UAE's Strait of Hormuz Exit Plan. Is Zero Dependence Possible?

**Tim Elliott** (0:00)
This is the Morning Drive at Mira Business FM. Next up, the UAE moving to cut its dependency on the Strait of Hormuz to zero. Concerns over regional security and supply chain resilience very much in focus. What it means for trade, for energy exports, and the wider economy is the next topic of discussion. Therefore, with us, Dr. Lijo John is Assistant Professor in Logistics and Supply Chain Management at Edinburgh Business School, Heriot-Watt University in Dubai. Joining us loud and clear over the line. Good morning, Dr. Lijo. Thanks for coming on.

**Dr Lijo John** (0:36)
Thank you, Tim, for having me here.

**Tim Elliott** (0:38)
You're very welcome. Can I start with the scale of an ambition like this? How much is this a temporary reaction to conflict recently, or how much of this is a rewrite of the kind of economic DNA of the UAE?

**Dr Lijo John** (0:52)
Well, it's a little bit of both, actually, because when we look at the way it has been structured, it's not that we had the Hubsan Pipeline just commissioned recently. It has been there for quite some time.
When we look at it, it's about 1.8 million barrels had already been transferred through Hubsan Pipeline for quite some time. While during this particular incident that we just hopefully have behind us, the entire capacity was increased to 3.5 million to anywhere between 5 million depending upon which day. So the capacity was already there and such a scenario of not having to depend on Hormuz was already there in place. However, when we look at the larger context within the UAE's economy, this was not... So the complete dependency to avoid Hormuz was not always there. The importance of that has been made very clear in the recent few months that we have seen. And to put things like Javallili Port, which is one of the biggest ports in the world, which has about the fourth terminal that is coming up, we are looking at about 15 million, 25,000,000.
That's the capacity that we're looking at. However, the ports that we have on the Gulf of Oman, be it in Dibba or Khorfakan, the combined capacity would be about 5 million, which is just a fraction of what we have from Javallili Port. Moving away from Javallili Port entirely wouldn't be so easy, and that wouldn't be so possible in the near future. However, given the fact that UAE is very consistent in ensuring that we diversify our opportunities, this particular incident just made it absolutely important to move it in that direction. To answer your question, yes, it has been the recent event has initiated or rather ensure that we fast-track our operations, but we were already there in terms of some amount of capacity, at least in terms of oil. So it's a reaction and it's also an opportunity in that sense.

**Tim Elliott** (2:57)
Well, it is and it's a shift, isn't it, in export focus to the Gulf of Oman. So it's almost a re-engineering of the trade geography, if you like.
How difficult is it to shift, not just crude oil, but complex imports, non-oil commodities like those, as you say, are moving through Jebel Ali port. How hard is it to move it away from the Gulf?

**Dr Lijo John** (3:26)
So I'll try to just divide into two aspects of it. First of all, UAE as an importer and secondly, UAE as an exporter. And when we look at UAE as an exporter, of course, we have the oil-based economy, which is a significant part of it, but also we export aluminum, we export hydrocarbons, petrochemicals, inert gases. So all those things require a separate infrastructure to be put in place.
And that will require a little bit more of a tricky situation or rather more of an infrastructure building, which is going to happen in stages. So obviously a scale of this kind of shift will require a little bit more planning and probably by the end of this decade, we will probably be in that position to shift it slowly. Now when we look at UAE as an importer, that's again a different case altogether because let's take the example of food. About 80% of the entire food that UAE consumes comes from outside. And that depends upon the input into the food, especially the fertilizer, which goes outside out of UAE. So that will require another whole lot of a structure set up that we need to prepare for the food that needs to be coming in, the cold storage, the supply chain, et cetera.
So broadly, the first step that, as I already mentioned, is going to be the energy, especially the crude. Second would be the other aspects of the UAE export, which is going to be the fertilizers, especially the LNG, jet fuel, for that matter, and inert gases, hydrocarbons, so which act as the input to many of the industries outside UAE. And then we'll also have to build capacity in terms of UAE as an importer, where we import our food and all the other finished goods that we buy. So that has to be a long-term process, and it's not going to be something that we do immediately. But we are on the right track, and that's hopeful to look at it in that sense.