The 3.3 billion USD Habshan-Fujairah pipeline, built by China Petroleum Engineering and Construction Corporation, was inaugurated on 21/06, with a capacity of 1.5 million barrels per day (which can be increased to 1.8m bpd), or the equivalent of ≈ 70% of the country’s oil exports, and roughly 10% of the 17 million barrels that are shipped every day through the Strait of Hormuz.
The 360-Km pipeline, all within UAE territory, ensures the safe flow of crude from the UAE’s western oil fields to the Gulf of Oman, bypassing the Strait of Hormuz, which Iran has threatened to block in retaliation for western sanctions on its oil exports as a result of the country’s nuclear program.
The pipeline will offer a sense of security for the Emiratis, who no longer have to fear a possible blockade of Hormuz. This will anger their Iranian neighbor, and repercussions will likely be felt on other tension points between Tehran and Abu Dhabi, possibly regarding the three islands whose sovereignty is disputed by both countries.
The UAE is not the only Gulf country that wishes to bypass the Strait of Hormuz. Back in 1982, in the middle of the Iraq-Iran war, Saudi Arabia completed two 1,170 Km pipelines transporting oil and gas from its eastern province to its western coast on the Red Sea. The more oil is flowed from the Gulf region without passing through the Strait of Hormuz, the less likely it is for Iran to try to block it. But unlike the UAE, Saudi Arabia and Oman, the other Gulf countries don’t have such an alternative, unless future pipeline projects through Kuwait and Iraq materialize. Major ports being built or planned in Kuwait and Iraq might offer an alternative in the future, but they are just the first step of an ambitious trade project whose infrastructure is far from being completed and depends largely on close regional cooperation that at the moment does not exist.
Beside its obvious geopolitical advantage, the Habshan-Fujairah pipeline will also improve the local economy. Fujairah, the only emirate in the country which lies on the Gulf of Oman, is located right in the middle between Oman and the Omani enclave at the tip of the Musandam peninsula. It also surrounds another Omani territory, the small exclave of Madha. The last emirate to join the Trucial States that formed the United Arab Emirates, Fujairah is also one of the weakest economies in the Federation and relies on subsidies and federal government grants. The new oil export terminal as well as other tourism-related projects, including a new 817 million USD resort will give a much-needed boost to the local economy.
The Habshan-Fujairah pipeline might have started out as a strategic project with economic repercussions since it not only bypasses the Strait of Hormuz but also reduces shipping and insurance costs, but it also comprises a no-less-important internal layer since it was designed to have a direct impact on local development, and, as a consequence, on national cohesion. The project will also test how far GCC countries are willing to take their cooperation. Indeed we might ask: what prevents GCC countries from developing a similar project on a larger scale to transport not only Emirati oil but also oil from other Gulf countries?