Iran’s frequent threats to close the Strait of Hormuz as a result of its ongoing political tension with the US and other Gulf nations will have a low impact on the UAE and the Kingdom of Saudi Arabia, according to a Moody’s report.
The Kingdom’s East-West pipeline system transports crude oil from the eastern province to the Yanbu port. Likewise, the UAE’s Habshan-Fujairah oil pipeline goes around the Strait of Hormuz, connecting Abu Dhabi’s oil fields to the export terminal in Fujairah, Khaleej Times reported.
The UAE pipeline’s transport capacity is 1.8 million barrels per day, meaning that it covers 75 percent of its oil exports. That said, the Kingdom’s transport capacity is 5 million barrels per day, which is about two-thirds of its crude exports.
The Strait of Hormuz is a narrow sea passageway for oil shipments from the Middle East. Because it is the main artery for oil transport, countries have been relying on it for a long time. If Iran decides to close the Strait of Hormuz, then ‘no one will benefit from it’, Alireza Tenksiri, commander of the naval forces of Iran’s Islamic Revolutionary Guard Corps said.
Countries including Kuwait, Bahrain, and Iraq do not have an alternative oil export route and will be at the receiving end of the conflict. But Oman’s major ports are located outside of the region. This way, the Strait of Hormuz closure will barely affect its oil shipments.
Senior analyst at Moody’s Alexander Perjessy said, “The Strait’s closure would disrupt tanker traffic and weigh on the foreign exchange and fiscal revenue of those sovereigns most reliant on the Strait for transporting oil and gas exports. Kuwait, Qatar, Iraq, Bahrain and, to a lesser extent, Saudi Arabia and the UAE, are a credit negative.”