Saudi Arabia has reopened an old oil pipeline,
which allows Riyadh to export more of its crude from Red Sea
terminals should Iran block the Strait of Hormuz.
The step came just days before the EU sanctions
against Iran including an export and insurance ban come into force
since July 1. In response Iran threatened to block the Strait of
Hormuz, which accounts for more than a third of the world's
seaborne oil exports from Saudi Arabia, Iran, Kuwait, Iraq, the UAE
and Qatar to the rest of the world.
Saudi authorities began test pumping through the
1.65 million barrel-a-day pipeline, which hasn’t been used for
crude supplies since 1990, as the situation with Iranian nuclear
program began to worsen.
“Saudis want to protect themselves
from possible disruptions in case of military action,” said Sergey
Vahkrameev, analyst at Metropol Investment. “But this pipeline
would secure only 20 % of the daily exports from Saudi Arabia, also
the cost of exports with a pipeline are usually
If a war breaks out in the region,
Riyadh would have to ask the US to convoy tankers to secure exports
as it was in the 1980s during Iran-Iraqi war, he
The Iraqi Pipeline in Saudi Arabia (IPSA) was
built the 1980s to bypass Gulf shipping lanes after oil tankers
were attacked during the Iran-Iraq war. Saudi Arabia confiscated
the pipeline in 2001 as compensation for Iraqi debts and has used
it to transport gas to domestic power plants.
Saudi Arabia built two pipelines known as Petroline in the 1990s
when it became worried about possible supply disruptions in the
The United Arab Emirates has also constructed
its own Hormuz bypass pipeline, which is due to start exports from
the Gulf of Oman next month.