London, 10 Sep - As Donald Trump continues to increase pressure on Iran ahead of the incoming November sanctions on Iranian oil, most recently by scheduling a UN Security Council meeting on Iran for later this month, global oil markets have gone into overdrive.
At the meeting, Trump is likely to address the problems he sees with Iran, including terrorism, regional interference, and human rights abuses, while outlining the need for the other UNSC members to join in with his sanctions against Iran.
In response to this, Iran has resorted to its traditional threats of closing off the Hormuz Strait, where a third of global oil exports pass through, which could well lead to higher oil prices.
What if Iran closes the Hormuz Strait?
This is unlikely for a number of reasons; not least because Iran has threatened to do this multiple times in the past and has not done so.
First of all, the countries that rely on the Strait are unlikely to allow Iran to close the Strait without major military action that Iran can ill afford. The US has also vowed to keep the Strait open.
Iran is threatening to close the Strait in order to intimidate other countries into appeasement and will only go through with the plan as a last-ditch effort, as it is essentially a suicide mission.
What will Iran really do?
Iran has secretly been planning to construct oil export infrastructure that would bypass the shipping channel and give Iran access to a better crude export point, far beyond that of Kharg and Lavan islands, where Iran currently moves 95% of its oil exports from.
The reason being that Kharg Island is located near Kuwait and Iranian crude have to sail past two American Air Bases, so they are vulnerable to attacks by the US and their allies. This is more dangerous now as Iran will soon be relying on their own tankers to transport the oil as shipping companies have increasingly pulled out of deals with Iran, which means that any attacks on Iranian crude transport will not affect relations with European or Asian countries.
On September 4, Iranian President Hassan Rouhani declared that by 2021 Iran would relocate its oil export infrastructure into the Gulf of Oman at the Port of Jask and construct an oil terminal with an export capacity of 1 million barrels per day and storage capacity of 10 million barrels.
However, it is hard to imagine that Iran would find investors for such a project given the high cost and high-risk nature of the project, especially once the US’s oil sanctions hit Iran.