Oil, gas and Iran economic analyst
The latest Statistical Review of World Energy published by the Energy Institute paints a troubling picture of Iran’s energy sector: a country with some of the world’s largest oil and gas reserves is increasingly struggling to meet its own energy needs.
The report shows a sharp slowdown in the growth of electricity generation and natural gas production at a time when Iran faces widening shortages of both.
Iran’s energy demand has continued to rise, driven by population growth, industrial consumption and heavily subsidized domestic prices. Analysts estimate the country needs annual increases of around 7% in electricity generation and 5% in natural gas production simply to keep pace with demand.
Years of underinvestment, delayed infrastructure projects and international sanctions, however, have left supply lagging behind consumption, creating electricity and gas shortages exceeding 20% during peak periods.
According to the Energy Institute, Iran generated nearly 399 terawatt-hours (TWh) of electricity last year, an increase of only 1% from the previous year. Natural gas production rose by just 1.3%, reaching approximately 265 billion cubic meters (bcm).
The figures represent a sharp break from the previous decade, when Iran’s natural gas production expanded by more than 5% annually and electricity generation grew by roughly 4% a year.
But recent growth of only 1–2% has widened the country’s structural energy deficit and accelerated a remarkable reversal in its regional energy position.
From exporter to importer
As electricity demand reaches its summer peak, Iranian authorities estimate the country faces a power deficit of 15–20%, despite lower industrial consumption following recent military strikes on several petrochemical and steel facilities.
The shortage has become so severe that Iran’s deputy energy minister traveled to Turkey on June 2 to discuss electricity imports.
According to Iran’s Energy Ministry, the country recorded net electricity imports of 1.1 TWh last year—the first time imports exceeded exports. A decade earlier, Iran exported roughly 8 TWh of electricity annually on a net basis and viewed itself as a regional power supplier.
Natural gas exports reveal a similar contradiction. Despite domestic shortages that repeatedly force power plants and industries to reduce consumption during winter, Iran exported 15.4 bcm of natural gas last year.
The future of those exports is increasingly uncertain. Iran’s 25-year gas export agreement with Turkey expires this month, and unless renewed, Iraq will remain Tehran’s only major gas customer.
Even Iraq has faced repeated disruptions in Iranian gas and electricity supplies and is pursuing alternative sources through regional energy connections.
Renewable targets out of reach
The Energy Institute’s report also highlights Iran’s struggle to diversify its electricity sector.
The government planned to add between 5,000 and 7,000 megawatts of new solar and wind capacity during the past year. Only around 1,000 MW entered operation.
As a result, renewable energy has been left with a marginal role in Iran’s power mix despite the country’s significant potential. Iran’s only nuclear power plant, Bushehr, generated 5.4 TWh of electricity last year, accounting for just 1.3% of total generation.
Hydropower has declined even more sharply.
For a second consecutive year, severe drought reduced hydroelectric output, which fell 36% to just 12 TWh. The scale of the decline is striking: Iran generated around 34 TWh of hydropower in 2019 and 23 TWh in 2023.
With reservoir levels continuing to fall and water shortages expected to worsen, hydropower is likely to remain under pressure, increasing reliance on fossil-fuel power plants.
Greenhouse gas emissions rise
Another major finding of the report is the rapid rise in Iran’s greenhouse gas emissions.
For the first time, Iran overtook Japan to become the world’s fifth-largest greenhouse gas emitter, behind only China, the United States, India and Russia.
The comparison is striking. Germany and Turkey—countries with populations similar to Iran’s and economies roughly 18 times and 4.5 times larger, respectively—each emit only about half as much greenhouse gas as Iran.
Iran’s emissions exceeded one billion tonnes for the first time last year.
Chronic natural gas shortages have forced wider use of heavy fuel oil (mazut) in power plants and industrial facilities, while slow renewable deployment, falling hydropower output and limited nuclear capacity have kept Iran heavily dependent on carbon-intensive fuels.
The result is a deepening contradiction: even as Iran faces worsening energy shortages, its greenhouse gas emissions have risen by 31% since 2015, reflecting an increasingly inefficient and carbon-intensive energy system.
This time, Taghi Changalvaei was one of those who went.
He entered the fire to help save Khayiz, a protected area in the southern Zagros near Behbahan, in Khuzestan province. He did not return.
For Zagros communities, his death was familiar. For years, local residents and environmental volunteers have been losing friends and relatives to fires that return each summer across the mountains.
