Sanctions-hit Iran turns to local firms to boost vital gas production

Esmail Baghaei, the ministry's spokesperson, responded to a reporter’s question during his weekly briefing on Monday, saying, “I will answer your long question with a short response: No letter has been received.”

President Trump revealed on Friday that he had sent a letter to Khamenei, offering negotiations while warning of military consequences if talks failed. Speaking to Fox Business Network, Trump said, “There are two ways Iran can be handled: militarily or through a deal. I would prefer to make a deal.”

The next day, Iran’s Supreme Leader Ali Khamenei, in a speech, made no mention of a letter from Trump but declared that the Islamic Republic would not negotiate with "bullying" powers. Iranian Media and observers interpreted this as an indirect response to Trump's demand for talks.

Trump’s explicit threat—both in his public statements and the reported letter—that the United States might consider military action if Tehran refuses genuine negotiations has put Khamenei under pressure to deliver a clear response. Whether the denial of receiving a letter is intended to delay such a response remains uncertain.

It is also possible that Trump sent a message rather than a formal letter, using intermediaries such as Russia or Qatar. This could allow Tehran to deny having received a letter and avoid the pressure to publicly respond.

Abbas Golroo, a member of the Parliament's National Security and Foreign Policy Commission, told Borna News Agency in Tehran on Monday that he had no precise information on Trump’s letter and suggested that what was being referred to as a letter was likely a message.

It is entirely possible that Trump sent a message in some form and that Iran may have already responded through indirect channels or intends to do so, while maintaining the pretense that no letter was involved.

In any case, the foreign ministry spokesperson condemned Trump's threats of keeping a military option on the table. “Various Iranian officials have spoken on this matter. The threat of using force is a criminal act under international law,” Baghaei said.

Iran, under intense economic pressure and a weakened regional position, also sees Trump’s maximum sanctions policy as a coercive tactic. Last month, when Trump reaffirmed his maximum pressure strategy, Tehran similarly rejected negotiations, citing its refusal to engage in talks under duress.

Tehran has long sought sanctions relief as a condition for engaging in talks. During the Biden administration, when indirect negotiations lasted more than a year, Washington informally eased enforcement, leading to a significant surge in Iran’s oil exports and nearly $100 billion in additional revenue.

The projected shortfall has fueled concerns over worsening blackouts and mounting pressure on the government to address the crisis.

Ali Nikbakht, chairman of Iran’s power plant association, estimated a 25,000-megawatt electricity deficit next year, which begins on March 21—roughly one-third of the country’s total consumption.

“We need to expand capacity by 6,000 megawatts annually, but next year we won’t even reach a third of that,” he said, adding that this year’s 20,000-megawatt shortage will persist. Several power plants, he noted, may be unable to operate during the summer due to financial constraints.

His remarks stand in contrast to Energy Minister Abbas Aliabadi, who insisted last month that Iran remains a major player in the global power industry.

“The Islamic Republic has secured a leading position in electricity production and equipment exports,” he said, adding that government planning would prevent major disruptions next summer.

However, power shortages have already led to unplanned, widespread shutdowns in recent months in the likes of schools and government buildings in massive swathes of the country.

Government spokesperson Fatemeh Mohajerani said last month, “Shutting down offices isn’t a solution, but a necessity. We had to choose between keeping offices open or preventing people from freezing.”

In parliament, lawmakers have voiced frustration over the outages. Jalil Mir-Mohammadi, an MP from Taft, said, “Continuous blackouts are damaging household appliances, while cuts to irrigation wells are devastating farmers.”

Rahmatollah Norouzi, another lawmaker, urged the energy minister to address the crisis in parliament.

The issue has drawn international attention. On February 19, US President Donald Trump reshared a post by journalist Ashley Rindsberg on Truth Social, citing a New York Times report on Iran’s blackouts. “This is how regimes fall,” the post read.

With summer approaching, Iran faces mounting challenges in managing an energy crisis that threatens homes, businesses, and political stability.

Mostafa Rajabi Mashhadi, Tavanir's CEO, told state media that the confiscated mining rigs consumed an estimated 800 megawatts of electricity.

He compared this to the 1,000-megawatt capacity of the Bushehr nuclear power plant, highlighting the significant strain the mining operations place on the national grid.

"Unfortunately, illegal use of the electricity network still occurs in the country," Mashhadi said, calling for increased cooperation with the Economic Security Police to identify and confiscate remaining illegal miners.

Under Iranian law, possession of unregistered cryptocurrency mining equipment can result in confiscation of the devices and fines of up to three times their value.

