockade: options, risks and unknowns

According to officials and energy sector executives, quoted by the Financial Times, these infrastructures could represent the only structural solution to reduce the region’s vulnerability to disruptions in the strait, even if they would require billions of investments, years of work and delicate political agreements between countries.

The ongoing crisis, highlights the reference newspaper of the City of London, has brought back to center stage the strategic value of Saudi Arabia’s East-West oil pipeline, 1,200 kilometers long and built in the 1980s during the Iran-Iraq war. The infrastructure allows up to seven million barrels per day to be transported to the Red Sea port of Yanbu, completely bypassing Hormuz. One industry executive called the pipeline “a stroke of genius”, while Aramco CEO Amin Nasser pointed to it as the main export route currently used.

The options

Riyadh is now evaluating how to increase the share of production – equal to around 10.2 million barrels per day – exported via pipeline rather than through waters controlled by Iran. Options under consideration include expanding East-West capacity and building new routes.

In the past, similar projects have been blocked by high costs and operational difficulties, but according to Maisoon Kafafy of the Atlantic Council today there is a change in approach: “We are moving from hypotheses to operational reality,” she explained. The most resilient option would not be a single pipeline, but an integrated network of energy corridors, even if this would be the most complex solution to implement.

It also fits into this perspective the possible relaunch of the Imec (India-Middle East-Europe Economic Corridor), the logistics corridor supported by the United States to connect India, the Gulf and Europe. The plan, which would also include energy infrastructure, however clashes with sensitive political issues, such as the hypothesis of a connection to the Israeli port of Haifa.

Obstacles, risks and unknowns

Interest in new projects was already high before the conflict, confirmed Christopher Bush, CEO of the Lebanese company Cat Group, involved in the construction of the East-West. However, obstacles remain significant: replicating a similar infrastructure today would cost at least five billion dollars, while more complex pipelines, for example from Iraq through Jordan, Syria or Turkey, could require investments of between 15 and 20 billion.

Added to these costs are security risks, as well as the geographical difficulties of crossing deserts and mountain ranges. Even the routes to Oman are not free from threats, as demonstrated by the recent drone attacks on the port of Salalah. The political unknowns are no less relevant: the management of pipelines and the control of flows would require unprecedented regional cooperation, overcoming the traditionally individualistic approach of the Gulf countries.

In the short term, the most viable options appear to be upgrading Saudi East-West and the existing pipeline between Abu Dhabi and Fujairah, increasing capacity without dealing with the complexities of new cross-border infrastructure. Riyadh could also develop new terminals on the Red Sea. According to industry sources, however, final decisions will only be made when the future of the Strait of Hormuz becomes clearer.