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A view is being seen of the northeast of Tehran at sunrise on August 17, 2012.
Iran’s energy crisis pushes economy to the breaking point
After weeks of increasingly severe blackouts caused by massive natural gas shortages in Iran, the state power company warned manufacturers on Friday that they need to brace for power cuts that could last weeks and cost billions of dollars. The government is facing a difficult choice between cutting fuel for power plants or for residential heating — and are taking the first option in a bid to keep a lid on public discontent.
Markets took small comfort, however, with the Iranian rial plummeting to 770,000 to the dollar, its lowest value ever. Ordinary Iranians spent most of last week not knowing whether they would be able to send their children to school or go to work themselves the next day, a situation which seems likely to continue.
Wait, doesn’t Iran have tons of natural gas? Yes, and generous subsidies for consumers to boot, which means the overwhelming majority of Iranians depend on — and arguably overconsume — natural gas for home heating and cooking. But even though the Islamic Republic sits on the world’s second-largest reserves, sanctions and international isolation have left its infrastructure and technology woefully inadequate to supply its own needs.
Iranian producers already burn off huge quantities of natural gas released in oil extraction because they lack the technology to collect it instead. And much of the natural gas Iran does extract is then exported to Turkey and Iraq, where it brings in much-needed hard currency.
The New York Times also reported on Saturday that Israeli strikes against two pipelines back in February forced Tehran to eat into reserves that it was unable to replenish over the summer.
Will the crisis reach a boiling point? With temperatures plunging as low as -20 C in many parts of the country, cuts to gas for domestic heating could put lives at risk. We’re watching for unrest, but keep in mind that hundreds of Iranians lost their lives and thousands more were arrested and abused by regime forces in 2022 and 2023 during the protests over the killing of Mahsa Amini. As long as the regime is willing to kill its own people in the streets, protest may be futile.What role does natural gas play in a clean energy transition?
Listen: How does natural gas fit into the shift toward a cleaner energy future? In this episode of Energized: The Future of Energy, host JJ Ramberg and Enbridge CEO Greg Ebel sit down with former CongressmanTim Ryan of Ohio. They discuss how energy jobs have revitalized Ohio’s economy, the role workers from the energy industry could play in the upcoming US election, and how natural gas can be combined with renewables to create a cleaner, more efficient energy transition.
Listen on Apple, Spotify, Goodpods, or wherever you get your podcasts.
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"The next 50 years belong to Alaska" — An interview with Gov. Mike Dunleavy
Listen: On the GZERO World Podcast, Ian Bremmer sits with Alaska Governor Mike Dunleavy to explore the state’s pivotal role in America’s energy, technology, and national security. Alaska sits at the heart of some of America's thorniest geopolitical challenges. Its renewable resources, natural gas, rare earth minerals, and freshwater make it a critical part of the country's energy and technology futures, while its strategic location near Russia and China underscores its geopolitical importance. No one understands better than Alaska Governor Mike Dunleavy, who drills into Alaska's energy and economic potential and discusses US national security concerns within a melting Arctic on the GZERO World Podcast.
Subscribe to the GZERO World Podcast on Apple Podcasts, Spotify, or your preferred podcast platform, to receive new episodes as soon as they're published.A woman and her sons stand on the edge of Maracaibo lake in front of oil rigs in Maracaibo February 15, 2008.
Oil, gas, gold for (pseudo-) democracy?
The United States has temporarily lifted sanctions against Venezuela’s oil, natural gas, and gold sectors after Venezuela’s strongman President Nicolás Maduro agreed to a deal with the US-backed opposition on scheduling elections with international observers and allowing opposition candidates to run.
This gives the South American country a lucrative opportunity to export oil to US markets, which will put coveted US dollars directly into Caracas’ coffers. Boosting the Venezuelan economy can’t hurt Maduro, fair elections or not, and could lead to lower US gas prices, which would save Biden some political pain ahead of his reelection bid.
The six-month scheme is a major reversal for Washington, which applied “maximum pressure” against the Venezuelan regime during the Donald Trump years. That approach seems to have largely failed: Sanctions have crippled Venezuela’s economy but failed to oust Maduro, and after an initial flurry of fanfare, the US-backed, self-declared interim leader Juan Guaidó’s movement is all but dead.
The White House says it will slam the hammer back down if Caracas doesn’t follow through with its promises. But Washington also wants to see political prisoners released, and Caracas seemed to nod at that expectation by releasing five detainees after the sanctions paused.