Tavanir's deputy for transmission and foreign trade estimated that approximately 700,000 illegal mining rigs are still operating in Iran, consuming around 2,000 megawatts of electricity.

The crackdown comes as Iran faces increasing pressure on its electricity grid, exacerbated by factors such as rising temperatures and increased industrial activity. It has led to mass closures of government offices, banks, and schools across most of Iran.

Earlier in the day, Iran's Power Plants Trade Association Chairman Ali Nikbakht predicted a 25,000-megawatt electricity deficit for next year, representing one-third of national consumption.

The capital Tehran’s water supply is particularly strained, with reservoirs at their lowest levels in years.

“The situation at key dams is concerning,” said Mohammad Javanbakht, deputy energy minister and head of Iran’s water resources management company.

“With a 47 percent drop in rainfall in Tehran province, the Lar, Latian, Mamloo, and Karaj dams, which supply much of the city’s drinking water, have seen significant declines," he added.

In recent weeks, images and videos of receding water levels at Tehran’s reservoirs have circulated widely, fueling public concern over worsening shortages.

In a report on the state of stored water behind dams, the Ham-Mihan newspaper wrote on Sunday: "The situation of the country's dams is so critical that water shortages and rationing will occur earlier than summer, and the state of Tehran's water resources has reached a crisis level unprecedented in recent years."

On Friday, Tehran’s water and wastewater company, Abfa, announced that water consumption had spiked 20 percent, reaching a record 48,000 liters per second. Officials attributed the surge to Iranian New Year preparations.

According to Abfa, rainfall since the start of the current water year has been the lowest in 57 years. “Without additional rainfall, current reserves should meet demand for at least the next three months,” it said.

The energy crisis, marked by widespread electricity shortages and gas deficits, has also disrupted industries across the country. Ageing infrastructure, international sanctions, and poor management have compounded the problem, leading to the shutdown of approximately 80 power plants and closure of businesses.

During the winter, Iran faces a daily shortfall of at least 260 million cubic meters of gas, further straining the electricity supply.

Iran has vast oil and gas reserves, much of which it cannot tap due to US-led sanctions which stall investment and technology improvement.

Sanctions are having an impact on the trade link by increasing costs and logistical hurdles, Bloomberg reported, citing Chinese refinery executives and shipping analysts.

Private Chinese refineries, which are the primary buyers of Iranian crude, have faced supply disruptions in recent weeks due to seller defaults, Bloomberg reported, citing industry sources.

While no specific reason was given, refinery executives attributed the issues to rising expenses and logistical challenges caused by US sanctions.

Washington has blacklisted more than two-thirds of the 150 vessels that transported Iranian crude last year.

The sanctions announced on February 24 followed similar measures by the US Treasury in late 2024, targeting ultra-large crude carriers in Iran's shadow fleet.

More than half of the tankers sanctioned by the United States have ceased operations outside Chinese or Iranian terminals, an investigation by Iran International revealed last month.

The increased restrictions have led to record-high freight costs, with the chartering rate for a non-sanctioned supertanker moving Iranian oil from Malaysia to China reaching up to $6 million—an increase of 50% from last year, Bloomberg reported, citing traders.

Some Chinese port authorities are also taking precautions. Shandong Port Group, which operates in a key refining hub, recently advised against handling blacklisted tankers, Bloomberg's report said.

Despite these obstacles, flows surged to a four-month high last month, partly due to a backlog of delayed cargoes, Bloomberg said.

However, an increasing number of ship-to-ship oil transfers are being conducted in "dark" mode, where vessels switch off their transponders to avoid detection, Bloomberg reported, citing satellite images and analysts.

In the waters off Malaysia, a key hub for Iranian crude shipments, up to seven such transfers were observed in a single day last month. Analysts noted that most of these operations were entirely "dark," indicating that shippers are taking greater precautions as Washington signals increased enforcement efforts.

On Wednesday, Reuters reported that the Trump administration is considering a plan to inspect Iranian oil tankers under an international accord designed to curb the spread of weapons of mass destruction.

Anoop Singh, the global head of shipping research at Oil Brokerage Ltd, told Bloomberg that financial institutions working with private Chinese refiners importing Iranian oil may come under fresh scrutiny. He added that Washington could choose to pressure countries such as India and the United Arab Emirates, where key shipowners and dark fleet operators are based.

He said that so far, the US has focused its sanctions on ships and owners, but the market has managed to create workarounds. “However, there are more critical parts of the network to target, from banks to governments to flag states and insurers — and regulatory avenues to explore,” Singh told Bloomberg.