President Trump's threat to impose a 20% fee on cargo passing through the Strait of Hormuz has intensified the urgency for Gulf oil producers to find alternative export routes. This situation arises amid heightened U.S.-Iran tensions, leading countries like Saudi Arabia and the United Arab Emirates to explore new infrastructure to bypass the strait.
The UAE is reportedly planning to build a new port and container terminal on its east coast, with Dubai-based DP World in discussions to develop this project. Ahmed bin Sulayem, CEO of the Dubai Multi Commodities Centre, emphasized that these developments are both immediate and part of a longer-term strategy to reduce reliance on the strait.
Currently, Saudi Arabia is diverting approximately 4 million barrels of oil per day through its East-West pipeline, which connects the eastern Gulf coast to the Red Sea, showcasing a successful adaptation to the geopolitical risks.
However, while these alternatives provide some relief, they do not eliminate the geopolitical risks entirely, as tankers must still navigate through potentially hostile waters. Analysts note that the UAE's proactive measures could enhance its bargaining power in future negotiations with Iran, potentially diminishing Iranian influence in the region.
Despite these efforts, other Gulf states like Kuwait, Iraq, and Qatar remain heavily dependent on the Strait of Hormuz, highlighting the limitations of existing alternatives. The International Energy Agency indicates that only Saudi Arabia and the UAE have operational pipelines capable of bypassing the strait, with a combined capacity of 3.5 million to 5.5 million barrels per day.
Experts suggest that developing sufficient alternatives could take 18 to 24 months, indicating a prolonged period of vulnerability for the region's oil exports