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War On Iran: – Refineries Hit – Oil Passage Toll To Pay For Iranian Damage
Iran has, as promised yesterday, responded to the USraeli attack on its energy installations by hitting refineries and gas facilities in several Persian Gulf countries.
Qatar spoke of ‘extensive damage’ to its gas liquefaction facilities caused by an Iranian attack. Saudi Arabia claimed that the attack was defeated but that a drone had hit its SAMREF refinery near Yanbu on its western coast. Kuwait reported fires at two of its three refineries, Bahrain and the UAE did not comment but people living there report of explosions, fires and damage.
Several missiles and drones hit Israel. It has by now come under a sustained attack with air alarms going off nearly every hour. This afternoon the BAZAN oil refinery in Haifa got hit.
The damage from the continuing U.S. and Israeli bombing campaign in Iran is also quite considerable. The Israeli plan is to destroy all of Iran’s capabilities to the extend that rebuilding will become excessively expensive.
But Iran has already planned for this. It has found a way to pay for rebuilding its state. As it is, and will likely stay, in control of the Strait of Hormuz it can ask for payments in exchange for providing safe passage.
Lloyd’s List reports:
Iran establishes ‘safe’ shipping corridor for approved and paid for transits
AT LEAST one tanker operator is understood to have paid a fee to Iran to transit the Strait of Hormuz while several other tankers have passed following Iranian vetting and diplomatic interventions, according to several well-placed sources with direct knowledge of the transits.
Multiple governments including India, Pakistan, Iraq, Malaysia and China are all understood to be discussing vessel transit plans directly with Tehran, where officials within the Islamic Revolutionary Guard Corps have established a nascent ship registration system for “approved” vessels to agree safe passage.
At least nine ships have now exited the strait via the “safe” corridor that routes ships through Iranian territorial waters via Iran’s Larak Island, which is used by the IRGC Navy and port authority to assess visual confirmation of the vessels.
biggerThe picture on the left shows the normal traffic route through the Strait while the picture on the right shows (except for the purple ship) the passing on the controlled route north of Larak Island.
Without the war and without the blockade of the Strait crude oil prices would hover around $60 bbl instead of the current $100-120 bbl (soon to be $200 bbl). When Iran will finally agree to an end of the war – months if not years from now – one of its conditions might be a surcharge of $10 bbl for any tanker passing the Strait. This would come, for a limited time, on top of the $60 bbl peace-level market price. A moderate toll when one considers the cost of today’s barrels. This while providing a significant income of some $50-100 million per day for Iran. It would help to recuperated the money needed to repair any war damage.
The U.S., if it will have any say in this, might well agree to that condition.
Currently Iran has some 140 million barrels of crude oil sitting in floating storage – i.e. on old rented tankers anchoring somewhere. That oil was hard to sell as it was under U.S. sanctions.
The U.S. is currently considering to lift those sanctions to provide more oil to the global markets and to thereby lower its price. As U.S. Treasury Secretary Scott Bessent announced:
In the coming days, we may unsanction the Iranian oil that’s on the water. It’s about 140 million barrels, so depending how you count it, that’s 10 days to 2 weeks of supply, that the Iranians had been pushing out, that would have all gone to China. In essence, we’d be using the Iranian barrels against the Iranians to keep the price down for the next 10 or 14 days, as we continue this campaign. So, we have lots of levers.
The U.S. wasn’t willing to lift those sanctions during peace talks with Iran. But seeing the the dearth of oil under war conditions and high prices it suddenly allows that to happen.
How that would be ‘against the Iranians’ when they can sell their parked oil at $100 bbl exceeds my understanding.
Added:
The U.S. seems to have run out of stand-off ammunition. F-35 fighters were ordered into Iranian air space and at least one got damaged. This confirms that air superiority over Iran has not been achieved (yet).
I wrote this for my family a few days ago (Mar 14), seems relevant to this conversation.
Here’s the latest update (Mar 14/26) on the US-Iran war and for this update I will focus on the larger Geopolitical consequences of the war over the short to medium term (<5 years). As mentioned in my prior message, the US & Iran are still in the escalation cycle period of the war and this will continue for the next few weeks or months at least. The US government has spent the prior week spreading talking points about Kharg island, the need for a ground component for a lasting solution to the Iranian problem as well as threats for the complete eradication of the Iranian oil industry. These talking points are being put out into the US / Western world media in order to prepare the public for a larger escalation of the war on Iran. Specifically, a US invasion of Kharg Island and other islands on the Iranian coast. Currently, the US is moving the 82 infantry division into the middle east, roughly 5000 soldiers, this division specializes in airborne assaults and presumably they would be used to seize Kharg island (and other islands) in the Persian gulf as a bargaining chip for future talks with Iran to open the Straights of Hormuz. From a military, this act is utter folly for the following reasons
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The Iranian air defenses have NOT been attrited and remain a dangerous threat to aircraft approaching Iran, in the past 2 weeks at least 7 US/Israeli aircraft have been shot down over Iraq, all of them more than 200 km from Iran’s boarders, Kharg island is only 15km off shore from Iran’s coast. Airborne troops would face severe danger approaching the island, fighting for the island and being supplied
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US troops landing on Kharg would not have any artillery and would face extreme difficultly being resupplied or evacuating wounded troops
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Kharg island is only 22square kms and is within artillery, mortar and short range missile reach of the Iranian coastal defenses
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Logistically, all of the US bases in the region that could support such an assault are under active attack by Iranian missile forces.
