Dr. Hashem Oraee was born in 1957 (1336) in Mashhad. In 1974 (1353), he left for England to continue his education and earned his Ph.D. in Engineering from Cambridge University in 1985 (1364). He is a recipient of the “Pochu Brodsky Prize” from Churchill College at Cambridge University and the “Institution of Engineering and Technology Award” from the UK. His academic career includes 40 years of teaching and research at universities in Iran, the UK, the US, and Canada. He has authored and translated 10 books in electrical engineering, holds 11 patents, has published over 60 articles in prestigious international journals, and presented 110 scientific papers at domestic and international conferences. Currently, he is a professor at Sharif University of Technology, the chairman of the Iranian Wind Energy Scientific Society, and the founder of Sajjad Industrial University.

We spoke with Dr. Oraee about the reported imbalances in the country’s energy sector, particularly in the electricity industry, and explored the nuances and related controversies. In this conversation, Dr. Oraee, with candor and expertise, shed light on aspects of the issue rarely discussed by government officials. Recently, however, some of these truths have been acknowledged by the fourteenth president of Iran, exposing inefficiencies in the sector. Through a meticulous and articulate approach, Dr. Oraee reveals the depths of a disaster that, until now, seemed hidden from public view. Nevertheless, it appears that many within the governing system—particularly supporters and even decision-makers—remain unable or unwilling to grasp the magnitude of the crisis. Whether due to deliberate neglect or oversight, this denial does not alter the realities of the energy sector, and as Dr. Oraee states, its deficits and shortcomings. If unaddressed immediately, darker and more uncertain days lie ahead.

The full interview with this university professor follows.

What does the term “imbalance” mean, and why is it being widely used in the energy sector these days?

First of all, the term “imbalance” was coined by Tavanir (Iran’s national electricity company) and the Ministry of Energy, and it is incorrect. This term does not accurately describe the situation. The reason they use “imbalance” is to downplay the severity of the issue. The correct term at its initial stage is “shortage,” and we should say “energy shortage.”

However, for some time now, I have been saying that even the term “imbalance” or “shortage” is insufficient because the reality is that we are facing an “energy crisis.” This is a crisis that, with great regret but absolute certainty, I must say is deepening by the day. This is my expert opinion, and I sincerely hope I am wrong.

Unfortunately, authorities do not want to and never have wanted to share the reality with the public because you cannot undo decades of mistakes overnight. Especially in the energy sector, fixing problems requires at least two things: abundant financial investment and a long timeline. And I would add a third, which might be more critical than the other two: “managerial competence.” If I were to choose one of these three as the main bottleneck, I would pick managerial incompetence.

We have had both time and, at certain points, money. Remember, during President Ahmadinejad’s administration, the country had significant foreign exchange earnings. I believe the root cause of today’s energy crisis lies in poor planning, negligence, lack of transparency, and ultimately, the inefficiency of state management.

You mentioned the Ahmadinejad era. When did this inefficiency and imbalance in the energy sector start in Iran?

Looking back, it becomes clear that since at least the 2000s (1380s in the Iranian calendar), the rate of demand growth has outpaced the growth in production capacity. This has been evident in electricity and gas sectors.

What about the 2010s?

Yes, but the demand has continued to rise every year, and we have been unable to keep production capacity in line with it. It was inevitable that we would reach this point. No one can claim that today’s situation is surprising. I always say this: the only surprising thing is that people and officials are surprised we have reached this point. It is not surprising at all. If we were to take this same path 100 more times, we would end up here every single time.

But this issue must have started somewhere. How did we get here?

We need to examine the foundations of the issue. Let’s go back to the Sixth Parliament and President Khatami’s administration. During that time, Parliament approved a policy to align energy carrier prices with inflation.

But in the Seventh Parliament, we took a wrong turn. What do I mean? Representatives in the Seventh Parliament overturned that law and passed a plan to fix energy carrier prices, which they considered a populist move. The Speaker of Parliament at the time even called it a “gift to the people.”

That was Gholam-Ali Haddad-Adel, correct?

Yes. It was clear at the time, and it is even clearer now, that this law led us astray. Fixing prices meant freezing energy carrier prices at a certain level. For ten years, the prices of diesel and gasoline in the country remained unchanged. Meanwhile, costs could not be frozen and rose with inflation, outpacing the revenue generated from these artificially suppressed prices.

