In response to escalating tensions and disruptions as the war continues now for 3 months in the Strait of Hormuz (a critical chokepoint carrying about 20% of global oil), Saudi Arabia and regional partners have activated and expanded a Red Sea logistics corridor. Central to this corridor is the East-West Crude Oil Pipeline, aka the Petroline, a 1200km pipeline which transports oil from the Gulf fields to the Red Sea Port of Yanbu, and then to global markets – a trade route also used at times by ARAMCO, the world’s largest crude oil exporter.
This initiative reroutes cargo and energy exports overland and via Red Sea gateways, reducing reliance on the vulnerable strait. It leverages capacity at Red Sea ports and complements pipelines like the Petroline discussed above, as well as the UAE’s Habshan-Fujairah pipeline, aka the Abu Dhabi Crude Oil Pipeline, a 360km pipeline in the United Arab Emirates that transports crude oil from the inland Habshan oil fields in Abu Dhabi directly to the port of Fujairah on the Gulf of Oman.
Egypt, which derives significant revenue from the Suez Canal – a 139km artificial waterway connect the Red Sea to the Mediterranean, has actively pursued diversification. The new Red Sea Corridor strengthens bilateral ties with Eritrea on the Red Sea Coast while promoting broader regional cooperation. Both nations emphasized that Red Sea security should remain the responsibility of countries bordering the Red Sea.
Economically, the corridor promises substantial benefits. It could boost trade volumes between North and East Africa and support landlocked countries. For Egypt it complements ambitions to expand port capacity and develop integrated logistics networks, such as "dry canal" concepts linking the Red Sea to the Mediterranean via high-speed rail. For Eritrea gains are enhanced connectivity, unlocking its strategic North - Eastern African coastline for greater economic participation.
However, challenges remain. Houthi attacks on Israeli carriers renewed from 8th of June, and with Iran still blocking the Strait, inflation and economic risks remain high due to the disrupted supply chain. Cape Of Good Hope re-routing adds about 10 -15 extra days compared to the Suez route resulting in increased working capital costs. Yet, surprising enough, despite both corridors being under Iran/Houthi's armed control, global fears of super-inflation and oil futures spiking through the roof (again) has thankfully not yet materialised. Either Hormuz is leaking oil or there is adequate storage outside the dangerous routes (for now) or passage is only for a privileged few despite blockages.