Iran's energy crisis worsens amid scorching heat and mismanagement
As Iran battles a heatwave, the nation's energy infrastructure is under severe pressure, exposing the government's long-standing failures and mismanagement.
As Iran battles a heatwave, the nation's energy infrastructure is under severe pressure, exposing the government's long-standing failures and mismanagement.
In the face of rising temperatures and heat, the Iranian government has announced the closure of government offices and banks nationwide on Sunday, July 28.
Ali-Akbar Mehrabian, the Minister of Energy, has acknowledged the challenges in producing and supplying electricity, highlighting the increasing pressure on the power grid. "From today on, it will become increasingly difficult to produce and supply sufficient electricity," Mehrabian stated, adding that each one-degree increase in temperature puts an additional 2,300 megawatts of pressure on the grid.
Heatwave strains an already fragile system
The current heatwave has seen temperatures in Tehran reach 40 degrees Celsius for the second consecutive day, while Varamin, a town near the capital, recorded a temperature of 43.2 degrees in the past 24 hours. Delgan in Sistan-Baluchestan province hit 50 degrees Celsius, making it the hottest city in Iran. Bafgh in Yazd province also saw temperatures rise to 49.3 degrees, setting a new record over the past 50 years. According to the Meteorological Organization, the peak of this heatwave is expected between July 24 and 28.
The Iranian government's response to the crisis has been to declare a holiday, shutting down all government offices and banks (excluding emergency and rescue services) on Sunday. Earlier, working hours for government offices on Saturday were cut short to 10 AM.
On July 25, Mehdi Abbasnejad Najafabadi, a climate change researcher, warned about the extreme heat and increased UV radiation, urging people to stay indoors. This advice came too late for the 225 people who had already been hospitalized due to heatstroke, according to Babak Yektaparast, spokesperson for the National Emergency Organization.
Underinvestment and mismanagement
The root of Iran's energy crisis lies in underinvestment and mismanagement. Mostafa Rajabi Mashhadi, spokesperson for Iran's electricity industry, predicted that electricity consumption would exceed 77,514 megawatts in the next two weeks, setting a new record.
Omid Shokri, an Istanbul-based Senior Researcher at George Mason University and Energy Expert, criticized the Iranian government for failing to invest adequately in the energy sector.
"The Iranian government needs to spend at least 6 billion dollars annually to meet the country's electricity needs, but this target has only been achieved once in the past 15 years (in 2010)," Shokri said.
"As long as sanctions remain in place and the FATF issue remains unresolved, the energy crisis will continue to worsen daily for the Iranian people," he added.
The consequences of the government's inability to provide electricity are severe. In addition to affecting homes, recent weeks have seen power cuts or quota-based distribution for offices, industrial estates, and industries. This has plunged hundreds of cities and villages into darkness during the peak summer heat multiple times.
Mansour Sohrabi, an expert in ecology and environmental science, emphasized the inefficiency of Iran's energy policies. "Most people in Iran use water-based air conditioners, with nearly 30 million such units in use across the country. These consume a significant amount of water and electricity," Sohrabi explained.
"The government's plans are not compatible with climate change, and they must be adjusted to address climate change accordingly."
The halt in investment in the electricity industry, the lack of development of power plants, and the aging grid are the main reasons for the electricity imbalance and the 14,000-megawatt shortage in Iran. As experts have pointed out, the government's failures are pushing the country towards an increasingly unsustainable future, with ordinary citizens bearing the brunt of this mismanagement.
Nameh News reported that former Deputy Foreign Minister Abbas Araghchi, who was the chief nuclear negotiator with the West in 2021 has been selected as the prospective foreign minister. However, no official announcement has yet been made.
The report also said that long-time diplomat and top-level official Ali-Akbar Salehi will head the Atomic Energy Organization of Iran.
Pezeshkian will be officially inaugurated as the next president on Sunday, July 28, in a ceremony presided over by Supreme Leader Ali Khamenei. Two days later, he will take the oath of office in the parliament. According to parliamentary law, the new president is required to present his agenda and introduce his cabinet ministers within two weeks of his inauguration.
No names or lists of ministers is considered final until the president officially submits his proposed appointees to Supreme Leader Ali Khamenei.
