Iran's energy crisis is not solely a result of international sanctions but also stems from years of mismanagement and underinvestment in infrastructure.
The government's heavy reliance on energy subsidies has created a culture of entitlement among citizens, complicating efforts to implement necessary reforms.
The ongoing energy shortages could have broader implications for Iran's regional stability, especially amid rising tensions with neighboring countries.
If the Iranian government fails to address the energy crisis effectively, it may lead to increased social unrest and protests similar to those seen in 2019.
Continued economic isolation could hinder Iran's ability to modernize its energy infrastructure, exacerbating the crisis in the long term.
The introduction of unsubsidized fuel prices may lead to a temporary relief but could also alienate lower-income citizens, increasing the risk of public discontent.
Iran Faces Severe Energy Crisis Amid Sanctions and Mismanagement
Iran is grappling with a significant energy crisis, characterized by periodic power cuts and severe fuel shortages, as reported by the Financial Times. Despite possessing the third-largest oil reserves and the second-largest natural gas reserves globally, the country is experiencing daily power outages lasting up to two hours. This situation has been exacerbated by the harsh winter and a sudden spike in household gas demand, alongside the government's decision to halt heavy fuel oil burning at power plants to combat pollution.
Economic Burdens and Government Response
The Iranian government has been struggling with a serious financial deficit, leading to reliance on the National Development Fund, which is intended to safeguard oil revenues for future generations. President Masoud Pezeshkian highlighted the challenges in paying salaries and the burden of supporting excessive energy consumption without economic returns. With fuel prices among the lowest in the world—less than 3 US cents per liter—massive subsidies have created a perception among Iranians that they are entitled to cheap energy. In 2022 alone, the government spent approximately $163 billion on energy subsidies, accounting for over 27% of the country's GDP.
Future Outlook and Potential Protests
As the energy crisis deepens, the government has begun selling high-quality gasoline at unsubsidized prices, targeting wealthier citizens. Additionally, a gradual energy pricing system has been introduced to curb excessive consumption among affluent households. However, any further price increases could trigger public unrest reminiscent of the violent protests in 2019 following a sudden fuel price hike. With a projected daily deficit of 260 million cubic meters of natural gas this winter, analysts warn that the crisis may worsen unless Iran can resolve its economic isolation and improve relations with the international community.
