January 29, 2020

By Josiah Terrell-Perica, Farmland Investment Director at FarmTogether

Iran’s greatest enemy is water scarcity and systemic failures around water management. Seven of the 10 most water stressed countries are in the Middle East, and climate change projections show that the situation will only become more dire. This region is warming faster than anywhere else on the planet and while Iran is blessed with oil, it lacks sufficient arable land and renewable water resources to sustainably feed its growing population. It is estimated that up to 50 million people, or over 60 percent of Iran’s population, could be internally displaced due to water scarcity over the next 25 years. (1)

Farmland is an intergenerational and strategic resource, and arguably the most precious. Acquiring highly productive farmland with excellent long-term water resources is at the core of FarmTogether’s investment thesis. Water is often the limiting factor in agricultural production, and trading food is essentially trading water. While many people think of rivers and lakes when they hear the term freshwater, 97 percent of freshwater on earth is beneath our feet. Aquifers are underground reservoirs that also (2) support the largest food production regions in China, India, and the U.S. In addition, nearly every major aquifer around the world is being overexploited and nowhere is it more visible than in Iran. 

The earliest civilizations were located in river valleys along the Nile River in Egypt, Indus River in India, Yellow River in China, and Tigris and Euphrates in present day Iraq. With the invention of motorized groundwater wells, agricultural land could be cultivated independent of surface water resources. The water wheel, archimedes screw, and rope-and-bucket approach to groundwater extraction were now a thing of the past. Humanity could now leverage advances in drilling and pumping technology to mine groundwater on a massive scale, and far beyond natural recharge rates. Today, agriculture utilizes 70 percent of global freshwater withdrawals, of which 70 percent of irrigation  is sourced from aquifers. The largest users of groundwater are India, China, U.S., Pakistan, and Iran. (3) 

Iran was one of the largest ancient civilizations and empires to develop outside a river valley. It is located in a very arid region where precipitation is a third of the world’s average. Around 3,000 years ago, the people of Iran devised a method to access groundwater as their population grew. They constructed gently sloped underground (4) canals called qanats that cut into aquifers and conveyed the water via gravity to cities and farms. It is estimated the combined length of all the qanats in Iran would stretch from the earth to the moon. The longest one is the Zarch qanat that extends 50 miles (5) and has been in operation for the last 700 years. Today, Iranians get around 10 percent of (6) their water from qanats, but they have been exploiting their aquifer on an industrial scale for the last 50 years. Between 1970 and 2000, the UN estimates that Iran’s groundwater usage increased by a factor of four – a trend that has only accelerated due to declining precipitation and diminishing surface water sources. 

The countries most dependent on groundwater resources are located in the Middle East and North Africa. Due to the minuscule precipitation in these regions, there is minimal recharge and the groundwater is thousands, if not millions, of years old. In the United Arab Emirates (UAE), for example, for every 25 gallons of groundwater extracted, one gallon is replenished. In the next decade, the UAE could potentially exhaust all of its groundwater. In Saudi Arabia the production of wheat was banned the last three years (7) due to concerns over depletion of its scarce water resources. (8) 

Singapore is an example of a country with virtually no agricultural capacity but high food security. It imports more than 90 percent of its food supply from 160 countries due to limited arable land. In 2019, Singapore was rated the most food secure nation while the U.S. was number three. Following Singapore’s model is essential to bolstering food security (9) by diversifying food suppliers and importing water intensive foods. Increasing imports and better integrating with global commodity markets will help preserve the little water countries like Iran have left. Moreover, food security is also important for peace and physical security. A breakdown in food security not only leads to poor nutrition and hunger, but is also linked to political instability, civil unrest, and even terrorism. (10) 

Iran shares a similarly grim hydrological outlook as its neighbors, but this is intensified by its economic isolation. The country has the largest population in the Middle East at around 80 million people, with 75 percent living in urban areas. While Iran’s water availability per capita is less than 20 percent of the world’s average, its per capita water consumption is above global averages, particularly in its cities. Furthermore, since the revolution in (11) 1979, the state has aggressively pursued a national security policy of food self-sufficiency but at great cost. Iran grows 90 percent of its food but agriculture uses 92 percent of its freshwater resources compared to the world average of 70 percent. Iran’s water policies promote rampant inefficiencies and waste, and agricultural yields are below world averages despite above average water usage.

