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As Israel and Iran attack each other with missiles, Tel Aviv is targeting especially vital energy infrastructure of its arch enemy, including key oil and gas facilities. What impact does that have on the Iranian economy.The escalating conflict between Israel and Iran, with both sides firing missiles and drones at each other, has even unsettled global energy markets.
Israeli attacks on Saturday targeted Iran's energy infrastructure, including vital oil storage sites, refineries and power stations.
Among the locations targeted was the massive South Pars gas field, which is part of the world's largest reservoir of natural gas. It's located off Iran's southern Bushehr province and is the source of most of the gas produced in Iran.
Iran shares control over the South Pars gas field with neighboring Qatar, which calls the reservoir under its control North Dome.
The attack, which forced Tehran to partially suspend production at the field, raised the prospect of a widening conflict threatening Iranian energy production and supply.
Iran's Foreign Minister Abbas Araghchi has slammed Israel for targeting South Pars, saying it was an attempt "to expand the war beyond" Iran.
"Dragging the conflict into the Persian Gulf region is a major strategic mistake, likely deliberate and intended to extend the war beyond Iranian territory," news agency AFP quoted Araghchi as saying during a meeting with foreign diplomats.
Iran's heavy reliance on hydrocarbons
Iran is a major player in the global energy sector, with the country home to the world's second-largest proven natural gas reserves, according to the United States Energy Information Administration (EIA).
Data from the intergovernmental organization, Gas Exporting Countries Forum, show the country produced about 266.25 billion cubic meters (bcm) in 2023, with domestic consumption accounting for 255.5 bcm. About 15.8 bcm of natural gas were exported.
When it comes to oil, Iran holds the world's third-largest crude reserves, or about 9% of the total proved oil reserves worldwide.
The country extracts daily about 3.3 million barrels of crude and another 1.3 million barrels of condensate and other liquids, of which it exports around 1.8 million barrels, according to Brussels, Belgium-based data analytics firm Kpler.
Iran is the third-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC). The income it generated from energy exports account for a sizeable chunk of government revenues and foreign exchange reserves.
A report by EIA suggests Iran earned $144 billion (€138.5 billion) in oil export revenues in the three years from 2021 to 2023.
"Iran uses several obfuscation techniques such as turning off its ship identification signals, applying ship-to-ship transfers, or relabeling cargoes as originating from other countries for both crude oil and oil products, which increases the challenge of providing precise export data," the report said.
China remains a big importer of Iranian crude, with the country importing 1.71 million bpd in March, up 20% from 1.43 million bpd in February, news agency Reuters reported.
The price of crude oil surged late last week after the Israel-Iran strikes began but it has since retreated, with both main oil contracts dropping by over 1% on Monday.
If Israel intensifies its targeting of Iranian energy facilities, however, it could trigger a spike in global oil and gas prices.
Sanctions cripple Iranian economy
Despite Iran's vast hydrocarbon reserves, much of its potential remains untapped.
Iranian officials acknowledge that the country needs advanced technology and billions of dollars in new investment to modernize its oil and gas sectors.
But the Middle Eastern country is subject to one of the most stringent sanction regimes in the world, hampering its trade and investment opportunities.
While a landmark nuclear deal between Tehran and world powers in 2015 promised sanctions relief in exchange for Iran restricting its nuclear activities, US President Donald Trump, withdrew the US unilaterally from the agreement in 2018 and reimposed sanctions during his first term in office.
The Western sanctions, aimed at curbing Tehran's nuclear and ballistic missile programs, have targeted Iran's oil exports, banking and shipping, among other sectors.
They have also severely curtailed Tehran's natural gas exports in recent years.
The measures have effectively crippled the Iranian economy, which is currently reeling from a raft of crises such as soaring inflation and a collapsing currency.
Blackouts in an energy-rich country
Decades of mismanagement and geopolitical tensions have compounded the economic problems. Despite its vast oil and gas resources, Iran has been struggling with energy shortages amid declining production, outdated equipment and a lack of investment in infrastructure.
Meanwhile, Iran relies heavily on natural gas for domestic consumption, particularly for electricity generation. Additionally, more than 95% of Iranian households are also connected to gas pipelines, and energy subsidies have resulted in overconsumption.
In recent years, the mullah regime has beenforced to impose rolling power blackouts affecting both homes and factories to cope with spikes in electricity demand.
Even Iranian President Masoud Pezeshkian in May criticized what he called the country's "excessive and inappropriate consumption" of electricity.
Edited by: Uwe Hessler
(The above story first appeared on LatestLY on Jun 16, 2025 11:30 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).
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