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While Kharg Island currently represents 90% of Iranian oil exports, Iran does have other alternative routes in the north & east that can be expanded if Kharg is taken offline (during the Iran-Iraq war Kharg was heavily damaged). In this light, why should Iran surrender if the oil facilities are captured or destroyed, would it not make sense to use those options and continue the fight? Kharg is not an oil refinery, it is an export facility only and if the oil cant be exported from it, it has no intrinsic value.
In short, while the US might be able to take the island, they would be unlikely to hold the island if the Iranians attacked it and the Iranians have no reason not to attack it. Accordingly, I believe the US military would not be in favor of such an operation at this time and would try to hold off for at least a few weeks (if not months) to weaken Iranian air defenses. However, the US simply doesn’t have this time if they wish to avoid a world wide economic crisis, there is a ticking clock.
From the Iranian side, Iran has responded to the limited bombing of it’s oil infrastructure by bombing the oil infrastructure in the Gulf States oil and reiterating that Iran will destroy all Middle East Oil refineries and vital infrastructure if their infrastructure is destroyed. Additionally, Iran has officially released two of their conditions for reopening the Straits of Hormuz (there are probably more that they will not released yet),
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reparations to Iran for war damages
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the complete withdrawal of all US bases from the Persian Gulf.
Clearly, a threat – counter threat, escalation cycle has settled in and we’ll see both sides escalate over the coming weeks. I suspect that Trump will time most of his escalations to occur after markets close (i.e. 4:30pm) and his largest escalations will happen on Friday/Saturday. As Trump will want to reduce wild Market fluctuations that might generate bad headlines (i.e. DOW drops 2000 points in 5 mins, worst drop in market history following Trump missile strikes). Iran however, is not being guided by stock market considerations so we might see a strange cycle of Iran making 1-2 escalations during weekdays and Trump make his counter-escalations on the weekends. There are countless minor ways both sides might escalate from here, but the only 2 that matter right now are 1) will the US try to seize Iranian territory 2) will ether side start a widescale, scorched earth policy of destroying oil refineries. Either of these two escalations will transform a crisis lasting months to a crisis lasting years.
With respect to the larger geo-political issues. Nations are now starting to recognize that the oil disruptions in the Middle East will last months if not years and they are starting to take actions to reflect this recognition. The other G7 nations have agreed to US demands to release 400 million barrels of oil from their strategic reserves while 400 million barrels sounds like a lot, the world uses around 100 million barrels a day and the crisis in the Middle East has reduced production by 8 million barrels a day(The biggest global oil supply disruptions ever), so this release will maintain normal world oil usage for about 50 days (assuming oil production doesn’t drop further, which is likely). After this period, whether it is 50 days or less, large scale economic disruption is unavoidable, this is the ticking clock and this threat is inducing irrational behaviour in the US and Western nations.
Oil (34%) and Natural Gas (25%) are the primary forms of energy usage in the world at 59% (What Fuelled the World in 2024? Fossil Fuels! – Canada Action). If Global oil production drops by 8% for more than 50 days, the world economic would suffer effects similar to the effects of covid, roughly an overall 3.4% drop in world GDP. However this decline would vary widely. Countries in Asia and Europe which are extremely depended on oil and gas imports would see a significantly higher decline (perhaps as high as 10%), India, the Philippines, Germany, England, Australia, Maylasia & Indonesia would be the hardest hit as they have virtual no domestic gas/oil production to fall back upon and would be forced to seek their energy needs on the world market at whatever cost they could afford. China was apparently very concerned about the possibility of the US attacking Iran so over the prior year it built up an estimated oil reserve of 900 million barrels (China targets steady oil output, more gas and stockpiling in five-year plan | Reuters) (roughly 3 month supply for its’ own domestic needs). Additionally, China has signed long term gas contracts with Russia and begun the construction of the power of Siberia 2 pipeline which will permanently redirect Russia’s Western most oil and gas reserves to China (previously these reserves were sent to Europe) – NOTE: the China does NOT disclosure their oil/gas reserves to the public so these numbers are estimates based on purchases vs estimated consumption and western analysts have a history of underestimating foreign reserves so it is possible the Chinese have significantly more reserves than believed, perhaps as much as 1.5 billion. Regardless of the exact amount of Chinese Oil reserves, the result is the same, after about 100 days we will see a significant drop in world-wide economic performance as strategic reserves are depleted and oil scarcity chokes off industrial output. Food prices will rise as transportation (i.e fuel costs) rise, fuel rationing for recreational vehicles may be introduced to reduce demand, eventually factories will close (temporarily at first, then permanently later) as rising fuel costs make production uneconomical. Energy grids will be constrained by lack of available fossil fuels and this will impose additional restrictions on our digital infrastructure (internet, data centres, etc…).
Posted by: Kadath | Mar 19 2026 18:07 utc | 95
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