The Trump-Xi summit runs through Fujairah

The recent summit between Chinese President Xi Jinping and US President Donald Trump in Washington is primarily focused on economic issues such as tariffs, Taiwan, artificial intelligence, and rare earths. The meeting is being framed as a contest between the world's two largest economies, each having a significant influence over the other.

While America controls advanced chips, China controls the refining of minerals that those chips, along with other products, depend on. However, there is an additional chokepoint in this scenario, and it lies in the Gulf. For the first time in a generation, the country holding control over this crucial asset is the UAE. The Strait of Hormuz has been largely closed since late February due to an American blockade, which has halted Iran's oil exports from the Gulf.

Saudi Arabia was forced to shut down the East-West pipeline that carried crude across the kingdom to the Red Sea, disrupting Arab buyers. The only remaining route is the line from Habshan to Fujairah on the Gulf of Oman, outside the strait. The UAE had announced plans in May to fast-track a second pipeline to double export capacity through Fujairah, with completion expected by 2027.

This development is significant because China's energy dilemma necessitates alternative solutions to its dependence on the strait. China is looking to reduce its reliance on a single stretch of water and is interested in purchasing more American oil to achieve this goal. The UAE is uniquely positioned to meet this demand, as it has left Opec, can sell volume on its own terms, and has built relationships with both China and the US.

The UAE offers a bypass route when Saudi Arabia's route is closed, and it holds significant relationships with both China and the US. This situation presents an opportunity and a test for all parties involved. The opportunity lies in diversifying away from the strait, benefiting every barrel that reaches Asia without crossing Hormuz.

The test is subtler and pertains to technology, particularly the export controls on advanced chips. While the Gulf countries have ambitions in artificial intelligence and rely on American chips, Beijing's request for relaxed export controls on these chips is a crucial factor to consider during the summit.