Given the recently brokered deal between Iran and the G5+1, one may wonder about Iran’s ultimate intentions in terms of energy. Why is Iran trying to develop nuclear power at all?
A quick look at Iran’s energy sector reveals a country self-sufficient in energy:
- 157 billion barrels of oil – Second largest conventional reserves
- 3.680 million barrels daily production – 1.971 million barrels daily consumption – Surplus of 46.4% of production
- 1187.3 trillion cubic feet of natural gas – Largest natural gas reserves
- 160.5 bcm yearly production – 156.1 bcm yearly consumption – Surplus of 2.7% of production
These figures, however, obscure a lack of Iranian refining capacity, making it a net importer of gasoline.
Regardless, Iran remains self-sufficient in fossil fuels and brings 1.7 million barrels to world markets daily, albeit at a discount because of the sanctions. As it stands, Iran could comfortably expand both gas and oil production to meet any domestic demand, though it remains limited by sanctions when it comes to bringing in foreign expertise, constructing pipelines, moving oil shipments, or finding trade partners, among other concerns.
This begs the question, why would Iran seek nuclear power when it’s sitting atop so much natural gas and oil?
Several reasons spring to mind:
- Iran could be trying to free up fuels destined for electricity production for export, thus giving it more hard currency reserves.
- Iran could be trying to diversify its energy mix and wean itself off of fossil fuels.
- Iran could be seeking the prestige associated with developing indigenous civil nuclear capacity.
- Iran could be seeking the prestige of having the first nuclear reactor in the Middle East.
- Iran could be trying to prove itself to the world and Middle East rivals.
- The Iranian regime could be trying to legitimize itself by portraying a scientific and geopolitical victory to the people.
- The regime could also be trying to legitimize itself by successfully defying the United States.
- Iran could be trying to export nuclear technology.
Many of these reasons overlap, but the reasons for doing so remain mostly political.
One thing is for sure, economically, an Iranian nuclear reactor makes no sense. This is a list, by no means exhaustive, of the costs Iran faces, both political and economic, for developing nuclear power.
- Iran faces the high initial capital costs, especially dire for a country recoiling from international sanctions
- The costs of research and development
- The costs associated with ensuring that nuclear power provides a substantial portion of electricity consumption
- The costs of uranium imports, which will likely be compounded by additional sanctions
- The costs associated with reconfiguring the power grid to account for base load nuclear power
- The costs of ensuring that nuclear facilities remain intact in a region prone to earthquakes
- The opportunity cost and opprobrium associated with defying the G5+1 for years
- Developing small scale nuclear power would only be acceptable to the West if accompanied by rigorous inspections and dismantling of much enrichment capacity, hardly acceptable for Iranian prestige
- The secondary costs and effects of having to contend with increasingly alarmed and militarized Middle East rivals
- Iran could face punitive action by OPEC. OPEC could attempt to lower oil prices, as it hurts Iran relatively more than the other members of OPEC.
This is not to suggest that states act rationally in the economic sense at all times. However, Iran clearly has more to lose than gain in economic terms by developing civil nuclear capacity. The question still remains, what need is there for nuclear power when the country has such plentiful fossil fuel resources? Despite protestations to the contrary, Iranian nuclear power makes little sense except for as a means of acquiring a nuclear weapon.