Iran Needs $80 Billion To Solve Natural Gas Shortage: Minister
Iran’s Oil Minister Javad Owji says the Islamic Republic needs some $80 billion in domestic and foreign investment to avoid natural gas shortage in winters.
Iran’s Oil Minister Javad Owji says the Islamic Republic needs some $80 billion in domestic and foreign investment to avoid natural gas shortage in winters.
On Tuesday Owji once again warned that the country would face a 200-million cubic meter daily shortage of natural gas this winter.
Speaking at a parliament session he said this amount is needed “in upstream and downstream to resolve the issue within the next three to four years,” something which is impossible due to lack of foreign investment.
Iran needs to develop its oil and gas sectors by technology from Western energy giants to boost production which is gradually falling. For instance, as natural pressure in the South Pars gas fields is dropping Tehran needs billions of either partnership deals or cash investments to build larger platforms to extract more gas.
More than 70 percent of Iran’s energy is supplied by natural gas and the South Pars field is responsible to provide around 75 percent of this amount, reiterated the oil minister underlining that the lack of investment to develop gas fields is the main cause of this shortage.
It was interesting to observe that Iranian officials and government-controlled media were claiming in August and September that as winter approaches in Europe, the West will need Iran's energy and might make more concessions in the nuclear talks.
Not only the oil minister but a host of other officials and local experts constantly highlight the need for foreign investments, but they have no say in the country’s foreign policy, which is the exclusive domain of Supreme Leader Ali Khamenei.
Director of Tehran Chamber of Commerce Investment Services says foreign investors are reluctant to enter a country in which even domestic investors cannot work and capital outflow is on the rise.
Speaking to ILNA News Agency, Faryal Mostofi said on Tuesday that apart from Western sanctions, lack of security in investment and economic freedoms in Iran have also dissipated investors’ enthusiasm to release funds, stating that Iran could become a suitable place for foreign investors if conditions were right.
Summarizing the reasons for the crisis, Mostofi added that “inflation, sanctions, mismanagement, corruption, and strict regulations” have forced even Iranians to invest their capitals in housing sector in countries like Turkey and the United Arab Emirates.
According to her, something between $30 to $100 billion capital has left Iran in the past ten years due to inability of government to control inflation, while countries like Afghanistan and Iraq have been able to fix it below five percent.
Since the Islamic Republic was established in 1979 Iran’s rate of growth has been relatively low averaging less than 3 percent per year, this comes as experts say it needs around six percent annual growth to solve its endemic unemployment problem.
It is not just the nuclear dispute and its resulting sanctions that prevent the involvement of Western firms, it is also Iran’s overall foreign policy as an anti-West ‘revolutionary’ state, with an unpredictable behavior and a closed economy.
Iran has the second largest natural gas reserves in the world, holding more than 17 percent of global discovered gas fields. However, without foreign investment and technology, it will become a natural gas importer while the US sanctions would not allow Western companies to have any business dealings with the country.
Fararu, which is a pro-reform website, interviewed Iranian economist Vahid Shaqaqi Shahri who said if the regime fails to clinch an agreement with the West over its controversial nuclear program and revive the JCPOA, the country may experience higher inflation that might bring its economic growth to zero in 2023.
Shaqaqi told Fararu that while Iran’s neighbors including Turkey and Saudi Arabia have experienced double-digit growths in the past few years, the economy of the Islamic Republic has shrunk in the face of sanctions and skyrocketing inflation.
Iran’s economy is almost completely state-run and the decision-makers in the country show no flexibility or interest in reform even though many warn the system needs drastic changes. The average annual inflation in the sixth months of the current Iranian year reached 42.1%, the Statistical Center of Iran announced in a report in September.
As the streets of many cities have turned into scenes of antigovernment protests since mid-September in the latest wave of anger at the totalitarian approach of the clerical regime towards cultural, political, and economic issues, there seems to be no glimpse of hope for any reforms by the authorities.
The people who are currently venting anger against the Islamic Republic in the streets and demand regime change are fed up with economic pressure and see a gloomy future for themselves; however, the government keeps cracking down, showing no interest in reforms.
In his Saturday interview with the Fararu news website, Shaqaqi said that the Iranian “economy has no more capacity to tumble down further.”
This university professor also referred to a recent report by the International Monetary Fund (IMF) which has forecast high energy and food prices and tougher economic conditions in 2023, warning that without “economic reforms, empowering the private sector, development of non-oil exports, and increase in investments,” Iran might see a more crippled economy next year.
Earlier this week, the IMF reported that with “Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook, global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023.”
This Iranian expert further noted that there are two more possible scenarios for the Iranian economy next year. “The optimistic scenario is that the JCPOA will be revived, and with the removal of the sanctions, the inflation rate will decrease to 20 percent and an economic growth of five percent could be achieved.”
With a slight increase in oil sales, Iran's economy has gained about 40 billion dollars from non-oil exports and imported a total worth of 45 billion dollarsin goods, Shaqaqi said, adding that the country has achieved economic growth of two to three percent, as predicted by the International Monetary Fund. However, he said, “if the conditions remain the same and sanctions are not increased,” one or two percent economic growth along with a 40 percent inflation can also be seen for Iran in 2023.
Iran’s economy is mostly influenced by political power. The government believes that in case of losing control over the economy, it will lose political authority.
A notable example is the Revolutionary Guard that plays a very significant role in the economy by monopolistic practices. Several cases of corruption and mega-size embezzlements have diminished popular trust in the regime.