This caused the energy industry to incur losses, which grew over time. Today, for instance, Tavanir faces debts of 150 trillion tomans.

To whom is this debt owed?

To electricity producers and industry stakeholders. Naturally, in such a situation, no one wants to invest. There is no trust, and this vicious cycle continues.

If I were to summarize, the current state of the energy sector boils down to two sides: supply and demand. Let’s first look at the production side or supply. In the electricity, gas, and gasoline sectors, the problem is essentially the same.

But wasn’t Total forced to leave Iran after Trump withdrew from the JCPOA?

I’m aware of that, but geopolitics and energy are intertwined. Sanctions didn’t fall from the sky; they were a result of our government’s decisions, which ultimately led Total to leave. And I don’t mean just this company; it’s about the larger picture.

The reality is that we failed to address fundamental challenges. For example, in the gas sector, production has stagnated, or at best, we have barely managed to maintain current levels. We urgently need pressure-boosting in our wells. Over 80% of our oil and gas wells are in their second half of life. To sustain production, pressure-boosting is essential.

We failed to invest adequately, lacked the necessary technology, and, in my opinion, didn’t give this matter sufficient attention. What did we do instead? Two years ago, the 13th administration said, “Let’s have domestic companies handle this.” They signed contracts totaling $20 billion with four domestic companies—Khatam al-Anbiya, MAPNA, OPEC, and Petropars—to take on these projects.

From the outset, it was evident that these companies lacked the technological and financial capacity. At best, we’ve managed to sustain daily gas production at around 885 million cubic meters. But this isn’t sustainable. Forecasts indicate that by 2027 (1406), we will face a sharp decline in production. According to the Parliamentary Research Center, the current average daily gas deficit is 73 million cubic meters, which will rise to 375 million cubic meters by 2027.

That’s a huge number!

Yes, it’s an enormous figure.

However, the situation in electricity is somewhat better for two reasons. First, the electricity sector is relatively stronger and has more private sector involvement. Unlike the gas sector, which is entirely state-run, the electricity industry has some privatized elements. Second, the electricity industry has deeper technological roots.

But even in electricity, we are falling short. According to official statistics, from October 2023 to October 2024 (Mehr 1402 to Mehr 1403), demand increased by about 7,000 megawatts, but we only added 2,235 megawatts in capacity—less than a third of the increase in demand.

In summary, on the production side, our equipment is aging, power plant efficiency is insufficient, and the grid is outdated and deteriorating further. Weak planning and a failure to prepare for the future have left us unable to meet demand.

What about the demand side?

The demand side is even worse. It’s completely neglected. We’ve priced energy so low that, for example, the price of diesel in Afghanistan—not Switzerland—is 170 times higher than in Iran. The price of gasoline in Syria is 63,000 tomans per liter.

When there is such a massive price difference between Iran and its neighbors, it inevitably leads to smuggling. It’s like pouring water down a steep slope—you can’t stop it.

This pricing disparity has led to an absurd situation where, as the Speaker of Parliament recently stated, 25–30 million liters of fuel are smuggled out daily. The President has even asked how it’s possible to lose 20 million liters of gasoline daily. The answer is simple: yes, it’s entirely possible. A quick calculation based on the Speaker’s figures shows that the profit from this smuggling amounts to over one billion tomans per minute.

Do you think citizens are at fault here? Are the people to blame for this situation?

The only group not at fault here is the people. Citizens neither make decisions nor implement policies. This chaotic situation results from the government’s economic and cultural policies.

For example, it’s nonsensical to talk about energy efficiency while keeping energy prices artificially low. Anyone who says otherwise is either clueless or dishonest. A resource treated as valueless cannot be optimized.

Look at the past six years: the price of bread has increased tenfold, dairy products over tenfold, foreign currency sevenfold, and housing and cars twentyfold. Meanwhile, wages have only tripled. The purchasing power of wage earners has fallen to about 30% of what it was six years ago.

Would you say the government is being overly cautious due to fears of public backlash, like the protests in 2019 after fuel prices rose?

Absolutely. But governments exist to make tough decisions, not easy ones. The easiest decisions require no expertise. Governments must make the right decisions, even if they are difficult.

