Iran Faces Unprecedented Energy Crisis: Industrial Sectors Shaken by Severe Shortages
Power cuts in Iran have reached unprecedented levels, severely impacting the country’s critical industries and threatening their ability to pay workers and maintain operations. The ongoing energy crisis has led to significant financial losses, particularly in the steel sector, as highlighted by Amir Kashani, the head of the Isfahan Chamber of Commerce. He estimated that the steel industry alone is losing around $4 billion annually.
In a recent interview with state television, an official from the Abbas Abad Industrial Compound in southeastern Tehran revealed that industries in the region are now experiencing power outages for up to 14 hours a day. This industrial area houses numerous factories that manufacture electronic and household appliances, car parts, plastics, and dairy products.
Mohsen Zabihi, the coordination deputy of TAVANIR, Iran’s state-owned energy company, shared insights on the current situation. On December 15, he stated that low winter temperatures combined with increased domestic gas consumption have led to severe fuel shortages for power plants, especially in northern Iran. As a response to the crisis, industrial units have been mandated to:
- Reduce electricity consumption by 50% from 6 am to 5 pm
- Cut down usage by 90% from 5 pm to 12 am
- Limit consumption to 70% until 6 am the following day
The ongoing disruptions in electricity supply are jeopardizing jobs, as many workers face the threat of unemployment. Chief Justice Gholamhossein Mohseni-Ejei has acknowledged the severe challenges production companies are encountering, including:
- Cash flow problems
- Inability to pay employees due to power shortages
Producers have reported that these power cuts are not only affecting their operations but also damaging their machinery and products. For instance, poultry farmers have experienced extensive losses due to the deaths of young chickens, while dairy producers are struggling with spoiled products during outages.
Amidst the economic decline over recent years, strikes by workers protesting low wages and delayed salary payments have become increasingly common. If the energy situation continues to deteriorate, the likelihood of protests could rise, prompting Mohseni-Ejei to brief security and intelligence officials to prepare for potential unrest reminiscent of the nationwide protests in 2019.
It is important to note that approximately 80% of Iran’s electricity is generated from fuel, and the private sector owns around 65% of fuel power plants. However, many companies classified as private are either wholly or partially owned by state entities, including Bonyad-e Shahid, Bonyad-e Mostazafan, and state-owned banks like Bank Sepah.
Transparency remains an issue, as data regarding electricity production, profits, and losses from fuel power plants is scarce. Experts have indicated that these power plants have been incurring significant losses since 2018 due to various factors, including the government’s strict price controls and failure to settle debts with these facilities.
Iran’s Minister of Energy, Abbas Aliabadi, recently disclosed that a considerable number of organizations and individuals have been exerting pressure on the electrical grid through illegal Bitcoin mining operations. Notably, some of these entities include state bodies, such as the Revolutionary Guards (IRGC). This illegal activity compounds the existing challenges faced by the energy sector, including the deterioration of power plants and the government’s inability to stockpile sufficient fuel for winter operations.
As the situation in Iran escalates, the potential for widespread industrial disruption and social unrest looms large. With industries grappling with power shortages, the need for a sustainable and transparent energy solution has never been more urgent. Industry leaders and government officials must collaborate to address these pressing issues to stabilize the economy and safeguard the livelihoods of countless workers across the nation.