In the last 50 years, it is estimated that Iran has depleted 70 percent of its total groundwater resources and water available per capita has been reduced by 75 percent. Close to 90 percent of (12) groundwater usage is by the agricultural sector and farmers bare as little as 5 percent of the energy costs used by their wells. In addition, around half of the wells in the country are (13) illegal and this limits the ability of the government to curtail excess demand for water. Technology has enabled farmers to access groundwater at greater depths, but the water is usually higher in salts and slowly poisons the soils. This is compounded by the lack of arable land, with 60 percent of the country’s soils unsuitable for agriculture and another 20 percent being of very poor quality. Less than 10 percent of the country has soils that are good to moderate in quality but half of Iran’s crops are on low quality land. There is both insufficient land and water for sustainable food production. (14) 

Iran is water bankrupt and a tectonic shift in management in the right direction may be too little too late. Like other oil-rich countries in the region, Iran will likely leverage its oil reserves extensively for desalination projects to support its self-sufficiency policy in the short-term. However, this would be incredibly expensive due to the high energy costs to both desalinate and lift the water to the interior plateau of the country. According to a Baker Institute Study in 2017, if Iran grew 10 percent of its wheat using liquid natural gas (LNG) for desalination, the equivalent loss in LNG export value would be close to $4 billion. This would put the opportunity cost of Iranian wheat via desalination at nearly 15 (15) times greater than the cost to import it. Pursuing this path makes no economic sense. 

Iran’s food self sufficiency policy has sacrificed the food security of an entire generation. In the near future, Iran will likely be a net importer of food and will become almost entirely dependent on food imports to survive in the long-term. Therefore, the solutions to circumvent the present and growing water crisis will come from diplomacy and trade. Commodities like wheat have multiple producers and high tradability, and Iran can use its oil to buy food. At this point Iran only has two choices: follow the Singaporean model or start preparing for mass migration.

1. https://www.tandfonline.com/doi/full/10.1080/03068374.2019.1567100?scroll=top&needAccess=true
2. https://water.usgs.gov/edu/gallery/watercyclekids/earth-water-distribution.html
3. https://www.ngwa.org/what-is-groundwater/About-groundwater/facts-about-global-groundwater-usage
4. http://hamed.mit.edu/sites/default/files/Qanat_WHC_2010.pdf
5. https://www.nationalgeographic.com/news/2017/05/iran-qanat-irrigation-engineering-history-video/
6. https://surfiran.com/zarch-qanat-3000-years-old-water-management-system/
7. https://gulfnews.com/uae/environment/uae-may-run-out-of-groundwater-by-2030-1.1475546
8. https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=Grain%20and%20F eed%20Annual_Riyadh_Saudi%20Arabia_4-4-2019.pdf
9. https://www.agdaily.com/news/2019-global-food-security-index/ 10 https://www.tandfonline.com/doi/abs/
10. 1080/09546553.2019.1599863 |
11. http://amir.eng.uci.edu/publications/16_IR_Socio_Economic_Drought.pdf
12. https://www.washingtonpost.com/world/middle_east/irans-water-crisis-the-product-of-decades-of-bad-plan ning/2014/07/01/c050d2d9-aeeb-4ea1-90cc-54cef6d8dd10_story.html
13. Tinoush Jamali Jaghdani and Berhard Brümmer, “Political Economy of Energy Subsidy– Groundwater Depletion
14. https://www.nature.com/articles/s41598-017-08066-y
15. https://www.bakerinstitute.org/media/files/files/1dcfb1ab/CES-pub-IranWater-040317.pdf