Fujairah offers a contingency plan to combat Iranian oil threat

11 February 2010

Tehran is driving the West to distraction with its nuclear plans. The Gulf, meanwhile, will complete a project in April that should help make Gulf oil supplies more secure

Like a slow-motion nightmare, the West is heading for confrontation with Iran over its nuclear plans, although it is more likely to take years than months to reach danger point. Hopes at the start of 2009 that a new administration in the US and a new president emerging from Iranian elections in June would establish a dialogue between the US and the Islamic republic have long gone.

President Obama is being driven to harden his rhetoric by fear of being accused of going soft on Iran and “terrorism”. In Iran, it is those who reject elections as a means of determining the direction of government policy who are making the running.

Sandwiched in between are Europe and other conciliators and apprehensive GCC states. Their worries are not so much about nuclear weapons, which are in the region already and controlled by Israel and Pakistan. What they fear is Iran’s capacity to cause mischief in other ways.

But talk of early military confrontation is misplaced. Obama is focusing on domestic issues. He is not yet sufficiently desperate to try and garner support at home by being tough abroad. Iran, meanwhile, is pressing ahead glacially with its nuclear programme, but making a lot of noise about how far it has developed.

The US strategy now is to deploy land and sea-based missiles in and around the Gulf while seeking support for a fourth UN Security Council Iran sanctions resolution. It will require China withdrawing its veto threat. This does not look likely soon.

But, the dysfunctional relationship between Iran, on the one hand, and the region and the world on the others seems certain to turn nasty eventually. No matter who is to blame for this sorry story, everyone has to be prepared for the worst.

This April will see the completion of one piece of GCC contingency plans. A 375-kilometre, 64-inch pipeline running from Habshan in Abu Dhabi to Fujairah on the Arabian Sea will evade the strategic bottleneck at the Strait of Hormuz. Once it is operating, further export capacity must surely occur.

Fujairah is already one of the world’s leading oil centres. Practically all offshore areas along its northern coast are dedicated to anchorage for large vessels. More than 11,000 vessels took advantage of this facility in 2009 and about 70 per cent of them were tankers. As part of the pipeline project, Abu Dhabi is building eight massive oil storage tanks, each with the capacity to hold 1 million barrels. These will complement the existing complex of crude oil storage tanks around Fujairah. A new oil terminal has been commissioned and work is beginning on an industrial zone.

But April will be a tipping point for Fujairah. Once Abu Dhabi’s oil starts flowing, it will become one of the world’s greatest oil centres, a name to be associated with Houston, Rotterdam and Singapore. Further investment in oil export capacity will make the emirate the world’s number one within a decade.

There is more to Fujairah than oil. It has invested in hotels and restaurants. The airport is expanding. There are light industries and warehousing. Two independent water and power plants (IWPPs) and plans for a refinery complete the energy portfolio. These projects, which have mainly been financed by Abu Dhabi, are drawing Fujairah closer to the heart of the UAE economic boom. The emirate is growing robustly.

Worries about the Gulf are bad news for some. But they are proving to be a boon to the people, businesses and government of Fujairah.

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