Iran’s repeated threats to close the Strait of Hormuz and the dramatic decline in ship traffic through Bab el-Mandeb because of attacks by Iran-backed Houthi rebels have prompted regional countries to accelerate the development of alternative trade corridors. In recent weeks, Saudi Arabia launched a tender for a railway linking the Persian Gulf to the upper Red Sea, and Kuwait signed a contract to build a railway connecting it via land to Oman. Turkey’s energy minister announced a preliminary agreement with Iraq to construct an oil pipeline capable of transporting 1.5 million barrels per day from the Basra region to the Turkish port of Ceyhan. The agreement also covers gas and electricity trade.
Turkey’s energy minister announced a preliminary agreement with Iraq to construct an oil pipeline capable of transporting 1.5 million barrels per day.
Turkish Energy Minister Alparslan Bayraktar told S&P Global Commodity Insights on April 14 that they expect to “enter into an energy framework agreement with Iraq in the upcoming months.” A month earlier, Iraq’s Ministry of Transport announced that Iraq will complete the first phase of the Grand Faw Port in the Persian Gulf by the end of 2025, a key component of a $17 billion project to link the Gulf to the Turkish border, and eventually to Turkey’s Mersin Port. Meanwhile, negotiations are ongoing to revive an inactive pipeline connecting Iraq’s Kurdistan Region to Ceyhan.
Turkey resumed electricity exports to Iraq last September, and Baghdad has announced that Turkish electricity imports would double to 600 megawatts in 2025. Just a week before Bayraktar’s visit to Iraq last month, the U.S. revoked Baghdad’s waiver to import electricity from Iran. As a result, Turkey is set to supply Iraq with twice as much electricity as Iran. These moves leave Iran out of regional trade corridors and are likely to reduce its influence.
In recent years, Turkey has solidified its position as a regional gas hub through the launch of the TANAP and TurkStream pipelines, which carry Azerbaijani and Russian gas to Europe. Recently, it also began receiving Turkmen gas via a swap deal through Iran for delivery to European markets. Since 2017, the Baku-Tbilisi-Kars railway also has significantly boosted Turkey’s role in east-west goods transit. At the end of 2024, Georgia completed modernization work on its section of the railway, increasing its annual capacity from 1 million tons to 5 million tons.
Kuwait is set to become the northern terminus of the Gulf Railway, which will extend 2,177 kilometers to Muscat, Oman, passing through Saudi Arabia and other Gulf nations.
Meanwhile, on April 7, Kuwait’s Minister of Public Works Noura Al-Mashaan signed a contract with the Turkish company Proyapi to design a railway linking Kuwait to Oman via other Gulf Arab states. Kuwait is set to become the northern terminus of the Gulf Railway, which will extend 2,177 kilometers to Muscat, Oman, passing through Saudi Arabia and other Gulf nations. The project, expected to be completed by 2030, not only has short-term potential to connect with Iraq-Turkey corridor projects but also aligns with Saudi Arabia’s plan to complete a rail link between the Persian Gulf and the Red Sea—effectively part of a vast regional railway corridor for the Gulf Arab countries.
Iran’s Isolation
For those familiar with Iran’s 80% reliance on non-oil trade via the Persian Gulf and its complete dependency on oil exports via the Strait of Hormuz, the actual closure of the strait has always seemed improbable. Yet, few anticipated that the Islamic Republic’s repeated threats would profoundly alter the region’s transit infrastructure.
Even Iran itself has tried in recent years to bypass the Strait of Hormuz, developing the Jask oil terminal for crude exports and the Chabahar port for non-oil trade. However, the Jask terminal, which it used for the first time last October, handled only 170,000 barrels per day for just a few weeks. The Chabahar port on the Arabian Sea likewise has failed to capture even 2% of Iran’s foreign trade volume.
Saudi Arabia, through two pipelines, and the United Arab Emirates, via the Habshan–Fujairah pipeline, can route half of their oil exports to global markets without using the Strait of Hormuz.
Iran’s foreign transit volume is limited to 22 million tons of goods, mostly exchanged with a few landlocked neighboring countries.
Iran has been excluded from all major regional transit corridors. Despite close ties with China, it has been sidelined from Beijing’s Belt and Road Initiative. Moreover, despite a transit agreement signed over two decades ago, neither Russia nor India has made any meaningful moves to use Iran as a corridor. China has prioritized routes through Iran’s northern neighbors to develop an east-west land corridor. Freight transit along the China-Central Asia-Caucasus-Turkey-Europe route has increased fivefold over the past few years.
Iran’s foreign transit volume is limited to 22 million tons of goods, mostly exchanged with a few landlocked neighboring countries. In contrast, Azerbaijan alone transited 33 million tons of foreign goods last year.
If the shorter Zangezur Corridor route, passing through Armenia, is launched, the Caucasus region will witness a further boom in foreign goods transit. For now, Iran has focused its efforts on opposing the opening of this corridor, while merely observing the rapid development of transit routes by the Gulf Arab states and Pakistan—projects that are poised to reshape the regional and even transregional trade corridor landscape.
