Readers will remember the many times Iran threatened to close the Strait of Hormuz and obstruct oil exports from countries on the Arabian Gulf. Now that the country is reaching out to the West for a freeze on sanctions imposed on it — and their possible relaxation in few months’ time if negotiations are successful — it seems that Iran itself is now concerned about a possible closure of the strait.

The secretary of Iran’s Free Trade Zones Co-ordination Council, Akbar Torkan, told Iran’s Press TV recently, “Iran is planning to build a new crude export terminal at Jask on the Gulf of Oman coast, giving the country a second hub for Gulf oil shipments”.

Iran approved the creation of a “special economic zone” at Jask and President Hassan Rohani is committed to construct a new crude export terminal to “further protect Iran’s oil lifeline against any possible threat to activities in the Mideast Gulf”.

These reports suggest that a 1,200-kilometre pipeline will run from Bushehr province and seemingly connect the current export pipelines and partially bypassing the export terminal at Kharg Island. The new terminal may have a storage capacity of 20 million barrels and reports suggest that it may cost $2.5 billion.

The idea is not entirely new as Iran had announced many a time during the 1980s when it was at war with Iraq that it will build such a pipeline to bypass the Gulf when its terminals and tankers were being frequently attacked. But the project never got off the ground due to its difficult route and the high cost associated with it. In any case, Iranian export capacity was built up to 6 million barrels a day (mbd) in the 1970s and is largely still available, while actual exports have fallen to 2.5mbd as a result of declining oil fields production and rising domestic consumption.

Even if Iranian exports increase in coming years, export capacity is unlikely to be a constraint. Therefore, a new pipeline cannot be justified economically and can only go ahead as a “strategic option”. The proximity of Jask to the Gulf and Strait of Hormuz and the number of pumping stations on the way do not appear to make for a strategic option.

It is not clear whether the new announcements are independent from the at least seven-year-old proposal to build a pipeline from the Caspian port of Neka to Jask to transport oil from Caspian producers, including Russia, Kazakhstan, Turkumistan and Azerbaijan in addition to any Iranian oil produced from its part of the Caspian. The line was proposed by Iran and may be 1,500-kilometres in length and will have seven pumping stations to deliver 1 mbd.

At the time the project was said to cost $3.3 billion though other reports suggested $5.2 billion.

Nearly two years ago Reuters and UPI reported Iran Oil Terminals Company director Pirouz Mousavi as saying: “The new terminal would enable Iran to export more oil from Caspian producers and provide a fallback option for Iran’s main export terminal at Kharg Island if there were any problems exporting Iran’s own oil from the Gulf.”

If export volumes are available and the political environment is better than what we see now, the project may appear to make sense. The countries involved may have voiced support at one time or another, but the project may have been passed over by events.

Azerbaijan has an oil pipeline running from the Caspian to Ceyhan in Turkey via Georgia and Kazakhstan. Though mutely interested in the Iranian option, it has built a pipeline to China and has a memorandum of understanding to transport its oil through the Azeri System to Ceyhan as well, a move that is foreseen as a competitor to the Iranian route.

Russia can easily take its Caspian crude oil into its own system where it has already established export routes westward to Europe and eastward to China and the Pacific.

Iran swaps oil volumes from Turkmenistan and Kazakhstan through Neka for the oil to be used in its northern refineries. The volume is said to be around 150,000 barrels a day and is projected to rise to 300,000. Iran’s ambassador to Azerbaijan recently said his country expects serious steps in the sphere of oil swaps between the two countries.

If the swap volumes increase further, Iran may reverse some of its oil pipelines to transport oil southward rather than go through a significant investment in a new system that needs more than one political agreement to go ahead.