After a short respite, Iran’s currency, the rial, plummeted on Monday to its lowest-ever level against the US dollar and other major currencies, just two days before the Norouz (Nowruz) holiday.
The Iranian currency had fallen to 605,000 rials per dollar earlier this month and then briefly rose to 590,000. However, despite a US sanctions waiver last week, the rial began to fall when the markets re-opened on Saturday after the Islamic weekend on Friday.
The rial was trading at 607,000 per dollar Monday afternoon local time, with each euro fetching more than 660,000 and the British pound 773,000.
The Biden administration renewed a sanctions waiver for Iraq to import electricity and natural gas from Iran, and also allowed Baghdad to pay Tehran with euros and dollars, providing a few billions of dollars to the crippled Iranian economy. However, local investors and ordinary people expect the economic crisis to deepen and inflation to rise. They buy US dollars and other major currencies to protect their capital and savings. Iran’s current annual inflation rate hovers around 50 percent.
The United States imposed tough sanction in 2018, when former President Donald Trump withdrew from the 2015 JCPOA nuclear deal. The Biden administration initiated talks in early 2021 to restore the agreement, but Iran refused a proposal in mid-2022, increasing its uranium enrichment to near weapons grade.
Iran’s proxies are also attacking Israel and international shipping in the Red Sea, while it also supplies weapons to Russia for its invasion of Ukraine.
In a statement released on Sunday, Hossein Mozaffar, appointed as the head of a committee investigating violence during the protests by President Ebrahim Raisi, claimed that the committee's findings suggest that "certain elements" instigated violence amidst what were otherwise peaceful protests. Mozaffar further stated that security forces were responsible for only "a few" isolated incidents of violence against protesters.
Mozaffar claimed such violations are in no way the result of a policy of the government and should be attributed to individual agents who have been legally dealt with.
UN, NGOs hold regime accountable for atrocities
Contrary to the regime’s narrative of events, a United Nations fact-finding mission established in November 2022 has found that authorities committed “crimes against humanity” – and that “security forces used unnecessary and disproportionate force which resulted in the unlawful killing and injuries of protestors”. The preliminary report, released on March 8, also noted a pattern of extensive injuries to protesters’ eyes that caused the blinding of scores of women, men and children including bystanders.
The full 400-page report is scheduled to be published this week.
In a report released March 6, the London-based Justice for Iran, a human rights NGO, contended that authorities deployed special combat forces and armed security forces to suppress the protests, resulting in "crimes against humanity.”
Scores of protesters were blinded with pellet guns aimed directly at their faces, and many of the tens of thousands who were arrested were tortured. Many of the victims have also claimed they were sexually assaulted during interrogations and in prison.
The protests that spread across Iran were sparked by the death of the 22-year-old Mahsa (Jina) Amini in the custody of the morality police hijab watchers on September 16, 2022 and lasted for several months.
Based on a coroner’s report in October 2022, the statement stressed that Amini’s death was not caused by blows to the head and limbs and instead attributed it to “underlying medical conditions”.
Last week, the UN fact-finding mission said it has "established the existence of evidence of trauma to Ms Amini's body, inflicted while in the custody of the morality police". This along with the "patterns of violence by the morality police" satisfied the mission that Amini was subjected to physical violence that led to her death.
Regime labels protesters as ‘rioters’
While the UN report, and other NGO’s, have often characterized Iranian protesters as peaceful – Mozaffar’s statement instead, refers to protesters as “rioters”.
The country’s Supreme Leader Ali Khamenei has also consistently dismissed the characterization of the uprising as peaceful, instead arbitrarily labeling them as "rioters" and accusing them of engaging in "terrorist acts."
In the first official figure, issued by the authorities in Iran, Mozaffar said a total of 202 civilians were killed during the protests. In addition, he accused “rioters and terrorists” of killing 54 of the security forces as well as 25 civilians during such operations.
Mozaffar also alleged that 90 of the other citizens killed during the protests were carrying melee weapons or firearms and were killed “during terrorist operations, combat, or attack against military and law enforcement bases and vital infrastructures and law enforcement agents.”
