Iran is considering allowing a "limited number" of oil tankers to pass through the Strait of Hormuz on the condition that the oil cargo is traded in Chinese yuan, CNN has reported.
A senior Iranian official told the US news outlet that Tehran is working on a new plan to manage tanker traffic through the strategic waterway on Iran’s southern coast.
Iran has effectively sealed off the strait, allowing only its own and Chinese ships to pass. Before the start of the US-Israeli war on Iran on February 28, at least 20 percent of the world’s oil flowed through it.
Iran’s Islamic Revolutionary Guard Corps (IRGC) says it will attack vessels linked to “aggressor nations,” such as the Gulf states that allow the US and Israel to use their territory for attacks on the Islamic Republic. The IRGC announced that the world should prepare for oil prices "reaching $200."
For decades, most international oil has been traded in US dollars. The earnings from oil sales by Gulf countries, known as "petrodollars," were mostly reinvested into the US economy through the purchase of sovereign bonds issued by the US Treasury.
Since Washington imposed economic sanctions on Moscow in 2022 following the start of the war in Ukraine, sanctioned Russian oil has increasingly been sold in rubles.
For years, China has used a covert, barter-style financial system to help pay Iran for oil, circumventing US sanctions. The system allows Iran to ship crude oil to China, while Chinese state-owned firms carry out infrastructure projects in Iran as payment.
Two tankers carrying liquefied petroleum gas (LPG) passed through the Strait of Hormuz early Saturday morning and are heading towards India, according to an Indian foreign ministry official speaking with CNN.
Iran’s ambassador to India, Mohammad Fathali, told India Today that Iran allowed Indian vessels to travel through the strait, without providing details of how they obtained permission.
India heavily depends on imported LPG and liquefied natural gas (LNG) from West Asia. The South Asian nation has experienced shortages of both fuels since the US-Israeli conflict with Iran started two weeks ago.
India’s Prime Minister Narendra Modi spoke with Iranian President Masoud Pezeshkian on Wednesday, CNN noted. During the conversation, Modi reiterated that the “unhindered transit of goods and energy” remained one of India’s top priorities.
The UN has warned that restrictions on shipping through the strait could have dire effects on the world economy, including on food production.
“When ships stop moving through that Strait, the consequences travel fast,” said Tom Fletcher, the UN’s under-secretary-general for humanitarian affairs.
“Food, medicine, fertilizer, and other supplies become harder to move and more expensive to deliver,” he added.
Along with surging oil prices, the closure of the Strait of Hormuz has caused fertilizer costs to rise by up to a third. If the strait remains closed, reduced fertilizer use could lead to lower harvests and potential food shortages worldwide in the coming year.
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