Economy

Desperate to sell oil, Iran inaugurates terminal to bypass Hormuz

By Al-Mashareq

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A picture taken on July 21, 2019, shows the IRGC patrolling around the seized British-flagged tanker Stena Impero as it is anchored off the Iranian port city of Bandar Abbas. [Hasan Shirvani/Mizan News Agency/AFP]

During his final fortnight in office, Iranian President Hassan Rouhani on July 22 inaugurated an oil terminal at Jask port on the Gulf of Oman that aims to bypass the Strait of Hormuz and establish an alternate route for oil exports.

At face value the project, which is reportedly incomplete, is a strategic move that would enable Iran, a major exporter of crude, to bypass the chokepoint where US and Iranian naval vessels have faced off multiple times in the past.

In the event of a positive outcome from the nuclear agreement negotiations, the terminal would enable Iran to ramp up oil sales, though there is ample evidence it has continued to export oil illegally, in violation of sanctions.

The stalled negotiations, slated to resume under president-elect Ebrahim Raisi, who will take office on August 3, are aimed at reviving the 2015 Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA).

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Iran inaugurated on July 22 a new oil terminal in Jask port, Hormozgan province, meant to bypass the Strait of Hormuz. [IRNA]

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The first phase of pipeline construction is shown in Jask port, Iran, last September. [Sahebnews.ir]

Iran's ultimate objective for the talks is to have the sanctions lifted.

US Secretary of State Antony Blinken said Thursday that although Washington is prepared for negotiations on the nuclear deal with Iran, talks cannot continue indefinitely.

The Rouhani administration boasts that the new terminal at Jask port would enable crude oil exports from Hormozgan province for the first time.

It also would allow tankers to avoid the Strait of Hormuz -- a passage less than 40km wide at its narrowest point.

In his July 22 speech, Rouhani said Iran has so far been able to export oil only through Kharg Island, noting that the new project allows the country's oil sector to be "free from the Persian Gulf and be independent from one sole port".

Celebrating unfinished business

The inauguration ceremony for the new terminal, which Rouhani joined via videoconference, was met with sharp criticism from Iranian commentators.

In multiple domestic media outlets, pundits aired the view that the lame duck president inaugurated an incomplete project for "show" in the last days of his second term, falsely describing it as "a great achievement".

The Iranian government has stated that the Jask project would secure oil exports from both the Persian Gulf and the Gulf of Oman.

But Iran has been the aggressor in the Strait of Hormuz, threatening to close the strategic waterway several times in recent years.

In May 2019, the Islamic Revolutionary Guard Corps (IRGC) launched attacks damaging four commercial ships in the strait, then repeated those attacks on two more vessels the next month.

In July of that year, the IRGC seized a British-flagged oil tanker and an Emirati tanker in two separate incidents.

A day after the inauguration of the Jask port terminal, Iran's Oil Ministry stated that the new, alternate pipeline will have a 1-million-barrel capacity -- more than triple the current export capacity. But this has not yet been reached, as the project is not complete.

The pipeline is estimated to be about 1,000km in length, originating in Bushehr province and passing through Bushehr, Fars and Hormozgan provinces.

Desperate to sell oil

The Islamic Republic is under immense economic pressure -- mostly of its own making -- and is desperate to sell oil, as it is able to export only very little because of sanctions.

The shortage of oil revenue has contributed to economic duress and severe stagflation, and is partly why the regime's long-term purpose appears to be gaining access beyond the Strait of Hormuz.

At first glance, it may seem that the Iranian government aims to bypass the Strait of Hormuz with the new pipeline, to use it as leverage to increase the price of its oil exports, Iran's Oil Ministry news agency (SHANA) said in an editorial.

More significant, it said, is the development of a "new civilisation east of the Hormuz strait and Makran beaches and the modification of Iran's geographical oil industry stretching from the country's southwest to its southeast".

While Iranians are grappling with extreme financial pressure, severe shortages of electricity and water, and sky-high inflation, the government has reportedly spent some $2 billion on the project thus far.

Meanwhile, its negligence and intransigence have cost the Iranian people dearly.

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