Human rights organizations have compiled the names of at least 551 protesters, including 68 children, who were killed by security forces.
Fazeli, responding to a hypothetical scenario during an interview with Khabar Online website in Tehran regarding a potential US attack on Iran's infrastructure, estimated a loss of roughly $60 billion specifically in the area of power generation. The question stemmed from alleged suggestions by some Iranian opposition figures urging US officials, particularly during the Trump Administration before 2020, to target Iran's infrastructure.
The sociologist expressed skepticism about whether the Iranian people would welcome such an attack. "I would not readily embrace such a notion. Do those proposing such actions believe that the world will rebuild power plants for Iranians after an attack?" questioned Fazeli.
Most among Iranian opposition groups and individuals demand regime change in Iran and demand that sanctions be maintained and strengthened against the Islamic Republic. A few might have even suggested in the past that military strikes may hasten the regime’s fall.
Fazeli went on to remark, "I cannot claim that my own over 150,000 followers represent the entirety of the Iranian populace." He emphasized, "Advocating for strikes on Iran and speaking in such terms normalizes malevolence. An attack on Iran is unequivocally evil. History shows that attacks on countries have never brought happiness to their people."
"If such an attack were to occur on any country, it would regress to the Stone Age; without electricity, there would be no water, internet, television, refrigeration, or anything," the sociologist remarked, continuing, "America attacked Iraq 20 years ago. Inquire with those who pilgrimage to Iraq. Ask them if Iraq is a developed country. Also, consider Libya. Even after 30 years since the war with Iraq, Khoramshahr and Abadan in Iran have yet to be rebuilt." Fazeli reiterated, "In the 21st century, the destruction of infrastructure signifies eternal ruin." Additionally, he suggested that reforming the system and rectifying the status quo without further fatalities and destruction is less costly than a destructive attack that leads to foreign humiliation. "We should not transition from a dire situation to absolute evil."
Moreover, Fazeli had previously drawn parallels between Iran's current state and the pre-revolution period of 1979, noting a high demand for political participation coupled with limited opportunities, which he believes could lead to instability.
Transitioning from hypothetical scenarios to real-world negotiations, former Iranian influential lawmaker Heshmatollah Falahatpisheh asserted that US-Iran talks primarily served to assuage President Biden's concerns about the upcoming election. Falahatpisheh disclosed that the discussions in Oman aimed to address Biden's electoral worries, with the US agenda dictating the terms while Iran had minimal input.
Falahatpisheh lamented missed opportunities for détente between Iran and the US, suggesting that Tehran sacrificed potential reconciliations with America over its involvement in conflicts like Ukraine. Despite ongoing talks in Oman facilitated by Omani intermediaries to curb Houthi attacks on Red Sea shipping, Falahatpisheh observed that Iran had made few gains.
The prospects for Iran remain bleak, with scant progress made in negotiations. However, amidst these discussions, Iraq secured approval from Washington to pay in hard currency for Iranian electricity and natural gas it imports.
These contracts, announced on Sunday, aim to increase the country’s oil production capacity by 200,000 barrels per day. However, most of the contracts are associated with a highly complex project that has awaited Western technology for years.
The largest of these contracts involves the development of the Azadegan oil field, which is shared with Iraq (known as Majnoon in Iraq). China's Sinopec began work on this field but left it half-finished in 2018 after the United States imposed sanctions on Iran. Azadegan is Iran’s largest oil reserve, but its structure is extremely complex, with only a 6% recovery rate. In simpler terms, under normal conditions, only 6% of its oil reserves can be extracted, leaving 94%, equivalent to 31 billion barrels worth $2.6 trillion, inaccessible without advanced Western technology.
On March 17, the Iranian oil ministry signed an $11.5 billion contract with 11 domestic firms, led by Advand Azadegan Company. This entity, established only in December 2022, lacks a significant track record in oil exploration and extraction. Another contract pertains to Masjid Soleyman, Iran's oldest oil field, which began producing oil 113 years ago but has faced a significant decline in production. Despite still holding 5 billion barrels of oil reserves, it requires increased pressure and recovery rate enhancement.