But this is far from Maduro’s swansong. There’s no set timeline to arrange for official candidate lists and hold votes, no agreed-upon rules for how the election and campaign will be conducted, and most importantly, no real incentive for Maduro to allow a truly fair contest. He’s made it this far under sanctions, after all, so why should he dread their re-imposition?
And if he can make some money while dragging the process out, pues que chevere (well, that’s great!).
The Graphic Truth: EU natural gas prices plunge
For months, Europe has been bracing for an energy crisis as it weans itself off Russian oil and natural gas amid the ongoing onslaught in Ukraine. But mother nature has given European countries a helping hand in recent weeks by keeping temperatures mild across much of the Northern Hemisphere – and reducing demand for gas needed to heat homes. As a result, the Dutch gas trading exchange – a benchmark for measuring natural gas prices – has plummeted by 80% from an August high and is now below pre-war levels. This is a welcome development for European governments that have already taken measures to curb consumption and shield consumers from high prices. We take a look at European natural gas prices since Jan. 2022.
Frenemy face-off at the World Cup: Morocco vs. Spain
It's just a soccer game. Or maybe there’s more to it.
On Tuesday, underdog Morocco takes on 2010 champion Spain at the Qatar World Cup in what one might frame as a battle between “neighbors” in Africa and Europe, separated by barely 9 miles of the Mediterranean Sea and with a long-fraught political relationship that’s seen some recent twists and turns.
And there’s a bigger geopolitical story that goes beyond the two kingdoms.
Territorial disputes have always made Morocco-Spain ties, to put it mildly, complicated. Morocco resents Spain for not handing over the former Spanish colony of Western Sahara, which Rabat claims as part of its territory and is rich in fish and minerals.
Morocco also has a beef with Spain over Ceuta and Melilla, two centuries-old Spanish enclaves inside Morocco and the last vestiges of European sovereignty in mainland Africa. (Fun fact: 20 years ago, the two sides almost went to war over a rock in the Strait of Gibraltar inhabited by … goats.)
The bilateral tensions have two major spillover effects with EU-wide implications.
First, Morocco has been accused of weaponizing sub-Saharan African migrants when it tells its border guards to stand by and "let" asylum-seekers try to scale the border fences of Ceuta and Melilla, which is EU sovereign territory. Rabat does this whenever Spain triggers it over Western Sahara: In May 2021, Madrid had to deploy the army to help defend the border from an influx of thousands of migrants after the Spanish government allowed a leader of the Polisario Front — a militant group that seeks independence for Western Sahara — to get medical treatment in Spain.
This is not just a Morocco-Spain problem. Once the asylum-seekers are on EU soil, they are free to travel to other EU countries — potentially unleashing a migration crisis across the entire bloc.
Second, whatever happens between Morocco and Spain is closely watched next door in natural-gas rich Algeria, which backs the Polisario Front and has kept the border with its western neighbor closed since 1994 to protest Morocco’s partial “occupation” of Western Sahara.
In late April, the Algerians first threatened to cut off gas supplies to the Spanish after Madrid announced it would resell some of that gas to Morocco. And when PM Pedro Sánchez went a step further by ending Spain's long-held neutrality on Western Sahara to ward off another migrant crisis, Algeria responded by selling more gas to Italy. Algerian gas deliveries to Spain are now down by half from a year ago and the US has become Madrid’s top seller.
Algeria's strong pushback to Spain's pro-Rabat gestures is a heads-up to the EU: Kicking the Russian gas habit is not risk-free. The more leverage an alternative supplier gets, the more inclined it'll be to turn on a dime and move to kill a contract if political feathers get ruffled.
So, what’s the current state of bilateral ties and what does the future hold? “Spain and Morocco are now on a honeymoon, but this is only a parenthesis before the next crisis, which Morocco will decide when to launch,” says Ignacio Cembrero, a veteran Spanish journalist and expert on Morocco-Spain relations.
The next big development will come, he adds, when the Spanish government follows the US in recognizing Moroccan sovereignty over Western Sahara, as the Trump administration did in December 2020 in exchange for Rabat joining the US-brokered Abraham Accords. “That’s what Morocco wants.”
Back to the soccer ... on the pitch, Spain is the favorite.La Roja has a young squad led by FC Barcelona playmaker Pedri that excels at its signature tiki-taka passing game. Still, the Atlas Lions have plenty of talent too and will surely give their northern neighbors a run for their money.
Yet off the field, the stakes are higher for Morocco. If it wins and becomes the first Arab country to reach the World Cup quarter-finals, Moroccans will go crazy at home — and in Spain, where some 800,000 of them live.
