Iranwire – “The Iran of 2025 is a developed country, ranking first in the region in economy, science and technology, with an Islamic and revolutionary identity, giving inspiration to the Islamic world and playing a constructive and effective role in international relations.”
This is the preamble to a document entitled “Prospects for the Islamic Republic on the Threshold of 2025”, which Ali Khamenei unveiled 18 years ago.
Now that the appointed date is on the horizon, few will have failed to observe that the Islamic Republic of Iran of today is very far from the rosy picture painted by the Supreme Leader. Iran is, in fact, mired in a slew of crises rarely seen even among underdeveloped countries, let alone those officially termed upper-middle-income.
The Iran of 2021 is a landscape of blackouts. Unprecedented power outages up and down the country have disrupted people’s lives and inflicted vast economic and social damage on top of those they were suffering before.
What role has Khamenei himself, as the principal architect of Iran’s future for decades on end, played in this disaster?
Over the past 15 years Iran has put forward an absurd number of development plans. In 2005, four such plans were issued based on the above-mentioned “Prospects” document. Then there are the official National Development Plans, of which there have been seven so far.
Of top of these, Ayatollah Khamenei himself unveiled two other grandiose documents: the “Islamic-Iranian Model of Development” in October 2018 and the “Second Phase of the Revolution” in February 2019, published on the 40th anniversary of the Islamic Revolution. At this juncture, both of the latter manifestos seem like a joke.
In the “Second Phase” document, Khamenei announced: “The fruit of the efforts made over the past forty years is before our eyes: an independent country and nation; free, powerful, dignified, faithful; advanced in science; full of valuable experiences; confident and hopeful; with a pivotal impact on the region and great judgement in global issues; with a record of growth in scientific advances; earning high ranks in important sciences and technologies, such as nuclear science, stem cells, nanoscience, aerospace, and so forth; leading in expanding social services; excelling in promoting jihadi motivations among young people; leading in having an efficient young population, and many other honor-winning features, which are all the products of the Revolution, and the result of taking the revolutionary and jihadi direction.”
Yes, indeed: the fruits of the efforts by the Islamic Republic over the past 40 years are before our very eyes! A country that has lost all economic, social and political aspiration in a bonfire lit by the hallucinations of none other than the Supreme Leader.
Iran is now a country that cannot generate enough electricity to meet its basic needs. It has no means to boost the capacity of its power plants or launch new projects to address the shortcomings. Simply put, the government no longer has any funds to invest.
Investments by the so-called “private sector”, meanwhile, have not only not solved any of the problems but compounded the existing ones. Now the government also has to worry about finding the necessary funds to guarantee cut-price electricity to unaccountable legal entities, to what purpose nobody knows.
We can also forget about the development of renewable sources of energy, and of course foreign investment. Talking about foreign investment is a bitter joke in an isolated and sanctioned country like Iran, from which even the domestic capital is escaping.
But Khamenei has a one-track mind. In it, Iran is perpetually at war with an ill-defined “enemy”: one so powerful it has now forced almost the whole world, from Europe to Russia, China and Turkey, to agree to honor sanctions on Iran. And in Khamenei’s mind, it is the Iranian people who must bear the heavy cost of this war.
Sanctions and Blackouts
Iran has been under crushing sanctions for eight years out of the past 10. Factnameh’s recent review of official figures shows that sanctions have indeed played a direct and decisive role in the fall of economic indicators.
This, of course, is not unexpected. The main effect of sanctions has been the fall in oil exports and revenues, followed by the disruption to Iran’s commercial and banking transactions with the outside world. But what does this have to do with the electricity supply?
1. The Government’s Cashflow Crisis and a Drop in Investments in Electricity
In Iran, the government is the principal investor in the electricity industry. According to the available official figures, in 2017, around 60 percent of power plant capacity in the country was controlled by the state. More recent official figures than this are not available, but it has been reported that after the recent privatization drives, this ratio has been reversed: the private sector’s share of power plants has increased to around 60 percent.
