The Riyalpolitik 5
The Riyalpolitik 5 highlights five recent geo-economic developments across the Middle East that we’re keeping an eye on.
1 Big Deal: Saudi Arabia Maxes Out Its Desert Pipeline
Saudi Aramco has ramped Saudi Arabia’s East-West Crude Oil Pipeline (the Petroline) to its full emergency capacity, redirecting crude from Gulf coast terminals to the Red Sea port of Yanbu. Simultaneously, the UAE is pushing its own bypass route: the Abu Dhabi Crude Oil Pipeline (ADCOP) connects onshore fields to the Fujairah export terminal (outside the Strait of Hormuz) and adds additional throughput capacity. In practice, however, the two pipelines together can deliver only an estimated 3.5–5.5 million barrels per day to non-Hormuz export points.
Why we care: Saudi’s Petroline was built in 1981 for precisely this scenario — a Gulf war that closes the Strait of Hormuz — and it is now doing that job for the first time at scale. But even using these alternative routes, there still remains a significant deficit (and risk: oil facilities in Fujairah, for example, were attacked by drones earlier this week) in the supply of oil coming from the region. The combined Saudi Petroline and UAE ADCOP bypass capacity reaches only 3.5–5.5 million barrels per day, according to the International Energy Agency — covering barely a quarter to a third of the roughly 20 million barrels per day that typically transit the Strait, leaving the remainder with no alternative route to market. The gap between available bypass capacity and total Hormuz flows reflects a structural reality that no single country could have been expected to fully hedge against: the sheer volume transiting the Strait has always exceeded what any overland infrastructure could realistically replace. For the past 2+ years, the Bab al-Mandeb Strait, between Yemen and the Horn of Africa, has been the region’s most consequential maritime chokepoint, with the Houthis attacking freight ships indiscriminately. Since the start of the Iran war three weeks ago, however, it has been relatively quiet. As the conflict broadens and continues to escalate across the region, this will be another key place to watch.
1 Major Policy Shift: Gulf SWFs Signal an Investment Rethink
Three of the four major Gulf economies (Saudi Arabia, the UAE, Kuwait, and Qatar) have quietly begun reviewing whether they can invoke force majeure clauses in existing contracts and scale back future investment commitments abroad. Force majeure refers to unforeseeable events beyond a party’s control, such as a war, that excuse them from fulfilling a contract. The Financial Times first reported the development on March 5, citing a Gulf official who confirmed the reviews were underway to offset war-driven budget strain without specifying which three economies were carrying out the review. Unsure how long this war will last and what the damage assessment will ultimately be, Gulf countries are contending with pressure on their budgets from declining energy revenues, disrupted shipping through the Strait of Hormuz, a spike in defense spending, and damage to tourism and aviation across the region. QatarEnergy had already declared force majeure on LNG shipments after Iranian drone strikes on Ras Laffan, the country’s main natural gas processing hub, a direct hit to roughly 20% of global LNG supply.
Why we care: The signal matters as much as the action. Saudi Arabia, the UAE, and Qatar collectively pledged hundreds of billions in U.S. investments following President Trump’s Gulf tour last May, commitments the White House treated as validation of its regional posture. An adviser to a Gulf government told the FT that the prospect of an investment pullback had already drawn attention inside the White House. Gulf leverage has often been assumed to run one way, but this week, the Gulf reminded Washington it runs both.
1 Source of Friction: Iran Sets Its Price for a Ceasefire
Last week, Iranian President Masoud Pezeshkian laid out Tehran’s terms for ending the war: recognition of Iran’s legitimate rights, payment of reparations from the U.S. and Israel, and firm international guarantees against future aggression. Iran has also told regional intermediaries it is particularly concerned that Israel will attack again after any current war ends, and is demanding a guarantee that neither the U.S. nor Israel will strike in the future. Iran’s foreign minister Abbas Araghchi rejected an unconditional ceasefire outright, saying, “We are ready to defend ourselves as long as it takes. And this is what we have done so far, and we continue to do that until President Trump comes to the point that this is an illegal war with no victory.”
Why we care: The gap between what Iran is asking for and what Washington is prepared to offer remains vast, while the economic clock continues to tick for everyone in the region and beyond. Tehran’s ceasefire demands, whatever their diplomatic merit, are structured (and possibly intended) to be impossible for any sitting U.S. president to accept publicly. Iran is keeping the door nominally open while maximizing economic pressure on the Gulf states hosting U.S. forces. The question is who blinks first, and whether Pezeshkian has any real leverage over the IRGC and the Supreme Council of National Security, in the wake of Israel’s strike on Ali Larijani. Both had pushed back against Pezeshkian’s apology to Gulf countries Iran has targeted, instead saying that Iran will not stop attacks until the US stops using these territories to attack Iran.
1 Under the Radar Development: The Gulf Is Building a “Petroline for Data”
Both maritime data chokepoints the Gulf depends on — the Red Sea and the Strait of Hormuz — are now effectively closed to commercial traffic. Seventeen submarine cables pass through the Red Sea, carrying the majority of data traffic between Africa, Asia, and Europe; additional cables run through Hormuz serving Iraq, Kuwait, Bahrain, and Qatar. If any are severed, the specialized repair ships cannot safely reach either passage. In response, Saudi Arabia, Qatar, and the UAE are financing six competing fiber-optic corridors through Syria, Iraq, and East Africa to give the region overland alternatives to the submarine cable routes now at risk. The most advanced is SilkLink, an $800 million project led by Saudi Arabia’s STC Group, laying roughly 4,500 kilometers of fiber through Syria to a Mediterranean landing station at Tartus.
Why we care: What the East-West Petroline is to oil, these corridors are intended to be for data: strategic redundancy built to survive a Gulf war. The Iran war has collapsed the timeline from “nice to have” to “build now.” The scramble has accelerated since Iranian strikes hit AWS data centers in the Gulf, threatening both choke points through which virtually all the region’s data traffic flows. This is also a geopolitical connectivity power play: Saudi Arabia is positioning Damascus as the spine of the region’s digital architecture, routing cables through Syria rather than Israel. The roads, cables, and trains are being designed to go through Syria. That’s a strategic bet on who could anchor the post-war regional order.
1 Fun Thing: Muscat Is Having A Moment
Oman has become a staging point for evacuation and repositioning flights, sitting just outside the most restricted Gulf airspace while still providing access to the southern bypass route via Saudi Arabia and Egypt. As airports in Dubai and Doha continue to be under fire and run very limited service, Muscat International Airport is quietly handling repatriation traffic that would normally flow through the region’s mega-hubs. Oman’s studied neutrality in the conflict — it mediated the February nuclear talks and has notably abstained from the fighting — has made it one of the Gulf’s safe havens, even as it absorbs hits from Iran to its ports and energy infrastructure
Why we care: Oman has long operated as the Gulf’s discreet back channel, the address you go to when no one else will take the meeting. That quiet positioning is now paying commercial dividends: Muscat is absorbing the overflow of airlines, executives, and evacuees that the UAE and Qatar can no longer easily accommodate. This is soft power expressed through geography. Oman didn’t ask to be the region’s emergency exit, but as one of the region’s longstanding neutral mediators, it built one anyway, and right now, everyone is using it.