16/04/2026

BIZ & FINANCE THURSDAY | APR 16, 2026

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M IDDLE EASTERN oil exporters need a plan B. Iran’s effective blockade of the Strait of Hormuz means Saudi Arabia, Qatar, the United Arab Emirates and others might end up having to pay tolls to get their exports out to buyers around the world. Unless Tehran sets these charges at a lowball level, there’s a major financial incentive for Gulf states to start build ing alternative pipeline routes in earnest. There is little recent historical precedent for a nation to tax passage through a natural waterway. Under the 1936 Montreux Convention, Turkey doesn’t charge for entry to the Black Sea, while Danish tolls for shipping to pass through the Oresund strait were abolished in 1857 amid international pressure. Egyptian fees for Suez Canal transit, like those levied by the Panama Canal, are different: both are artificial passages that need cash for their upkeep. Thus far, Iran has merely said that safe passage through Hormuz hinges on coordination with its authorities, stopping short of setting a public and specific toll. Still, there is plenty of scope to charge one. Gulf oil producers stand to lose hundreds of billions of dollars per year if the strait stays shut, which suggests that Tehran has the long-term negotiating power to influence the terms of any re-opening. Putting a number on the toll takings is tough. In the past month, at least one of the handful of ships that has transited the strait has paid US$2 million — the same figure the New York Times said Tehran would look to levy, citing two senior Iranian officials. Trade publication Lloyd’s List says that before the war, up to 50 tankers carrying crude, other oil products and liquefied natural gas typically passed through each day, or 18,250 a year. On that basis, Tehran could theoretically pocket US$37 billion annually if traffic normalises. Other approaches yield much smaller figures, though. Another toll idea floating around is a US$1 per barrel charge. Around 20 million daily barrels flowed through Hormuz before the war, of which perhaps half could conceivably find another route based on existing infrastructure. Assume the US$1 fee applied to 10 million barrels per day, then, and the annual total would be US$3.7 billion per year for Tehran. That looks like the low end of reasonable estimates. Even this relatively small yearly toll would stack up. Apply a 5% discount rate, which is roughly Saudi Arabia’s 10-year borrowing cost, to 25 years of payments at US$3.7 billion annually. The total sum is US$54 billion in today’s money. The question is whether that conservative number is high enough to incentivise Iran’s Gulf adversaries to construct a workaround to dodge the tolls, in the form of oil pipelines that skirt the strait. One headache is working out where they should go. Merely replicating Saudi’s 1,200km, 7-million barrel-a-day pipeline to the port of Yanbu on the Red Sea would create new problems. Gulf states would still have to get their product past the Bab el-Mandeb Strait

Hormuz pipeline workaround looks worth the cost

Energy producers consider new export routes amid disruptions to a major global shipping lane. – PEXELSPIX

new oil loading terminals at Duqm and Salalah, and US$10 billion to fortify critical sections with C-RAM and Patriot anti-missile systems. The overall price tag comes to US$55 billion, which is roughly the same as the US$54 billion low-end estimate for the present value of 25 years of possible Hormuz toll payments. In other words, the pipeline projects could potentially pay for themselves over a generation by allowing the Gulf states to avoid Tehran’s strait fees. That’s surely worth doing, since the real tolls could be higher, and ending dependence on an adversary has incalculable value. Even for hugely wealthy states like Saudi and the UAE, these numbers represent an expensive undertaking — and an extremely unwelcome one, given all they would do is provide new infrastructure for the same fossil fuels they intend to increasingly pivot away from. Even if they take the plunge, they will still have to pay tolls before the pipelines become operational. Still, it seems logical for Saudi and its neighbours to get building. Over 80% of the burden of paying the tolls would likely fall on