During Pezeshkian's presidential campaign, initial speculations pointed towards former Foreign Minister Mohammad Javad Zarif as a key cabinet member. However, shortly after Pezeshkian's victory, Zarif announced that he would not be joining the administration.
Instead, he was appointed as the head of the Strategic Council for Transition, tasked with identifying and recommending ministerial candidates.
Asr-e Iran, a moderate-conservative website, on Thursday claimed that it has identified the three potential candidates for the foreign minister role selected by the committee, from whom Pezeshkian must choose.
All candidates belong to the reformist faction: former Deputy Foreign Ministers Abbas Araghchi and Seyyed Mohammad Sadr, who also served as Deputy Foreign Minister for Arab and African Affairs, and academic and former Ambassador to Russia, Mehdi Sanaei.
Earlier in July, the IRGC-affiliated Tasnim news agency also identified Araghchi as the "most probable" candidate for the foreign ministry.
Tasnim also asserted that Pezeshkian's message to Hezbollah leader Hassan Nasrallah, was authored by Araghchi.
Araghchi, served as deputy to Zarif during Hassan Rouhani's presidency, which concluded in mid-2021. He was Zarif's right-hand man during talks that led to the 2015 JCPOA nuclear deal.
Another potential candidate named in the media is Mehdi Sanaei, who served as Iran's Ambassador to Russia, Senior Advisor to the Foreign Ministry, and a former Member of Parliament. The Iranian media highlight his fluency in English, Russian, and Arabic, recognizing him as both a practitioner and a professor in international relations.
During political roundtables and election debates, Sanaei served as one of Pezeshkian's political advisors, leading the media to believe that he was one of Pezeshkian's candidates for the Ministry of Foreign Affairs.
In 2019, Sanaei found himself at the center of a significant controversy following the death of his daughter in Moscow, described as an apparent suicide. The Iranian embassy announced Arefe Sanaei's passing on social media but denied suicide as the cause, attributing her death to a "brain stroke."
Contradictorily, a local TV station reported that the ambassador's daughter fell from a ninth-floor window onto a Renault car, resulting in her death. Radio Free Europe/Radio Liberty (RFE/RL), a US-funded news organization, corroborated this account, confirming local media reports that Arefe Sanaei fell onto a car in the street.
Supreme Leader Ali Khamenei has consistently reiterated his priorities, which include supporting proxy groups in the region and steadfastly advancing the nuclear program. In his latest speech, he praised the parliamentary-approved "Strategic Action Plan to Lift Sanctions and Protect the Iranian Nation’s Interests," which mandates the government to increase uranium enrichment and reduce UN inspections According to Zarif, this law has been a significant obstacle to achieving meaningful progress in negotiations.
In an article published on Saturday, the firebrand Hossein Shariatmadari, editor of the flagship hardliner newspaper Kayhan, funded by Ali Khamenei's office, criticized the newly elected Masoud Pezeshkian's Strategic Council for Transition.
Shariatmadari contended that the council, entrusted with identifying and proposing ministerial candidates, comprises individuals ill-suited for their roles. Using harsh language, he blasted them for incompetence and fraud but also for their supposed liberal leanings without offering any concrete evidence.
"Many members of the council and its subcommittees have a history marked by collaboration with enemy intelligence services, security convictions, corruption, and defense of homosexuality," the radical ideologue continued. "Their track records reveal disbelief in the system and the revolution, and they have openly aligned and collaborated with the US, UK, and Israel during riots and uprisings."
While he did not name anyone specifically, most of the hardliners' critiques these days are directed at former Foreign Minister Mohammad Javad Zarif, who leads the council.
Shariatmadari accused the council of "open alignment and collaboration with the US, UK, and Israel," engaging in secret meetings with known US adversaries, and complying with directives from then-US Secretary of State John Kerry regarding Yemen.
Most of his criticism implicated Zarif specifically, as Shariatmadari's critique of foreign policy alluded to the 2015 incident when former US Secretary of State John Kerry issued a warning to Iran over its alleged support for Houthi rebels in Yemen.
