Iran Losing Steel Export Markets, Industry Insider Says

Two Lebanese government sources said on Wednesday that Iran's ambassador in Beirut, Mojtaba Amani, has proposed an Iranian "gift" of fuel to Lebanon. 

If a deal is reached between Tehran and Beirut, the fuel deliveries would be Iran's first directly to the country after it previously sent some to its ally Hezbollah, a powerful armed group that is part of Lebanon's coalition government.

Lebanon has been struggling with outages for decades but its economic meltdown since 2019 has drained state reserves and slowed down imports of fuel for government plants, leaving most of the country with just one or two hours of state-provided electricity per day. The outages have forced households to rely on subscriptions to private generators that have skyrocketed as global fuel prices spiked.

Lebanon has natural gas fields in the Mediterranean Sea but a boundary dispute with Israel has so far prevented gas extraction that could help its economy.

The delivery of free fuel to another country is a sensitive issue in Iran where an economic crisis has impoverished millions of people, while the government has failed to reach a nuclear deal with the West, which could end economic sanctions imposed by the United States since 2018.

Economist Mehdi Pazouki says, "The government of President Ebrahim Raisi has been put at the disposal of the Imam Sadeq alumni who have no executive experience." Imam Sadeq University is known for its more than usual religious orientation.

Pazouki added in an interview with the centrist daily Ham Mihan on September 2 that "economic managers of the early years after the 1979 revolution had a far better performance than the current officials."

Meanwhile, the moderate news website Rouydad24 quoted Pazouki as having said in the interview that no foreign investment is likely to be made in Iran without solving the Islamic Republic's problems with the JCPOA and FATF. The economist was hinting that Iran needs to improve its ties with the West by reaching a nuclear deal and accept the terms of FATF, an international financial watchdog.

The Financial Action Task Force, whose evaluations of a country’s financial regulations can impact it ability to interact with the international financial system has black listed Iran and demanded legislation to improve transparency and a ban on financing of terrorism.

Pazouki added that the government's economic team behaves like an organized religious organization. "When you hand over a government ministry to someone whose only accreditation is having studied at the Imam Sadeq University and has no background in executive work, you will obviously leave the government face to face with economic problems," he said.

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Journalist Zaynab Ghobayshavi writing in Rouydad24 quoted critics who say Raisi's economic team cannot step up to its job and his aides lack coordination and a teamwork mentality.

Pazouki told Rouydad24 that Raisi’s economic ministers have yet to present an economic plan, but they lack a strategy. Nonetheless, the Raisi administration claims that the budget bill for the current year has been formulated based on the country's sixth development plan that was made under former President Hassan Rouhani while the new administration has been constantly criticizing its predecessor’s economic policies.

"If Rouhani's plans are bad, why are you still following them as your own policy?" Pazouki asked.

During the election campaign in 2021, Raisi had said that he has a 7000-page economic plan, but no one has ever seen even seven pages of that plan, the economist said. He then argued adding that lacking a plan, the Raisi Administration made one of the biggest mistakes in the history of the Islamic Republic, that is increasing the minimum wage by 57 percent overnight while the country was suffering from an inflation rate more than 40 percent. It also increased employment in the government sector by 38 percent.

Even some of Raisi’s political allies, such as hardline conservative politician Hedayatollah Khademi have charged that Raisi's ministers are not fit for their jobs and the President should fire them and demand operational plans from the remaining ministers.

Khademi went on to say that Raisi's ministers failed to meet any one of the nation's expectations during the past 13 months, and even if Iran reaches an agreement with the West, the current ministers will not be able to solve any of the country's problems.

In another development, lawmaker Somayeh Rafiei has also said that after 13 months in office, there is no coherence and coordination visible in Raisi's economic team.

Iranian lawmakers have repeatedly threatened to impeach Raisi's economic team, and tabled motions for their impeachment, but Speaker Mohammad Bagher Ghalibaf have so far stopped every motion, waiting for Raisi to fire them.

Amid nuclear talks with the West, Iran has hardened its position in recent days and government officials as well as its media have been suggesting that Europe is facing a winter energy shortage that Iran can help alleviate if a deal is reached and US sanctions lifted.

But the relatively independent Shargh newspaper in Tehran has published a report based on official statistics saying that shortages of gas and electricity cost Iranian businesses billions of dollars in losses in 2021-2022.

The loss equals 10 percent of Iran’s oil and non-oil exports that generate desperately needed foreign currency.

The government facing both a natural gas shortage and inadequate electricity generation decided not to reduce supplies to homes, which was common during the last years of the former administration. Instead, industries were deprived of electricity in peak summer months and gas in the winter.

