How Iran Plans To Bypass The World’s Main Oil Chokepoint

Iran

 

Iran Tries to Bypass the Hormuz Strait

Global markets have recently gone into overdrive in anticipation of the US-Iran standoff’s outcome. President Trump is building up pressure on Tehran, his latest move was to announce his chairing of a UN Security Council meeting on Iran (the US is holding the council presidency this month), most likely to lambast once more the Iranian regime, whilst the Iranian authorities are reverting to their traditional threat, the closing off of the Hormuz Strait. Yet behind the bellicose façade, under the international radar Iran has been proceeding gradually with the construction of oil export infrastructure that bypasses the potentially fatal chokepoint and gives the Ayatollah regime a viable alternative to Kharg and Lavan islands, which currently account for the overwhelming majority, more than 95 percent, of Iran’s oil exports.

What’s wrong with Kharg Island?

What happens if Iran decides to block the Hormuz Strait?

This is highly unlikely to take place – first of all, because all Iranian boasting about it controlling the Strait simply does not match with the facts. Countries on the other side of the strait, primarily UAE, will not sit idly by as Iran acts unilaterally, especially with a U.S. Air Base around. The main strategic reason why Iran will not go to such lengths is its relative military weakness – it has found some ways to circumvent the decade-long arms sales embargo, however, this pales in comparison to the possibilities of its potential adversaries. With Russian submarines built in the 1990s, Chinese-designed missile boats and midget submarines bought from North Korea, Iran’s military successes, in the event of an all-out war, would be very short-term. The Khamenei Regime will opt for the Hormuz blocking option only if the situation goes as far as to threaten its immediate physical security.

Where will the oil export gravity center shift?

Notwithstanding the cost and the feasibility of the port construction, from the viewpoint of its energy policy Iran’s export diversification drive is very timely, given the heated geopolitical atmosphere. By means of building Jask, it could substantially reduce military risks related to Kharg Island (all the more so that it already has a fully functional Navy base in Jask). On the other hand, it will inevitably run into project delays and cost overruns as the number of foreign parties interested is at bargain-basement levels. An eventual government shift in Iran – an anticipated move towards more radical candidates instead of the moderate Rouhani – would ramp up political support for the project, yet would fail to speed up the construction of Bandar-e-Jask. Absent destructive wars, a mid-2020s phase one commissioning seems like a reasonable bet, until then Iran will have to bear with Kharg Island.

Full article: How Iran Plans To Bypass The World’s Main Oil Chokepoint (OilPrice)

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