Beyond Hormuz: The Future of Middle East Trade Corridors with Amit Mor

0:01 Good afternoon and welcome to the Middle East Forums weekly podcast. My name is Lauri Rean and on behalf of MEF, I thank you all for joining today and for your continued support of our work. This afternoon we are joined by Amit Moore, CEO of Echo Energy Financial and Strategic Consulting and a senior lecturer at Reichman University who is an expert on Middle East energy infrastructure and economic development. Amit will share his insights on the way in which the recent wars and maritime disruptions in the Middle East have exposed vulnerabilities in global trade and alternatives to current routes including the India Middle East Europe economic corridor known as IMAC and other potential land routes. Amit will speak for about 15 minutes followed by 15 minutes of audience questions. So if you'd like to ask a question, please feel free to use the Q&A function at the bottom of your screens to enter your submissions and I'll do my best to get to as many of your questions as possible. Today's podcast is being recorded and will be available for future viewing. So, please do share the link with those in your networks who you think would be interested in learning more on this important and very timely topic. Welcome Amit and thank you for

1:04 joining us this afternoon. I hand the floor over to you. Thank you very much Lori. Very glad to be here. So basically we discuss the importance of course of the hormuz and the babel mande bis canal pathways and to those choke points which are discussed and under development uh these days. So uh as uh many of you heard uh of course the hormuz straight is a critical choke point especially for energy but not only transportation before the war um about 20% of the world oil was shipped via those straits that is about 20 million barrels per day the world consumes a bit more than 100 million barrels per day and about also about 20 uh% of the world liqufied natural gas LNG which is

2:08 liqufied um and produced especially in Qatar also at the United Arab Emirates. So um of course with the war we noticed a major spike in oil prices which increased by up to 60% from around say 68 $70 per barrel of WTI West Texas up to $120 per barrel. Today the prices have decreased sharply because uh Mr.

2:44 Trump postponed the war again. Uh so prices are oil is traded around $75 per barrel. Major decrease. Energy prices have increased much more than that. uh almost doubled because about 20% of the gas uh which is produced in cattle especially didn't flow to the international markets. So that had a major impact especially on electricity tariffs in Europe which increased by depends well were up to 30%. And not only oil and gas has a major impact also on agricultural serial products like wheat, corn, barley, and so on because about 30% of the fertilizers in the world are exported from the Persian Gulf. uh also chips

3:50 prices have increased significantly because Helenu which is produced in associated in association with natural gas uh production uh about onethird of that is produced in the Gulf and this is a major feed stock both for fertilizers but also for cheap production and so on so forth. So what we noticed in the past 5 months is a significant increase which in prices inflationary pressures uh basically hurting of decrease of interest rate in some places increase in interest rates.

4:33 Erh so in this respect since the straight of form is actually was shut down most of this period and right now it is in a closure I would say according to uh the public information that we have. So we are expecting much more disruptions in the future in all this chain in all the supply chains energy fertilizers food and many many other prochemical products and so on so forth.

5:08 In addition, the hotties major proxy of Iran of Yemen's of Yemen they again appear to shutting down the straight of Babel M and very very important choke point in the wall about 10% of the energy about close to 30% of the um caros in the world containers ships and so on so forth which goes basically via the Swiss canal and both sides northern and and southern or eastern and lately uh important strait was almost shut down for two years since October 2023 and uh was opened in the past several months. But again lately it is actually I would say almost totally uh closed and

6:14 uh the alternative the immediate alternative is basically to circle Africa via the cape of good hope and uh this is very very costly. So let's discuss energy and then uh we can discuss caros and other alternative routes. So basically what are the alternative routes for oil? So uh two major pipeline. One is basically the petrol line which was constructed back about more than 40 years ago during the Iraqi Iran war by Saudi Arabia. This is a east west pipeline which basically has a capacity of up to 7 million barrels per day to deliver oil from the region of the Gulf in Saudi Arabia, the region, major region of oil production to the Red Sea, the port of Yanbu. And very

