Iran’s Energy Crisis
Iran is experiencing a systemic energy crisis. While many times in the past, Iran has had gas shortages or refined product shortages, this time Iran is undergoing an energy meltdown, with parallel shortages of electricity, natural gas and refined products. The Iranian energy crisis can affect regime stability. The lack of ability to provide basic energy needs to the public is an indicator of significant regime weakness. Iran’s gas trade with its neighbors— Turkey and Iraq—has also been disrupted. There is no quick fix to Iran’s energy shortages, which will continue to limit economic activity.
Iran holds the world’s second largest natural gas reserves and is the fourth-largest holder of oil reserves globally. With 300 sunny days annually, vast coastal and mountainous windy regions, the country also has strong wind and solar potential. Yet, Iran faces a constant 20% electricity deficit, a 25% natural gas deficit, and severe shortages of petroleum products, especially gasoline. For years, Tehran has seen the energy crisis coming but took no meaningful steps to avert it.
There is no quick fix to Iran’s energy crisis. Iran’s Oil Minister Mohsen Paknejad said this week that Iran needs $45 billion in investment to emerge from the energy crisis. Iran could reduce the impact of the crisis through increased gas imports from Turkmenistan. However, Iran has not been able to sustain gas import from Turkmenistan over the years, due to Tehran’s lack of payment. The regime’s energy subsidies to the public are also a huge financial burden, with close to a quarter of Iran’s GNP expended on subsidies.