By Muhammad Sahimi
Over the past two years, Iran's program for constructing the complete cycle for
producing enriched uranium - the fuel for nuclear reactors and nuclear power
plants (NPPs) - has been the subject of intense discussions. Over this period,
the experts and inspectors of the International Atomic Energy Agency (IAEA)
have been visiting Iran on a regular basis to inspect its nuclear
facilities. The information and data that have been collected by the IAEA on
Iran's nuclear energy program have revealed sustained and determined efforts by
Iran since 1985 for developing an advanced program for producing enriched
uranium. The Bush administrtation has been arguing that the primary purpose of
Iran's nuclear program is developing nuclear weapons. The European Union (EU),
which has very extensive commercial relations with Iran; Russia, which is
completing the construction of a NPP in Bushehr (on the shores of the Persian
Gulf), and Japan, which has signed a lucrative oil agreement with Iran for
developing Iran's giant Azaadegaan oil field, have all pressed Iran hard,
demanding that it reveal all the details of it nuclear program.
The Board of Governors (BOG) of the IAEA has had periodic special meetings to
review the progress in assessing Iran's nuclear program. In its latest special
meeting on Iran, which was held on Monday November 29, 2004, the IAEA reported
to the BOG its latest findings on Iran's program, and due to the agreement
that Iran recently signed with the EU troika - Britain, France, and Germany -
for suspending its uranium enrichment program, no further special meeting of
the BOG of the IAEA has been scheduled; that is, Iran's case before the BOG
has gone back to being a normal, un-urgent case for now.
In a series of articles that were posted on Payvand in early October 2003, the
author prsented a brief history of Iran's nuclear program (Part I); described
the general outlines of the arguments that may justify Iran's nuclear energy
program as economically viable (Part II), and explained the crisis that was
emerging at that time in the relationship between Iran and the IAEA (Part III).
This article and Part V continue the discussions that were begun in the first
three parts of the series and expand on them.
When Part II of this series was first posted in October 2003, many colleagues
and readers of the article urged the author to quantify the arguments presented
in that article that were supportive of Iran's nuclear energy program as
an economically viable program. The goal of the present article is just that:
analyzing Iran's program for generating nuclear energy in the context of its
energy needs over the next two decades, and carrying out an economical analysis
to quantify and support the arguments that were first presented in Part II,
using the latest and most accurate statistics on Iran's energy consumption
and production currently available.
Another goal of the present article is to debunk - hopefully for the last
time - the "argument" that the US neo-conservatives have been making, namely,
that given Iran's vast oil and gas reserves, it does not need nuclear energy.
The neo-conservatives and their allies, ranging from Israel to Iran's
anti-democratic forces (from the group that makes new "discoveries" on Iran's
program on a weekly basis to the monarchists), are the last group that are
still hanging onto this argument! The analysis and arguments presented in Part
II (and its short version published in the International Herald Tribune on
October 14, 2003), as well as those presented by numerous others, have already
made their impact: Iran's nuclear energy program has been transformed from one
not needed by, or suitable for, Iran to a one for which the EU is willing to
GUARANTEE the supply of nuclear fuels, provided that Iran "suspends"
indefinitely its uranium enrichment program!
At the same time, it should be pointed out that when, under the US
encouragement (some say pressure), Iran's nuclear energy program was started
by the Shah in 1974,
(a) Iran's population was less than half of the present 70 million;
(b) its oil production was about 5.8 million barrels (MB) per day, compared
with the present average daily production of 3.9 MB/day;
(c) it exported about 5 MB/day of oil, compared with the present average
daily export of 2.6 MB/day;
(d) its energy consumption was less than one-fourth of the present;
(e) the Shah's government was burning Iran's natural gas for elimination,
simply because it had no use for it, and,
(f) unlike now, Iran's oil reservoirs were not in decline, needing
re-pressurization (see below) by natural gas injection.
In short, Iran did not need AT THAT TIME to generate electricity using NPPs.
This then begs the question: Why is it that, given its present conditions
which can justify use of NPPs for producing electricity (see below), the
neo-conservatives and their allies believe that Iran does not need nuclear
energy, whereas the US strongly pushed the Shah in the 1970s to build NPPs
when Iran had no need for them (see Part V)?