For example, when prices are suppressed, it should only be for a short-term adjustment—say, a few months or years—until the situation stabilizes. In energy, things are worsening every day. Sooner or later, this bubble will burst.

But this issue is worsening daily. What’s the result?

We’ve already reached the tipping point. For instance, the country recently shut down for three days. Yes, the government has been cautious, but it shouldn’t have let things reach a stage where a drastic price increase becomes inevitable.

Currently, Iran spends $127 billion annually on energy subsidies, making it the second-largest subsidizer in the world.

Which country ranks first?

Russia. We account for 20% of global direct energy subsidies. The government simply cannot sustain this anymore.

Tavanir is bankrupt. The government can no longer afford to produce gasoline at 8,000 tomans per liter or import it at 80 cents (50,000 tomans) per liter and sell it for 1,500 or 3,000 tomans. It just can’t afford it.

In the gas sector, we are practically giving it away for free to households. We’ve extended gas pipelines to every corner of the country, but now we don’t have enough gas to fill these pipelines, which cost billions of dollars to construct.

How did it come to this?

Because we gave gas away for free, there was no revenue to reinvest. The government had no funds to allocate, so it ended up exhausting resources. And now, the public is skeptical. Even if prices are raised, people won’t believe the extra money will be reinvested to ensure future energy security.

People are almost certain that any additional money they pay for energy will go anywhere but where it’s needed. This skepticism stems from a lack of trust in the government—a social capital we have squandered far too cheaply.

Do you mean the funds might go to regional political engagements involving Iran?

Exactly. You hear this sentiment on the streets. Whether it’s true or not doesn’t matter anymore—what matters is that this is what people believe.

So the public hasn’t been convinced or justified in this regard?

You could say that people have been lied to so often that they no longer believe the truth. For example, if the reports are accurate—and I don’t know if they are—that $42 million in cash was found in the Iranian embassy in Syria, the question arises: why was that money there? There should never be cash in an embassy.

Similarly, we see Lebanese citizens in interviews saying their government doesn’t have the funds to rebuild homes, yet Iran is supposedly offering $14,000 to every person whose home was destroyed in southern Beirut.

Whether these are enemy rumors or not, it doesn’t matter.

Because they’re believable?

Yes, they’re believable. The government has failed to communicate transparently with the public and hasn’t been able to effectively refute such claims with logic and evidence. Instead, secrecy and opacity dominate.

This has led to a climate where some believe that ordinary citizens cannot be responsible for smuggling 20–30 million liters of fuel daily. And they’re right—some claim this is “state-sponsored smuggling.” This term has emerged in the public discourse, suggesting that some of the gasoline and diesel—resources owned by the people—are being exported by entities outside the government’s budgetary framework.

In such a murky environment, rumors thrive. Who is responsible for addressing this? People don’t believe in the government’s narrative anymore. That’s why we’ve reached a point where production not only fails to meet demand but is falling short every day.

What happens if this trajectory continues?

Two years ago, I predicted that we were heading toward simultaneous shortages in all energy carriers. At the time, no one paid attention.

This means not having enough gas, which then leads to electricity shortages since electricity generation relies on gas. These shortages reinforce each other.

If this trend continues, industries will shut down entirely. Our GDP will suffer, the economy will contract, and we won’t even have the money to import gasoline. In short, this isn’t just an energy crisis—it’s a systemic economic crisis.

Given everything you’ve said, what is the most critical obstacle to resolving these imbalances and shortages in the electricity sector?

The first and most important step is for the government to recognize that energy is a commodity, not a political tool.

If energy carriers like gasoline, electricity, and gas are recognized as commodities, then the government should step aside from production. The government doesn’t grow watermelons or produce goods; it oversees and regulates.

Why shouldn’t energy work the same way? The government must openly and courageously admit that we are in a dire situation.

Hasn’t the current administration already acknowledged this to some extent?

Not in the way that’s needed. Just yesterday, I saw a government official on TV saying, “Thank God, the grid is stable.” Meanwhile, I have a letter from a provincial authority ordering the complete shutdown of gas to an industrial estate effective immediately.

This letter is dated December 14, and it says: “Gas supply to companies in this industrial estate is cut off as of today.” Not tomorrow—today. This shows the height of managerial incompetence.

