The Trump administration’s proposal was reported by the Wall Street Journal, citing U.S. and Middle Eastern officials and documents:
Analysis: The proposal appears designed to address two goals: rebuild damaged Gulf energy infrastructure and develop alternative transportation routes that reduce dependence on the Strait of Hormuz. That could improve the region’s energy security and lessen the risk that a disruption at the strategic waterway threatens global oil and gas supplies.
For markets, however, this remains a proposal under discussion. Traders will want to see which countries participate, how the fund would be financed and how quickly any infrastructure projects could be completed. The announcement may be positive for longer-term energy security, but it does not immediately eliminate the geopolitical risk premium in oil.
How anxious would Gulf states be for the idea?
Gulf leaders probably believed Iran needed to be contained, but they did not want their economies and energy infrastructure turned into the battlefield. They can blame Iran for its aggression and simultaneously blame Washington for starting—or dramatically expanding—a war without an adequate plan to protect the region or secure a quick diplomatic settlement. That tension may also explain why Trump is now proposing a $5 billion rebuilding fund: the administration needs to repair both Gulf infrastructure and confidence in the U.S. partnership. However, the Gulf state leaders may also be wary about putting the US/Trump in charge (or be the intial underwriter). Trump always has an alternative motive. What will he want in return (even though he started the whole mess) for the US $5 billion?
This article was written by Greg Michalowski at investinglive.com.
Source: Investing Live - News