In Part V of the series, the important role that the US and its European allies
played in starting Iran's nuclear program will be discussed in considerable
details. In particular, we will review the history of the US involvement with
Iran's nuclear program to show, based on the newly accessed documents, that not
only the US strongly encouraged the Shah to buy NPPs from the US, but was also
willing to offer Iran, as a sweetener for the deal, the complete facilities for
uranium enrichment if Iran agrees to buy eight US-manufactured NPPs! This
should be compared with the present state of affairs whereby the US and the EU
are trying to stop Iran from utilizing its uranium enrichment facilities and
offer, instead, to supply Iran the enriched uranium for its NPPs! In addition,
we briefly review the positions of some of the leading neo-conservatives in
the US regarding Iran's nuclear energy program which reveal the extent to which
they are willing to go, in terms of inflicting on Iran civilian casualties and
economic destruction, to stop it from starting to operate the Bushehr reactor.
In the opinion of the author, giving wide exposure to this position of the
neo-conservatives is particularly important, since Iran's anti-democratic
forces are the neo-conservatives allies.
To begin the discussion, we must first decouple Iran's need for nuclear
energy from its perceived or real intentions for producing nuclear weapons,
since constructing NPPs does not necessarily indicate any intention
for making nuclear weapons. Recall that when Iraq's program for making nuclear
weapons was discovered by the IAEA after the Persian Gulf war of 1990-1991, it
did not have a single nuclear reactor; its only reactor, under construction at
Osirak, had been demolished by Israel's bombing in 1981. The apartheid regime
of South Africa produced 16 nuclear bombs in the 1980s, without having a
single nuclear reactor!
More specifically, the goal of the present article is twofold.
(a) We describe Iran's energy needs over the next two decades when its
population may reach 100 million, and the resources that it will and must have
in order to secure adequate energy supplies. It is universally recognized that
energy security, which includes securing adequate and DIVERSIFIED energy
resources, is a highly important part of any nation's national interests which,
by their very definition, transcend the political system that governs a nation.
Iran, as a sovereign nation, has a fundamental right to diversify and develop
its energy resources - the engine for its economic and social development.
(b) Why Iran must stop relying on oil and natural gas as its main sources of
energy, and begin developing alternative sources, is discussed next. We show
that, in addition to being in its long-term national interests, there are
compelling economical, environmental and technological reasons for Iran to seek
out alternative sources of energy, instead of relying so heavily on the fossil
fuels. Moreover, we argue that a nuclear energy program has many other
benefits for Iran in terms of the necessary technology that must be imported
into the country, and the educated class of people that will run Iran's nuclear
Whether Iran is trying to make nuclear weapons is beyond the scope of this
article and, therefore, will not be discussed.
Iran's Energy Consumption and Resources
Iran's population is currently estimated to be close to 70 million, about 70%
of which is below the age of 30. This should be compared with Iran's population
of 30 million when the Shah started Iran's program for building NPPs in 1974.
Most estimates indicate that Iran's population may reach 100 million by 2025.
According to reliable statistics (provided by not only Iran's Ministry of
Power, but also by International Energy Agency, the British Petroleum Annual
Statistics, etc.), between 1977 and 2003, Iran's rate of energy consumption
has on average increased 5.5% per year, from an equivalent amount of 181 MB to
about 740 MB of crude oil. Moreover, since the end of Iran-Iraq war in 1988,
Iran's oil consumption has had an annual growth rate of about 8%, while the
supply of energy from all of its sources has had an annual growth rate of 6%,
hence barely keeping up with energy consumption. Between 1977 and 2001, the
electricity production has been experiencing an average annual growth rate of
8.5%. Iran currently produces 31,000 megawatt (MW) of electricity. Most
importantly, in 1977 Iran consumed 29.6 MB of crude oil to generate
electricity, whereas 265 MB of oil were used in 2003 for the same purpose,
representing an average annual growth rate of 8.8%.
If the above trend continues and crude oil is not replaced by another energy
source, and if Iran does not increase its oil production significantly, it may
become a net IMPORTER of oil over the next decade, a huge catastrophe for a
country that obtains 80% of its total export earnings, 45% of its total annual
budget, and about 15% of its GDP from exporting oil. It is estimated that
during 2004 the average price of Iran's crude oil will be about $30/barrel.
It is noteworthy that Iran earns about $900 million/year for every $1/barrel
increase in the price of its oil. We now describe in more details Iran's
various energy sources.
