Battered Iran seeks new oil export route

June 7, 2012 at 1:53 PM
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TEHRAN, June 7 (UPI) -- Iran, struggling against ever-tightening international sanctions over its nuclear program, is reportedly planning to build a new export terminal on the Arabian Sea at Jask, bypassing the strategic Strait of Hormuz, the only way in and out of the Persian Gulf.

The narrow, 112-mile waterway is a vital oil artery, particularly to Asia, that Tehran has threatened to close if the United States and European powers step up the sanctions. That's due to happen June 28, when new U.S. sanctions take effect, to be followed by an EU boycott of Iranian oil exports July 1.

The Mehr news agency reported says the new infrastructure will be built by the state-owned Iranian Oil Terminals Co.

Most of Iran's exports are funneled through the big terminal on Kharg Island in the northern gulf, then shipped southward in supertankers through the U-shaped strait.

IOTC Managing Director Pirouz Mousavi says the company plans to lay a 1 million barrel-a-day pipeline running the length of Iran from the Caspian Sea in the north, where substantial oil strikes were made recently, to Jask.

The Iranians have provided no details on when the terminal and the pipelines will be completed, or what the new terminal's capacity will be.

It's not clear whether another pipeline will be built to pump oil from Iran's main oil-producing zone in Khuzestan province several hundred miles north of Jask that normally go through Kharg.

What is clear is that it will probably take at least two years to build that kind of infrastructure from scratch and it's most likely that if the current confrontation between Iran and the U.S.-led powers in the Persian Gulf does erupt into conflict it will be within the next few months.

Two rounds of negotiations in Istanbul and Baghdad in April and May to find a diplomatic solution to the thorny nuclear issue failed to make any progress.

Hopes are dim that a last-chance meeting in Moscow scheduled for June 18-19 will fare any better because of the significant differences that remain between the two sides.

But the reports of belated Iranian plans to bypass the Strait of Hormuz suggest that Tehran believed it could bluff its adversaries into a settlement favoring Iran.

They further suggest Tehran realizes it should prepare for the worst and find ways to maintain its vital oil exports, the country's economic mainstay.

Arab producers along the western shore of the gulf already have pipelines in place that could ensure some of their exports will continue flowing overland to ports outside the gulf.

Saudi Arabia has pipelines that run west to the Red Sea from its gulf-side oil fields, and the United Arab Emirates has recently built a pipeline from its Abu Dhabi fields to Fujairah on the Gulf of Oman.

Other exports could be hooked up to pipelines in Iraq that run northward to Turkey's Mediterranean terminal at Ceyhan, or possibly to other networks to the Mediterranean via Syria and Lebanon, political violence permitting.

The Iranians appear to have been slow off the mark and have given no sign of seeking alternative export routes northward via Turkey or Russia.

Azerbaijan, Iran's northern neighbor, has an oil and gas pipeline running from Baku, its capital on the Caspian, to Turkey via Georgia.

But Tehran's relations with Azerbaijan, which has built close links to Israel, are badly strained amid Iranian suspicions Israel might use Azeri bases to launch pre-emptive air strikes against Iran's nuclear facilities.

Tehran's feeling the economic strain because of the sanctions imposed in mid-2010 and progressively tightened since then to force Iran to abandon its nuclear project, particularly its uranium enrichment program.

Its oil production fell 12 percent in the first three months of 2012 and is expected to slump even further in the coming months.

But there's no indication this has convinced the Iranians to be more flexible.

Iran is storing oil it's no longer able to export in supertankers, mostly anchored off Kharg Island, heavily bombed during the 1980-88 war with Iraq, and other gulf terminals because key customers like India and Japan have been scared off by the threat of punitive U.S. and EU economic measures.

"Iran's increasingly isolated -- diplomatically, financially and economically," says David Cohen, the U.S. Treasury's undersecretary for terrorism and financial intelligence.

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