Iran opens new oil terminal in bid to bypass Strait of Hormuz for exports

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Iranian President Hassan Rouhani speaks during the meeting of the National Combat Board with Coronavirus (Covid-19) in Tehran, Iran on November 21, 2020.

Handout of the Iranian Presidency | Anadolu Agency | Getty Images

WASHINGTON – Iran opened its first oil terminal in the Gulf of Oman on Thursday to make Iranian President Hassan Rouhani’s regime less dependent on the Strait of Hormuz, which is often a source of international tension.

The location of the new oil terminal – a project that began in 2019 and will cost around $ 2 billion – will also reduce transportation and insurance costs for oil tankers.

“This is a strategic step and an important step for Iran. It will ensure the continuation of our oil exports,” Rouhani said in a televised address, according to the state media.

The Strait of Hormuz, an important channel between the Persian Gulf and the Gulf of Oman, is used by oil producers to transport crude oil from the Middle East. About 20% of the world’s crude oil is carried through the waterway.

The new terminal gives Iran more space to operate. The Strait of Hormuz is a narrow stretch of water between Iran and the United Arab Emirates that connects the Persian Gulf with more open waters. The new terminal is located east of the wider Gulf of Oman, which flows into the vast Arabian Sea.

Iran previously threatened to close the strait in response to the Trump administration’s decision to reinstate the sanctions.

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“This new crude oil export terminal shows the failure of Washington’s sanctions against Iran,” said Rouhani, adding that Iran plans to export 1 million barrels of oil a day.

Washington imposed sanctions on Tehran after former then-President Donald Trump withdrew from the Joint Comprehensive Plan of Action (JCPOA) in 2018.

The JCPOA, brokered by the Obama administration in 2015, lifted sanctions on Iran that had hampered its economy and roughly halved its oil exports. In exchange for billions of dollars in sanction relief, Iran agreed to dismantle some of its nuclear programs and open up its facilities to wider international inspections.

In addition to the USA, France, Germany, Great Britain, Russia and China were also signatories to the agreement.

In 2018, Trump kept a campaign promise and unilaterally withdrew the United States from the JCPOA in what was dubbed the “worst deal ever”. Trump has also reintroduced the previously lifted sanctions against Tehran.

The Trump administration’s “maximum pressure” campaign crippled the Iranian economy and reduced oil exports.

The Biden government is working to revitalize the JCPOA with the other signatories to the agreement.