Over the past decade, major discoveries by the National Iranian Oil Company
(NIOC) have increased Iran's proven and recoverable oil reserves to about
131 billion barrels, up from 93 billion barrels in 1993. This represents about
11.4% of the world's proven oil reserves, making Iran second only to Saudi
Arabia. During the first six months of 2004, Iran produced about 4.1 MB/day,
up from an average of 3.9 MB/day in 2003. Iran's SUSTAINABLE oil production is
about 4 MB/day. About 70% of Iran's oil (2.8 MB/day) is produced by 9 giant
onshore fields, with the offshore fields (in the Persian Gulf) producing
another 0.675 MB/day (17% of the total production). Note that Iran was
producing about 5.8 MB/day of oil during the last two years of the Shah in
1977-78, but has never exceeded, on an average basis, 3.9 MB/day since the
Islamic Revolution, while its population has increased by 130%. Iran's OPEC
quota is 3.817 MB/day. Its oil exports average about 2.6 MB/day, mainly to
China, Europe, Japan, and South Korea.
Iran spends $3 billion/year to subsidize the price of oil products for its
domestic consumption. Another $2-3 billion/year is spent on IMPORTING some oil
products (mainly gasoline). To counter the rising rate of consumption of
gasoline (10.5% per year), Iran has doubled its price over the past 2 years.
Iran plans to increase its oil production to 7 MB/day by 2025. This would need
about $60 billion in foreign investment. Since President Khatami was elected
in 1997, Iran has succeeded in attracting about $20 billion in foreign
investment for its oil and gas sectors, with its lion share going to the
natural gas sector (see below). Since Iran's Constitution prohibits granting of
oil rights on a concessionary or direct equity basis, Iran's main mechanism
for granting contracts is the Buy-Back scheme, whereby the contractor pays for
all the investments, receives compensation from NIOC in the form of an
allocated production share, and transfers the operation of the field to NIOC
after a fixed period. This arrangement has been criticized domestically (mainly
for its guaranteed high rates of return, which is typically 15-18%, and was
over 20% for the first 2-3 contracts), and has not made many foreign oil
companies very happy either, as they may not be allowed to develop their
discovery, let alone operating them. In addition, the short terms of such
contracts (typically 5-7 years) are disliked by oil companies. As a result, in
January 2004, Iran announced major modifications to the Buy-Back scheme by
extending the length of such contracts to as many as 25 years, while allowing
for continued involvement of the oil companies after a field's operation is
transferred to NIOC.
Iran possesses about 942 trillion cubic feet (TCF) in proven natural gas
reserves - 15.2% of the world's proven reserves - second only to Russia.
Of these, about 62% are in mostly undeveloped non-associated fields
(associated gas is what one finds in oil reservoirs). Iran's major gas fields
include the giant South Pars (with reserves of 280-500 TCF) in the Persian Gulf
which is the largest gas field in the world. This field also contains over 17
billion barrels of gas condensates (liquids). In addition, many of Iran's oil
fields produce large amounts of (associated) gas. Iran's natural gas production
in 2002 was about 2.7 TCF.
Natural gas has increasingly become the main source of energy in Iran. Whereas
in 1977 it represented only 8.4% of Iran's energy consumption, it now accounts
for more than 53% and is rapidly increasing. This statistics alone should
debunk the argument of opponents of Iran's nuclear energy program that it has
not tried to use its natural gas a source of energy.
Iran has given the highest priority to development of South Pars field, since
it shares it with Qatar. The field is supposed to be developed in 28 phases;
16 phases are currently active. Developing South Pars has attracted over $15
billion in foreign investments, and has generated at least 30,000 new
engineering and supporting technical jobs in Iran. In addition to natural gas,
gas condensate production from the field should reach about 220,000 barrels/day
by 2005, and 630,000 barrels/day by 2015. When South Pars is fully developed,
Iran will earn over $11 billion/year for at least 30 years from this field
Between 35% to 40% of all the produced natural gas is injected into many of
Iran's giant but aging oil fields for pressure maintenance and secondary oil
production (see below). The rest is either exported by pipelines or as
liquefied natural gas, or is consumed domestically. Iran exports natural gas to
Turkey, and has signed agreements, or is negotiating, to sell gas to Armenia,
Azerbaijan, China, Georgia, India, Pakistan, South Korea, Taiwan, and the
United Arab Emirate. It is also actively seeking to export gas to Europe
through Turkey and Greece (an agreement with Greece has been signed), hoping
to export 300 billion CF/year of gas by 2007.
Iran also uses its natural gas as feedstock to develop its petrochemical
industry, which currently produces nearly $2.7 billion in petrochemical
products for domestic consumption and exporting. This generates much added
values for Iran's natural gas, hence justifying its use for a set of projects
for downstream and commodities production, rather than just burning it as a
source of energy. We will come back to this point shortly.
