The Iranian government long has used cheap, subsidized energy to curry favor with a dissatisfied population. That strategy now brings the Islamic Republic to the brink of a crisis from which it may not recover. Iran’s ongoing energy crisis now triggers protests among various economic sectors, while ordinary citizens criticize the government’s failure to manage electricity and gas shortages.
In recent days, as energy shortages have led to partial shutdown of industries, truck drivers across many Iranian provinces have gone on strike.
In recent days, as energy shortages have led to partial shutdown of industries, truck drivers across many Iranian provinces have gone on strike, protesting subsidized fuel quota reductions, insurance problems, and insufficient income. This development poses a serious threat to the national economy, because Iran’s poor rail infrastructure cannot fill the gap. The past is precedent: In November 2019, the Islamic Republic tripled gasoline prices overnight, sparking nationwide protests. Reuters estimated the following month that the ensuing crackdown had killed 1,500 Iranians and injured more than 10,000 more. The chaos also disrupted Iran’s foreign trade. Rolling blackouts have ruined bakery dough across the country, prompting strikes among bakers. A video circulating on social media shows police opening fire on May 24, 2025, to disperse a gathering of bakers in the religious city of Mashhad in northeastern Iran.
To deal with the growing energy deficit, the government has embraced four strategies: The regime blames citizens for excessive energy consumption, spreads falsehoods, proposes energy price hikes, and increases the budget of repressive forces like the Islamic Revolutionary Guard Corps.
Such strategies likely will fail. To accuse the public of high energy use, even though average household electricity consumption in Iran is around 1,100 kilowatt-hours annually—40 percent less than in European households and several times lower than in the U.S., Canada, Japan, or the Gulf Cooperation Council states—is dishonest. This did not stop President Masoud Pezeshkian, however, from claiming in May 2025 that Iran’s households are consuming four to six times the average consumption in Europe.
This year’s budget includes a direct allocation of $15 billion worth of crude oil to the Islamic Revolutionary Guard Corps for export.
This year’s budget includes a direct allocation of $15 billion worth of crude oil to the Islamic Revolutionary Guard Corps for export—four times last year’s figure. An additional $12.4 billion is allocated in the official state budget for military organizations. This exacerbates a growing trend. The head of Iran’s National Productivity Organization recently revealed that the government and the real private sector each account for only 15 percent of the national economy. The remainder is controlled by institutions under Supreme Leader Ali Khamenei’s oversight, including the Revolutionary Guard’s business entities.
Largely due to fear of public backlash, the government has refrained from increasing diesel prices over the past ten years and gasoline prices over the last five. However, this year, it signals that it will raise prices for both fuels. It has begun to prepare the public with the announcement of plans to introduce a three-tiered diesel pricing system: a subsidized quota rate, a semi-subsidized rate, and a full-cost market rate. The lack of any corollary timeline, though, suggests government anxiety.
The Iranian government sells gasoline, diesel, and electricity at extremely low prices to domestic consumers, wasting up to $60 billion annually. Subsidized diesel sells for around 0.3 cents per liter and gasoline for about 1.5 cents at fueling stations. Diesel production costs at Iran’s domestic refineries are estimated at around 30 cents per liter—a hundred times higher than the current subsidized quota price. Last year, Iran consumed 124 million liters of diesel daily, with a daily shortfall of five million liters. This gap is widening each year. Moreover, the government now supplies electricity to industries for only four days a week, and the diesel shortage has made it nearly impossible to run backup generators. Small industries are forced to purchase diesel on the black market at prices up to fifty times higher than the official rate, making it economically unsustainable. In addition, last year Iran imported about eight million liters per day of gasoline and diesel through bartering with fuel oil, significantly increasing the government’s subsidy burden.
Even when Iran can import electricity, the stark price disparity between domestic and imported electricity makes imports financially damaging.
The government also has urged industrial operators to import electricity directly from Turkey and Azerbaijan. However, the electricity import capacity from Turkey and Azerbaijan stands at just 850 megawatts, less than 4 percent of Iran’s summer electricity deficit. Even when Iran can import electricity, the stark price disparity between domestic and imported electricity makes imports financially damaging—especially since the government is suppressing commodity prices in a desperate attempt to rein in runaway inflation. According to the International Monetary Fund, Iran ranks fourth globally in terms of price growth. Iran’s national currency has lost over 90 percent of its value in recent years.
Such realities have forced the regime to gamble on repression at its best survival strategy. In 2023, hackers leaked an internal Revolutionary Guard document revealing a $400 million request for anti-protest equipment from the government, including surveillance cameras, facial recognition systems, and internet filtering tools—mostly ordered from China.
To grasp the magnitude of this crisis, consider the following: Even if all three northern neighbors—Turkmenistan, Azerbaijan, and Armenia—were to supply their entire electricity generation to Iran, it would not cover even half of Iran’s summer electricity deficit. Similarly, even if Azerbaijan and Turkmenistan, with a combined daily gas export capacity of 180 million cubic meters, sent all their gas production to Iran, the country’s winter gas shortage would persist.
This massive crisis unfolds even as the Islamic Republic claims to be enriching uranium for nuclear power generation. Yet, nuclear-powered electricity accounts for less than 1 percent of total power production. The Bushehr nuclear plant, Iran’s only nuclear power facility, has generated about 70 terawatt-hours over twelve years—worth only $5 billion in regional electricity markets. Meanwhile, Iran spent $8 billion to build the plant, and U.S.-led sanctions have cost the country an estimated $2 trillion to $3 trillion in lost economic opportunities during last fifteen years.
