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Saudi Arabia's Geopolitical Muscle
No Silver Lining For Iran in Oil Crash

As countries around the globe absorb the impact of the oil crash, even states with large energy sectors have usually found a silver lining in cheaper electricity costs, which in turn lowers both the cost of manufacturing and of living. Not so for Iran, as The Financial Times reports:

Decades of heavy government subsidies have left Iran with high levels of energy consumption — per capita consumption of electricity is about 2,160 kilowatt hours compared with 1,300 kWh for neighbouring Iraq.

While Iran’s energy demands are growing at about 6 per cent a year, growth in capacity is limited to a third of that. The energy ministry admits its depleted power network requires at least 120tn rials ($4.4bn) of investment.

This is a severe challenge for a country also grappling with the impact of crippling international sanctions related to its nuclear power programme and the legacies of populist policies implemented by its previous government. Sliding crude prices are also having an impact. The IMF said in October that Iran needed oil prices above $120 a barrel to balance its books. Brent crude, the international benchmark, was on Monday trading at $58 a barrel.

The oil crash was Saudi Arabia’s geopolitical masterstroke, which, as Walter Russell Mead wrote last month, made clear the power the KSA wields on the world stage and struck, as was intended, directly at Iran. Now it appears the move is paying double dividends against the Kingdom’s number one enemy.

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  • Fat_Man

    Iran has nothing to worry about. They have the President of the United States in their back pocket.

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