near Yemen. The nearby territory is controlled by Iran-aligned Houthi rebels, raising the risk of further drone attacks on new and old pipelines. Gabriel Collins, of Rice University’s Baker Institute for Public Policy, has had a stab at a holistic workaround. He envisages twin pipelines with 56-inch diameters, each carrying 5 million barrels of daily supply, stretching 1,800km from southern Iraq through Kuwait and then along the coast to pick up oil from Saudi and the UAE. Terminating in two Omani ports, Duqm and Salalah, it would avoid both the Red Sea and Gulf chokepoints, meaning crude could flow freely east into the Indian Ocean to Gulf states’ main Asian customers. But it would take up to seven years to build — and cost a lot. Gulf states might have to fork out US$18 billion alone on the construction cost of the pipelines and pumping stations to move the oil along them, Collins reckons. Add a further US$12 billion in project development expenses and US$7 billion headroom in the plausible event of the project taking longer, or hitting snags. He also assumes nearly US$8 billion for “The risk of that is that there are fewer available low-end devices, which in Africa in particular is going to hurt. It is a serious issue.” The rush to build AI data centres has sent orders soaring for advanced high-bandwidth memory microchips, which help the systems process vast amounts of data. As chipmakers prioritise the lucrative AI industry, they are producing fewer less flashy chips that are used in everyday consumer electronics like phones and laptops, pushing up device prices. Chey Tae-won, chair of the South Korean business group that includes chip giant SK hynix, told reporters at a tech conference in San Jose in March that the shortage will likely persist through 2030.

Gulf states, according to Bruegel research. They could split the cost of new pipelines in step with their intended usage. Of course, there’s another way to conceive of these numbers. Arguably they give Iran a maximum target for how much it could hope to raise. It should rationally set the tolls at a level that would be as high as possible without incentivising Gulf rivals to build the new pipelines. And plenty could change in the next seven years. US President Donald Trump is now implementing a blockade of Iran-approved ships that are making it through Hormuz, and an intensified war that ultimately unblocks Hormuz is still possible. Yet Iran has proved that it has the ability to wage asymmetric warfare around Hormuz, and the regime seems hard to budge. Even if Saudi and its neighbours pay US$55 billion for pipelines that remain as a backup, they might still view that as a sound investment to create some geopolitical breathing room. GeorgeHay is Breakingviews’ EMEA editor, based in London. network and compete with Elon Musk’s Starlink. Despite the exciting developments, most people will only “use satellite once in a while”, Badrinath said. “Most of the time, you’re still going to be at home under WiFi or outside on your mobile network. And satellite doesn’t work indoors that well.” It’s also important that satellite companies offering cross-border services follow existing frameworks for the mainstream mobile internet, Badrinath stressed. “It’s important that policymakers define policies that ensure that rules on privacy, on legal intercept, all those compliance rules are also adhered to by satellite operators. And that’s something that we’re working on with them.” – AFP

AI-driven chip shortage slowing efforts to get world online TOKYO: A memory chip crunch fuelled by the artificial intelligence (AI) boom is hindering efforts to bring more people online worldwide, the head of the GSMA telecoms industry association told AFP. low-end devices”, he said in an interview ahead of a GSMA event in Tokyo on Wednesday. If everyone were able to access the internet through their mobile, global GDP could grow by as much as US$3.5 trillion (RM14 trillion) by the end of this decade as digital tools and information make businesses more profitable, according to the GSMA.

An estimated 2.2 billion people – around a quarter of the global population – were not connected to the internet at all in 2025, according to the United Nations. Yet only 4% of people live in mobile internet connectivity blackspots, according to the GSMA, whose members include more than 1,000 mobile operators and related businesses. That means higher smartphone prices caused by the global shortage of memory chips are a “real hit” to efforts to close the gap, director-general Vivek Badrinath said. “It is a very tight situation” and “many manufacturers have reduced their efforts on

The organisation is “engaging with every player in the industry” to address the issue – including by lobbying policymakers to cut taxes or provide financing, and by encouraging smartphone recycling, Badrinath said. Meanwhile, the rapid expansion of low orbit satellite communications networks promises to eventually offer connectivity to people practically anywhere on the planet. Amazon said Tuesday it had signed a deal to buy the US telecoms satellite group Globalstar, to expand its own space-based internet