Iran: Relief From Sanctions, Relief for the Environment

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The United States first imposed sanctions on Iran in 1979 following the seizure of the US embassy in Tehran. Though the sanctions have been lifted and adjusted at various points during the subsequent decades, they have largely remained in place and have been intensified until they ultimately blocked practically all trade and investment between the two countries. 

In the early 2000s, Iran was found to be non-compliant with its nuclear obligations and refused international demands to halt nuclear activity, maintaining its objectives were peaceful. By 2006, the United Nations rolled out its own sanctions against Iran. These initial embargoes were relatively narrow, restricting materials and technology related to uranium enrichment or with any sort of militaristic application. They were expanded and tightened over time, ultimately barring all non-humanitarian financial assistance to Iran and placing limitations on interactions with its financial sector. 

The EU also imposed its own tough sanctions against Iran. All of these restrictions meant that by 2010, Iran’s ability to produce and export oil, its chief commodity, was severely limited; its ability to invest or be invested in was practically non-existent; its access to foreign-made technological equipment—including those without militaristic applications— was severely curtailed; and of course, the assets of many companies, individuals, and official institutions were frozen.

Background: Iranian agriculture

While sectors like agriculture were rarely, if ever, directly subject to sanctions, the fact that the restrictions applied to Iranian banks, shipping companies, and port operators made it extremely difficult for international companies to interact with Iran. So that has meant some degree of added pressure on Iranian agriculture.

By far, the most important agricultural product in Iran is wheat. Roughly 60 percent of all cropland in the country is dedicated to growing the crop, and with production at 13 million tonnes in 2014-2015,  Iran is consistently within the top-15 producers of the cereal in the world.  Still, that covers less than three-fourths of its demand, and in 2015-2016 imports are expected to come in at 5.3 million tonnes.  Much of the imported wheat comes from Switzerland, Germany, Turkey, and the United Kingdom.  

For barley and rice, the story is similar. Iran produces a significant amount of each; 3.2 million tonnes and 2.5 million tonnes,  respectively, but has to import between 30 and 45 percent of its demand for each. Sugar is another extremely important agricultural import for Iran: in 2014, it spent close to $700 million on imports,  mainly from India and Brazil.   

Again, it’s important to note that under the sanctions, countries could still export agricultural products to Iran; the restrictions just made it very difficult for Iran to pay for these imports. Trade with Iran, therefore, often required some degree of trust between the two parties, or willingness by each to use a sort of barter system rather than cash.  

With the tightening of the sanctions, it increasingly became important to Iranian authorities that the country be self-sufficient, or close to it, in the production of its essential foods. And so in some ways, the sanctions encouraged a further intensification of agricultural production, especially for staples like wheat and sugar. 

Broadly speaking, Iran has boosted production of its staple crops since 2000, especially sugar. For the products that Iran produces with an eye for export; namely, pistachios, grapes, and saffron, production growth has been more muted. But exports of these products do continue to flow to China, Iraq, the UAE, Afghanistan, as well as various countries within the EU. 

A not-so-fertile crescent 

While the intensification of agricultural production may sound like an unexpected silver lining for Iranians, the reality may not be quite so rosy. 

Iran’s annual supply of freshwater per person fell from 2,254 m3 in 1988 to 1,950 m3 in 1994. By 2005, the figure had dropped to 1,750 m3 and by 2013 to 1,666 m3 per person. Estimates suggest that the 2020 figure will be about 1,300 m3.   

Although officials in some of Iran’s major cities continue to ask residents to reduce their water consumption, the unfolding crisis is hardly their fault: more than 90 percent of Iran’s water is used for agricultural purposes.  Given that more than half of Iranian farmland is not irrigated,   and that which is irrigated tends to use inefficient surface (also known as “flood”) irrigation methods, an increase in agricultural production can mean a corresponding increase in water usage.

Past administrations reacted to shrinking water supplies by focusing on dam construction. And while that offered temporary relief, especially for nearby farmers using the stored water for their crops, dams can, in the long term, actually exacerbate water shortages.