Iranian media have reported that since 2020, 27 people have died while trying to control fires in the Zagros.
Most were not professional firefighters. They had no specialized training, no protective clothing and little more than improvised tools.
They went because the forests were burning, and because in many parts of the Zagros, people know that if they do not move first, help may arrive too late.
A landscape primed to burn
The Zagros Mountains run for about 1,600 kilometers, from northwestern Iran toward the Persian Gulf. Their oak woodlands cover almost six million hectares, roughly 40 percent of Iran’s forest area, and support millions of rural livelihoods while helping regulate water and prevent soil erosion.
The Persian oak defines this landscape, shaping village economies, water systems and grazing patterns. But the Zagros oak belt has been shrinking for decades under pressure from illegal logging, overgrazing, drought, climate change and poor management.
Each summer, fire turns that decline into an emergency. That pattern was visible again in Khayiz, where a blaze that began on Badil Mountain burned for days through protected forests near Behbahan, exposing shortages of aerial firefighting capacity.
Experts say the fires have become larger, harder to contain and more closely tied to climate stress, fuel buildup and weak management.
Winter and spring rains can cover the slopes with grasses and seasonal plants. By early summer, heat dries that vegetation into fuel load: the combustible layer that lets a spark, a cigarette butt, a campfire or an intentional blaze spread quickly.
One part of the debate concerns grazing. In the past, livestock consumed part of the seasonal vegetation that now dries out in the mountains. From around 2021, authorities pursued efforts to reduce grazing pressure more seriously to help forests and pastures recover from overuse.
The aim was environmental protection: overgrazing has long damaged Zagros forests, limiting natural regeneration and weakening young oak growth. But some experts argue that reducing livestock presence without alternative vegetation management may have left more dry grass and brush by summer.
That does not make grazing restrictions the cause of the fires. Climate change, drought, oak decline, human negligence, arson, weak fire roads, aircraft shortages, poor coordination and lack of equipment all remain central. Unmanaged vegetation, some experts say, may be one piece of a larger puzzle.
In parts of Spain and the western United States, targeted grazing is used to reduce wildfire fuel loads and maintain firebreaks. For the Zagros, the question is whether the state can protect forests without removing one form of vegetation control and failing to replace it with another.
Bigger fires, weaker capacity
The statistics point to a worsening burden. In the Iranian year that began in March 2021, about 21,000 hectares of forests across the country burned, according to figures cited in Iranian media. By the year that began in March 2024, that figure had risen to about 27,000 hectares.
By November 2025, Iran had recorded more than 2,300 fires across national land, forests and rangelands, burning about 46,000 hectares. A recent study of the southern Zagros recorded more than 13,000 fire events from 2000 to 2023, with a sharp increase in the most recent years covered by the study.
The year that began in March 2026 has opened with another wave of fires, from Khayiz and Mongasht to the highlands of Lorestan, Fars and Kordestan provinces. Mongasht, a long mountain massif between Khuzestan and Chaharmahal-Bakhtiari, is one of several rugged areas where local residents are often the first responders.
The financial picture has also worsened. On paper, the rial budget of Iran’s Natural Resources and Watershed Management Organization has increased. But once the collapse in the value of Iran’s currency is taken into account, its real resources appear to have fallen sharply.
Calculations based on budget figures cited in Iranian media and market exchange rates suggest the organization’s dollar-denominated budget dropped from roughly $94 million in the Iranian year that began in March 2021 to about $41 million in the year that began in March 2026. Compared with the year that began in March 2016, the decline is estimated at more than 60 percent.
The direction is clear: while the fires have grown, the state’s real capacity to fight them has shrunk.
The consequences are visible on the ground. The fire in Khayiz is now out. But for Changalvaei‘s family, and for the families of others who died trying to save the Zagros, the fire has not ended.
Without changes in policy, funding and firefighting capacity, next summer will bring the same scene again: men with shovels, branches and bottles of water climbing toward the smoke, while fire moves through the oaks and leaves behind ash and names.
Air quality monitors showed hazardous pollution levels in parts of Kerman, Yazd, Isfahan, Markazi, Chaharmahal-Bakhtiari, and Sistan-Baluchestan provinces, according to Iranian media.
The sustainable development news site Payam-e Ma reported that air quality index readings reached 500, the highest level on the scale, at several monitoring stations in Kerman province on Thursday morning.
The site said the extent of the dust storm showed it was a regional weather event rather than pollution from local urban or industrial sources.