Masjedsoleyman's productivity has declined sharply from 170,000 b/d in 2017 to 5,000 in 2023. The new contract aims to add only 9,000 b/d to the current level, with 80% of its reserves remaining untapped. Iran's oil fields, with 650 billion barrels of oil in situ reserves, typically have a recovery rate of about 20%, highlighting the need for advanced Western technology to boost extraction rates.
Each 1% increase in the oil recovery rate translates to $550 billion more in revenue for Iran. However, it remains unclear what technology domestic companies will employ for these developments. Moreover, the question arises: if domestic firms possess this capability, why were these complex fields not entrusted to them earlier?
About 80% of Iran’s active oil fields are in the latter half of their life cycle, experiencing an annual productivity decline of 8-12%. To maintain production levels, Iran requires 300 million cubic meters of gas injection into these fields, yet it only injects 30 mcm/d due to natural gas shortages.
Other four contracts
In addition to these two fields, contracts for the development of Azar, Somar, Saman, and Delavaran oil fields will also be signed with domestic companies. Previously, Iran had contracted the development of the Azar oil field with Russia's Gazprom, but the company's delays led to the cancellation of the contract last year. Similarly, over two decades ago, the government had signed the same contract with IRGC’s Khatam-al Anbiya Construction Headquarters, yielding no results. Subsequently, a memorandum of understanding was signed with Polish PGNiG in 2017, also without any tangible progress.
Iran’s oil ministry announced the signing of three contracts to develop the Somar, Saman, and Delavaran oil fields on March 17. However, Mehdi Heidari, CEO of the Iranian Offshore Oil Company, responsible for operating these fields, stated in June 2022 that domestic companies were already engaged in their development.
$20-billion worth gas contract
Iran's Oil Ministry finalized a $20-billion agreement with multiple domestic firms on March 10 to erect 28 platforms, each weighing 7,000 tons, and install 56 compressors to enhance pressure at South Pars. This move is made despite Iranian companies' lack of experience in manufacturing such equipment, and even Chinese firms lack the requisite technology. Chinese CNPC, previously part of the Total-led South Pars Phase 11 development consortium, exited the deal a year after Total. Notably, half of the $5-billion contract value for the South Pars Phase 11 development was allocated to constructing a 20,000-ton platform with two massive compressors, a task surpassing the capabilities and technological know-how of the Chinese company.
Until recently, the wellhead pressure in the Iranian sector of South Pars remained steady at an average of 210 bars. However, since 2023, its pressure has started declining by 7 bars annually, resulting in a loss of 10 bcm each year. Significant pressure fall in Phase 12, the largest phase of South Pars, has already begun in recent years, with output levels declining from 65 mcm/d in 2018 to the current 43 mcm/d, according to a report from the National Iranian Gas Company, as reported by Iran International.
Iran had ambitious plans to produce 85 mcm/d of gas from Phase 12 by launching three platforms. However, due to erroneous drilling engineering at the location of the third platform, a substantial portion of its production turned out to be brackish water instead of natural gas. Consequently, production from this phase was slashed to 65 mcm in 2018 and dropped to 34% in 2023. Ultimately, Iran relocated the third platform from Phase 12 entirely to Phase 11 of South Pars last summer.
Across the 24 phases constituting the Iranian section of South Pars, approximately 10 wells have encountered engineering mishaps, resulting in the production of more brackish water than gas. In an effort to salvage production levels, Iran initiated Phase 11 of South Pars in August 2023 and launched a drilling spree. Additionally, the Iranian Ministry of Petroleum inked a deal in November 2023 to drill 35 new wells with domestic companies. However, while additional drilling may sustain gas production levels from South Pars in the short term, it is anticipated to hasten pressure decline in the Iranian section.
Iran's only recourse lies in the installation of 20,000-ton platforms equipped with massive compressors—a technology monopolized by Western companies. Currently, all 24 phases of the Iranian side of the field are operational, leaving no room for the introduction of a new phase to bolster production or offset output declines from other phases.