Currently, Iran has a capacity of about 31,000 MW of electricity, of which
more than 75% is generated by natural gas plants, 7% by hydroelectric, and
18% by oil-fired plants. The corresponding percentages worldwide are,
respectively, 17%, 17% and 8% . Iran currently consumes about 28,000 MW of
electricity (the rest of the electrical capacity is exported). The demand for
electric power is growing at an annual rate of 8%. Thus, Iran projects needing
70,000 MW of electricity by 2021, of which it plans to produce 7,000 MW by
NPPs, representing 10% of its electric power. Currently, 19% of the world's
electricity is generated by NPPs, and the IAEA estimates that this will reach
27% by 2030 (see below for further discussions).
Iran does have large potential for hydroelectric power generation, estimated to
be about 20,000 MW/year. It is currently building 7 hydroelectric power
plants, representing over 63% of its current power generation projects, that
will generate by 2007 over 8020 MW of electricity. By 2021 some 14,000 MW of
electricity will be generated by hydroelectric power, projected to represent
20% of Iran's electrical capacity. In addition, Iran has some potential for
generating electricity from geothermal sources, with its first geothermal power
plant going online recently near Ardabil, in northwestern Iran. Several small
photovoltaic units that generate electricity are operating in rural areas of
Nuclear Energy Program
As mentioned above, by 2021 Iran wishes to generate at least 10% of its
electricity by NPPs. However, constructing the NPPs is only part of the plan.
Iran also wishes to possess the full nuclear fuel cycle for producing enriched
uranium, as its has very significant natural uranium reserves in the form of
uranium ore. The main reserves are in Saaghand, 300 miles south of Tehran in
the Yazd Province (representing one of the largest deposits of uranium ore in
the Middle East), and near Bandar Abbas. During 1993-1994, the Beijing Research
Institute of Uranium Geology of China aided Iran with uranium mine exploration
and operation, but Iran appears now to be self-sufficient in the required
It is estimated that Iran's known uranium ore reserves can produce as much
electricity as 43 billion barrels of oil. This is a huge amount by any
criterion, but particularly so if we only recall that if we extract ALL
of Iran's known recoverable oil reserves (a remote possibility!) and use
fully one-third of them only for generating electricity, we will generate as
much electricity as what Iran's presently-known uranium deposits can produce!
The uranium ore is first converted to a powder, usually called the yellowcake.
Iran is building plants in Ardakan and Bandar Abbas for this purpose. The
yellowcake is then further processed to produce gaseous uranium tetra- and
then hexafluoride. The facility for doing so is in Isfahan, which can also
produce uranium oxide and uranium metal, the main components of nuclear fuel.
The Natanz facility is to be equipped with the standard uranium-enrichment
instrument, namely, a large number of cascaded centrifuges that spin uranium
hexafluoride gas at very high speeds and separate the lighter uranium-235
hexafluoride from the heavier uranium-238 hexafluoride. Of every 1000 uranium
atoms only 7 are uranium-235. It is uranium-235 which is used in nuclear
reactors and also nuclear bombs. Hence, one must have a large number of
cascaded centrifuges to produce enough uranium-235. The Natanz facility has a
pilot gas centrifuge plant that currently houses nearly 1300 centrifuges, and
a large-scale production plant which will house up to 50,000 centrifuges, the
installation of which (to begin in 2005) will take up to 10 years. Such a
facility would then have the capability for producing enough uranium for annual
consumption of a nuclear reactor of the Bushehr-type (producing 1000 MW of
electricity). We note that about 20 countries around the globe are active in
Three companies, Kaalaa-ye Electric, Pars Taraash, and Faraayand Technique, can
produce parts for the centrifuges that are to be used for enriching uranium.
Iran also has nuclear waste disposal sites near Qom (Ghom), Karaj, and
Anarak. There are three other nuclear facilities in Iran which represent
research institutions, and are not directly related to uranium enrichment. It
must be emphasized that the IAEA has been monitoring all of Iran's known
The Case for Nuclear Energy
The main argument of the critics of Iran's nuclear energy program is that, it
has vast oil and gas reserves, hence needing no nuclear energy. The argument is
mostly hot rhetoric. Canada and Russia, both major oil exporters, rely on
NPPs for a significant portion of their electricity needs. Russia has vast oil
and gas reserves (its gas reserves represent about a quarter of the world's
known reserves), and Canada exports 1.5 MB of oil to the US every day, yet they
both continue building NPPs. Between 1974, when Iran signed its first agreement
for building NPPs, and 2000, use of NPPs for generating electricity in the
world has increased by a factor of 12! In particular, France is now producing
most of its electricity using NPPs.