That practice, combined with repeated drought events, the continued mismanagement of water resources, and climate change is sucking Iran’s rivers and lakes dry. Perhaps the most obvious and alarming example of the phenomenon is in the far northwest of the country, where Lake Urmia, once the sixth-largest saltwater lake in the world, has shrunk by about 88 percent over the past few decades. 

Fortunately, it appears that policymakers are at least well-aware of the ongoing water crisis. In 2013, the head of the Ministry of Energy (which regulates water) said that the situation had reached “critical levels”; the following year, the former Minister of Agriculture described the water shortage as a “major threat” to the country.   

Unfortunately, the desiccation of Lake Urmia is having negative effects far beyond the obvious: the exposure of the lakebed is tied to the increase in “noxious dust” that nearby residents now have to breathe. Indeed, Iranian desertification is one of the factors contributing to the deterioration of air quality in many parts of the country. In urban areas, this deterioration is also being driven by the dirty gasoline fueling vehicles. 

Perhaps surprisingly, given its vast petroleum reserves, Iran is a major importer of gasoline. 

But because of the growing difficulty of sustaining these imports, Iran has been forced to increase its own production of gasoline. The problem here is that Iran’s aging refinery infrastructure and the lack of investment available to update it has forced the country to convert some of its petrochemical factories into gasoline plants. These converted factories typically create low-quality gasoline that pollutes more potently—especially deleterious given the growth of Iranian cities and its inability to import emissions-reducing catalytic converters for vehicles. In Tehran, air quality has gotten so bad that schools have even been temporarily closed because of it. 

Sanctions relief

Iranian officials are optimistic about the far-reaching benefits of sanctions relief, especially those benefits related to food and pollution.

Iran’s extensive oil and natural gas reserves have lent themselves to a robust petrochemicals industry, including petro-fertilizers. Indeed, Iran has been a major producer of urea for several decades, but sanctions have meant that Iranian product struggled abroad, and had to be sold at a discount. An easing of trade restrictions will help make Iranian urea more attractive on the international market, allowing Iranians to raise their prices, and potentially forcing regional competitors to drive down their own prices. 

Foreign investors are also excited about the petrochemicals potential: India, for example, indicated its interest in establishing a $3 billion  petrochemicals plant in Iran that would make use of the country’s cheap natural gas as feedstock. An increase in investment could help Iran further diversify the types of petro-fertilizers it produces beyond urea, and reduce its reliance on imports for such products. 

Iran has also made clear its intentions to ramp up its own investments abroad. Last year, it launched its first overseas farming initiative in nearby Kazakhstan, and announced its intention to set up similar projects around the world. According to the Minister of Agriculture, Iran intends to invest in 500,000 hectares of farmland globally. The Iranian Ambassador to Kenya confirmed his country’s interest in growing rice, corn and wheat in the East African Community countries (Kenya, Tanzania, Uganda, Rwanda, and Burundi) from which it already gets some tea and coffee.  Iran is also working to develop 60,000 hectares of farmland in Brazil, and has indicated its interest in investing in and increasing cooperation with countries including Ghana and Serbia. 

If Iran imports more of its food from abroad, its strained water resources stand to benefit. The increased ease with which it can import efficient and cheap farming equipment, including advanced irrigation technology, could also help protect its water. 

As for Iran’s other precious but fragile natural resource—its air—policymakers are optimistic that the sanctions relief will have a transformative effect. 

Iran, currently the world’s tenth-largest emitter of greenhouse gases in the world, claims that it will be able to cut its emissions by an additional 8 percent by 2030, bringing its total cuts from 4 to 12 percent, thanks to the lifting of sanctions. The increased ease with which the country will be able to import cleaner gasoline, attract investment to update its refineries, and access renewable energy technology, are all expected to have significant benefits for its environment. 

Ultimately, all of these benefits will depend on a committed Iran—one that is not only committed to sticking to the terms of the nuclear agreement, but also one that is committed to prioritizing the things most important to the Iranian people.

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