Despite regional challenges and China’s long-term strategy, the port of Duqm in Oman is fast becoming a crucial Middle Eastern shipping hub, set to reduce the significance of both the UAE’s Jebel Ali and Iran’s Strait of Hormuz.
Located on the Arabian Sea, 345 miles south of the capital Muscat in southern Oman, the town of Duqm is becoming a key industrial port altering the geostrategic map of the Middle East. Poised to become a global transhipment center in the region, this former quiet fishing village has experienced significant expansion in recent years, with a 120 percent growth in population from 2008 to 2010 alone.
The port is part of Duqm’s Special Economic Zone (SEZAD), which Oman established in 2011 to diversify its economy beyond oil and gas exports. To achieve this goal, SEZAD began specializing in other sectors such as manufacturing, logistics, tourism, fisheries, and mining. Today, Duqm is shaping up to become a smart-city.
The port comprises the largest dry dock in the region, with capacity for 200 ships per year and plans to become the home harbor for 400 large-scale fishing vessels. “Duqm is the largest economic project in the Middle East region and one of the largest in the world,” according to Salah Hamood al-Hasni, the SEZAD site’s general manager.
Oman is keen to leverage Duqm’s strategic location to drive its 2020 economic vision to create a stable economy while encouraging private investment.
An Emerging Competitor against the UAE
Inspired by Singapore, the world’s maritime capital, Oman is seeking to strengthen its regional presence among its neighbors, especially the United Arab Emirates (UAE). The UAE currently dominates the shipping field in the region through Dubai’s Jebel Ali, the largest and busiest seaport in the Middle East and the world’s largest man-made harbor. The port consists of two huge container terminals where vessels offload cargo before it is re-shipped throughout the Gulf, India, and Africa.
Similarly, Duqm is emerging as a transhipment and trade connecting point, providing access to the main sea lanes between the Red Sea and the Gulf. Through the Red Sea, Duqm will be a crossroad of three continents: Asia, Europe, and Africa.
Notwithstanding the competition, the UAE and its allies, including Saudi Arabia, the U.S., and Israel, might derive political benefits in Duqm that would serve their joint effort to isolate Iran. Muscat obtained $210 million in funding from Riyadh in 2o18 to develop Duqm’s infrastructure.
An Impact on Iran’s Regional Power
Oman enjoys good relations with Iran despite the fact that it is a member of the Saudi-UAE-led Gulf Cooperation Council (GCC). Iran’s Strait of Hormuz is strategically situated at the mouth of the Arabian Gulf—through which pass one-fifth of the world’s oil tankers. Still, the accessibility of Duqm’s port undermines Iran’s threats to block the Strait of Hormuz following the re-implementation of U.S. sanctions.
Located just outside of the Arabian Gulf, Duqm aims to become an alternative port to the volatile Strait of Hormuz, as it allows for unimpeded access to the Indian Ocean for gas, oil, and bulk products arriving overland from the Gulf. “Doing business in Duqm will prevent you from going through any of those instabilities,” al-Hasni said.
The U.S. reached an agreement with Oman to have access to the port of Duqm in March, 2019. It provides Washington with a key base in the Arabian Gulf, especially as its tensions and concerns about Tehran’s nuclear programs continue to rise.
Besides its wrangling with Iran, the U.S. is also attempting to expand its presence in Duqm to undermine China’s growing political influence in the region.
China’s Investments Could Trap Oman in Debt
Duqm plays a crucial role in Beijing’s Belt and Road Initiative (BRI), a multi-billion- dollar overseas investment program to link Asia with Africa and Europe. Chinese firms agreed to invest up to $10.7 billion in Duqm in 2016. But observers are raising concerns about Beijing’s approach to Oman. They fear that China’s ultimate goal is to control the port by trapping Oman in debt as it did in 2018 with Sri Lanka, which had to hand over a port to Chinese companies when it was unable to repay loans. Additionally, there are signs that China might also use the port for military purposes in the future.
Nevertheless, Duqm is merely one part of China’s regional strategy. “I don’t see China shifting all its regional trade activities to Duqm because the largest trading partner in the Gulf for China remains the UAE,” according to Muhammad Zulfikar Rakhmat, an analyst on China-Middle East relations.
Gulf Crisis Might Hinder Oman
Although Oman remains neutral in the Qatar diplomatic crisis, which began in 2017 after a Saudi-led coalition of Arab countries severed relations with Qatar, the crisis still negatively affects it. Before the blockade on Doha, the GCC members were planning to build a railway that would stretch from Kuwait, down the Gulf coast through the UAE to Oman, connecting Bahrain, Qatar, and Saudi Arabia.
However, the construction of the project that was due to start in 2021 has been put on hold due to the diplomatic rift. As the crisis continues, the deadline for the railway remains unknown, and the Gulf tensions are causing concern for Oman and the future of its projects.
The Duqm project is set to start its full-scale operations in 2020. If all goes well, it is likely to steal the limelight and fast become an international hub in an increasingly tense but wealthy region. The regional discord and global power struggle over the port town might yet generate unexpected and prosperous outcomes for Oman, enabling it to attract investments beyond the oil and gas industry. This could help the sultanate recover from the revenue deficit it is facing because of the billions of dollars it has borrowed since the decline of oil prices in 2014.