At the same time, construction of NPPs in Iran is completely consistent with
the general trends in Asia. According to the IAEA , 23 of the last 31 NPPs
connected to the world's power grid have been built in Asia. Of the NPPs
currently under construction, 18 of 27 are located in Asia, generating 78%
more electricity by 2015 than 1995. In addition, according to the IAEA analysis
, subject to certain reasonable assumptions, by 2030 27% of the world's
electricity will be generated by NPPs, compared with the current rate of 19%.
Even in the US, the Bush Administration has been talking about a nuclear power
renaissance, and the US nuclear industry has been calling for construction of
50 NPPs by 2020 .
However, aside from the above general arguments, one can completely justify
Iran's nuclear energy program based on economic, environmental, NUCLEAR
EXTERNALITIES, and Iran's long-term national interests. In what follows we
discuss each of these aspects.
The Economics of Iran's Nuclear Energy Program
If oil is to be used for generating electricity, then, for every 1000 MW of
electricity, Iran must use between 20 to 25 MB of crude oil per year, depending
on the oil quality. This implies that, for an average price of $25/barrel
(currently the oil prce is much higher, and will presumably remain so for many
years to come), Iran will lose $500-625 million/year in oil exports, which
should be compared with the operating cost of about $140 million/year for a
NPP generating the same amount of electricity. In 2003 alone, Iran used 265 MB
of crude oil to generate 18% of its electricity. With a 2003 average price of
$26/barrel, this represents $6.89 billion worth of oil exports for A SINGLE
YEAR, a staggering figure that can pay for complete construction of at least
two Bushehr-type (1000 MW) reactors and their operations for several years at
the current prices! When we consider this over the useful life of a NPP
(say, 50 years), not only Iran can replace the oil-generated electricity with
that generated by NPPs, it will save tens of billions of dollars. Note that
constructing NPPs in Iran should, under normal circumstances, be considerably
cheaper than in the US or the EU, as the labor force is much cheaper in Iran,
and many expensive legal and regulatory aspects of constructing a NPP in the
US  do not simply exist in Iran.
Burning oil to generate electricity also creates severe environmental problems,
as it has been doing in Iran, with very significant economic consequences which
will be described in the next section.
Now consider natural gas power plants. As we already pointed out, Iran has
already made great strides in using natural gas for its energy needs, with
75\% of its electricity, and 53% of all of its energy consumption being
supplied by natural gas, hence debunking, once again, the main argument of
the neo-conservatives and other opponents of Iran's nuclear energy program
that Iran has not made the necessary effort to use its natural gas for its
energy needs. At the same time, there are other areas of needs for natural
gas that have priorities that may even be higher than using it for generating
electricity, some of which are as follows.
(a) The author has been involved in computer modelling of oil and gas
reservoirs for over 25 years . A study in 1998 concluded that, out of Iran's
60 oil fields (at that time), 57 of them needed major technical studies,
repairs, upgrading, and repressurizing by natural gas (the author was a member
of the group that studied this issue and reached the above conclusion). A
typical Iranian oil reservoir is fractured, and is of carbonate-type with a
very tight rock matrix. It is well-known that injection of huge amounts of
natural gas into almost all of Iran's oil reservoirs is practically the only
way of maintaining their pressure to produce oil (a process called secondary
recovery). Water injection, another common method of pressure maintenance in
oil reservoirs, is not suitable for most of Iran's oil reservoirs . Since,
over time, the pressure will decline, the amount of injected gas must also
increase to keep pace (at some point gas injection alone will not be effective
anymore, and one must start what is usually called the tertiary recovery
process). Currently, 35%-40% of all of Iran's natural gas production must be
injected into its giant but aging oil reservoirs, without which the production
of most, if not all, of them will rapidly decline.
At the same time, consider the following: If the natural gas that one burns
annually to produce 1000 MW of electricity (the amount that the Bushehr
reactor will produce) is injected into a typical Iranian oil reservoir, it will
increase the reservoir's production by at least a few thousand barrels/day,
depending on the reservoir's geology and history of production. The earning
from exporting the extra oil can pay for and cover part of the operating cost
of a 1000 MW reactor ($140 million/year) and reduce its operating cost to a
level that makes it economically competitive with the cost of a gas power
plant, estimated to be $60-70 million/year, while not polluting the environment
by burning oil or natural gas.
