Iran Blackouts Go away Trade in Tatters Forward of Trump’s Return

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(Bloomberg) — Iranian businessman Amin Samieepour is no stranger to power outages during his three-decade career, yet he can’t recall a worse time than the current run of blackouts immobilizing his kitchenware factory.

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“It’s terrifying to have electricity cut off during working hours, leaving your staff idle,” Samieepour, 42, said. “The current situation is at its most disastrous state, and it’s only going to get worse in the near future.”

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Since November, producers have been denied electricity for as many as two days a week as the aging grid staggers under international sanctions and lack of foreign investment. The regime is bracing for a harder road ahead, with incoming US President Donald Trump pledging maximum pressure and preparing a new sanctions package targeting the oil industry.

The string of power outages is Iran’s worst in decades and has hit large swathes of the economy, crimping key industries and pushing a country rich in energy resources further into crisis. Manufacturers already are reeling from a cocktail of sanctions, 30% inflation and a failing currency.

“I don’t feel optimistic about the future with this trajectory,” said Abdolkarim Masoumi, 36, who runs the Soren Chemical Co. supplier. “I’ve seriously thought about downsizing and, several times, even shutting down my business.”

At stake for the Islamic Republic isn’t just the survival of energy, steel and auto producers but also the theocratic regime underpinning the nation since the 1979 revolution.

The ruling clerics in recent years faced unprecedented levels of unpopularity, and that vulnerability is compounded by their rapidly diminishing regional influence amid Israel’s wars in Gaza and Lebanon, and Syria’s regime change.

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Even after the cease-fire agreement between Israel and Hamas, direct conflict with Israel remains a possibility. If Iran suffers a military strike on critical parts of its grid, nuclear facilities or other key infrastructure, the sanctions will hinder its recovery.

Blackouts cost the economy about $250 million a day, the Iran Chamber of Commerce, Industries, Mines and Agriculture estimated.

About 40% of steelmaking capacity sits unused, natural gas supplies to at least a dozen petrochemical plants are suspended, and gas flows to the cement sector were cut by 80%, the state-run Islamic Republic News Agency reported.

“The situation is the worst I’ve seen in the past 25 years,” Samieepour said.

The Purchasing Managers’ Index has dropped for nine straight months, according to figures published by the Iran chamber. It linked those declines to electricity shutdowns.

In addition, the percentage growth in gross domestic product is forecast to halve from now into 2027, according to the World Bank. Export growth also is expected to plummet.

“Iran’s energy crisis is part of a broader, domino-like economic collapse, where failures in one sector trigger cascading effects across others,” said Danial Rahmat, an independent analyst based in Tehran.

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Electricity consumption has more than doubled since 2005, and some argue that sizable gas subsidies encourage wasteful habits such as blasting air conditioners with the windows open.

At the same time, new generation capacity hasn’t kept pace because potential overseas investors want to avoid running afoul of US restrictions.

Energy Minister Abbas Aliabadi warned this month that Iran’s electricity shortfall will likely rise to 25,000 megawatts by midyear from 20,000 megawatts last summer.

“The reality is that there are energy imbalances,” Aliabadi told lawmakers Jan. 5, IRNA reported. “Diversifying output is certainly in our plans, but it requires time.”

The government has 14 short-term projects planned for summer, including work on fuel-oil units, easing network restrictions and increasing renewable-power capacity, he said. The minister didn’t give a price tag.

Iran has the world’s second-biggest reserves of natural gas but struggles to tap them. It faces a gas deficit of at least 200 million cubic meters a day, said Reza Padidar, vice president of the Oil Industry Federation of Iran. That’s almost equivalent to Germany’s average daily consumption.

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“The response to unprecedented international sanctions has been insufficient,” Padidar said. “Energy, once a driver of economic growth, has become a barrier.”

A major phase of the massive South Pars field took 18 years to finish because of financial squabbles and multiple rounds of ever-stronger sanctions.

France’s TotalEnergies SE made two attempts to help develop the site before withdrawing, leaving a domestic company to complete the job by taking a used platform from another area of the field.

Renewables are virtually non-existent. More than 92% of Iran’s energy supply comes from oil and gas, compared with 60% globally, the state-run Shana news agency reported Jan. 13.

A 1,000-megawatt nuclear plant operates in coastal Bushehr, and another being built in Khuzestan province is expected to produce 300 megawatts a day.

The 2015 deal with the US intended to prevent Iran from enriching uranium to weapons grade. In return, sanctions were eased.

But Trump withdrew from that in 2018, saying it wasn’t comprehensive enough, and reimposed penalties on energy, shipping and banking.

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Since then, the rial has weakened dramatically against the dollar, losing about 90% of its value on the unregulated, open market.

Strikes in the industrial sector are being reported. Pensioners, health-care workers and traders at Tehran’s centuries-old Grand Bazaar have all staged protests and walkouts in recent months.

Previous attempts by the government to raise gasoline prices triggered violent protests, most recently in November 2019.

Without some respite from penalties, the energy deficit likely will worsen. The country needs to spend about $15 billion annually by 2029 to address the shortages, an oil ministry official said in November.

The OPEC member’s oil exports revived under President Joe Biden, climbing 65% to an average of about 3.3 million barrels a day last year, according to a Bloomberg survey.

That may not last long after Trump’s inauguration Monday. There’s a general consensus among key advisers to squeeze Iran with sanctions on major players in the oil industry, Bloomberg News reported Jan. 16. Those may come as early as next month.

Making a new deal with Trump is a priority for Reformist President Masoud Pezeshkian, who considers it key for economic survival.

The government this month held a third round of talks with the UK, France and Germany on the issue, with the deputy foreign minister describing the Geneva sessions as “serious, frank and constructive” on X.

That potential gives Masoumi, the chemicals supplier, something hopeful to hang on to.

“With the new pragmatism the ruling system has shown, I think things can still improve,” he said, “unless, of course, bombs or missiles derail the path forward.”

—With assistance from Julian Lee and Elena Mazneva.

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