The US is discussing a $10 billion joint investment fund with Arab states to build pipelines and other infrastructure that would let the region route energy exports around the Strait of Hormuz. Washington would commit $5 billion, with regional states funding a matching amount, as Brent crude trades near $100 a barrel following the closure of the strait during the Iran war.
Washington and Gulf states split a $10bn fund
The US is discussing a $10bn joint investment fund with Arab states, according to a draft presentation seen by the Financial Times. Washington would commit $5bn to the initiative, called the Partnership for Allied Construction & Trust, while regional states would fund a similar amount through a new holding company.
The presentation described the Pact as a historic $50bn-plus investment platform that would drive investment in energy and infrastructure assets across allied Middle East countries. Sovereign wealth funds and private capital firms, including Blackstone, BlackRock's Global Infrastructure Partners and KKR, are listed in the presentation as potential co-investors alongside the sovereign wealth fund holding company. A person familiar with the matter said some of the named firms were blindsided by the mention. The US would chair the Pact board, and technical negotiations with Arab states are due to begin in October.
Strait closure has pushed Brent near $100
Iran slowed shipping through Hormuz to a trickle after the US and Israel launched their war against the country in February, turning the strait into Tehran's most important source of leverage against Washington. The disruption has pushed Brent crude to just under $100 a barrel, while US diesel prices have hit record highs.
The presentation frames the initiative as a hedge against that leverage. According to the Financial Times: "one chokepoint cannot halt regional energy flows", the document states, arguing that more routes leave adversaries less able to disrupt global energy systems.
Gulf pipelines are already being built, and already vulnerable
Saudi Arabia and the United Arab Emirates are already discussing or planning new pipelines to move crude to ports outside Hormuz. But that infrastructure is not immune to attack: Riyadh shut its East-West pipeline this month after a drone strike launched from Iraq hit the line. The US is currently escorting some oil tankers out of the strait, though the flow of other commodities, including liquefied natural gas and petrochemicals, through the waterway remains negligible.
Michael Wahid Hanna of the International Crisis Group said Arab states would only invest if the economics made sense, noting they would weigh the projects against a scenario where conflict has receded and oil prices have settled. The White House declined to comment, and Blackstone, GIP and KKR did not immediately respond to requests for comment.
Source: Financial Times
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