We must also remember that, (1) the natural gas that is injected into Iran's
oil reservoirs is largely recovered, hence making it even more economical to
use NPPs to produce electricity and use the gas for pressurizing the oil
reservoirs, and (2) NPPs have ZERO emission of carbons and other pollutants
into the air, whereas fossil fuels, including natural gas, emit large amounts
(b) As pointed out above, most of Iran's gas fields contain also huge amounts
of liquefied natural gas (LNG). Natural gas can also be easily converted to
LNG, which is sold at a price much higher than that of natural gas itself.
However, the OPEC treats LNG similar to crude oil when determining quota for
its members, and as a member of OPEC Iran cannot exceed its quota. Therefore,
natural gas production cannot be increased arbitrarily to compensate for the
gas that used domestically .
(c) As mentioned earlier, Iran is already exporting natural gas to several of
its neighbors, and is actively seeking exporting very large amounts of gas to
Europe. This is all part of a new emerging global market - natural gas -
which is going to have  great impact on the world economy with geopolitical
implications. By saving as much natural gas as possible for export, Iran will
be in a very strong position in this emerging market to play a role similar
to that of Saudi Arabia in the oil market, given its gas reserves.
(d) Iran is developing its petrochemical industry, for which the main
feedstock is natural gas. The added value generated by producing petrochemical
products (which can be up to 100%, depending on the products) - not to mention
the jobs and industrial base that it creates, and the foreign currency income
that it generates - is much greater than what Iran may gain by simply burning
huge amounts of gas to generate electricity. In fact, the world's $500 billion
petrochemical industry has been developed precisely for this reason: The added
value that one gains from converting natural gas to downstream petrochemical
products which, in Iran's case which has vast gas reserves and cheap labor
force and energy resources, cannot be ignored.
(e) Unlike the popular belief, burning natural gas does contribute to
degradation of the environment - by producing and releasing carbon into the
atmosphere and contributing to the Greenhouse effect and global warming.
This will be further discussed in the next section.
Environmental Problems Caused by Fossil Energy Usage
"The more we look to the future, the more we can expect countries to be
considering the potential benefits that expanding nuclear power has to offer
for the global environment and for economic growth...."
The above are what Dr. Mohamed ElBaradei, IAEA Director General, said  in
advance of a gathering of 500 nuclear power experts in Moscow from 27 June -
2 July, 2004, marking the 50th anniversary of the start of the first NPP.
Dr. ElBaradei points out an important fact: NPPs DO NOT POLLUTE THE
ENVIRONMENT ON A REGULAR BASIS, but that is exactly what oil and other fossil
fuels have been doing to Iran for years. If one is to obtain a true estimate of
the cost of using oil, and even natural gas, as sources of energy, one must
take into account the huge cost of the medical care for people who suffer from
the diseases caused by pollution of the environment by oil and natural gas, as
well as their damage to Nature. As early as 1990, in a seminar at Gustave E.
von Grunebaum Center for Near Eastern Studies of the University of California
in Los Angeles the author stated that ,
"Typical estimates for the cost of producing electricity and other forms of
energy using oil and gas are only based on their market prices. These
prices reflect only the cost of producing oil (and gas) and of transporting
them to the consumer. However, some of the costs of consuming fossil energy are
not directly included in our energy bill, nor are they paid for by the
producers. These are the HIDDEN, but real, costs that the society pays
indirectly for the health problems caused by air, water and soil pollution r
esulting from using fossil energy, environmental degradation caused by carbon
emission and global warming, and acid rains. For example, according to the
American Lung Association, total health costs, including lost potential income,
of air pollution alone are estimated to be about $50 billion/year. The main
culprit for air pollution is the fossil fuels, mainly oil, our primary source
of energy. Evaluating the economics of the damage inflicted on Earth by global
warming, caused by carbon emission that is the direct result of burning oil and
natural gas, is currently impossible."
Supplying energy to the world releases six billion metric tons of carbon into
the atmosphere every year, with Iran contributing her share. Iran is beset
by huge environmental problems, caused by oil and gas consumption, that are
reaching catastrophic scales. Although Article 50 of Iran's current
Constitution states that, "In the Islamic Republic of Iran protection of the
environment, in which present and future generations should enjoy a
transcendent social life, is regarded as a public duty," various reasons kept
in the back-burner the goal of cleaning the environment and maintaining it that
Since 1980, carbon emission in Iran has risen by 240%, from 33.1 million
metric tons emitted in 1980 to more than 85 million metric tons at present.