7:19 very quickly already in a week or two since the war began and the straight of were shut down the Saudis were able to divert much of their oil export to the Red Sea and then via the straight of Babel Mande to the east because it is important to realize that about 90% of the oil and gas which is produced in the The Persian Gulf is directed to the far east, China, India, Japan, Korea, Taiwan and other nations in the east. So uh this was a very very important alternative which lately just in the past two weeks the Houthis again declares that they are shutting shutting down the straight especially for Saudis cargo. So right now as we understand most of the um Saudi oil is locked and

8:24 basically what they are trying to do is to divert the caros northwards towards the stress canal and then via the Mediterranean to uh bypass Africa via the Cape of Good Hope and to the east which takes about a month uh longer. and much more costly and indeed higher insurance rates and so on so forth. So that that's what is happening right now. Uh the other was constructed about 20 years ago already by the United Arab Emirites which deliver about 2 million bars per day which is about 60% of the oil export capacity uh from the region from the area in the G Gulf Persian Gulf towards the Gulf of Oman that is uh eastern to the straight of

9:27 Formos, bypassing the straight of Formos. So the Emirati, Emirutis could and indeed continue to um ship portion of their oil production via Dwood, the the port of Fujara. So this is the situation right now. Iraq Iran we'll discuss in a minute Baharin they don't have any other alternative to ship their oil from the Gulf other than the straight of Hum what we can see is that thousands indeed thousands of tankers road tankers and caros because that is trucks are basically driving uh taking all the way from Saudi and Iraq

10:35 basically to the ports of the Middle East especially in Syria and Turkey and also uh few hundred by about 200 trucks a day via the port of Kyifa in Israel. So the major I would say um success of the Iran Iranis is that they capture the world as we say they are in fact influencing significantly the world economy by controlling the state of rumors and in this respect they the focus of the this war right now of Trump's administration is to open the stray. This is a major constraint right now. All the other objectives of both Mr. Trump, the US government and the Israeli government will not achieve that it is in this respect the Iranis are winning. They demonstrate major major resilience.

11:41 They survived. none of the other objectives that is dismantling the nuclear capacity and the missiles capacity u I I I think a well um known objective that is to um dismantle this uh k regime fundamental regime of Iran. All of those objectives were not achieved.

12:17 The focus is right now to open the straight of Rumos. So this is situation right now very limited options. These are the two pipelines and trucks and road tankers. Thousands of road tankers. I didn't believe at the beginning that they say hundreds of trucks every day from Iraq, from Saudi to the ports of the Mediterranean, via Iraq, Syria to Turkey, some via Israel. These are the So what in this situation, what are the options for the intermediate and the long run? one of the uh spoken option that was declared um at the economic summit of the G20 in Delhi back in I think it was May 2023 before the October war is the IMAC IMC initiative. The IMC is the India Middle

13:22 East Europe economic corridor. The idea is to uh ship to connect India via ships of course and caros via the emirites and Saudi via roads and especially later on via speedy trains to uh via Saudi via Jordan to the port of Hifi in Israel and from there to Europe.

13:55 So this initiative is discussed. It is a long run initiative that is a lot of investment will be required to build the fast trains and so on so forth. Um right now there there is no progress in this initiative but there are also other other initiatives especially initiated by Turkey Turkey didn't like the idea of the IMAC because it does not include the Turkey so uh they signed last June two months ago on array of memorand of understandings, initial agreements with one with Iraq to develop what is called the development road. That is a road and later on a train route from the

15:00 the region of the Persian Gulf to deliver caros especially from Iraq to eastern Turkey and the ports of the Mediterranean and from there to Europe. another initiative uh and agreement which were signed uh indeed a few weeks ago between uh Turkey, Syria and Jordan and Saudi Arabia to revive the hijaz railway which back at the Ottomans Empire.

