Absence of energy diplomacy is one root cause of shortfalls and lack of decent growth in the key power sector, a veteran economist says.
Despite abundant energy resources ranging from fossil fuels to renewables, which can be used as economic leverage in international negotiations, Iran has neither benefitted from such resources for sustainable economic development nor to improve its foreign relations, Ali Shams Ardakani, head of the Energy Commission of Iran Chamber of Commerce, Industries and Mines, told Barq News.
Ardakani defines energy diplomacy as benefiting from energy resources to build and strengthen the domestic economy and having an upper hand in settling international disputes.
"Energy diplomacy is expected to help us not get embroiled in regional and international conflicts, which inherently do not let our economy grow. A robust diplomacy can and will help us outdo our rivals like Turkey and Saudi Arabia,” he said.
It is indeed regrettable that Iran has access to huge energy resources, but weak diplomatic relations have taken a toll on different sectors, especially the power industry, he stressed.
Ardakani, a former diplomat and government advisor with a PhD in economics, believes that hanging on to passive diplomacy has had (and will continue to have) an adverse effect on Tehran’s efforts to expand its power export.
“Lack of productive relations with the world can jeopardize national interest."
Referring to Turkey, Russia and Saudi Arabia as having succeeded in dominating markets via effective diplomacy, he recalled that Turkey hardly has access to half the energy sources as Iran. However, it is playing a significant role in the energy sector and surprisingly has announced readiness to sell gas and electricity to neighbors.
According to the 2025 Vision Plan, Iran should be “the strongest economy in the region,” but policy and decision makers seem oblivious to the fact that fulfilling such ambitious goals demands cordial foreign relations, détente and skilled energy diplomacy.
Lack of Development
“Lack of [decent] development in our power industry is the outcome of the ineffectiveness of past diplomacy,” he added. Iran’s power sector has not developed as would have been expected.
Close to 4,000 megawatts was added to the national grid a year between 2006 and 2013. From 2014 to 2020 it fell by a massive 50%.
To have a footprint in the regional energy markets deserving of its status, Iran must have a much more dynamic diplomacy, the senior analyst said.
"Cordial ties with the region and beyond can definitely help the country introduce its strategic commodities like gas and electricity" to the outside world.”
Those who decide about the Financial Action Task Force (FATF), should have deep knowledge about international financing, but in Iran this does not hold as decision makers do not know that failure to ratify laws demanded by the global anti-money laundering watchdog will undermine the economy, Ardakani was quoted as saying.
The Paris-based FATF has for years demanded that Iran adopt anti-money laundering and anti-corruption transparency laws, and reform its banking system to be allowed full access to the world banking system. FATF put Iran on its blacklist in 2020 after Tehran failed to comply with international anti-terrorism funding norms.
This came after Iran failed to meet the deadline set the by the watchdog at FATF’s meeting in October 2019 to fully comply with FATF standards.
“Foreign policy and energy diplomacy are intertwined. The most effective strategy in [dealing with] global markets is to carefully avoid conflicts.”
The other problem that has plagued Iran’s power industry is that senior officials do not interact with informed minds and seasoned experts and probably do not believe in doing so.
“We could have developed our renewables instead of burning natural gas in thermal power plants, but …”
Consumption Pattern
Senior officials have used energy diplomacy in the worst possible manner with outcome being that now “our energy consumption patterns are among the worst in the world.”
Iran was the world’s largest energy subsidizer in 2018, according to the International Energy Agency's report.
Having spent $70 billion on energy subsidies in 2018, it topped the global list, leaving behind Saudi Arabia with $44.7 billion and China $44.4 billion.
Energy consumption in Iran’s household sector is twice the global average and in industries the conditions are worse as most machinery and equipment are old and should be replaced.
Ardakani concluded by saying that rethinking foreign policy and improving bilateral and multilateral relations is the best way to restore Iran’s presence in international and regional markets.
