There Is A Crack In Everything
Will 2025 see Iran crack under the strain of an energy crisis and failed foreign policy?
Over the years I have met many Iranians - living outside Iran of course. Educated, cultured and charming every one. And then there is the history of Iran stretching back millennia - a country I would love to visit - but not as it is. Not yet.
A degradation of Iran’s proxy forces on almost all fronts, an escalating energy crisis and cracks appearing in the social fabric can lead us to ask - is it different this time? Lets dig in.
Judge, Jury and… executed.
Given the many momentous events happening in the world, the assassination of two (or three (see image)) high-ranking hardline judges in Iran was little reported this week.
Accounts are also filtering in of anti-government banners being displayed on overpasses. Clearly there have been many such incidents over the years, all more or less brutally supressed. But maybe this time its different?
Is A Dream A Lie that Don’t come True?
Part of the social contract, if that is indeed an appropriate term, has been that in the interest of projecting Iranian power by threatening the west in general and Israel in particular, the population has had to put up with authoritarian rule, a depressed economy and a collapsing currency. Whilst sanctions have been more or less diligently applied, they have been sufficient to limit Iran’s ability to provide for both its population and fund its adventurism.
When Iran fired missiles at Israel in April 2024, a few managed to penetrate the multi-layered air defenses, some even striking but not doing much damage to the southern military base of Nevatim. In response, Israel’s air force “flew some sorties” - which itself is an achievement given the distance. The aim, however, was not “shock and awe” but rather a carefully designed destruction of Iran’s air defenses. A plan that bore fruit when a second response was required in October 2024 in which Israel achieved multiple hits on Iran’s missile industrial complex.
Iran conducted its first-ever direct attack on Israel from Iranian territory in April 2024 after the IDF killed one of Iran’s senior-most Islamic Revolutionary Guards Corps (IRGC) commanders in Syria. Iran fired over 300 drones, cruise missiles, and ballistic missiles targeting the IDF Nevatim airbase in the Negev desert and an IDF intelligence center in Mount Hermon. Israel and its allies intercepted the vast majority of the projectiles that Iran fired at Israel. Israel responded to the April 2024 Iranian attack by striking a Tomb Stone target engagement radar that was part of an Iranian S-300 air defense system in central Iran. Eliminating a target engagement radar renders a surface-to-air missile battery unable to track and engage targets.
Iran conducted its second-ever direct attack on Israel in October 2024 after the IDF killed former Hamas Political Bureau Chairman Ismail Haniyeh, former Hezbollah Secretary General Hassan Nasrallah, and former IRGC Operations Deputy Brigadier General Abbas Nilforoushan in Summer and early Fall 2024. Iran fired around 180 ballistic missiles at Israel, causing minor damage to Israeli military and civilian infrastructure. The IDF responded to the most recent Iranian attack on Israeli territory by launching three waves of strikes into Iran on October 25. The recent IDF strikes will likely disrupt Iran’s ability to manufacture some advanced ballistic missiles. The IDF targeted mixing equipment used to produce solid fuel for ballistic missiles in order to limit Iran’s ability to manufacture the kinds of long-range ballistic missiles that Iran fired at Israel in April and October 2024. (Institute for the Study of War)
Playing with Fire
Prior to these attacks, Iran had orchestrated a multi-faceted encirclement of Israel using proxy forces: Hezbollah in Lebanon and Hamas in Gaza whilst simultaneously turning Syria into a proxy state that funnelled weapons and know-how to both. Further south, the Houthi in Yemen, having survived a long war with Iran’s regional competitor, Saudi Arabia, were (and are) also used as agents in Iran’s proxy war.
Long-standing Iranian grand strategy in the Middle East has been to use a network of proxy militias to do its bidding and to keep its hands clean hoping to avoid retaliation. The Iranian doctrine involved using its proxy militias to destroy Israel in a ‘ring of fire’ and push the U.S. out of the Middle East before it would settle accounts with its Sunni opponents. (Real Clear Defense)
Indeed, it is considered likely that one element of the timing of the October 7th attack was to scupper the rapprochement of Israel and Kingdom of Saudi Arabia that was close to an historic agreement.
Following the Hamas atrocities of October 7th 2023, Israel has successfully regrouped and significantly degraded the capability of both Hamas and Hezbollah. The rapid and apparently unexpected collapse of the Iran-backed Assad regime in Syria may or may not have been part of a broader plan - but certainly, the weakening of Hezbollah opened the path to this regime change. At the same time, Iran’s (and by proxy, Syria’s) ally, Russia was deeply distracted by its invasion of Ukraine. Russia’s inability or unwillingness (or both) to help Assad can’t have gone unnoticed in Tehran.
It is not a large step to imagine a renewed regional push against the Houthi in 2025 - once Trump is in office and the Israel-Saudi detent is rejuvenated (most likely very discretely in private).
So the Mullah’s social contract of “make sacrifices and we will be a regional super-power” is probably wearing a bit thin. And then the lights go out. Again.
Iran’s coordinated seven-front “ring of fire” strategy—aimed at overwhelming Israel—has reshaped Jerusalem’s national security doctrine. For the first time, regime change in Iran has emerged as a central goal of Israeli state policy. (Hoover Institution)
Energy, its always Energy
Whilst Iran has been suffering setbacks in almost all arenas of its “Ring of Fire”, it has also been seeing increasing problems with its internal energy systems.
Low energy prices have discouraged private investment and lead to wasteful consumption.
Sanctions have made it difficult for Iran to attract foreign investment to modernize its energy sector.
Iran's infrastructure is aging and needs investment to maintain and expand.
Years of mismanagement and corruption have contributed to the crisis.
The impacts are not widely reported but are showing up across the broader economy:
Power outages have become common in residential and industrial areas.
Factories and government offices have been forced to close or operate with reduced hours.
Power plants have been burning heavy oil to generate electricity, which has caused dangerous levels of air pollution.
It may be possible to hide the bad news about the Ring of Fire, but power cuts, along with fuel and food shoratges, cannot be hidden for long. The currency markets have noticed as the Rial has halved (again)
Tens of millions of people across Iran are facing major disruptions as authorities shut down services in the face of an exacerbating energy and currency crisis amid historic regional tensions.
This week, government offices, schools, banks and businesses in major provinces and in the capital Tehran have been largely closed due to worsening fuel and power shortages as temperatures dropped to subzero levels.
Energy Minister Abbas Aliabadi said on Wednesday that 13 power plants are out of commission due to a lack of fuel. Al Jazeera
Energy, Energy, Everwhere, Not A Drop To Spare
Wouldn’t it be an amazing irony, if Iran was broken by an energy crisis?
Iran was the fourth-largest crude oil producer in OPEC in 2023 and the third-largest dry natural gas producer in the world in 2022. It holds some of the world's largest deposits of proved oil and natural gas reserves, ranking as the world's third-largest oil and second-largest natural gas reserve holder in 2023 (EIA)
One wonders what would have happened if sanctions on oil exports had been more aggressively enforced these last 4 years? Renewed vigour and application of sanctions could have an outsized effect given the apparent underlying weakness of the regime.
Just sayin.
We asked for signs
The signs were sent
The birth betrayed
The marriage spent
Yeah, and the widowhood
Of every government
Signs for all to seeI can't run no more
With that lawless crowd
While the killers in high places
Say their prayers out loud
But they've summoned, they've summoned up
A thundercloud
They're going to hear from meRing the bells that still can ring
Forget your perfect offering
There is a crack, a crack in everything
That's how the light gets inAnthem by Leonard Cohen