Let’s just hope the celebrations don’t turn into the violent riots that erupted across Belgian and Dutch cities when Morroco upset Belgium in the first round.This comes to you from the Signal newsletter team of GZERO Media. Sign up today.
The logo of the Nord Stream 2 natural gas pipeline project is seen at a rolling plant in Chelyabinsk, Russia.
What We're Watching: Russian gas pipeline problems, China's economic slump, the other mobilization
Did someone blow up the Nord Stream pipelines?
The operator of the two Nord Stream gas pipelines, which run from Russia to Western Europe under the Baltic Sea, reported “unprecedented” leaks and massive pressure drops on Tuesday, stoking fears of foul play. Nord Stream was not actually carrying gas to Europe at the time — the EU froze approvals for the new Nord Stream 2 line after Russia invaded Ukraine, and Russia halted existing flows through Nord Stream 1 in August, blaming Western sanctions. But the incident comes as Europe bundles up for winter with substantially reduced shipments of Russian gas. Seismologists recorded explosions in the area on Monday, and European officials have suggested sabotage, but so far there is no hard evidence. Russian officials, for their part, lamented the incident’s impact on “energy security,” while some pro-government outlets have suggestedAmerican sabotage. If it were deliberate, who’d benefit most from blowing up a non-operational pipeline? Apart from the geopolitical intrigue, there are environmental concerns too — the line is now leaking gargantuan amounts of methane, churning up the sea off the Danish island of Bornholm.
China turns from Asia’s economic leader to laggard
The bad news just keeps coming in what has been the worst year for China's economy since Xi Jinping took over in 2012. The World Bank predicts that China's GDP will expand this year by just 2.8% — half the government's modest target of 5.5% and less than the average for the rest of Asia for the first time since 1990. What a turnaround for “the world’s factory,” which for decades led the region with double-digit annual GDP growth. How did we get here? Well, Xi's stubborn refusal to relax the zero-COVID policy has certainly done a number on the economy and global supply chains. A real estate sector crisis, piling debt, and an ongoing energy crunch have only made things worse. What can Xi do? Implement broad structural reforms that could upend the Chinese economic model. But don’t expect that anytime soon. Right now, Xi is only thinking about next month's 20th Congress of the ruling Communist Party, where he'll get a third five-year term as CCP boss. Watch to see whether Xi appoints more economists and technocrats over loyalists to senior party posts, which might indicate that fixing the economy takes priority over ensuring loyalty to him at all costs.
What We're Drafting: Security guards for the World Cup
Vladimir Putin’s partial mobilization of reservists to fight in Ukraine has grabbed global headlines, but there’s another draft in the works for a less nefarious purpose. Two months out from the men’s soccer World Cup in Qatar, Doha is calling up hundreds of civilians for mandatory military duty as ... security guards. The drastic recruitment drive reflects the scale of effort needed as the Gulf nation of 2.8 million — only 380,000 of whom are citizens — prepares for an influx of 1.2 million people for (arguably) the world's biggest sporting event. The conscripts, including diplomats recalled from overseas, will do their “patriotic duty” by frisking fans for weapons, drugs, and (gasp!) booze — a big no-no in a Muslim country. (But Qatar will allow ticketed fans to drink Budweiser, an official sponsor, outside of stadiums before and after matches.) The security guards are being trained with hour-long marches to keep fit and have been told to treat all fans equally, based on the UN Declaration of Human Rights, which clearly did not apply to the thousands of migrant workers who died while building the World Cup stadiums.This article comes to you from the Signal newsletter team of GZERO Media. Sign up today.
The Graphic Truth: Natural gas prices make EU power costs soar
EU natural gas prices have gone through the roof since Russia invaded Ukraine and cut off gas flows. This has sent European electric bills soaring — to the point that Brussels is ready to intervene in energy markets to protect consumers.
Some of the ideas being thrown around are a cap on the price of Russian gas to deter President Vladimir Putin from messing with the Nord Stream 1 pipeline as pushback for sanctions; a ceiling on the price of all gas used to produce electricity; a windfall tax on all energy firms to pay for consumer subsidies; and a limit on what non-gas producers can earn beyond a market price of 200 euros per MWh.
These measures aim to curb power prices and boost gas supplies before the winter, when Europeans will need more power to heat their homes. But will they be enough to fix the bloc's energy crunch before angry, cold EU residents start blaming their governments?
We compare two benchmarks for the bloc — German spot electricity prices and Dutch gas futures — over the past year.