Other Routes: How Shipping Is Circumventing the Strait of Hormuz War Zone
Newsweek · C · trust 58/100
0 Share Newsweek is a Trust Project member See more of our trusted coverage when you search. Prefer Newsweek on Google to see more of our trusted coverage when you search. The U.S. military said that fresh strikes launched Wednesday would degrade the ability of Iranian forces to attack commercial shipping in the Strait of Hormuz but the renewal of hostilities around the critical waterway have sparked a search for oil export alternatives.
In prewar times, the strait was the transit point for one fifth of the world’s hydrocarbons, but an Iranian closure, a U.S. blockade, and a June 17 truce that reopened it now in tatters , Gulf oil producers that use it are examining other ways to transport their commodities.
"Major shipping operators have established overland routes to help alleviate the backlog around the strait, while Gulf states are preparing longer term strategies—such as new pipeline and port development projects," Tamsin Hunt, senior analyst, strategic intelligence at security firm S-RM, told Newsweek on Wednesday.
The International Maritime Organization (IMO) said Wednesday the Strait of Hormuz is too dangerous for commercial vessels to transit, weeks after it had announced an evacuation program to rescue seafarers who had been trapped on ships inside the Persian Gulf.
Gulf countries share those fears and are acting accordingly. The United Arab Emirates is looking to build a new port and container terminal on its east coast to bypass the Strait of Hormuz and reduce dependence on its Jebel Ali hub, CNBC reported.
Dubai-based port operator DP World is looking to develop the port in the coastal area of Fujairah and a new terminal at the harbor there, the Financial Times reported on Monday, citing unnamed sources describing it as both an immediate solution and a long-term plan.
The UAE has also been using tankers to transport crude from inside Hormuz to waters outside the strait, where it can be transferred to larger ships for delivery to Asia, Andy Lipow, president of Lipow Oil Associates, told CNBC.
Leon Schulz, spokesperson for Hapag-Lloyd, the world’s fifth largest shipping company, told Newsweek that the latest hostilities had no impact on its operations as it had already adjusted its network so that its ships do not transit the strait until further notice.
He said it continues to serve customers in the Gulf region through a combination of alternative transport solutions.
Depending on the origin, destination and operational feasibility, cargo may be routed through ports such as Salalah, Jeddah, Khorfakkan and Sharjah, and transported onward using third-party feeder services, land bridges, and other inland connections.
"These solutions allow us to maintain connectivity to markets in the Gulf region. However, they are more complex and less efficient than regular maritime services through the Strait and may result in longer transit times, additional handling, and reduced capacity," he said.
Saudi Arabia has been diverting about four million barrels a day of crude oil from its 750-mile east-west pipeline over to Yanbu on the Red Sea where they are loaded onto tankers, according to CNBC, citing Lipow.
However, this presents a risk when tankers must pass the Bab el-Mandeb Strait and face the threats of attacks by Iranian-backed Houthis, which could also disrupt oil supplies.
The Strait of Hormuz is far from being a secondary route just yet, and pipelines cannot make up for the shortfall of crude and liquefied natural gas stranded in a prolonged closure. Also, Kuwait, Iraq and Qatar retain heavy exposure to the waterway.
Hunt from S-RM said that the shipping industry is accustomed to finding new routes to avoid conflict in the Middle East.
However, she added that, even as US-Iran tensions eased under the now defunct MOU, shipping flows through the Strait of Hormuz were slow to resume due to security risks and uncertainty around the stability of the ceasefire, but also because adaptations to shipping schedules are not easy or quick to reverse.
"For operators reliant on shipping between Asia and Europe, the lengthy journey around the Cape of Good Hope has become an established alternative, but requires careful planning and increased fuel allocations," added Hunt.
Building alternatives to reduce reliance on the Strait of Hormuz, including developing enough pipelines, shipping routes and other workarounds could take years.
On Wednesday, Iraq’s Oil Minister Bassem Mohammed Khudair said on a trip to the United States that his country had a U.S.-backed strategy to diversify its crude oil and petroleum product export routes beyond the corridor.
It would involve working with U.S.-based TI Capital and Qatar's UCC, to build a strategic export pipeline network from Basra to Fishkhabour.
However, redirecting regional oil exports from the Strait of Hormuz would "take years, very likely over a decade," according to Yörük Işık, an Istanbul-based analyst and maritime expert who runs the Bosphorus Observer consultancy.
He anticipated Saudi Arabia would invest more into the Red Sea ports and significantly improve domestic rail and highway networks.
"Similarly, the UAE will invest a great amount of money to turn Fujairah into a state-of-the-art port connected to other UAE points via highway and rail," Işık told Newsweek .
"But the entry to UAE will shift from the Persian Gulf to the Sea of Oman," he added, "if you are planning to buy property in UAE—forget Dubai—Fujairah is the place to have returns."
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