15:36 This uh train uh connected Mecca and Medina's religious towns in Hijaz area in southern southwest Saudi Arabia via Jordan via Palestine, Syria to Turkey, another branch where went to Egypt. So uh they would like to revive that that route uh which will not include Israel and to connect uh indeed the Gulf region and Saudi Arabia via Syria and Jordan. So all of those initiatives are long I long basically long duration initiatives. It will take 10 20 years and we'll see what is going to materialize. Uh but bottom up we'll see also already uh initiatives uh of uh as mentioned of

16:41 trucking they basically thousands of trucks both of oil tankers road oil tankers uh that deliver Iraqi oil from the south to Turkey and to international markets and uh also uh about 200 100 trucks are from the port of Kyifa going to Jordan crossing the Jordan River at the Jordan River crossing and then to Jordan and from there to Saudi and Arab United Arab Emirites and other countries and also to Iraq in this route. So uh what I think is very very important is that uh to see to realize that in the longer run possibly all B3 and also another route via Egypt many routes several routes

17:45 will develop because the Saudis other nations of the Gulf they uh fear that the Iranians will have a control of the straight of Formos and that such a blockades and closure of the strait could happen again and again. Also the Babel Mabel Mitra could be shut down by the Hodis. uh so uh land routes uh are developing and uh the IMAC is very very important I think to all the nations involved but we'll see other routes as developed as well and uh I think this is a positive uh um approach to see uh several routes and the approach should be a bottom up.

18:42 We are starting with drugs and also here the Israeli government, the Jordanian government. Hopefully they will come to agreement to enhance to increase the volume of trucks which are crossing the Jordan River crossing every day. Instead of 200 trucks a day, we can in I believe in three to four years time could increase this uh volume to 2,000 trucks a day. It has a major effect on the port of Kyifa logistical the towns in the region. We need a lot of uh logistic infrastructure in this later on possibly a train will will connect also from Hifa to Jordan which can connect to the Hijaz train if materialized and other routes so visav which are very very important I feel

19:46 that alternatives to the sewers canal it's very important to realize that about close to onethird of the container ships in the world are crossing the Swiss canal and the Bab and Mandep straight. So as long as the hotties demonstrated the capacities to disrupt the uh uh um passage, a safe passage in in the state of Bal Mande and the world led by the Americans had a campaign against the if you recall and the world is not doing something radical to stop the hoodies from disrupting the uh the the transportation via the straight of for the American army is it's not that he's not able but there was not a a a a direct order for the

20:51 American military to the central command to uh open the passage the straight of formos that is it's very very easy and it's very for the Iranians via drones via small speed boats. Uh the area is the high mountains but tens of kilometers of high mountains. Many creeks you know very small uh few soldiers with with drones and missiles can target and ships and that's what they have been doing in the past five months. So it's very very easy to shut the the the the um basically the shipping in the in those traits and it is very difficult militarily militarily to guarantee safe passage and then the insurance companies are intervening and raising dramatically the insurance cost

21:57 and ship owners are not willing to risk the the their fleet and therefore if the military guards, revolutionary guards want, so they uh they shut this uh important choke point. Therefore the alternatives are very very important and basically what I see is visav energy that in the next five years we'll see and even before we'll see a major construction of pipeline to bypass the straight of formos theiris they they already they already started almost double the capacity of the pipeline to the Gulf of Aban I see situation in which the Saudis will also construct oil pipelines to Roman to the Indian Russian bypassing the straight of Roman possibly also long pipelines from Kuwait and South

23:03 Iraq to via Saudi to Oman. So in I would say in 10 years time the importance of the straight of the most will be much uh less critical than today. Who suffers most and will continue to suffer? Uh Kata because Qatar is exporting liqufied natural gas. There is no pipeline option for energy. So they are totally dependent on exporting energy via the strait of Hummus and continue uh to be dependent on that. Erh for the Mediterranean, we see other options of reviving pipelines like the T line uh from Saudi to Lebanon via Syria, Jordan and Syria.

23:57 Other pipelines from Iraq to the Mediterranean via Syria, Syria and so on so forth. So via energy I think in the years time are going to be good Caros will discuss already the various options for alternatives. So unfortunately once those two choke points are so critical in in in a few years time we'll find alternatives to important strips.

24:31 Thank you so much Amit. That was very informative. You covered a a lot of ground there. We have a number of questions, but I'm going to take the moderator's liberty of asking the first to you. Um the the the proposed Saudi Turkish railway that you discussed that's going to link the Persian Gulf to Europe through Jordan, Syria, and Turkey. Um the the Israelis seem to be very concerned about that. Um it's a challenge to their role in regional trade as well as uh that it it builds a a rival to the IMAC. But um I think they're also concerned that the cooperation is built on military ties that are aimed at undermining Israel.

