Lessons from US-Iran War - alternative energy

Last week we began discussing lessons from the US-Israeli war on Iran. The Pakistan-mediated peace effort has hit roadblocks. This week's Irani demands of lifting US maritime blockade, recognition of Irani sovereignty over Hormuz, sanctions relief, guarantees about permanent peace, simultaneous cessation of hostilities in Lebanon and war reparations to Iran have been rejected by Washington, which instead demands greater scrutiny of Iran's nuclear, missile programmes and its proxies. Pakistani interlocutors are painstaking trying to bridge gaps in belligerents' perspectives, and rubbishing CBS News allegations of hiding Irani warplanes.

The world is concerned about continued disruption of supplies from the Middle East through the Strait of Hormuz (SoH), carrying roughly 20% of the world oil, 25% LNG and up to 35% of global urea and fertiliser. Crude constitutes around 20-21 million barrels per day (mbpd), over 85% of which goes to the Asian markets (China, Japan, India and South Korea), meeting over 80% of these countries' needs. The global oil demand was projected to soar to around 104.8 mbpd in 2026.

Hormuz is about 167 km long, with a width varying between 34 and 97 km, bordering Iran, Oman and the UAE. At the narrowest point, Iran claims 22 km, leaving the rest 12 km to Oman. So technically, the shipping passes through Iran or Omani territorial waters and not the international waters.

There are five onshore pipelines that transport Saudi, Iraqi, Irani and Emirati crude; through Oman to the Arabian Sea, Saudi Arab to Red Sea, or Türkiye to Mediterranean Sea, with a maximum capacity of around 9-10 mbpd, as discussed in an earlier piece "Hormuz - alternatives and peace" published in this space on March 26, 2026. Qatar, Kuwait and Bahrain have no pipeline alternatives and are entirely dependent on Hormuz. Iran itself is dependent on SoH for its Kharq oil and gas fields and has built a Hormuz bypass, the 1,000-kilometre Goreh to Jask terminal on the Gulf of Oman, designed for 1 mbpd.

All LNG must ship through SoH. Qatar's 77 million tonnes of LNG capacity at Ras Laffan, the largest in the world, supplies about 19% of global LNG needs, and is entirely Hormuz dependent, with no pipeline alternative.

Possible alternatives to Iran's IRGC/Pasdaran-controlled SoH, irrespective of the outcome of the present standoff, include expansion of the present pipeline network; digging of a channel like the Suez Canal, and movement away from fossil fuels to greener energy.

Pipelines first. The UAE plans to build a new 1.5 mbpd pipeline (ADNOC 'Hormuz Bypass' Expansion-2027) connecting Jebel Dhanna to Gulf of Oman. This would essentially double the UAE's already existing bypass capacity through Habshan-Fujairah called ADCOP, from 1.8 mbpd to 3.6 mbpd. US-backed India-Middle East-Europe Economic Corridor (IMEC) plans to link the Arabian Peninsula to the Port of Haifa in Israel. This pipeline/rail project would provide GCC direct access to the Mediterranean. Iraq's proposed 1,600 km Basra–Aqaba Pipeline will transport Iraqi crude to Aqaba (Jordan) on Red Sea, diversifying Iraqi export routes. Iran itself wants to move 1 mbpd through Goreh-Jask Pipeline to Jask terminal on the Gulf of Oman. Oman 'plans' international pipelines to India, Saudi Arabia and Pakistan (Gwadar) to bypass Hormuz. However, more pipelines would be needed in an extensive underground network to offset the effects of Hormuz disruption, as present network is well short of transporting the needed 21 mbpd, which is increasing.

Second, renewables. The ongoing Hormuz disruption, the largest in history of global oil markets, accelerates quest for alternative energy, an emerging tool for energy security besides being a climate goal. Unlike oil and gas, solar and wind energy is not vulnerable to supply risks, inflationary shocks and supply vulnerabilities. Albania with highest renewable shares (99%) remains protected during the current crisis. Some countries (Philippines, South Korea and Vietnam) are doubling down for wind, solar and battery storage to replace expensive LNG imports. High gasoline prices are causing boom in Electric Vehicle (EV) sales and rooftop solar installations in Pakistan, where more people are mulling to go entirely off-grid. Some countries (Japan and Italy) are reverting to coal to ensure immediate power availability. The war has also deflated the pre-war notion of LNG as a reliable bridge to a green future. Strikes on major facilities like Qatar's Ras Laffan and Fujairah in the UAE have demonstrated fossil infrastructure as a high-risk target.

The EU is accelerating its 'REPowerEU' project replacing gas consumption with heat pumps and domestic wind/solar power. In addition to falling prices, inventions like water-powered domestic turbines, and solar systems when paired with battery systems for storage, renewables can provide steady electricity inexpensively, even when the sun doesn't shine or there is no wind.

China has emerged not only as the largest global oil storage destination with months of stocks, it also leads in renewables and EVs. That has cushioned it off from oil shocks, besides augmenting its global prestige, reach and clout, as the West grapples with high fuel costs and erratic supplies. So, because of Hormuz disruptions, even though the US aggressively promotes petroleum and natural gas, there is greater push for renewable energy, with China leading the pack. China exported record solar panels in March to countries like Nigeria, India and Australia.

However, there are pitfalls. Some crucial industries (aviation and cement) have no readymade alternative to fossil fuels. The shift to renewables is costly for most countries, yet consumers would switch to renewables when affordable, reducing dependence on imported petroleum. The trend is an irreversible given.

Third, digging a bypass channel like the Suez Canal through the Arab landmass, from Iraq-Saudi Arabia to Red Sea, or Iraq-Saudi Arabia-Oman to Arabian Sea, would be costly, time consuming and arduous, if not impossible. One thing is clear, GCC and Saudi Arabia, after this war is over, would look for alternative to Hormuz irrespective of the status of the waterway, as negotiated in the post-war settlement. They would, in their 'never again moment', not want to remain hostage to Irani brinkmanship ever; and the rest of the world 'may' aid and support such initiatives, with or without the UN auspices.