Amit Mor, CEO of Eco Energy Financial and Strategic Consulting and a senior lecturer at Reichman University spoke to an August 3 Middle East Forum podcast (video). The following summarizes his comments:
The Straits of Hormuz, Bab al-Mandeb, and the Suez Canal are among the most critical maritime choke points for global transportation and energy. These routes are currently under threat by the Iranian regime and its Houthi proxy in the conflict with the U.S. and are witnessing major reductions in shipping traffic. The pressing search for alternative Mideast routes exposes how the vulnerabilities of a disrupted flow of goods can rattle international economies and financial markets.
The Straits of Hormuz, Bab al-Mandeb, and the Suez Canal are among the most critical maritime choke points for global transportation and energy.
Prior to the war, 25 percent of the world’s maritime oil exports, or approximately 20 million barrels, was shipped through the Hormuz Strait. “The world consumes a bit more than 100 million barrels per day.” Moreover, 20 percent of Liquefied Natural Gas (LNG) produced in Qatar and the United Arab Emirates (UAE) is shipped through the Strait. In addition to the shock felt by the oil and gas markets, chip production, supply chains, petrochemical products, food, and fertilizers are affected, with more disruptions expected. The Suez Canal, much of whose maritime traffic passes through the Bab al-Mandeb Strait, transports 10 percent of global energy and 30 percent of world cargo. It, too, is “almost totally closed” because the Houthis, Iran’s proxy in Yemen, are shutting down the Bab al-Mandeb Strait.
Two major pipelines emerged as alternative routes to transport oil. The Petroline, constructed by Saudi Arabia some 40 years ago during the Iran-Iraq War, is an east-west pipeline delivering oil from the Gulf region to the Saudi Port of Yanbu on the Red Sea. Prior to the most recent disruptions of shipping through the Bab-al-Mandeb Strait, 90 percent of oil and gas produced in the Persian Gulf was transported from the Red Sea through the Strait to such Far East countries as China, India, Japan, Korea, and Taiwan. Since the Houthis have shut the Strait to Saudi cargo, the latter is diverted north through the Suez Canal and on to the Mediterranean Sea to reach countries to the east. However, by forcing this ocean freight to circle the Cape of Good Hope at the southern tip of Africa in order to reach the Far East, the journey is extended by a month. Consequently, shippers incur significantly higher maritime travel expenses and costlier insurance rates.
The other pipeline, constructed two decades ago by the UAE, delivers 60 percent of the oil export capacity from the Persian Gulf to the Gulf of Oman, thereby bypassing the Strait of Hormuz to the east. However, the country of Bahrain has no alternative to the Strait of Hormuz to ship its oil. Qatar is also dependent on the Strait to export its LNG because there is no pipeline option. Alternatively, thousands of oil tanker trucks transport oil from Saudi Arabia and Iraq to Mideast ports in Syria and Turkey. This “bottom-up initiative” of resorting to trucking keeps the flow moving, thereby enabling Saudi and Iraqi oil to be delivered to Middle East ports, “especially in Syria and Turkey.”
One of the most important long-term initiatives, declared at a May 2023 economic summit, is the ambitious India-Middle East-Europe Economic Corridor (IMEC). IMEC’s goal is to connect India, via ships and cargo, to the UAE and Saudi Arabia through roads, and later, high-speed trains traversing Saudi Arabia and Jordan, to the Haifa port, and then on to Europe. The conflict with Iran has accelerated the Gulf’s need to develop alternatives to the blockades imposed on the straits, which “could happen again and again.”
IMEC’s goal is to connect India, via ships and cargo, to the UAE and Saudi Arabia through roads, and later, high-speed trains traversing Saudi Arabia and Jordan, to the Haifa port, and then on to Europe.
Not wanting to be excluded from IMEC, Turkey entered into a series of Memoranda of Understanding (MOUs) with Iraq to create “the Development Road.” The Road, later to become a train route, will transport goods from the Persian Gulf through Eastern Turkey and deliver them to ports on the Mediterranean. From there, the cargo can reach Europe and other international markets.
A recently signed agreement between Turkey, Syria, Jordan and Saudi Arabia – but excluding Israel – seeks to revive the Hejaz railway, dating back to the former Ottoman Empire, to “connect the Gulf region and Saudi Arabia via Syria and Jordan.” The Hejaz is a region in southwest Saudi Arabia that contains the kingdom’s religious locales, Mecca and Medina. The railway connected these holy cities to Syria, Jordan, Turkey and then-British Mandatory Palestine. A branch of that railway extended to Egypt.
A current agreement between Israel and Jordan involves the transit of 200 oil tanker trucks daily from the Haifa port across the Jordan River. This number could grow to 2,000 trucks daily in three to four years if the two neighbors cooperate and agree to prioritize security and logistics. This ambitious vision will require “a lot of logistic infrastructure” in the communities surrounding the Haifa port. If the IMEC vision materializes, the long-term potential for growth includes building a railway from Haifa to Jordan, which could then connect to the Hejaz railway line and other lines.
The long-term timeline is projected to be one to two decades, but for now the bottom-up method of trucking as a viable land route alternative is embraced by the Gulf states as a way to circumvent Iran’s and the Houthis’ blockades of critical choke points. The main sticking point in the current U.S.-Iran conflict is the closure of the Strait of Hormuz because shippers are not willing to risk their fleets. The Iranian regime’s Islamic Revolutionary Guard Corps targets ships and tankers with drones and missiles from the high mountainous area above the Strait. “It’s very easy to shut [down] the shipping to the Hormuz Strait, and it is very difficult militarily to guarantee a safe passage.”
A major challenge for the U.S. is regaining free access through the Strait of Hormuz for international shipping because Iran claims it will charge levies and taxes for any ship transiting the Strait.
The next five years will see the construction of major pipelines which will bypass the Strait of Hormuz. The Emiratis have already almost doubled the capacity of their pipeline to the Gulf of Aden. The Saudis could construct oil pipelines to Oman and the Indian Ocean, with possible “long pipelines from Kuwait and South Iraq, via Saudi to Oman.” Additional options include the resuscitation of pipelines to Mediterranean ports such as the Trans-Arabian Pipeline (Tapline) from Saudi Arabia to Lebanon via Syria, and pipelines through Syria from Iraq.
A major challenge for the U.S. is regaining free access through the Strait of Hormuz for international shipping because Iran claims it will charge levies and taxes for any ship transiting the Strait. The international community should join with the U.S. in objecting to the regime’s holding the Strait hostage. “If they achieve such taxation on ships and tankers,” other straits would likely undergo similar threats of extortion. It remains a “very important mission for the Americans [and] for the international community” to ensure free passage through global choke points.
