Iran's energy and pollution crisis wreaks economic damage

Government offices, schools, and universities in Tehran were shuttered on Thursday as the country's ongoing energy crisis escalated in a week of shutdowns across Iran.

Tehran's Governor Mohammad Sadegh Motamedian said closures of facilities this week have had little impact on reducing energy consumption or alleviating pollution.

"The closures have merely shifted the crisis from one point to another," he said, adding that they had led to more traffic, higher gasoline consumption, and, consequently, increased pollution.

The crisis has been unfolding across Iran. Ahmad Mousavi, CEO of the electricity distribution company in Golestan province, said that only a 10% decrease in consumption was seen after four-day closures.

The closures, which began earlier this week, are part of a broader set of measures taken across the country to combat both air pollution and the ongoing energy crisis.

It has seen the shutdown of 390 public and private swimming pools in Tehran alone. Additionally, industrial units have been forced to operate at reduced capacity, with small industrial units now working only two to three days a week due to ongoing energy shortages.

The economic cost of the closures is substantial for a country in the midst of the worst recession since the founding of the Islamic Republic, with losses estimated at 50,000 billion rials (over 63 million dollars) per day.

Industries face full wage payments despite significantly reduced working hours, and businesses are struggling to absorb the financial burden of both energy shortages.

The ongoing disruptions are also expected to exacerbate budgetary challenges for the government, which has projected a 39% increase in tax revenues for the next fiscal year—a target that may be difficult to meet given the widespread economic losses.

With the energy crisis showing no signs of easing, in spite of Iran's having one of the world's largest natural gas reserves and vast oil reserves, the situation is expected to worsen if international sanctions and domestic mismanagement continue to stifle necessary investment in the energy sector.

Energy expert Narsi Ghorban estimates that $250 billion is required to address oil and gas infrastructure issues, with an additional $19 billion needed for the electricity sector.

The looming threat of a return to stricter sanctions, particularly with the return of Donald Trump who has promised "maximum pressure" in his Iran policy, adds further uncertainty to Iran’s already fragile economic outlook.