In 2021, Iran International TV released an audio recording in which Zarif discussed his purportedly close relationship with former US Secretary of State John Kerry. Also, in 2018, John Kerry admitted that he had met with Zarif to preserve the 2015 nuclear deal with Tehran.
Shariatmadari further criticized Pezeshkian, asserting that although his rhetoric aligns with Khamenei's directives, his actions, particularly the formation of this council, contradict them.
“Given the divergent perspectives of the majority of the steering council members and its subcommittees from the Islamic and revolutionary viewpoints of Mr. Pezeshkian, there is a legitimate concern that the candidates recommended by this council and its subcommittees for ministerial and other critical positions may be fundamentally misaligned with the objectives of the honorable President,” Shariatmadari wrote.
The initial list of 16 members in the council includes prominent 'reformist' figures such as former Government Spokesman Ali Rabiei, Pezeshkian's campaign manager Ali Abdolalizadeh, academics Hadi Khaniki and Mohsen Renani, former Minister of Economy Ali Tayyebnia, former Culture Minister Reza Salehi Amiri, and former lawmakers Ali Tajernia and Ali Shakouri-Rad.
The council is under scrutiny not only from hardliners but also from reformists, as jockeying takes place to obtain ministerial posts. Despite its claims of implementing "reverse discrimination" to include women and religious minorities, the council features few female members.
Every faction appears eager to secure a position in the cabinet and is apprehensive about others gaining dominance, particularly given the significance of the upcoming four years. This period is crucial due to concerns over Khamenei's advanced age and the potential for this administration to act as a transitional government during potentially turbulent times if a new leader assumes power.
On Thursday, Mohammad Ali Abtahi, a prominent reformist politician and senior aide to former President Mohammad Khatami, questioned the cabinet's inclusivity. He pointed out that while hardliners are expected to be included in this cabinet, they do not reciprocate by including reformists when they are in power.
"In Ebrahim Raisi’s government, even those with the slightest association with reformists were excluded from any positions," Abtahi said.
Meanwhile, reformist commentator Abbas Abdi attempted to mirror Pezeshkian's rhetoric of bridging the gaps between various political factions. This approach aligns closely with Khamenei's recent call for unity, emphasizing the need for "one voice to be heard from Iran."
Using a football analogy, a favored sport in Iran, Abdi remarked in Etemaad daily on Saturday: “The political game in Iran is influenced more by the conditions of the playing field than by its direct players, such as the cabinet and ministers. The playing field has been severely damaged. There are numerous disagreements and inefficiencies within the administrative and executive structures in politics.”
It appears that Abdi, consciously or unconsciously, is advocating for changes similar to those proposed by Pezeshkian—changes that are not feasible with the Supreme Leader at the helm. However, Abdi did not explicitly express his stance on Khamenei; instead, he deferred to Pezeshkian, who has so far received Khamenei's support.
In the final analysis, it is difficult to determine whether Shariatmadari's provocative statements are his own or if they reflect directives from the Supreme Leader's office.
Iran's Deputy Transportation Minister, Kheirollah Khademi, stated this week that if Tehran cannot secure Moscow’s loan, its participation in the railway project would be essentially meaningless.
Despite years of negotiations and the signing of several memoranda of understanding, with the latest one concluded 15 months ago, Moscow has yet to decide on investing in or providing a loan to Tehran for the completion of the project.
The railway would connect the two northern cities of Rasht and Astara, on the border with Azerbaijan – and make it a critical segment of the International North-South Transport Corridor (INSTC) to link India, Iran, Russia, and Europe.
With the project requiring a $1 billion investment, the Islamic Republic has sought Russian loans, aiming to earn transit revenue from moving Russian goods to Asian countries and vice versa.
In May 2023, alongside the signing of a MoU between the two countries to develop this railway line, then-Iranian President Ebrahim Raisi’s website described it as a "giant project."
It announced that the railway line was scheduled to be completed in three years, stating it would have the capacity to transport 10 million tons of cargo in its first year of operation, as well as up to one million passengers annually.
Based on this, Raisi's website stated, the railway could generate $20 billion annually for Iran.
Yet, expecting $20 billion in annual revenue from a $1 billion investment in a 164-kilometer railway can be seen as unviable, given that Iran's total foreign cargo transit revenue from all modes of transport (roads, railways, air, and sea) was $1 billion in the previous year, according to Iranian customs statistics.