Note that, whether oil or natural gas is used, carbon emission cannot be
avoided. This emission is one of the main culprits behind air pollution in
Tehran and all other major cities of Iran that has reached catastrophic levels,
so much so that the elementary schools must be closed on many days. According
to Iran's Ministry of Health, and the Organization for Protection of the
Environment, long-term effects of the polluted air are responsible, directly
or indirectly, for causing 17,000 deaths/year in Tehran alone, as well as
causing severe problems for people with asthma, heart, and skin conditions.
The cost of medical care for such illnesses is reaching, by Iran's standards,
astronomical levels. Generating electricity by NPPs does not directly address
such problems, but it does reduce the pollution and environmental degradation
caused by burning oil and (in the long-run) natural gas.
Polluted air also severely damages soil and groundwater resources by
contaminating the rain water. At the same time, Iran's industrial base, using
fossil fuels for energy, generates wastes that contaminate a large number of
rivers and coastal waters and threaten drinking water supplies. Iran is
actually reaching the stage which is characterized by chronic shortage of clean
water - believed by many to be the cause of many future wars in the Middle
A recent study by John Deutch and Ernest Moniz of the Massachusetts Institute
of Technology  argued that even in the US, if certain technological
advances are made (expecting to achieve these advances is entirely reasonable),
and subject to a modest tax on the carbon emitted into the atmosphere, the cost
of generating electricity by NPPs will become competitive with that of gas
Finally, strict environmental regulations and public opposition have prevented
development of significant oil reserves in the US (for example, in Alaska).
At the same time, Western European countries have been discouraging use of oil
and gas, with some moving towards NPPs. Since 1980, France has increased its
production of electricity from NPP by 80% and reduced its oil consumption by
10%. But, the same countries that are reluctant to use oil and gas because
they fear damage to their environment, demand Iran to burn oil and gas
to generate electricity!
Externalities are said to arise when decisions of some economic agents affect
the interests of other economic agents . A good example is provided by the
US space program in the 1960s. Although the program was intended for (and
succeeded in) landing men on the Moon, it also resulted in tens of thousands
of inventions and technological advances that we now use in our every day
lives. What are the externalities of nuclear technology for Iran? One can list
at least four major catagories . Iran's nuclear program will result in,
(a) development and nurturing of new and unprecedented capabilities for
building technological infrastructures;
(b) cross-fertilization and diversion of nuclear-related know-how, research
and development, and supply chain to Iran's other industries, and other
branches of science, such as medicine and agriculture;
(c) added-value and versatility of nuclear technology-related training, and
(d) creation of new cadre of managers of technology, technocrats, and
organizational system culture.
In the author's opinion, nuclear externalities alone justify a nuclear energy
program for Iran. Our contention is perhaps best described by Perkovich who
declared that ,
"Nuclear establishments can be seen as avatars of modernity, national prowess,
and power, and the leaders of these establishments are well-positioned to
pursuade (political) leaders and public to give them rein and bring greatness
to their nations."
Iran's Long-Term National Interests
Iran must confront the challenge of its demographic explosion without having
access to many of the necessary tools, which are strong state structures,
large amounts of investment capitals, and industrial infrastructres that are
reasonably advanced. At the same time, oil and natural gas are Iran's
non-renewable national wealth. Once they are burned, they can never be
recovered. One cannot expect Iran to recklessly deplete its non-renewable
national wealth without receiving any lasting benefits in return, but this will
happen if Iran's energy sources are not diversified, and it continues to rely
almost exclusively on oil and natural gas as almost the only sources of energy.
Since the 1979 Revolution, Iran's population has more than doubled, from 30 to
nearly 70 million, while its present oil production is only 70% of the
pre-Revolution level. As pointed out in the Introduction, the question is: Why
is it that the US and its allies believed in the 1970s that Iran needed NPPs,
when its population was less than half of the present; its oil production was
much more than now; its natural gas was being burned uselessly; its energy
consumption was about a quarter of the present, and when, unlike today,
its oil reservoirs were not in desperate need of natural gas injection, but
that, now, Iran does not need alternative sources, including nuclear energy?
How should Iran feed, house and educate its rapidly growing population, create
jobs for its army of educated people, and develop its infrastructure and
industrial base, mostly based on its income from exporting oil and gas, but
also use the SAME resources to satisfy its ever increasing energy needs?
The Challenges of Nuclear Energy
To be fair, we must also recognize that NPPs do have their own problems:
(a) Nuclear power plants require high initial capital cost and investment.
