While the UN’s sanctions on Iran fall short of the crippling measures sought by the US and UK, the European Union is preparing its own set of measures against the country. The aim is to hit key sectors of the oil and gas industry, prohibiting investment and the transfer of technology.

Tehran’s finances are already under tremendous strain from the cost of importing fuels

The condition of the Iranian energy sector is already weakened through a combined lack of finance, technology, skilled personnel and equipment. But Tehran continues to maintain that it is business as usual even as a number of projects struggle to get off the ground.

After evicting European oil majors, Shell and Repsol, the Oil Ministry awarded the development of the several phases of the vast South Pars gas field to a consortium of local firms, including an affiliate of the Iranian Revolutionary Guard Corps (IRGC).

The IRGC is now the target of UN sanctions. That a consortium so close to the IRGC has been awarded phases on the South Pars scheme highlights concerns over its increasing power in the country, as well as undermining any hopes of progress. While Iran claims it has the ability to develop the phases, it remains a concern whether they will have access to the finance and technology needed. Fewer countries are also willing to deal with Iran for fear of falling out with the US.

The government will be forced to contribute increasingly large amounts from the budget to cover the shortfall in foreign investment.

But Tehran’s finances are already under tremendous strain from the cost of importing fuels, and then the subsidies it pays to the general population. All the while, demand continues to grow in the country.

Slashing the government support is the widely recommended remedy, but will be a highly controversial move for Tehran, which it will continue to postpone.