Hormuz as strategic lever: Can overland pipelines break Iran’s grip?

The US-Iran ceasefire collapsed into a dangerous cycle of tit-for-tat violence since Sunday early morning, when Iran’s Islamic Revolutionary Guard Corps (IRGC) attacked the M/V GFS Galaxy, a Cyprus-flagged container ship, claiming they only fired "warning shots". But as a result of massive fire onboard, the crew had to abandon the ship with one crew member, an Indian, missing. The Indian Embassy in Muscat is actively coordinating with Omani search-and-rescue teams to locate the missing Indian and arrange for the safe repatriation of the rescued Indian crew members.

Subsequently, the IRGC declared the Strait of Hormuz closed 'until further notice' and launched attacks against Oman’s Duqm port on the Arabian Sea—which hosts logistical support centres and refuelling platforms for US aircraft carriers—drawing public condemnation from Oman. In swift retaliation, the US military has carried out airstrikes against Iranian coastal military infrastructure, maintaining that the Omani southern route is open for maritime traffic. Iran, in turn, struck US bases in Jordan, Kuwait, Bahrain and Qatar.

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Meanwhile, maritime traffic through the Strait has dropped to a bare minimum over the last four days.

Sunday's Iranian attack took place following a failed diplomatic bid by Iranian Foreign Minister Aragchi, who had visited Muscat the previous day. He sought to ensure that all shipping transited under Iranian supervision rather than using the Omani route. However, under pressure from the US and the Gulf Cooperation Council (GCC), Oman instead proposed a "two-corridor plan" for the ships to choose either the Iranian or Omani waters to pass through. Prior to Aragchi’s arrival in Muscat, a Qatari delegation had met with him in Mashhad to defuse the escalating military crisis, immediately following the conclusion of the funeral ceremonies for the late Ayatollah Ali Khamenei. However, this diplomatic effort similarly collapsed.

The Strait of Hormuz has become Iran's new WMD—a weapon of mass disruption—even as Tehran remains willing to compromise on the actual WMD, its nuclear programme. Its control has become a new red line for Iran, in addition to its earlier red lines of not agreeing to zero enrichment and curtailment of its ballistic missile programme.

Will Iran's bet on its long-term leverage over the Strait of Hormuz prove correct? And will the GCC pivot away from the Strait?

Saudi Arabia was the first to commission a new 1200 km pipeline, the East-West pipeline, in 1977 after abandoning the Tapline constructed in the 1950s, which traversed Jordan and Syria to the Lebanese port of Sidon, due to persistent geopolitical instability. The East-West pipeline connects the Kingdom's eastern oil fields to the Red Sea port of Yanbu. Its commissioning in 1982 coincided with the outbreak of the Iran–Iraq War, with frequent attacks on oil tankers. Following the February 28 crisis, this pipeline became a critical lifeline for Saudi Arabia’s oil exports. Even though the pipeline was ramped up to full capacity, the Kingdom had to reduce its exports by as much as 2 million barrels per day (bpd). To mitigate such bottlenecks in the future, Saudi Arabia is presently planning to expand the pipeline's capacity by an additional 2 million bpd.

However, Saudi Arabia's primary vulnerability lies not in its exports to the West, but in its supply lines to Asia, which constitutes roughly 80% of its total exports. These volumes remain highly exposed to Houthi attacks at the southern Red Sea exit of the Bab el-Mandeb. As a result, Saudi oil exports to Asia declined by roughly 25% following the February 28 crisis, as the Kingdom could no longer safely rely on the Red Sea exit. While it utilised Egypt's Suez-Mediterranean (SUMED) Pipeline to export to Western markets, a substantial portion of its exports to Asia had to be rerouted around the entire African continent.

Thus, while alternative overland pipelines offer critical operational flexibility to Saudi Arabia, it is unable to resolve its structural dependence on the Strait of Hormuz.

Kuwait and Bahrain, which have, in effect, become landlocked after the February 28 closure of the Strait of Hormuz, are now planning to export their petrochemicals by establishing feeder lines to a proposed main line in Saudi Arabia, which will connect to Yanbu. However, this project, which is under active consideration, will take about five years to complete.

Qatar, though equally landlocked like Kuwait and Bahrain due to present circumstances, faces critical issues. First, it would not like to become dependent on its larger neighbour, as this would compromise its ability to pursue an independent foreign policy. Second, Qatar is acutely aware of the break of diplomatic relations with Saudi Arabia in 2017 which took three and a half years to resume. Additionally, Qatar, whose main exports are LNG (liquefied natural gas) and LPG (liquefied petroleum gas), will not be able to use a normal pipeline system. Hence, the strategic compulsion for Qatar to accommodate Iran more than the others do.

The UAE is relatively well-placed—next only to Oman—as far as its dependence on the Strait of Hormuz. Along with Saudi Arabia, it is the only other GCC country to operate a major strategic bypass pipeline for its crude oil. Its 400-kilometre pipeline connects onshore oil fields in Abu Dhabi with the deep-water port of Fujairah on the Gulf of Oman, located just outside the Hormuz chokepoint. Conceived specifically to tide over the contingency of a Hormuz blockade, this pipeline became operational in 2012 and has proven absolutely critical for the UAE since the outbreak of the war. Because the current line’s maximum capacity is about 1.8 million bpd, the UAE is fast-tracking a second parallel pipeline to double its capacity by 2027. In addition, it is planning a multi-fuel refined products pipeline to Fujairah to be completed by 2017. Though Fujairah remains within the drone range of Iran and has in fact sustained strikes during the current conflict, this infrastructure would serve as the UAE's primary insurance to insulate its future exports from a total Hormuz shutdown. The UAE's future plans include further expansion of the port at Fujairah and developing a new port south of Fujairah closer to the Omani border.

Additionally, UAE, Bahrain, and Saudi Arabia also depend heavily on container ships for exporting their industrial products. To tackle the Hormuz dilemma in the future, they will have to develop land bridges to reach Fujairah and Yanbu.

Thus, while Iran’s current leverage over the Strait of Hormuz is enormous, this influence will inevitably erode over time. Consequently, it is imperative for Tehran to make certain compromises, such as abandoning its proposed service charges, and to establish a via media with Muscat for joint control over the strait, as outlined in the memorandum of understanding.

The clashes over the weekend have had an adverse impact on global oil prices, which climbed from $70 following the Doha Talks on June 5 to $83 per barrel now. During those talks, both sides had agreed to desist from any kinetic action for a week to accommodate the funeral ceremonies, which was short-lived. Further escalation will have a considerable impact on retail gasoline prices in the US—an outcome President Trump would want to avoid.

Tehran is gambling that it can absorb US airstrikes and use its leverage over global energy markets to outlast Trump, hoping that the political pressure of rising oil prices ahead of the US midterm elections will force him to back down. In response to Trump’s declaration last week that the ceasefire is “over”, Iran has stated that it will no longer honour the provisions of the MoU. Trump has now decided to reimpose a naval blockade on Iran as of tonight. Thus, by aggressively shutting down Hormuz, targeting US bases and suspending the MoU, Iran risks crossing Trump's threshold for deterrence and triggering a full-scale, devastating war again. To prevent this, it is essential that both sides take a step back and approach the negotiations realistically, as a continuation of the war would serve the interests of neither the US and Iran nor the global economy.

The bottom line is targeting of commercial shipping and sailors must end immediately.

(The author is a former Governor of India to the International Atomic Energy Agency (IAEA) in Vienna, as well as a former Ambassador to Egypt and former Permanent Representative to the Arab League. The views expressed in this piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.)