More importantly, Iran has 15,000 kilometers of railway lines, yet only a very small portion of foreign goods transit is conducted via these railways.
It is thus unclear how the government expects to generate $20 billion in annual revenue by adding just 164 kilometers (approximately one percent) to its existing railway lines.
Adding further uncertainty to the project's future is Khademi's admission that the final cost of the project has not yet been determined.
Iranian authorities' approach of exaggeration
In recent years, Iran has taken an exaggerated approach in its cooperation with Russia and China to counter perceptions of international isolation.
For instance, Iranian Oil Minister Javad Owji recently claimed that Russia has agreed to deliver 300 million cubic meters per day (mcm/d) of gas to Iran through the construction of a massive pipeline, which would transform the Islamic Republic into a "regional energy hub."
This claim of 300 mcm/d in Russian gas deliveries starkly contrasts with the current reality, where only Turkey and Iraq are customers of Iranian gas. Last year, their combined daily purchases from Iran totaled just 33 mcm.
Moreover, Pakistan has suspended its contract to import 22 million cubic meters per day (mcm/d) of Iranian gas since 2015 due to the risks of US sanctions. Even if Pakistan were to begin importing gas from Iran, the Islamic Republic would be able to export only 55 mcm/d in total. It remains unclear how the additional Russian gas would benefit Iran.
Meanwhile, both Turkey and Iraq, as Iranian gas customers, have signed agreements with Turkmenistan for gas purchases.
Turkey not only directly purchases gas from Russia but also transits Russian gas to Europe, essentially eliminating the need to buy Russian gas via Iran.
Iran itself faces a gas deficit, and if it were to consume imported Russian gas, the cost would be equivalent to the annual budget of the government, making it practically impossible.
Iranian Oil Minister Javad Owji last week went even further, claiming that Russia has agreed to bear the cost of constructing a gas export pipeline to Iran via the Caspian Sea.
The estimated cost of constructing a pipeline with a daily transmission capacity of 300 million cubic meters (mcm) of gas is approximately $20 billion for the maritime segment alone. Additionally, hundreds of kilometers of pipeline would need to be laid across Russia's land segment to reach the northern Caspian Sea. Given that Russia has not been willing to invest even $1 billion in a short Iranian railway line to complete its North-South corridor for the transit of goods to Asian markets over the past two decades, it is highly doubtful that Russia would be willing to spend tens of billions of dollars to build a gas pipeline to Iran.
Owji’s expectation, therefore, appears to be highly unrealistic.
Myth of capital attraction
Iranian officials often said that over the past three years, the country has attracted $13 billion in foreign capital.
This figure, however, represents foreign investment permits issued by the government in the past three years, rather than the actual investments made by foreign companies or governments in Iran.
According to statistics from the UN Conference on Trade and Development (UNCTAD), Iran has attracted a total of $4.347 billion in direct foreign investment over the past three years. In comparison, this figure is eight times less than Turkey's foreign investment and fifteen and seventeen times less than that of Saudi Arabia and the United Arab Emirates, respectively.
Meanwhile, the statistics by the Central Bank of Iran show that the net capital account in Iran was negative $44.5 billion from March 2020 to December 2023.
In other words, capital flight from Iran over the past three years has been equivalent to ten times the amount of foreign direct investment attracted during the same period.
Capital flight from Iran exceeded $20 billion in the first nine months of the last fiscal year (March 20, 2023, to December 22, 2023), marking a historic record. The Central Bank has not yet published the net capital account status for the entire fiscal year.
While Russia continues to procrastinate in granting a $1 billion loan for the Rasht-Astara railway line, the Iranian state has expediently provided hundreds of suicide drones to Moscow over the last year for its military invasion of Ukraine.
As a result, Iran not only faced severe sanctions from Europe and the United States but also effectively lost the opportunity to continue nuclear negotiations for sanctions relief. This situation is exacerbated by Russia's imposition of preconditioned sanctions exemptions on trade with Iran and its reported takeover of Iran's oil, steel, and petrochemical markets in Asia, further diminishing Iran’s ability to negotiate for sanctions relief.