However, given nuclear externalities and other benefits of nuclear energy
described above, the high cost is completely justified in Iran's case.
(b) The second problem of NPPs is their safety which must be at a very high
level so that the chances of accidents, similar to those that happened in
Three-Mile Island in the US (in 1979) and in Chernobyl in Ukraine (in 1986),
will be minimal. The aforementioned MIT report  called for maintaining the
current standards of "less than one serious release of radioactivity accident
for 50 years from all fuel cycle activity," which "should be possible with the
new light-water reactor plants" (that is, the reactors that use the heat from
nuclear reactions in a nuclear reactor to generate steam for use in a power
plant). The fact is that the safety of NPPs is a recurring problem. Even J
apan, an advanced industrialized nation, has had many nuclear accidents.
Therefore, the nuclear industry can no longer ignore this problem, or claim
that it has addressed it in a satisfactory manner.
(c) One must also address the problem of safely storing the nuclear wastes
produced by NPPs which will be radioactive for at least tens of thousands of
Renewable Energy Sources for Iran?
Iran does have potential for generating significant amounts of electricity
using renewable sources (although, in some way, nuclear energy may also be
considered as a renewable source). One is hydroelectric which, as pointed out
above, should provide 20% of Iran's electricity by 2021. Iran's central desert
has the potential to produce some energy using solar technology, but the
technology is not advanced enough to act as a major supplier, at least not yet
or in the near future. There is also some potential for geothermal energy, but
its extent is limited. Altogether, such alternative methods cannot provide
more than 25% percent of Iran's energy needs, at least over the next two
Iran's goal of generating, by 2021, 10% of its electricity by NPPS, 20% by
hydroelectric, 65% by natural gas, and 5% by other sources is rational
and economically justified. The benefits of diversifying Iran's energy sources,
and in particular resorting to nuclear power plants for a fraction of Iran's
needed electricity, far outweight any possible drawback that it might have,
although the author cannot conceive one.
 The Role of Renewables in Future Energy Directions, International
Energy Agency report (October 2002).
 See the IAEA Press Release
 See, Physics Today (April 2002), p. 54.
 G. Rothwell, Triggering Nuclear Development: What Construction Cost
Might Prompt Orders for New Nuclear Power Plants in Texas, Public
Utilities Fortnightly (May 2004), p. 47.
 M. Sahimi, Flow and Transport in Porous Media and Fractured Rock,
1st ed. (VCH, Weinheim, Germany, 1995); 2nd ed. (to be published in 2005).
 See also W.O. Beeman and T.R. Stauffer, Is Iran Building Nukes? An
Economic Analysis, Pacific News Services.
 D. Yergin and M. Stoppard, The Next Prize, Foreign Affairs, vol.
82 (No. 6), 103 (2003).
 For expanded content of that seminar see, M. Sahimi, How Much
do We Pay for a Barrel of Oil? in, Proceedings of the Third International
Conference on Non-Renewable Energy Sources, Tehran, Iran (December 1993), p.
127, and, M. Sahimi, Factors Affecting the Development of Fossil Energy
Resources of Developing Countries, in, United States-Third World
Relations in the New World Order, edited by A.P. Grammy and C.K. Bragg (Nova
Science Publishers, New York, 1996), p. 361.
 J.M. Deutch and E. Moniz, The Future of Nuclear Power; see also, Physics Today
(December 2003), p. 34.
 J. Hirshleifer, Price Theory and Applications, 2nd ed. (Prentice
Hall, Englewood Cliffe, 1980).
 N. Meshkati, The Nuclear Question, paper presented at symposium on,
Politics and Governance in a Changing Iran, Hoover Institution, Stanford
University, Stanford, California (November 31, 2003).
 G. Perkovich, Nuclear Power and Nuclear Weapons in India, Pakistan, and
Iran, in, Nuclear Power and the Spread of Nuclear Weapons: Can We Have
One without the Other, edited by P.L. Leventhal, S. Tanzer, and S. Dolley
(Brassey's, Washington, 2002), p. 196.
About the author:
Muhammad Sahimi is Professor & Chairman of Chemical and Petroleum Engineering
at the University of Southern California in Los Angeles. In addition to several
scientific organizations, since 1986 he has been a member of the Union
of Concerned Scientists and a contributor to its Partners for Earth Program. He
has been a visiting professor in Australia, Europe and the Middle East, and a
consultant to many energy firms around the world. A shortened version of the
present article and Part V will soon appear in Harvard International Review.
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