Despite Rumors, Logistical Shortfalls Rule Out Russian-Iranian Oil Blending

Speculation has recently mounted that Iran is managing to export its crude oil using routes over the Caspian Sea. Given the Iranian regime’s sanctions-breaking expertise, developed over nearly 50 years, one might expect the Iranians capable of putting such diversions in place. But as yet there is little public evidence that they have managed to do so in any appreciable quantity.

Iranian oil is produced onshore in the southwestern province of Khuzestan (from the Ahvaz, Gachsaran, Marun and Aghajari oilfields) and offshore in the Gulf from the Abuzar, Doroud, Foroozan and Salman fields. Iran’s domestic oil is largely refined in Gulf coastal areas close to the producing fields, in part because pipelines headed northwards have to go through the Zagros Mountains.

There is however the Ahwaz-Ray Oil Pipeline, which can deliver 300,000 bpd of crude from the Dezful oilfield to Tehran refineries. This supplements a small 100,00 bpd capacity pipeline from Yeke Tut on the Caspian coast to Tehran and thence to Tabriz, which is fed by crude purchased from Russia, shipped south across the Caspian. These two crude pipelines therefore enable refineries to produce petroleum products for Tehran and north-western Iran. There is also a petroleum product pipeline delivering 204,000 bpd of petrol and diesel direct to Tehran from the south as well.

But for the moment there is no means of getting Iranian crude in bulk from the main producing fields in the southwest past Tehran to the Caspian. It might be possible to switch the flow of the Tehran to Yeke Tut pipeline, and make it an export rather than an import pipeline – and to convert it even to carry petroleum products such as diesel. It should also be feasible to expand the terminal at Yeke Tut to handle greater volumes.

The Caspian coast oil pipeline terminal at Yeke Tut north of Zaghmarz (Google Earth/Airbus/CJRC)

From Yeke Tut, Iran would need a tanker fleet to move the crude north across the Caspian. Russia does have a fleet of shallow-draft tankers which can navigate both the Caspian and Volga-Don Canal system, but Russia is already facing difficulties exporting what it produces itself. Even Iranian ingenuity is unlikely to deliver a quick technical or infrastructure solution to these gaps in the network.

Caspian region pipeline networks (CIA World Factbook)

Iranian pipelines, including natural gas (red) (CIA World Factbook)

A number of other export solutions might be available to Iran if it enjoyed normal relations with its neighbors to the north. But Iranian threats have soured relationships, and diplomatic exchanges and visits by Iran to these northern neighbors are usually received coolly.

In theory, Iranian oil could be shipped through the BTC pipeline to Ceyhan from Baku, but there is no way of getting Iranian oil to Baku. Nor would Azerbaijan – which has a tense diplomatic relationship with Tehran - want to facilitate such an arrangement.

At the moment, Baku takes in Kazakh oil shipped across the Caspian Sea from Aktau. The oil is shuttled across the Caspian by five specially-designed, shallow-draft, Kazakh-flagged crude tankers, several of which are owned by foreign investors.

This fleet has been built up by Kazakhstan to reduce dependency on shifting its oil through the Caspian Pipeline Consortium (CPC) pipeline, which runs north of the Caspian through Russian territory. A study of the AIS tracks of these five tankers show them largely sticking to the Aktau-Baku route, and none ever going near Iranian waters. (However, AIS does show that some may periodically visit Makhachkala, north of Baku on Russia's Caspian coastline.)

For Iran, the ultimate goal would be to resume the 90% of exports of oil which went to China, now that shipborne exports by ship have been completely cut by the US naval blockade. The CPC in Kazakhstan already moves oil eastwards to China through Alashankou, but again there is no logistical means to get Iranian oil into the CPC, either at Aktau or elsewhere. The Kazakh government would not in any case be keen on the idea, as the risk of sanctions would also jeopardize the running of the CPC pipeline westwards.

Given Iranian ingenuity, the sanctions-breakers will be trying to invent new routes. They may be particularly focused at the moment on increasing exports of products such as diesel and petrol rather than crude, which technically would be easier than increasing crude exports. But they face formidable infrastructure challenges, and their adversaries are watching for any signs that they are making a breakthrough. Ukraine has already demonstrated it has the capability to detect and engage any available Russian-associated targets in the Caspian Sea.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.