Will the Gulf crisis spill over to the ports sector?

Competition among ports in Gulf Cooperation Council (GCC) countries is expected to heat up as operators chase larger shares of the region’s growing logistics sector. Some estimates project that total GCC port throughput will grow to 35 twenty-foot equivalent unit (TEUs) by 2020, with more than $36 billion of investments committed for greenfield schemes and port expansions.
If that outlook coincides with the continuation of the Gulf crisis, it is logical to expect the negative repercussions to spill over to the ports sector. Indeed, without cooperation among GCC states to reduce risks, several Gulf ports may be subject to overcapacity and considerable pressure in the medium to long term.
Currently, there are around 37 seaports (major and minor) operating in GCC states: 21 in Saudi Arabia, nine in the UAE, three in Oman, and two each in Qatar and Bahrain. The total capacity of these ports combined amounts to more than 50 million TEUs annually. But more than a third of that capacity is limited to Jebel Ali Port in Dubai, and about 95 percent in only 10 ports, most notably Jeddah in Saudi Arabia, Khor Fakkan in the UAE and Salalah in Oman according to MEED.
Yet the dominant position of Jebel Ali Port may be challenged as competition between Gulf ports and beyond is expected to increase. Importantly, the political differences, if they persist, may also hamper economic integration in the ports sector.
Khalifa Port in Abu Dhabi has witnessed rapid expansion since its launch at the end of 2012. China’s Cosco Shipping Ports, one of the largest container terminal operators in the world, will complete the port’s second terminal next year, doubling its capacity to about 5 million TEUs annually, with the possibility of expanding it to 6 million by 2020. 
In this context, Chinese companies operating in Abu Dhabi are likely to move some of their business from Dubai to Khalifa Port and the free zone there, or transfer a significant part of their future activities there. As a result, this development may increase competition between the two ports or others in the UAE, and may negatively affect their profitability in the long term.
The Saudi government is counting on the development of King Abdullah Port as a key component of Vision 2030, given its strategic location on the Red Sea coast. Riyadh is seeking to raise the port’s capacity to 10 million TEUs per year by 2020, then double that figure to 20 million containers by 2025. This figure, if achieved, puts the port in a strong competitive position against Jebel Ali Port.
The Kingdom also plans to build a 1,600-km-long railway linking the Red Sea with the Arabian Gulf. This project, if completed, is expected to give Saudi Arabia several competitive advantages.
Qatar’s Hamad International Port was officially inaugurated on Sept. 5, 2017, and is expected to become one of the largest ports in the region within three years. Its current capacity (first phase) is 2 million TEUs, and will go up to 7.5 million TEUs on completion of all three phases through 2020.

Without cooperation among GCC states, several Gulf ports may be subject to overcapacity and considerable pressure in the medium to long term.

Dr. Naser Al-Tamimi

In Oman, an ambitious project in Duqm is looking to establish a major industrial center and a large port benefiting from the location of the area, overlooking the Arabian Sea and close to international shipping lines. The port is expected to be able to deal in the first phase with 3.5 million TEUs a year after completion.
Other major Gulf projects under construction include Mubarak Al-Kabeer Port in Kuwait and the $1.6-billion fourth terminal at Jebel Ali Port. In addition, ports in the UAE’s northern emirates and in Iraq are undergoing expansion. Apart from competition among GCC states, new challenges from ports in Pakistan, Iran and Djibouti, as well as Chinese projects along the new Silk Road, are increasing. 
Gwadar Port in southern Pakistan has a strategic position that gives China and Central Asian countries access to the Gulf and the Middle East. It is also a vital part of the China-Pakistan Economic Corridor, with the Chinese planning to invest up to $60 billion in infrastructure and energy projects announced by Beijing in 2014.
Iran is seeking to develop Chabahar Port in cooperation with India, and to make it one of the most important industrial centers in the region. Tehran is also looking to modernize several facilities and seaports from Bandar Abbas in the Gulf to the Caspian Sea.
If these developments take place amid the Gulf crisis, stalled GCC economic integration and the absence of intra-Gulf cooperation on ports benefit-sharing, they could lead to harmful competition. This would affect the long-term profitability GCC ports, and make some of them even less commercially attractive.
• Dr. Naser Al-Tamimi is a UK-based Middle East researcher, political analyst and commentator with interests in energy politics and Gulf-Asia relations. Al-Tamimi is author of the book “China-Saudi Arabia Relations, 1990-2012: Marriage of Convenience or Strategic Alliance?” He can be reached on e-mail: [email protected]. Twitter: @nasertamimi