They now hate Iran for damaging their energy infrastructure and therefore don’t want to indefinitely pay it “petroyuan” as part of the “toll” system that the Islamic Republic is flirting with imposing.
Andrew Korybko
The Financial Times recently reported that “Gulf states consider new pipelines to avoid Strait of Hormuz”.
Per their assessment, “In the near term, the most viable options may be
to expand the East-West pipeline and also Abu Dhabi’s existing route to
Fujairah.” Future plans, however, could include new pipelines to the
Arabian, Red, and/or Mediterranean Seas, the last one paralleling the
frozen India-Middle East-Europe Economic Corridor (IMEC) but only in the
event of an Israeli-Saudi rapprochement.
From the
Gulf Kingdoms’ perspective, provided that a US-Iranian deal is reached
so that Trump doesn’t carry through on his threat to destroy Iran’s
energy infrastructure and thus prompt Iran to carry through on its own
threat to destroy the Gulf Kingdoms’, export route diversification is
their top priority. Given the existing damage to their energy
infrastructure from Iran, which defends
this on the basis that the US used their bases and/or airspace for
attacking it, they don’t want to pay any so-called “toll” to it.
About
that, Iran is flirting with such a system as a form of “reparations”,
one which could also lead to the yuan challenging the dollar as the
global reserve currency if Tehran demands payment in it for transit. It
was recently concluded here
that “The US will have lost the Third Gulf War if China can still rely
on Iran as a reliable low-cost energy supplier while turning the yuan
into a global reserve currency that challenges the petrodollar.” That
assessment still stands but with an important caveat.
Trump
might end US involvement in the war without reopening the strait after
asking those that actually rely upon it to do so instead during his
latest national address.
In that event, Iran might indeed impose its “toll” system and help
launch the “petrodollar” (if the region’s energy infrastructure isn’t
destroyed per the sequence that was detailed two paragraphs above), thus
leading to the US’ strategic defeat. Nevertheless, if the Gulf Kingdoms
eventually stop using the strait, then this would be a pyrrhic victory.
Therefore,
one scenario that might unfold and which can’t be ruled out is that the
war ends with a “toll” system in place and the birth of the
“petroyuan”, but these outcomes are eventually phased out as the Gulf
Kingdoms expand existing pipelines away from the strait and later build
new ones. While the Financial Times estimated that another East-West
pipeline would cost $5 billion while a Mediterranean one might reach
$15-20 billion, the overall savings from evading the “toll” system would
be worth it.
To be sure, the Gulf Kingdoms are disappointed with
the US for not adequately defending their energy infrastructure from
Iran’s retaliation so they don’t exactly love the petrodollar anymore,
but they now hate Iran after what it’s done to them much more than they
dislike the US. For that reason, they’re not expected to indefinitely
tolerate its hypothetical “toll” system and “petroyuan” demand, instead
truly prioritizing export route diversification after the war (if their
energy infrastructure still exists by then).
With this
imperative in mind, it can thus be expected that the Gulf Kingdoms will
phase out their use of the strait after the war if Iran imposes a “petroyuan” “toll” system
upon them. Even without that, they’ve now learned the importance of
having alternative export routes, but it’s unclear which ones Bahrain
and Qatar will pioneer. Transiting across Saudi Arabia will strengthen
Riyadh’s influence over them, but building underwater pipelines to the
Kingdom’s Emirati rival would rile Riyadh. Time will tell.