Iran: New Project Threatens Importance of The Strait of Hormuz

By: Meir Javedanfar

10/09/2008

The recent threats made by the Iranian military regarding the option of closing down the strait of Hormuz has made the oil producing Persian Gulf emirates nervous.

As well as working behind the scenes to facilitate a diplomatic solution, many of them have come up with a number of ideas, one of which is to build a pipeline to transfer oil and gas from the Persian Gulf side of the strait of Hormuz, to the Arabian sea side. This project will enable ships to load up oil and other goods, without having to pass through the strait. Although this will be beneficial to them, it will be at the expense of Iran,as it will cause a huge depreciation in the strategic value of the strait of Hormuz, and Iran’s control over it.

The other project which is currently being studied involves the building of a canal through the desert to enable ships to pass through. This would use the same concept as the Suez and Panama Canal. With a price tag of $200 billion, some are debating its cost effectiveness.

This comes on the heels of another blow to Iran’s position from the Persian Gulf countries. This time, from the economic perspective. According to the Financial Times “The head of an Iranian equities fund is abandoning attempts to set up operations in the Gulf, blaming the political tensions surrounding Tehran’s nuclear program. The decision comes after Dubai officials blocked the company from receiving a financial services license and Arab investors shunned investment opportunities”.

As these new developments show, despite the warm hand shakes and gestures of friendship, the Persian Gulf Emirates are viewing Iran’s regional and nuclear strategies as a threat, and thus want to reduce their exposure to them by lowering Iran’s strategic importance.

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