Trump move could turn Bandar Abbas from being Iran’s lifeline to Achilles heel

As US President Donald Trump is in the last stage of announcing his move on the Iran nuclear accord - which in his opinion from the beginning was a bad deal giving a free hand to the Khamanei regime to spread terror in the region - Tehran is putting all their hopes on another counter strategy which they feel will help them overcome the stranglehold of any American sanctions this time.

According to Financial Times, the indirect ‘defiant message’ was obvious when Iran’s deputy oil minister Alireza Sadeghabadi made a visit this month to the Gulf Star refinery in Bandar Abbas , Islamic republic’s largest such facility. “We will face no problems in supplying petrol both in terms of quantity and quality,” he said during his visit.

“We do not need to import any [essential] equipment and material to complete the refinery and produce petrol,” he added.

But little does the regime in Tehran realize, according to experts, that despite the progress made in the sector since sanctions were lifted in 2016, it would be the energy industry that will be worst hit when sanctions are reimposed this time.

“We do not need to import any [essential] equipment and material to complete the refinery and produce petrol.”

Other modernization programs which have not moved forward will not be able to make any headway.

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It may be recalled that Iran began constructing the Bandar Abbas refinery in southern Iran in 2006 during the hardline of Mahmoud Ahmadi-Nejad’s presidency. Because of the hostile environment Iran could not import the required equipment to complete the refinery.

Following the 2015 nuclear accord under president Hassan Rouhani Iran prioritized ‘fuel independence’, with
the first phase of the facility inaugurated in 2017. After a massive investment of €4 billion the refinery is now producing 16million liters of petrol per day, which is due to increase to 22 million liters over the next few weeks.

During the period of sanctions, Iran could not by petrol from commodity trading houses, including Vitol, Trafigura and Glencore. The government was forced to depend on its own petrochemical plants which produce low-quality fuel. Smog-filled cities and damaged car engines were the end result.

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At present, the situation has reversed and quality fuel is abundant locally and the increased crude output of nearly 4m b/d enables local refining as well as helped boost exports which have more than doubled to about 2.6m b/d.

But Tehran will find all these gains difficult to hold on to and sustain if President Trump brings in new sanctions when he announce his policy on the nuclear deal on May 12.

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As Oil minister Bijan Namdar Zanganeh admitted in parliament, Iran “must co-operate with foreigners because we need both capital and technology. The [financial] resources are not good and we are facing serious problems,” he said.

Zanganeh said Tehran needed $200 billion of foreign and domestic investment to achieve its goals of increasing production to 4.8m b/d by 2021.

Total’s $4.8bn contract to develop part of South Pars, the world’s biggest gasfield, would be jeopardized if sanctions are reimposed. Other European companies are also in a wait and watch mode.

“Within Europe there are enough companies with substantial US interests, that they will co-operate [with sanctions] even if their governments say not to,” said Richard Nephew, an analysts at Columbia University’s Center on Global Energy Policy to FT.

Iranian crude sales to Asia could also be hit as Japan and South Korea will go along with the Trump administration.