25:07 And in fact, Israeli Transportation Minister Muri Reed warned Netanyahu back in June of the rapid formation of these regional partnerships in trade and energy that deliberately bypass Israel, posing a strategic threat to Israel's national security. Um also urging the US to to intervene on these types of initiatives. Um there's also the concern that Turkey is seeking to replace Iran in the region while attempting to revive the Ottoman Empire. So um you know that Saudi Turkish Turkey rail project seems to be a big concern to Israel also perhaps maybe undermining the ability to expand the Abraham Accords in in Israel's view. So can you share your thoughts on these concerns?

25:47 So I think that Israel should take a positive approach. We cannot oppose those initiatives. Indeed, Turkey is emerging as a rival to Israel as an enemy to Israel and we have to deal with that in the future. But uh those initiatives which combine Saudi and the other Gulf Aides and other nations in the region uh I think we should um not oppose them but bottom up build the alternative of the IMAC. We should not wait to until basically major decisions of the nations of Saudis or so on so forth. We should act on the ground to enhance the capacity of to start with a tracking routes. We are crossing the Jordan crossing via Jordan to enable

26:53 instead of 200 tracks a day, 2,000 trucks a day in several years time. So if we are able indeed to do that and this is much depends on Israel and on Jordan and we should cooperate with them. I think it's their initiative and basically their motivation as well to develop that route because nobody is going to wait for us. There are those initiatives are going to take place. So we should act on the ground start with tracking and then shift to trains.

27:29 We cannot stop or force Americans to object to those initiatives. And uh if we are going to also to to increase the capacity of the trucks passing the crossing the the Jordan River crossing is a major task both for Israel and Jordan. There are security issues, logistic issues and so on so forth. We can do that and uh I I think that we are able to demonstrate first to ourselves with the Jordanians that this option is viable, is secure and will continue from there with other alternatives.

28:10 Thank you Ahmed. Um someone asked will the straight of Hermoose ever become international waters again? Um I know you're optimistic that 10 years hence we won't need the straight but but what are your views on whether it will ever you know go back to the way it was pre the war? No, we will lead the straight. No doubt that we lead, but the relative importance will decrease in time, I believe. And uh that's a major task for the US administration this day because are claiming that they will want to handle the passage there. They want to charge levies and taxes and so on so forth. And I think that the international community should object that because it is opposing all international laws. Uh think that if if they want and achieve such taxation of ships and tankans. So the many many straits the Malaka strait the Babel

29:16 Mandep trade the Gala strait other strait the Danelli strait and so on so forth they would like to do the same. So it's a very very important mission for the Americans to the international community to make sure that's going to be a free passage via those trade and the Iranians are not going to give up easily as we understand but this is a very very important mission for the international community. Um thank you. I'm going to throw out one more question. We've we've sort of run out of time, but somebody asked um said that pointed out that there's an oil pipeline that extends from Elat to one of Israel's Mediterranean ports. Isn't this an option for Saudi oil? The Elat Ashkanon pipeline exist. It was constructed back in the late 1960s when the Swiss canal was closed following the six day war 50% together the Israeli government and the Iranian government to ship Iran oil. uh via Israel. This is a an option. Uh

30:20 there is a major environmental objection in Israel to revive and allow major transportation of ships and caros via from the basically Red Sea to the Mediterranean via this this route. So, Israel can get some uh some basically uh um transportation fee or something like that. It's not a major economic benefit to Israel, but this is an existing option. But we need to remember that more than 90% of the uh oil from the Gulf is directed to the Far East and not to Europe and to compete with the Suez Canal and the Sumate Pipeline which connects the Red Sea with the Mediterranean.

31:09 um it is possible but as mentioned I'm not sure that environmentally it is of the benefit of Israel. Thank you so much Ahmed you provided a lot of information and I'm sorry we didn't get to all the questions but we'll we'll certainly continue this conversation in the future. We'll have you back as things develop. So thank you for joining. Thank you everybody in the audience. I wish you all a wonderful afternoon. Um, please also join us Wednesday at 1 uh 3 p.m. for Israel Insider with Ashley Perry. Have a good afternoon. Thank you.

31:41 Thank you very much.