Trump’s War Has Changed the Persian Gulf and There’s No Going Back

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In launching his war against Iran, President Donald Trump created a dilemma for countries in the Persian Gulf, Europe, Asia, and Africa that is likely to permanently alter the shape of international trade.

“What we’re witnessing is not merely a shipping disruption,” Samriddhi Vij, an associate fellow in geopolitics at the Dubai-based Observer Research Foundation Middle East (ORFME), told WhoWhatWhy. “It’s a structural recalibration in the architecture of global trade. Countries that built entire development models around frictionless maritime access suddenly discovered the alternatives have limits.”

Before Trump and Israeli Prime Minister Benjamin Netanyahu launched the war, nearly a quarter of worldwide oil and gas shipments passed through the Strait of Hormuz. Eighty percent of those shipments were bound for Asia — mostly China, Japan, and India.

Iran, Saudi Arabia, Qatar, Bahrain, Kuwait, the United Arab Emirates (UAE), and Iraq depended heavily on the waterway for their energy exports, using it to ship about 20 million barrels per day of oil and oil products.

Iran’s efforts to exert sovereignty over the waterway as a response to the attack have created both logistical and philosophical dilemmas for the countries in the region, especially Gulf sheikhdoms.

In a column for the Financial Times on April 7, Badr Jafar, the UAE’s special envoy for business and philanthropy, said Iran’s actions have created an atmosphere in which the Gulf states would never “return to a posture of strategic dependence on a narrow strait controlled by an unpredictable neighbour.”

He wrote: 

I have spent the past month in discussions with hundreds of business leaders and senior Gulf government officials on the crisis and what comes after it. The conversation has already shifted — from managing the immediate crisis to redesigning the systems that created this vulnerability in the first place.

Very Few Viable Options

But the Gulf states — as well as Turkey and Iraq — realize that finding an adequate alternative to Hormuz is much harder than they expected.

According to Mohammed Salih, a nonresident senior fellow at the United States’ Foreign Policy Research Institute:

Every country to the west (i.e., Iraq, Kuwait, Qatar, and Bahrain) and immediately south of the Strait of Hormuz (i.e., the UAE) stands to sustain considerable losses from an Iranian closure of the Strait. These countries cannot circumvent Iranian military closure and firepower over the strait.

Thus far, only Saudi Arabia and the UAE have managed to find functioning alternative routes for oil exports that avoid the Strait of Hormuz. Kuwait, Qatar, and Bahrain do not have coastlines that extend outside the Gulf. 

Until now, according to the International Energy Agency, the UAE has exported 93 percent of its liquified natural gas (LNG) through the Strait of Hormuz. Qatar, one of the world’s largest LNG producers, exports 96 percent of its LNG through the strait. There are no alternative available pipelines for large gas exports at the moment. 

To date, only two existing pipelines are capable of bypassing the Strait of Hormuz.

In the aftermath of the Iran-Iraq War, in the 1980s, Saudi Arabia built a 746-mile East-West pipeline inside the kingdom. Until the current war with Iran, the Saudi kingdom was exporting an estimated 7 million barrels of oil a day. Only about 2 million barrels were transported through the East-West pipeline. 

The UAE also has an operational 235-mile oil pipeline that transports crude oil and connects Abu Dhabi’s Habshan onshore fields to Fujairah on ​the Gulf of Oman. With the Strait of Hormuz open, the UAE was exporting about 3 million barrels of oil a day. The UAE’s pipeline alone can handle only about half of that volume.

“Iranian attacks on May 4 are a stark warning and reminder of Tehran’s belligerence and its intention not to allow” alternative routes such as the Fujairah pipeline, said Salih.

A number of other options have been proposed over the years, but analysts believe they are either too costly or impractical because of the lack of regional security cooperation. Investors are still debating the cost-benefit analysis.

One option discussed is to build a parallel pipeline to the current East-West pipeline in Saudi Arabia. The extra pipeline would not only enable the kingdom to rely entirely on overland shipment but would also help other Gulf countries. Constructing the pipeline would cost at least $5 billion. 

Iraq and the Kurdistan Regional Government recently renewed export from Kurdistan’s Kirkuk to Turkey’s Mediterranean port of Ceyhan, but at present that pipeline can carry only around 170,000 barrels per day. It’s possible that it could be expanded to carry 250,000 barrels per day in the future, but that is still far short of Iraq’s current export of about 3 million barrels per day.

Analysts Are Not Optimistic

Salih noted:

Iraq or Turkey are not going to be realistic options in the short to medium term. In the medium to long term, alternative pipelines could be built across Iraqi state territory (including the Kurdistan Region), connected to Jordan and Turkey to deliver energy resources to global markets.

But such projects would require major investment, governance discipline, and security control that Iraq does not necessarily have at the moment.

There also have been talks of two multicountry projects, though neither is in construction status.

One proposal is to use some of the existing land and rail infrastructure in the Middle East to build a multicountry network connecting Iraq through Jordan, Syria, or Turkey — a project that has been estimated to cost around $15 billion.

Another much-talked about proposal is the US-backed India-Middle East-Europe Economic Corridor (IMEC), touted by proponents as a plan not just to reroute shipping routes but to engineer new global trade and economic development. There are no cost estimates, formal funding, or construction plan for it.

Regional and Global Politics

Global and regional politics are the reason that many of these options are not moving forward.

The most viable of the existing ideas for now — in terms of both cost and the need to coordinate policy and bureaucracy among multiple states in the region — is the plan to expand the existing Saudi land pipelines. And even that may prove problematic.

In the Gulf, the rivalry between Saudi Arabia and the UAE became apparent when Abu Dhabi announced last month that it was leaving the Organization of Petroleum Exporting Countries (OPEC). Although Saudi Arabia dominates OPEC in practical terms, the UAE was one of the initial founders of the organization, whose purpose was to maintain the global price of oil by controlling how much of it reached the market. Saudi Arabia and the UAE have also competed with each other in places like Yemen, where both countries have funded competing factions.

Not Just Economic Uncertainty

Gulf countries have traditionally relied on the United States for their military arsenals. Since the Iran war started, several — notably the UAE, Saudi Arabia, and Qatar — have quickly exhausted their missile defenses in responding to attacks from Iranian ballistic missiles. Until now, all the countries depended on the US for Patriot and other defensive missiles.

There are no reliable public estimates for how many missiles each Gulf country had before the war started or how many remain. However, it is public knowledge that several Gulf countries — including the UAE and Saudi Arabia — are now trying to diversify their military options by signing defense technology deals, such as with Ukraine for drones, in an effort to minimize dependence on their existing arsenal or replenishment sources.

Retired Col. Mark Cancian, senior adviser at the Washington-based Center for Strategic and International Studies (CSIS) defense and security department, said that as of last month all Gulf countries have asked to renew their military agreements with Washington. But, he added, they now face competition, as the US rebuilds its own depleted stockpile of missiles and Ukraine depends on its supply to fend off Russia.

“When they bought [previous rounds of munitions], they didn’t have to compete with Ukraine and the US having to maintain [their] own inventory. By now, they have used a large part for their air defense Patriots and THAADS,” he said, referring to Terminal High Altitude Area Defense missiles. 

“Bottom line is that there has not been a problem in the past. It is a major problem now,” he added.