US Seeks to Rebuild Gulf Energy Infrastructure With $5 Billion Fund

The Trump administration has proposed committing $5 billion to a new fund to rebuild Middle Eastern energy infrastructure damaged during the Iran war and reduce the region’s dependence on the Strait of Hormuz.

Washington is seeking matching contributions from eight regional partners, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Kuwait, Oman, Iraq and Jordan, with the aim of creating a $10 billion investment vehicle.

The proposed fund would be called the Partnership for Allied Trust and Construction, or Pact, according to The Wall Street Journal.

Washington Seeks Gulf Contributions

Discussions remain under way, and the structure could still change, according to U.S. officials. It is unclear whether all eight governments will participate.

The U.S. Development Finance Corporation would manage the fund under the proposal.

The federal agency works with the private sector to advance U.S. national-security objectives, although its programs have traditionally focused on developing economies rather than wealthy Gulf states.

The initiative comes after seven months of conflict damaged pipelines, refineries, oil fields and natural-gas export terminals across the region.

Energy analysts and officials estimate that rebuilding could cost tens of billions of dollars, covering engineering, construction, equipment and materials.

Hormuz Exposure at the Center

A central goal of the plan is to develop infrastructure that would allow Gulf producers to move more oil and gas without relying on the Strait of Hormuz.

Saudi Arabia and the UAE have greater scope to support alternative export routes, while smaller producers including Kuwait and Qatar remain heavily dependent on the waterway.

“This strategy has risk written all over it,” Bilal Saab, senior managing director of TRENDS US, told WSJ.

Some Middle Eastern officials have questioned the timing of the initiative, arguing that rebuilding energy sites before a peace agreement with Tehran could leave new infrastructure exposed to further missile and drone attacks.

They also view the proposal as an attempt by Washington to reduce Hormuz's strategic weight while projecting unity with regional partners in confronting Iran.

Supply Pressure Persists

The conflict has already disrupted efforts to bypass the strait.

Drone attacks earlier this month shut Saudi Arabia’s bypass pipeline, forcing more crude through Hormuz and placing additional pressure on a tanker fleet already stretched by longer voyages and shuttle movements.

Producers from the UAE to Iraq are also pursuing alternative export routes. Those workarounds have kept some barrels moving but have tied up ships and pushed freight costs higher.

Saudi Arabia has struggled to ease the bottlenecks sustainably, with its oil production falling to a multidecade low.

“There seems to be a realization within all Arab Gulf states and even in Iraq that the status of Strait of Hormuz in the short to medium term will not revert back to what it was before the conflict,” Umer Karim, a Gulf security researcher at the U.K.’s University of Birmingham, told WSJ.

"They need to work upon creating viable, secure and dependable routes and corridors that can bypass the strait."

Karim warned that new corridors could create fresh dependencies between regional states, complicating their implementation.