By Frank Wouters, Chairman at the MENA Hydrogen Alliance
We are now 3 months into the Iran conflict, and the global economy is paying a heavy price. The impact on the GCC countries is severe, albeit different for each. The IMF expects that the economies of Qatar, Bahrain and Kuwait will contract this year. Oman, Saudi Arabia and the UAE are also affected, but benefit from higher oil prices and sea access outside the Gulf.
Governments have taken immediate action to bypass the Strait of Hormuz and reduce the impact on the economies. Some of these measures will be permanent. The UAE is fast-tracking the Habshan-Fujairah pipeline corridor to expand export capacity by 2027 to 4 mbpd, up from 1.5 mbpd. The Port of Fujairah, traditionally a liquids port, has been transformed into a container terminal in record time. Because Fujairah cannot accommodate large container ships, Abu Dhabi Ports Group is leasing port capacity in Pakistan and has made smaller container vessels available with on-board cranes that shuttle between Pakistan and Fujairah and compensate for the lost port capacity in Dubai and Abu Dhabi. Containers are then loaded onto Etihad Rail cars, which commenced commercial operation in 2023. Containers are also put on trucks and have been able to provide critical supplies of food and medicine to the rest of the GCC countries, including Kuwait. Fertiglobe is trucking ammonia fertilizer from Ruwais to ports outside the Strait of Hormuz, and Dubal imports alumina feedstock via Sohar and transport it by road to its smelters in Dubai. However, this is a lot more expensive than seaborne transport, adds considerably to the cost of the final product and is not a permanent solution.
New infrastructure will be built to make the GCC economies more resilient. In addition to the east-west pipelines, I expect that the GCCIA’s grid backbone will be given a boost. What is also gaining more attention is the IMEC initiative, the India-Middle East-Europe Economic Corridor, that links ports, rail, energy, and digital infrastructure across India, the Gulf, and Europe. IMEC aims at linking the three regions through connectivity infrastructure, including for green energy. Launched in September 2023 during India’s G20 Presidency, the initiative was formalised with a Memorandum of Understanding signed by eight signatories, including KSA and the UAE in the GCC.
Both IMEC and the GCCIA have seen some but no major investments in recent years. However, the current war may give such generational infrastructure visions the necessary political and economic boost they require. As the saying goes, never waste a crisis!