Experts told the outlet that simultaneous increases in airborne particles across several provinces on Iran's central plateau pointed to weather systems carrying dust across the region.
Repeated droughts, shrinking vegetation cover, dry wetlands and expanding dust sources had increased the frequency and severity of such events, they said.
"From this afternoon, the concentration of dust will gradually decrease," she told state media, adding that skies over the province would remain dusty on Friday, although conditions would improve.
Authorities issue health warnings
Authorities across affected provinces urged residents to stay indoors where possible, wear masks and avoid unnecessary outdoor activity, particularly children, older people and those with heart or lung conditions.
In Isfahan province, crisis management chief Mansour Shishehforoush said a dust mass with domestic origins had entered from Semnan province and northern parts of Isfahan.
"This condition will continue until the end of Thursday," he told IRNA.
He said authorities had ordered temporary restrictions on polluting industrial units and other measures to reduce health risks.
Visibility falls, roads close
In Yazd province, weather official Ghasem Raji said the dust had spread across most parts of the province from Wednesday afternoon into Thursday morning.
"Horizontal visibility in Yazd city reached the critical level of 500 meters at times today," Raji told Mehr. He said relatively strong winds had carried dust into the province from neighboring areas and warned the conditions would continue through Thursday, disrupting travel.
Police in Kerman province said heavy dust and sharply reduced visibility had forced the closure of roads in both directions in Rigan, Fahraj and Narmashir counties until further notice. Authorities urged motorists to avoid the affected routes, slow down elsewhere in the province and postpone unnecessary travel.
Maryam Salajegheh, a Kerman weather official, said conditions would remain severe until Thursday afternoon.
"From this afternoon, the concentration of dust will gradually decrease," she told state media, adding that skies over the province would remain dusty on Friday, although conditions would improve.
In Chaharmahal and Bakhtiari province, a weather official said dust had moved in from central and neighboring provinces and would persist until early next week.
"With the increase in wind speed in the coming days, dust will intensify," the official, identified by state media as Qatreh, said.
The patient paid 1,592,500 rials (about $0.91) for 15 insulin pens in early May. The same prescription, purchased from the same pharmacy in Tabriz on June 28, cost 39,092,500 rials (about $22.27), an increase of about 2,355%.
The sharp rise in the patient's bill far exceeded the increase in the price of the medicine itself. The total cost of the prescription rose from 96,862,500 rials (about $55.19) to 134,362,500 rials (about $76.56), an increase of 37,500,000 rials (about $21.37), or about 38.7%.
The receipts show the same billing categories, including the insurer's contribution, the patient's share, coverage for patients with special illnesses and pharmacy service fees. But while the drug's price increased, the Social Security Organization's reimbursement remained fixed at 96,000,000 rials (about $54.70), leaving the patient to pay the difference.
The newer receipt also included a new line item labeled "difference" worth 37,500,000 rials (about $21.37), transferring the additional cost directly to the patient. That line did not appear on the receipt issued in early May.
As a result, while the price of the drug itself increased by less than 40%, the patient's out-of-pocket payment rose more than 24-fold because the insurance reimbursement ceiling was not adjusted.
Drug prices continue to climb
Iran International reported in late April that insulin prices had already surged compared with levels before the Persian New Year (March 21), with some domestically produced brands rising by up to 212% and imported products by as much as 271%.
The latest receipts suggest prices have continued to rise since then, while also highlighting the growing burden on patients as insurance coverage has failed to keep pace with higher costs.
Industry blames production costs
Pharmaceutical industry representatives say the crisis has been driven by a combination of factors, including the removal of subsidized exchange rates, the depreciation of the rial, higher prices for raw materials and packaging, rising wages, increased financing costs and supply chain disruptions linked to the recent war.
They say manufacturers have also struggled with higher working capital requirements, while delayed price adjustments and insufficient government and banking support have compounded the problem.
Since January, following the government's exchange-rate unification policy, pharmaceutical raw materials that had previously been imported at a subsidized exchange rate have instead been purchased at rates more than five times higher.
Mohammad Abdehzadeh, head of the Health Economy Commission at the Tehran Chamber of Commerce, told Donya-ye Eqhtesad on Wednesday that most medicines had been removed from the subsidized currency system since March and were now being produced using the new exchange rate.
The newspaper said Iran's pharmaceutical sector was facing twin pressures: producers struggling with sharply higher manufacturing costs and liquidity shortages, and patients increasingly forced to bear a much larger share of medicine costs out of pocket.
