The Strait of Hormuz is the world’s most important chokepoint for oil, where almost a fifth of the world’s crude or about 20 million barrels per day (bpd) passes through to markets in Asia, Europe, North America and beyond.
Shipping through the narrow strait, with the lane just three kilometers wide in either direction at its narrowest point, has become fraught since the US began building its military presence in the Persian Gulf.
Iran is currently building a $1.8 billion oil pipeline to its port of Jask outside the mouth of the Persian Gulf as part of plans to protect its exports against potential problems in the region and to boost shipments of Caspian oil.
The approximately 1,000-kilometer pipeline will bring oil from Goreh in Bushehr to Jask, making it strategically important as the country’s second-largest crude oil export terminal.
The Kharg Island terminal deep in the Persian Gulf is currently Iran’s key outlet, accounting for 90 percent of its oil exports. To reach Kharg, tankers must pass the Strait of Hormuz.
“We are now building a 1,000-kilomter pipeline from Goreh to Jask, and our oil exports are no longer connected to the umbilical cord of the Strait of Hormuz. This is the first in Iran’s history,” Rouhani told a meeting of Iran’s governors in Tehran late Tuesday.
Rouhani said Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei had told him that the project was “the most strategic work” his administration had been doing.
“This pipeline through which we will be transporting our oil to Jask and the Sea of Oman is a great, huge and unique work in the history of Iran,” the president added.
The new terminal is close to Chabahar which Iran is developing in cooperation with other countries, most notably India.
Chabahar is about to become a key link in the International North South Transport Corridor (INSTC), a multi-modal network of ship, rail and road routes to move freight between India, Iran, Afghanistan, Armenia, Azerbaijan, Russia, Central Asia and Europe.
It offers a key trade and transport corridor that presents a cheaper and shorter alternative to the traditional route through the Suez Canal.India, Iran, Russia push alternative to Suez CanalIndia, Iran and Russia will meet next month to discuss the operation of a 7,200 km trade and transport corridor that presents a cheaper and shorter alternative to the traditional route through the Suez Canal.
The terminal would be connected to Iran’s Caspian Sea port of Neka, enabling Tehran to boost shipments of oil from Caspian producers.
Iran’s oil industry is on the frontline of the fight against the United States’ maximum pressure in a bid to reduce exports to zero.
Head of Iran’s Plan and Budget Organization Mohammad Baqer Nobakht said earlier this month that the government planned to run the country without oil. Iran, he said, earned just $8.9 billion from the sale of oil and related products in the last fiscal year, down from a peak of $119 billion less than a decade ago.
A boom in manufacturing has already seen Iranian companies looking beyond the domestic market to export an increasingly diverse range of goods, turning the devaluation of the rial to their advantage.
In 2019-20, non-oil exports totaled $41.3 billion, exceeding oil exports for the first time in Iran’s modern history. Around half of Iran’s non-oil exports were reportedly in manufactured goods, meaning that Iran’s factories earned more than double what the country’s oil rigs earned in export revenue last year.
Iranian consumer goods and industrial products—ranging from cookies to stainless steel—are exported widely within the Middle East as well as further afield to China, Russia and Europe.
Manufacturing is also a major contributor to employment. Between March 2018 and December 2019, the manufacturing sector added 472,000 jobs.
The pivotal role of the sector in Iran’s economic resilience has not escaped the attention of the Trump administration. In January, Washington imposed new sanctions, targeting Iran’s construction, manufacturing, textiles, mining, aluminum, copper, iron and steel industries, Treasury Secretary Steven Mnuchin said.
The coercive measures affect the private sector and millions of blue-collar workers in Iranian factories, disproving the US government’s claim that the sanctions target the state and not ordinary people.