US pitches USD 10 bn Gulf reconstruction fund as Qatar pushes back on the “worthless Hormuz” thesis

Washington is offering to help rebuild what its war broke: The US is pitching to seed a USD 5 bn reconstruction fund to rebuild the region’s energy infrastructure damaged during the Iran war, run through the US Development Finance Corporation (DFC), Bloomberg reports, citing a DFC document it has seen. Eight partners from the region are being asked to match: The US wants Saudi Arabia, the UAE, Qatar, Bahrain, Kuwait, Oman, Iraq, and Jordan to double the vehicle to USD 10 bn under the working name Partnership for Allied Construction and Trust, the Wall Street Journal reports.

The plan targets four things: Routes around the Strait of Hormuz, restoring energy exports, hardening sites against future strikes, and rebuilding domestic infrastructure. Nothing is signed, and terms could still shift.

But not everyone’s convinced: Geopolitical analysts are flagging some problems with the pitch. Chatham House fellow and Managing Director of geopolitical consulting firm Trends US Bilal Saab told the journal the approach is “risk-laden,” while Umer Karim of the University of Birmingham warned it could “leave smaller Gulf producers more, not less, dependent on the US.” And Qatar has been more pessimistic on the Hormuz bypass push, with Energy Minister and QatarEnergy CEO Saad Al Kaabi saying earlier this week that Hormuz “will never be obsolete,” as he pushed back directly on US Treasury Secretary Scott Bessent’s claim that the waterway will be “worthless in two years.” Doha, notably, isn’t planning any bypass pipelines in the strait that carried about a fifth of global LNG trade in 2024, almost all of it Qatari and Emirati. You can’t exactly reroute everything around Hormuz: The crisis around the strait could delay some of QatarEnergy's expansion projects because critical equipment is struggling to reach Qatar, Reuters quotes Al Kaabi as saying. The warning reaches into a North Field expansion aiming to nearly double Qatar's roughly 77 mtpa capacity to 142 mtpa — North Field East’s first train is due online in the first half of 2027, with the rest of its trains slated for later that year, while North Field South isn’t scheduled to begin production until 2028. In perspective: Some machinery and equipment required for setting up LNG plants are too heavy and tall to be routed in cargo planes, and hauling them by land over long distances is a logistical nightmare.

That’s why Qatar’s redundancy plan isn’t more pipelines. It is US LNG: The company is already in talks with US suppliers including Venture Global, Cheniere, and Woodside Energy for around 2-3 mn tons of LNG annually through 2031 to help cover customer commitments, while rare Hormuz crossings and ship-to-ship transfers outside the strait have kept some Qatari volumes moving.

On production: Al Kaabi said QatarEnergy is currently producing only a “very minute” volume of LNG. Two of Ras Laffan’s 14 LNG trains have also been offline since Iranian strikes earlier this year, removing around 12.8 mtpa of capacity for an expected three-to-five years, while constrained Hormuz crossings have made moving the remaining output harder.

Meanwhile, Saudi and UAE are shopping for consultants for their planned pipeline workarounds, and Indian state-run Engineers India (EIL) is a top candidate. The Indian company is reportedly in early-stage talks with Saudi and the UAE for consultancy and engineering mandates as the two countries look to cut their reliance on the Strait of Hormuz. The Gulf producers are planning about USD 1 bn in pipelines, storage facilities, and export terminals to build out alternative routes for crude and petroleum products — and EIL wants a piece of the design and feasibility work that comes with it, The Hindu reports.

For now, existing workarounds are on the mend: Saudi Arabia aims to restore about half the East-West pipeline’s capacity within days following recent drone strikes, with full repairs possibly taking five to six weeks. And Iraq began trucking crude oil from its southern oilfields to keep its Turkey-bound northern export routes supplied, after wrapping a two-day pilot that moved c. 38k barrels aboard 209 tanker trucks. Limited truck availability and constrained loading infrastructure at southern oilfields mean a significant expansion would be needed to materially increase northern exports, BOC sources told the newswire.