Iran’s plastics industry brings in much-needed foreign currency, which it can use to try and contain runaway inflation
Last month in the South Korean city of Busan, government negotiators failed to agree to set up a treaty to tackle plastic pollution, instead only deciding to continue the two years of negotiations in 2025.
While over 100 developed and developing countries wanted the treaty to limit plastic production, a handful of oil and gas reliant states – vocally led by Saudi Arabia, Russia and Iran – wanted it to focus on the consumption and recycling of plastics.
Experts told Climate Home that Iran’s opposition is largely because plastic production is a lifeline to the country’s sanction-hit economy as it is a key source of foreign currency to contain soaring inflation and of jobs in some of the country’s poor and dissatisfied southern provinces.
Plastics and gas
Plastics are made from oil and gas and Iran’s plastics industry boomed after the country discovered vast natural gas reserves in the late 1980s. Iran is now by far the world’s biggest exporter of methanol, a key feedstock for making ethylene and propylene, the essential building blocks of most plastics.
The plastics industry contributed nearly 2% of Iran’s GDP in 2022 and polymers – of which plastics are a major part – was the second biggest source of export revenue in the country after oil and gas. Despite privatisation attempts, the industry remains effectively controlled by the government.
Climate Home spoke to a former senior manager in Iran’s petrochemical industry, who did not want to be named. With its “diverse range of products, critical role in employment and contributions to growth and earnings, the petrochemical industry is a cornerstone of the nation’s economy,” they said.
They said that because of the challenges posed by oil sanctions and fluctuations in crude oil exports, the foreign currency generated by exports of petrochemicals like plastics has become an important tool for managing the country’s soaring inflation rate, which is one of the worst in the world.
The Iranian government uses foreign currency to import basic staples like wheat and rice and its central bank uses foreign currency to buy the Iranian Rial, propping up its value. Both measures help control the cost of living and inflation.
Plastic production curbs are a threat to Iran’s geopolitical power too, according to Maria Ivanova, a Northeastern University professor who has followed the plastics talks. She said that much of Iran’s geopolitical power comes from controlling the supply of oil and gas and of petrochemicals. Global moves away from plastics are a “potential threat to geopolitical leverage”, she said.
Iran has also been hesitant to sign up to global treaties in general. It is one of only three countries not to have ratified the 2015 Paris climate agreement and in 2022 was one of only eight nations not to vote for a right to a clean, healthy and sustainable environment as a human right.
Kaveh Madani is a former deputy head of Iran’s environment department and now director of the United Nations University Institute for Water, Environment and Health. He told Climate Home that “historically, Iran has been under international pressure for fair and unfair reasons and is not keen on committing to agreements that may create obligations for it down the road.”
Local importance
While it is of national importance, much of the industry is located in the country’s south, close to the offshore gas reserves that are needed to make plastic and near to the ports from which it can be exported to nations like China, India and Türkiye.
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This part of the country is important politically. Its oil and gas resources are the backbone of the economy but its people are relatively poor. It is home to many religious and ethnic minorities and has been active in nationwide anti-government protests like the 2021 Khuzestan water protests and the 2022/2023 Mahsa Amini uprising. Economic instability from plastic production cuts could lead to further turmoil.
While opposing production curbs, the Iranian government has taken some measures to reduce plastic waste. After a viral campaign spearheaded by Madani and involving celebrities, the environment department banned plastic bottles of water from its offices.
Madani said that Iran is concerned with plastic pollution like other nations but, with a sanctioned economy that relies heavily on the petrochemical industry, it does not want to take measures that would put its survival at risk.
“As long as its economy is under pressure, Iran considers [plastic production curbs] as irrational and even suicidal,” he said.
