Iran’s protests expose energy crisis no successor can escape

An opinion piece written by  Robin M. Mills, for The National, examines Iran’s latest wave of unrest through the lens of its energy and resource sector, arguing that while protests may challenge the political order, deep structural problems in oil, gas and water will confront any future leadership.

“Cut off the financial lifelines”, Reza Pahlavi, son of the deposed shah, told protesters in Iran from his exile in the US last January 16. He urged key industries to go on strike. A labour standstill in the petroleum sector was a central part of the overthrow of his father in 1979. 

Mills notes, however, that today’s Islamic Republic has insulated itself from a repeat of that vulnerability.

Iran is experiencing its fifth major protest wave since the 2009 Green Movement, and Mills describes it as the most violently suppressed. While the regime’s failures have fuelled anger, he argues that the oil industry is no longer Supreme Leader Ali Khamenei’s “Achilles heel”. The state learned from the shah’s downfall: Iran’s oil sector now requires fewer workers, permanent staff are politically vetted and relatively well paid, and contractors—though insecure—still earn more than average workers, reducing their willingness to strike.

Oil exports have recovered from a pandemic low of 0.82 million barrels per day in 2020 to about 1.74 million bpd last year, though still far below pre-sanctions levels. China remains Iran’s only significant paying customer.

According to Mills, these volumes are sufficient for the regime to muddle through, but corruption severely undermines the benefits. Iranian crude sells at steep discounts, and parliamentary testimony suggests that billions of dollars in revenue are either trapped abroad or diverted by regime-linked intermediaries.

Mills links these losses to broader economic instability. Sanctions have restricted Iran’s ability to repatriate earnings, while tighter US controls on Iraqi banking and the halt of gas exports to Iraq have strained finances further. The resulting currency collapse—more than halving the rial’s value against the dollar—has intensified inflation and popular discontent.

Looking ahead, Mills outlines several succession scenarios should Khamenei exit the scene, from overt IRGC control to a ruling council, or in an optimistic case, a democratic transition. Yet he stresses that all outcomes inherit the same structural challenges. Energy subsidies alone account for up to 15 per cent of GDP, encouraging waste and proving politically explosive to reform. Gas shortages, underinvestment in South Pars, and heavy pollution from fuel oil and low-quality petrol compound public grievances.

Economic recovery, Mills argues, depends on meeting domestic gas demand and easing sanctions to enable investment. Oil production could rebound with access to markets and capital, but ideological barriers and strong resource nationalism complicate rapprochement with the US.

Beyond hydrocarbons, Mills identifies water scarcity as an even greater threat. Mismanagement, over-extraction and IRGC-linked infrastructure projects have deepened shortages, particularly in poorer provinces where protests have been most intense.

Mills concludes in The National that subsidies, corruption and elite capture will be difficult to dismantle. Any future leadership, he argues, can secure public support only by offering credible solutions to Iran’s intertwined energy and water crises.

By Sabina Mammadli