Iran Drought: Water Shortages, Energy Chaos, Crypto Miners

Iran is facing increasingly severe water shortages amid drought conditions, accusations of water mismanagement and a significant rise in bitcoin mining seemingly aimed at circumventing US-imposed economic sanctions.

Media reports from the region tell of lengthy power cuts and fears of water scarcity as the country faces its hottest summer in 50 years, and of hydroelectric dams drying up and farmers protesting excessive use of groundwater through thousands of illegal wells.

Despite its rich reserves of fossil fuels, Iran depends upon hydropower for around 25% of its electricity. However, in April this year, the country's deputy energy minister for water and wastewater affairs Ghasem Taqizadeh Khamesi told Iranian media that dam levels had dropped by 20 percent since September 2020 due to a 50 percent decrease in rainfall compared with last year, and that reservoirs are now at 50% capacity.

Khasemi also said that the energy ministry planned to deliver water by tanker to 6,000 villages, explaining: "Currently, 50 percent of Iran's population lives in areas where only 20 percent of the country's water resources are available, that is why we have to transport water and supply it through water tankers in these regions.”

However, reports suggest that plans to divert water from region to region, laid out in a new water bill due for submission to the Iranian parliament this month, are highly contentious and fail to take into account expert advice and analysis.

The head of Iran's department of environment, vice president Isa Kalantari, has reportedly criticised the country's water policy, saying: “In terms of development, there has only been one policy in the country: plundering our natural resources, including water and soil.”

Meanwhile, as people complain of power cuts harming business, healthcare and education, there are indications that Iran's power grid is being used to generate cryptocurrency. The country's power minister, Reza Ardakanian told Bloomberg News that 1 million new power users since last year - due to an increase in manufacturing and cryptocurrency mining - have sent daily consumption soaring. The Iranian Labour News Agency says that only 16% of the added volume is attributable to licensed, legal miners.

According to Reuters, a report by blockchain analytics company Elliptic estimates that 4.5% of all bitcoin mining takes place in Iran, while statements from Iran's state-controlled power generation company from January this year indicate that up to 600 MW of electricity was being consumed by miners. In return for cheap power, miners are obliged to sell the bitcoin they earn from their transactions to the Iranian central bank.

"The Iranian state is therefore effectively selling its energy reserves on the global markets, using the bitcoin mining process to bypass trade embargoes," the study reads.