Didn’t they know the day before that they would need to cut off the gas? It’s clear that the government still hasn’t fully acknowledged the depth of the problem. They’re unwilling to admit their mistakes, acknowledge that there’s no quick fix, and explain that solutions will be painful and require sacrifice.

What should the government do to address this crisis?

The government must first accept that energy is a commercial commodity, not a political instrument. It must abandon its paternalistic approach. I am not surprised that the situation has reached this point because governments are notoriously poor at managing commercial enterprises.

Currently, all gas, gasoline, diesel, and a significant portion of electricity production are controlled by two ministries: Energy and Petroleum. They’re doing everything except what they’re supposed to—governance and policymaking. Instead, they’re engaged in business operations like production, transmission, and distribution.

The result is what we see today. Anything handed over to the government for profit-making inevitably fails. Why should electricity be state-owned? Each city has a state-run electricity distribution company. Here’s the most shocking part: they’re still selling new service connections annually, even though they cannot meet the existing demand.

How can you justify selling one million new electricity connections every year when you can’t supply power to your current subscribers? The government is merely trying to scrape by day by day.

So you believe privatization is the solution?

Yes, but it cannot happen overnight. My suggestion is that while the government struggles with its current state, it should simultaneously engage experienced, knowledgeable, non-governmental experts to develop an “Energy Policy.”

This policy should gradually shift toward privatization and allow the creation of an “energy market” where prices are determined by supply and demand. However, the government refuses to allow this because, naturally, energy prices will rise in a free market.

But when prices rise, the government must support vulnerable populations intelligently. The current approach, where subsidies are distributed equally, is the easiest but not the best solution.

What about the industrial sector and its role in this crisis?

Our electricity industry is strong and advanced. We are not lacking in capability. However, the entire production, transmission, and distribution system is state-controlled—managed by regional electricity companies, Tavanir, and distribution companies.

These entities procure meters from private manufacturers and transformers from private companies but fail to pay for them. Any private company you investigate will have accounts receivable from Tavanir that are ten times their working capital. In total, Tavanir owes 150 trillion tomans.

Instead of directing funds toward the electricity industry to support its working capital and encourage production and development, the government has taken their products and refused to pay. Private companies must borrow at 30% interest to cover costs, further squeezing them.

The government has essentially placed its foot on the neck of the private electricity sector and is suffocating it.

Given this grim description, is the electricity industry on the verge of collapse?

It will not continue in its current form. Private electricity companies are not thinking about expansion anymore. They can’t even sustain their current operations—they are being suffocated.

Why isn’t the government paying these companies?

Because it doesn’t have the money. Why doesn’t it have the money? Because it buys electricity for 500 tomans and sells it for 100 tomans.

Any company that operates like this—buying at a higher price and selling at a lower one—will inevitably go bankrupt. The government is out of funds and turns to the state for subsidies. The state promises to pay but doesn’t because it has no money either.

Lastly, the government frequently blames citizens for the imbalances, emphasizing that Iranians consume several times more energy than Europeans. How accurate is this claim?

This claim is entirely false. I’m not surprised that the government makes it, but energy consumption per capita is a flawed metric. What matters isn’t how much energy I consume as an individual but what I do with it.

There’s a measure called “energy intensity,” which indicates how much energy is consumed to add one dollar to the GDP. That’s what matters.

Additionally, our per capita consumption isn’t exceptionally high globally. But more importantly, we consume energy very inefficiently—across all sectors. Our industrial equipment is inefficient, and our buildings lack standards. The government has suppressed prices, so there’s no incentive to invest in efficiency.

The government has also failed culturally, neglecting to educate people about the importance of selling oil and gas profits and reinvesting them in infrastructure for the benefit of current and future generations.

So you believe the people bear no responsibility?

Exactly. With complete confidence, I can say that the only group not at fault here is the people. Citizens follow the government’s economic, social, and cultural policies.

The government has failed completely in this domain. It has focused on short-term political gains and avoided making difficult but necessary decisions. Even during presidential debates, candidates still promise not to raise energy prices—a populist but fundamentally flawed policy.

Thank you, Dr. Oraee, for sharing your time and insights with Peace Mark Monthly Magazine.