Iran’s petrochemical sector needs natural gas to operate, and they sustained losses because of shortages. The other export-oriented sector, the steel industry needs a lot of electricity, and some plants were intermittently idle in the past 15 months.

Shargh quoted figures from the energy ministry saying that electricity imports from neighboring countries increased by 51 percent in June-July 2022, compared with the same period last year, while exports decreased by 60 percent.

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Iran holds the world’s second largest natural gas reserves, but its energy shortage is mainly due to two self-made problems, emanating mostly from its confrontational foreign policy that deprives the government from income and investments.

Iran’s gas production is gradually falling as natural pressure in its South Pars fields is dropping and it needs technological help from Western energy giants to build larger platforms with stronger pumps to get the gas out. This in turn needs either partnership deals or Iranian cashinvestments to the tune of $50 billion.

But because of its long-running confrontation with the West, primarily the United States, and its nuclear program seen as a serious threat, Iran has not been able to benefit from Western technology and investments. Recently, it is trying to import gas from Russia.

The other serious issue is insufficient electricity generation capacity, which is also largely due to lack of efficient technologies and money for investments. Domestic demand for gas and electricity has been rising, while production has been falling.

Lack of money, price controls and bad planning have also prevented the development of solar energy, which is suitable for a country with more than 300 sunny days in the year.

The rising demand for energy is due to extremely low rates for domestic consumers, which essentially amounts to subsidies that have been in place since the 1980s. The Islamic Republic has been reluctant to erase the subsidy that amounts to more than $50 billion a year because of its closed economic system run by the government.

As the government controls the energy markets and prices, offering very low prices to producers, there is little incentive to invest in power generation, including solar energy.

With an economic crisis prevailing since 2018 when the United States withdrew from the 2015 nuclear agreement and imposed sanctions, it is much harder for the government to reduce energy subsidies. When the government modestly raisied gasoline prices in November 2019 it led to nationwide anti-regime protests in which security forces killed at least 1,500 people.

Marandi published a series of tweets from his interview with Al Jazeera news channel on Saturday, saying, “Iran will be patient. The US under Obama systematically violated the deal and under Trump/Biden it imposed maximum pressure against innocent citizens... Winter is approaching and the EU is facing a crippling energy crisis.”

Emphasizing that “Iran won't accept ambiguities or loopholes in the text,” he said, “There should be no loopholes that can be used to undermine a deal. There are problems with a few words and the US can easily fix them.”

“The US domestic situation is a key reason why a nuclear deal has been allusive (elusive). While some EU governments have already asked Iran about oil as well as natural gas exports, Biden is fearful that foes will depict him and certain allies as weak,” he added.

Tehran is trying to sell the agreement as beneficial to Europe's energy crunch, regardless of the fact that even with no sanctions or restrictions on Iran’s exports, the country is unable to provide European countries with natural gas. 

Iranian media repeatedly talks about ‘Europe’s freezing winter” while it has almost nothing to do with Tehran’s crude oil exports, except generally helping to bring down oil prices. Europe’s need to replace Russian gas is a specific issue on its own that Iran cannot help with due to its own shortages. A nuclear agreement now cannot impact Iran’s ability to export natural gas for the foreseeable future mainly due to Iran’s huge domestic need.

In a Saturday rally among his supporters in Wilkes-Barre, Pennsylvania, Trump said, “Iran was dying to make a deal with me. I would have had a deal done with Iran one week after the election.”

Criticizing the possible financial benefits of such a deal for the Islamic Republic, he said that “now we’re going to pay them hundreds of billions of dollars, and they’re going to have nuclear weapons within a short period of time. Honestly, they can’t be stupid; they must hate our country.”

He also denounced Biden’s policies that are "allowing Iran to build a massive nuclear weapon.”

Moreover, Trump praised China’s President Xi Jinping for ruling the Chinese people with an iron fist, remarks that prompted Mohammad Marandi, an advisor-cum-spokesman for Iranian negotiators, to respond. “Your regime has bloodied much of the world with an iron fist,” he tweeted on Sunday. 

Trump concluded by repeating his chorus, saying “Iran, China, Russia and North Korea weren't going to do a thing against us just two years ago,” but now “we're a nation that is no longer respected or listened to around the world.” 

Hassan Rouhani, the only Iranian president who has ever spoken to a US president, was quoted as saying that he had a chance to talk with Trump when he was in New York in 2019. Rouhani talked with Barack Obama over the phone in September 2013. 

On Thursday, September 1, a bipartisan group of 50 US lawmakers sounded the alarm on a looming agreement with Iran,urging the administration to immediately consult with Congress.