As Iran struggles with a major energy crisis, with businesses and government offices partially shut and remote learning under way in certain areas, strong and immediate government action is needed to stem the “significant” economic impact it is having, according to analysts.
The country has been struggling to cope with increased demand during the winter months and has already called on households to lower heating levels to avoid blackouts.
Last week, Iranian President Masoud Pezeshkian also apologised to the public in a local interview. “Unfortunately, this year, we are compelled to ask the public to show some restraint,” he said, adding, “we will work hard to ensure that such events do not occur next year”.
The current crisis stems from the government’s “inability to manage energy and petrol consumption costs effectively”, said Mahdi Ghodsi, an economist at The Vienna Institute for International Economic Studies.
In Iran, one litre of fully subsidised petrol costs about 15,000 rials or less than 2 US cents, according to the unofficial rate on Wednesday on currency exchange site Bonbast.
Last year, the fossil fuel subsidy per capita for Iran is estimated to be about $917.5, according to International Energy Agency estimates. Subsidies covering oil, electricity and gas increased to more than $154 billion in 2022, before falling to $81.8 billion last year, the IEA said.
Daily petrol consumption reached 111.3 million litres in the last Iranian fiscal year, which starts mid-March, up from 102 million litres the previous year, according to official data.
“This heavy consumption is coupled with significant government subsidies, which have become unsustainable,” Mr Ghodsi said. Long-standing issues such as underinvestment in power infrastructure have also led to the current situation.
Iran possesses vast hydrocarbon reserves – it was the fourth-largest crude oil producer in Opec last year and ranked as the world’s third-largest oil and second-largest natural gas reserve holder last year, according to the US Energy Information Administration.
However, despite being a major oil producer, the main reason for the imbalance in energy production and consumption in Iran is energy subsidies, said Mohammad Farzanegan, professor of Middle East economics at the Centre for Near and Middle Eastern Studies, Philipps-University Marburg in Germany.
“As a result of cheap energy, the energy intensity of production remains high, and there is less interest or incentive to improve energy efficiency,” Prof Farzanegan said. “It is also problematic to attract private investors and foreign direct investment in sectors where the government actively intervenes in regulating prices.”
Economic sanctions have also increased the political risk in Iran and raised the transaction costs for international projects, he added.
But while the Iranian regime has blamed sanctions for the crisis and that is a factor, the bigger issue is one of mismanagement, bad governance and “a regime that doesn't know what to prioritise”, said Alex Vatanka, senior fellow and director of the Iran programme at the Middle East Institute.
Dimming economic growth
Iran’s economy has already been struggling under crippling Western sanctions and while the economic impact of the power crisis is “significant”, it grows more severe as power cuts become longer and more frequent, said Mr Ghodsi.
“Power cut disrupts economies of scale, reducing efficiency not only during the outage itself but also in the recovery period once power is restored. This inefficiency compounds over time, particularly if the power cuts are unpredictable,” he explained.
While the economic cost of the power crisis has not yet been fully estimated, Prof Farzanegan cited a recent estimate by the former director of the Iran Chamber of Commerce in local media, which projected a loss of $110 million a day due to power cuts last year.
While there is talk about increasing fuel prices and cutting out subsidies, “energy is sensitive and … a lot of people rely on cheap energy”, Mr Vatanka said.
“Instead of suddenly increasing the price of energy, the government could have spent the last year or two educating the public about good practices when it comes to energy use. [People] have become used to almost free energy, but the government doesn't engage in education on those things. Instead, it educates about ideological issues. So again, it points to wrong priorities,” he said.
Subsidies can be reduced and removed, but the government will need to compensate for that, he explained. Energy efficiency can and should be improved, considering the amount of energy that is wasted in the country, but political and foreign policy change is critical for any change, Mr Vatanka said.
According to Prof Farzanegan, to rectify the situation, there is a need for energy subsidy reform and the removal of US sanctions.
“Both require a strong government, political will, and significant support from civil society. A large campaign within Iran is necessary to raise public awareness of the significant and costly effects that the continuation of energy consumption subsidies has caused.”
At the same time, the government needs to find a way to negotiate with the new administration in the US to lift the sanctions. The latter may “require difficult agreements”, he said.
To navigate the current crisis and restore stability, the government must take bold and decisive action, added Mr Ghodsi. It must “prioritise cutting unnecessary expenditures that do not serve the public interest”.
