The Gwadar Port Nexus of Great Power Rivalry: A Trialogue of Marine Economics, Geostrategy, and Economic Impact Assessment in the Strait of Hormuz

Abstract

Issam AW Mohamed

Pakistan’s Gwadar Port is increasingly at the center of heightened great power rivalry between the United States and China over the Strait of Hormuz, the world’s premier tanker chokepoint. Chokepoint nations experience various conflicts and challenges associated with keeping the oil supply lines flowing. Greater US-China rivalry will have further implications on the Gwadar Port industry. Accordingly, the goal of this research is to: (1) identify and analyze the cost structure of the Gwadar port; (2) provide an evaluation of the port using the best vessel operating model in marine economics; (3) conduct a trade-creation versus trade diversion analysis of the Gwadar port using the CGE model and its corresponding indirect multiplier impact; and (4) assess the regional economic impact of the Gwadar port on Pakistan’s GDP and regional job creation between 2024 and 2030. The findings of this research are as follows: (1) baseline values indicate that Gwadar offers a 14.5–17.2% cost advantage compared to Jebel Ali; (2) a full closure of the Strait of Hormuz would increase shipping costs to Gwadar by 189–240%; (3) the regional multiplier effect of the Gwadar port is 1.8–2.2 and could create 900,000 jobs between 2024 and 2030; and (4) the US Iranian confrontation is established to serve as an indirect tool to degrade the Gwadar port.Pursuing a cost-benefit analysis of alternate rail and maritime routes between the US and China, this paper argues that the US strategy to influence China is underlined with geostrategic considerations of building a "choke point leverage" and hence "entries" into the Persian gulf region. This strategy is incorporated in Gwadar port projects, together with the US-China agreement on trade-transport-late- kinematics, and the US interest in "busting" of the latter through competing activities at the Expanding Port of Duqm and the construction of the China Railway to Xinjiang. Three policy simulations are carried out to model the impact of a US blockade on the value of Gwadar port project, and test competitiveness of China Railway and Port of Duqm as "insurance" options. The simulations are based on empirical data from US-China trade flows, freight rates and port expandability, as well as historical data from the US-China trade war. The paper concludes that Gwadar is a critical asset in the US China rivalry, but its fate depends less on port infrastructure than on the stability of the Hormuz Strait and the evolution of Iran-US relations.

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