The Islamic Republic is teetering. Protests erupt with increasing frequency and spread like wildfire across the country. Israeli precision strikes have shattered the illusion of Iranian deterrence. Transition also looms, as the Islamic Republic’s leader for the past 35 years, the 85-year-old Supreme Leader Ali Khamenei, publicly hints at his own mortality. Add into the mix rapidly deteriorating quality of life.
The Iranian rial is at near record lows and will soon surpass one million rials to the U.S. dollar, a decrease of more than four orders of magnitude. Officially, inflation surpasses 35 percent; unofficially, it could be higher. An Iranian economist recently warned hyperinflation may be around the corner.
Just as North Korea builds empty facades to create an illusion of progress and Turkmenistan attaches frameworks of glass and mirrors over crumbling Soviet structures to do likewise, the Islamic Republic builds empty and irrelevant monuments to its own supposed industrial might but it allows its core infrastructure to deteriorate. The Islamic Revolutionary Guard Corps can build dams that dry up the Zayandeh Rud in Isfahan, but Iranian authorities cannot keep the country’s lights on.
While the regime has made some key investments—the Tehran metro system (decades delayed) and the Imam Khomeini International Airport (also decades delayed)—most of the country’s core infrastructure, from highways to refineries to the electrical grid, date to the shah’s era.
Electrical grid failures have escalated this winter. Iran’s electricity shortage is now the equivalent to eight Hoover Dams. The regime has resorted to burning mazut, a low-quality and heavily polluting fuel once common in the Soviet Union.
Iranian authorities cannot use the excuse that the Iraqi government makes: That its population gain and resulting increase in consumption explain its shortfalls. After all, while Iraq’s population growth rate has steadied at 2.3 percent, Iran’s growth rate has now fallen to below replacement value with a population decline imminent.
What then is causing Iran’s electricity shortfall and rampant brown- and blackouts? Iranian officials both blame sanctions while simultaneously suggesting Iran’s indigenous capabilities make it immune. Historically, mismanagement and corruption cripple Iran’s economy far more than sanctions do, especially as these are often undermined by loopholes and lack of enforcement. Drought has also undercut Iran’s hydroelectric generation.
Bitcoin mining may also explain a lot. In 2021, Minister of Energy Reza Ardakanian, a technocrat who had risen through the ranks as deputy minister of Planning at the ministry and had a stint as deputy minister for Urban Development at the Ministry of Interior, told the reformist daily Etemad, “Early heat, decline in hydroelectric generation, and cryptocurrency have all caused problems. We had cryptocurrency miners who consumed 300 megawatts of electricity, but global studies have shown than ten percent of Iranian generation goes toward cryptocurrency mining.” A general rule of thumb in the West is that one megawatt can power 1,000 homes, and so a shortfall of 300 megawatts could power a city the size of Pittsburgh.
However, the energy intensiveness of American homes mean they consume more on average, and so in the Iranian context, a 300-megawatt shortfall might mean draining all power from an Iranian city with a population equivalent to Boston’s, such as Yazd or Kerman.
The situation could be worse. Three hundred megawatts may not sound like much on its face, but Iranian officials regularly underreport critical statistics. If Ardakanian says that cryptocurrency mining consumes ten percent of Iran’s electricity generation, the true figure could be double that and likely has only increased in the four years since Ardakanian’s comments, especially as inflation, unemployment, and youth underemployment make Iranians more desperate.
The Islamic Revolutionary Guard Corps also may contribute to the problem as the group has long prioritized its own financial interests over Iran’s well-being. Iranian security services may fear the general populace making crypto-transactions the regime cannot control, but the Guards also recognize the potential for their own financing of terror groups and proxies throughout the region.
If the population of Yazd must experience a mid-summer blackout amidst 110 Fahrenheit weather so the Houthis can get missiles or Revolutionary Guards general can get individually wealthy, so be it.
While Iran is relatively opaque, other regional developments provide reason for concern about its Bitcoin mining problems. Uzbekistan and Kazakhstan, two countries relatively more developed and less isolated, also experience significant strains on their electrical grids due to crypto-mining. The difference between these Central Asian states and Iran, however, is their ability to solicit Western assistance to upgrade and expand their capacities to meet the challenge.
The conversation about the Islamic Republic, both among Iranians inside the country as well as in the West, often centers around the regime’s illegitimacy and its violations of human rights. Outrage over any number of sparks—press freedom (1999), allegations of football match fixing (2001), election fraud (2009), the economy (2017-2018), and mistreatment of women (2022-2023)—has erupted into nationwide protests. Similar grievances have brought down other regimes.
While diplomats and analysts focus on these and speculate about the potential for a Mashrutiyyat version 2.0, Iran may well be on its way to falling victim to the first Bitcoin Revolution, not because opposition parties use the cryptocurrency to fuel unrest, but rather because of the inability of Iran’s electrical grid to keep up with desperate Iranians seeking to escape poverty and Revolutionary Guardsmen indifferent to their plight but motivated by their own greed.
About the Author: Dr. Michael Rubin
Dr. Michael Rubin is a senior fellow at the American Enterprise Institute and director of policy analysis at the Middle East Forum. He is also a 19FortyFive Contributing Editor. The views expressed in this opinion piece are the author’s own.
