Fujairah rises as Iran war fears grow

14 July 2008
The bulldozers are busy in Fujairah port as the world worries about the security of the sea route to the source of Gulf oil.

New cargo berths are being created, but the project is overshadowed by plans to create an export terminal outside the Strait of Hormuz for 1.5 million b/d of crude.

Work has started on a 360-kilometre pipeline that will link Abu Dhabi's Habshan oil field with Fujairah. It is due to be finished in 2010. Its port has six completed oil tanker berths and capacity will be doubled in a new project that is now under way.

In February, Vopak Horizon Fujairah, a joint venture independent oil storage company part-owned by the Fujairah government, opened a new expansion of its crude oil and refined products storage terminal. Plans call for an 80 per cent capacity increase to 2.7 million cubic metres and for up to six more offshore tanker berths to be created.

Seaway dependence

The anchorages off the coast of Fujairah are among the world's busiest. On 13 July, a dozen tankers were visible from the port's control tower. Within a decade, Fujairah will be one of the most important petroleum storage and trading centres. If GCC states agree on a crude oil pipeline grid, Fujairah could be one of its main beneficiaries.

The urgency in developing an oil terminal outside the Strait of Hormuz is driven by the long-term need for more outlets for Gulf crude.

Most Iraqi oil exports are taken by tanker through the Gulf. The only other country in the region free from total dependence on the seaway is Saudi Arabia, which pumps about 2.5 b/d through its east-west pipeline.

More than 12 million b/d of oil now pass through the Strait. This figure will probably rise by 50 per cent in the next 10 years.


The apparent vulnerability of the world's most important world oil supply route is at the heart of the speculation that has sent oil prices close to $150 a barrel.

On 9 July, Iran staged tests of long-range missiles to demonstrate it was ready to retaliate. The headline writers seized on the affair, but the reality is more prosaic. America, despite the rhetoric of some of its leaders, is in no mood to open a new war front and almost certainly does not have the resources to do so.

Reports that Israel is preparing to strike Iran's nuclear facilities have also failed to convince sober analysts of regional affairs. The targets are too dispersed and Israeli bombers cannot reach Iran without crossing airspace controlled by the US.

Whatever the nationality of the pilots, any bomber attack on Iran would implicate America. It would provoke a lethal response in Afghanistan and, crucially, in Iraq - just when the administration is convincing sceptics it is winning there at last.


That is why the US military and the Defense Department are the most sceptical about war talk.

The insider's view from Washington is that war is possible, but unlikely. President Bush, in all probability, will hand over responsibility for the Iranian conundrum to his successor.

There is, nonetheless, concern among America's closest allies that those behind the 2003 Iraq war still might have the power to repeat their previous mistake. They are doing everything they can to demonstrate that sanctions are a better option. Some in the US administration are starting to say openly they are working.

The hawks say that that is baloney, and want military action now. But practically no one is listening to them anymore.

Most intelligent students of the facts have long since concluded that there is no stomach for another fight, and Washington knows it. The Iranians probably know it better than anyone else.

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