In practice, this switch-over makes little difference because either way, for the moment at least, it is the government that pays for the electricity generated and sold by power plants. A fall in government revenue therefore plays a direct role in the development of the electricity industry. The inflation-adjusted official figures for 2020 and 2016 shows that the value of the Ministry of Energy’s budget for development alone has fallen by more than 40 percent in a few short years.
2. The Government and the Goals of the Sixth Development Plan
In recent days the government has come in for criticism because it failed to implement the redevelopment of power plants laid out in Iran’s Sixth Development Plan.
True, Article 48 of the plan stated that electricity generation should increase by 25,000 megawatts between 2017 and 2021, and it has not. But the same plan predicted that economic growth in Iran would be an average of eight percent per year in the same period, when Iran’s economy has in fact shrunk by 1.5 percent.
The same plan also predicted that the annual inflation rate would be below nine percent; last year it stood at over 30 percent.
The government’s available money does not even stretch to paying its own employees and retirees, let alone implementing development plans. Even if the government prints money and injects it into the economy, this will only add to inflation, and melt like ice in the unmitigated summer heat.
3. Sanctions and Disruptions to Operations
The government’s financial woes are only part of the story. The soaring price of the dollar, shortages of foreign currency and disruptions to the importation of much-needed equipment have also affected the electricity crisis. In other words, sanctions have disrupted repairs to both the electricity distribution grid and network.
Figures published in 2017 by the Ministry of Energy show that after sanctions first came into effect in 2012, the process of reducing electricity wastage came to a halt. But it picked up again after 2015 when there was hope that the sanctions would finally be lifted.
The figures for the years after 2018, when sanctions were re-imposed, are once again not available. But one can reasonably assume that this will have adversely affected the work to reduce the colossal amounts of electricity being lost to the network.
4. Flight of Foreign Investors
After the nuclear agreement was signed, there were reports that foreign companies were “rushing” to invest in renewable energy in Iran. Had the JCPOA remained in situ, Iran might well have resumed “normal” relations with other countries and some of these investments would have come to fruition by now. But this, of course, is not what happened.
Who Is Responsible for the Sanctions and Their Cost?
As mentioned, in the mind of the Supreme Leader of the Islamic Republic, there is no place for a resolution to the conflict with the “enemy”. After the nuclear agreement, Khamenei officially forbade negotiations with the US over any other issues.
Both he and the adventures of the Revolutionary Guards in the region played an important role in the American withdrawal from the nuclear agreement and the reimposition of sanctions. So too did his insistence on continuing nuclear activities – ostensibly, for the purposes of generating power for Iran.
After 2018, Khamenei repeatedly and obstinately rejected negotiations with the Trump administration. To all intents and purposes, he is similarly responsible for any ongoing obstacles to a renewed deal with the United States.
Does Khamenei Have a Solution?
In Khamenei’s mind the so-called “resistance economy” is the incantation that will solve all Iran’s problems. But “resistance economy” is a catchphrase, and nothing more. To this day, no-one knows what exactly he means by it.
On February 18, 2015, Khamenei issued another edict entitled “General Policies of the Resistance Economy” in which this magical phrase appeared surrounded by other buzzwords such as “jihadi”, “flexible”, “endogenous growth”, “creator of opportunities”, “productive”, “advanced” and “extrovert”.
“Jihadi” has no clear definition in this context. “Flexible” and “creator of opportunity” is not something the Islamic Republic has ever been known for. And “productive” is not the proper adjective for an economy that has been hobbled by recession for the past decade. Juxtaposing “endogenous” and “extrovert” is odd, and “advanced” is a ridiculous and, of course, sad description for an economy that cannot provide its people with enough electricity to keep cool in summertime.
As it happens, the General Policies of the Resistance Economy does mention electricity twice. What is interesting that it refers to electricity exports as a “weapon” with which to fight the sanctions on oil and gas – unaware, or perhaps trying to smother the fact, that not only was electricity never going to counter oil sanctions, but it would add another crisis to the myriad of crises into which the Islamic Republic has sunk.