LONDON, Sept 14 (Reuters Breakingviews) – U.S. Treasury Secretary Scott Bessent has made another bold prediction. Speaking at the G20, he said the Strait of Hormuz could become a “worthless” body of water within two years as Gulf producers increasingly rely on pipelines rather than tankers. The shutdown of Saudi Arabia’s biggest bypass route suggests making that vision a reality will be tricky.
Drone attacks have forced Saudi Arabia to halt operations on its East-West pipeline, a route that has become critical since the war curtailed shipping through Hormuz. Over the past six months, the kingdom has used the pipeline to reroute roughly 4 million barrels of oil a day, around 4% of global supply, to the Red Sea port of Yanbu. The episode exposes a flaw in Bessent’s enthusiasm for pipelines as an escape route for the current crisis.
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On paper, there is a raft of projects that could reduce reliance on Hormuz. The United Arab Emirates is expanding its export capacity outside Hormuz through its new West-East pipeline project, while Iraq is planning a new export corridor through Syria, Jordan and Turkey. Those projects could eventually transport some 4 million of extra barrels per day. Add that to the additional volume pushed through the Saudi East-West pipeline since the start of the conflict, and around 40% of the 20 million barrels per day that previously flowed through Hormuz could be replaced.
Yet rather than eliminating geopolitical risk, such projects may simply relocate it, as Saudi Arabia has discovered. Built during the Iran-Iraq war to bypass Hormuz, the East-West pipeline has simply become a bigger target. The route was hit by Houthi drones in 2019 and has now been struck again.The same risks hang over the most ambitious proposal now on the table: a new pipeline linking Iraq’s northern oilfields to Syria’s Mediterranean coast. Backed by a consortium including oil major Chevron (CVX.N), opens new tab, TI Capital and Qatar’s UCC Holding, the project could cost at least $15 billion. Yet the original Kirkuk-Baniyas pipeline, which the new route will essentially revive, offers little reassurance. It was repeatedly disrupted by regional conflict, shut during the Iran-Iraq war and effectively knocked out by the 2003 U.S. invasion of Iraq. The investment case now rests on the hope that Baghdad can gradually assert control over Iran-aligned militias. Recent events suggest that those efforts remain a work in progress.
Security risks may make the new Iraq-Syria project harder to finance. In theory, a stable alternative route could command a premium over Hormuz-bound exports. But investors will want assurances that revenues can withstand political or security disruptions. Iraq’s fragile finances, and memories of the Iraq pipeline through Saudi Arabia that was seized by Riyadh after Saddam Hussein’s 1990 invasion of Kuwait, may make Baghdad wary of offering broad guarantees.
That does not mean such projects lack merit. Saudi Arabia’s Petroline and Egypt’s SUMED pipeline show that alternative routes can reduce reliance on chokepoints. Yet they have complemented Hormuz, not replaced it. And, if the Gulf’s most important bypass route can be knocked offline, then hopes that pipelines can solve the current crisis will fade. That will put Washington and Gulf states under pressure to reach a deal with Iran that restores confidence in Hormuz, however unpalatable that may be.
CONTEXT NEWS
Saudi Arabia shut its East-West Petroline after drone attacks hit the route, disrupting a pipeline that has become critical to the kingdom’s exports during the Strait of Hormuz crisis. The 1,200-km (745-mile) pipeline running across the Arabian Peninsula has served as a vital route out for global supplies of Middle East oil for the past six months while the Strait of Hormuz has been largely shut by war, moving 4 million to 5 million barrels per day, amounting to 4% to 5% of global supply.
During the G20 summit, U.S. Treasury Secretary Scott Bessent said the Strait of Hormuz would become a “worthless piece of water” within two years as a result of new overland pipelines being built in the region. One of these pipelines that have received U.S. backing is the Iraq-Syria crude oil pipeline. Syria and Iraq have both signed separate memorandums of understanding with a consortium comprised of U.S. oil major Chevron, TI Capital and Qatar’s UCC Holding to carry out technical and financial studies in preparation for the project.
Afiq Fitri Alias