COMPANY PROFILE
Name: Grubtech
Founders: Mohamed Al Fayed and Mohammed Hammedi
Launched: October 2019
Employees: 50
Financing stage: Seed round (raised $2 million)
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
Evacuations to France hit by controversy
- Over 500 Gazans have been evacuated to France since November 2023
- Evacuations were paused after a student already in France posted anti-Semitic content and was subsequently expelled to Qatar
- The Foreign Ministry launched a review to determine how authorities failed to detect the posts before her entry
- Artists and researchers fall under a programme called Pause that began in 2017
- It has benefited more than 700 people from 44 countries, including Syria, Turkey, Iran, and Sudan
- Since the start of the Gaza war, it has also included 45 Gazan beneficiaries
- Unlike students, they are allowed to bring their families to France
Infiniti QX80 specs
Engine: twin-turbocharged 3.5-liter V6
Power: 450hp
Torque: 700Nm
Price: From Dh450,000, Autograph model from Dh510,000
Available: Now
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
COMPANY PROFILE
● Company: Bidzi
● Started: 2024
● Founders: Akshay Dosaj and Asif Rashid
● Based: Dubai, UAE
● Industry: M&A
● Funding size: Bootstrapped
● No of employees: Nine
The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
COMPANY%20PROFILE%20
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COMPANY PROFILE
Name: Mamo Year it started: 2019 Founders: Imad Gharazeddine, Asim Janjua Based: Dubai, UAE Number of employees: 28 Sector: Financial services Investment: $9.5m Funding stage: Pre-Series A Investors: Global Ventures, GFC, 4DX Ventures, AlRajhi Partners, Olive Tree Capital, and prominent Silicon Valley investors. Our legal advisor
Rasmi Ragy is a senior counsel at Charles Russell Speechlys, a law firm headquartered in London with offices in Europe, the Middle East and Hong Kong.
Experience: Prosecutor in Egypt with more than 40 years experience across the GCC.
Education: Ain Shams University, Egypt, in 1978.
The Voice of Hind Rajab
Starring: Saja Kilani, Clara Khoury, Motaz Malhees
Director: Kaouther Ben Hania
Rating: 4/5
Abu Dhabi GP schedule
Friday: First practice - 1pm; Second practice - 5pm
Saturday: Final practice - 2pm; Qualifying - 5pm
Sunday: Etihad Airways Abu Dhabi Grand Prix (55 laps) - 5.10pm
COMPANY%20PROFILE
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Results
5pm Maiden (PA) Dh80,000 1,400m
Winner No Riesgo Al Maury, Szczepan Mazur (jockey), Ibrahim Al Hadhrami (trainer)
5.30pm Handicap (PA) Dh80,000 1,600m
Winner Marwa W’Rsan, Sam Hitchcott, Jaci Wickham.
6pm Handicap (PA) Dh80,000 1,600m
Winner Dahess D’Arabie, Al Moatasem Al Balushi, Helal Al Alawi.
6.30pm Handicap (PA) Dh80,000 2,200m
Winner Safin Al Reef, Connor Beasley, Abdallah Al Hammadi.
7pm Wathba Stallions Cup Handicap (PA) Dh70,000 2,200m
Winner Thulbaseera Al Jasra, Shakir Al Balushi, Ibrahim Al Hadhrami.
7.30pm Maiden (TB) Dh 80,000 2,200m
Winner Autumn Pride, Szczepan Mazur, Helal Al Alawi.
Past winners of the Abu Dhabi Grand Prix
2016 Lewis Hamilton (Mercedes-GP)
2015 Nico Rosberg (Mercedes-GP)
2014 Lewis Hamilton (Mercedes-GP)
2013 Sebastian Vettel (Red Bull Racing)
2012 Kimi Raikkonen (Lotus)
2011 Lewis Hamilton (McLaren)
2010 Sebastian Vettel (Red Bull Racing)
2009 Sebastian Vettel (Red Bull Racing)
What is a calorie?
A food calorie, or kilocalorie, is a measure of nutritional energy generated from what is consumed.
One calorie, is the amount of heat needed to raise the temperature of 1 kilogram of water by 1°C.
A kilocalorie represents a 1,000 true calories of energy.
Energy density figures are often quoted as calories per serving, with one gram of fat in food containing nine calories, and a gram of protein or carbohydrate providing about four.
Alcohol contains about seven calories a gram.
A Prayer Before Dawn
Director: Jean-Stephane Sauvaire
Starring: Joe Cole, Somluck Kamsing, Panya Yimmumphai
Three stars
The Energy Research Centre
Founded 50 years ago as a nuclear research institute, scientists at the centre believed nuclear would be the “solution for everything”.
Although they still do, they discovered in 1955 that the Netherlands had a lot of natural gas. “We still had the idea that, by 2000, it would all be nuclear,” said Harm Jeeninga, director of business and programme development at the centre.
"In the 1990s, we found out about global warming so we focused on energy savings and tackling the greenhouse gas effect.”
The energy centre’s research focuses on biomass, energy efficiency, the environment, wind and solar, as well as energy engineering and socio-economic research.
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
Key findings of Jenkins report
- Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
- Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
- Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
- Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
At a glance - Zayed Sustainability Prize 2020
Launched: 2008
Categories: Health, energy, water, food, global high schools
Prize: Dh2.2 million (Dh360,000 for global high schools category)
Winners’ announcement: Monday, January 13
Impact in numbers
335 million people positively impacted by projects
430,000 jobs created
10 million people given access to clean and affordable drinking water
50 million homes powered by renewable energy
6.5 billion litres of water saved
26 million school children given solar lighting
