boosted prices Sunday as it started phasing out subsidies. The price of home heating oil jumped five-fold while gasoline went from one of the cheapest in the world to the normal global price in the snap of a finger.
The price jumps were stunning in their magnitude. The Majlis had ordered that subsidies be phased out over five years to avoid huge price shocks, but President Ahmadi-nejad opted for startling and giant price hikes right away.
Even more stunning was the fact that no one in the Majlis complained about the new prices. It was clear that the order had come down from the Supreme Leader not to make a political issue out of the changes. Even so, it was remarkable to see all 290 members of the Majlis simply roll over and take what Ahmadi-nejad was doing without complaint.
The regime made its intolerance of criticism of the shift abundantly clear on the first day by arresting Fariborz Raisdana, an economist who criticized the subsidies-to-welfare program as unfair in a television interview on BBC Persian.
One Majlis deputy interviewed by the Associated Press did complain. “The price of fuel was supposed to reach international levels in five years, not this year,” he said. But he did not permit his name to be used.
Perhaps because of the enforced silence over the lifting of the subsidies, Majlis deputies were extremely vocal about the firing of Foreign Minister Manouchehr Mottaki. The president has the legal authority to fire any minister any time he wishes. But deputies shouted and pounded the table over Mottaki’s firing, chiefly focusing on the way Ahmadi-nejad sacked him while he was abroad on an official mission.
Ahmadi-nejad went on state television at 9:30 p.m. Saturday night to be interviewed. The interviewer said the questions would be mostly about the economy—and, except for the first, they all were. But no one said the president would use the broadcast to announce the end of subsidies.
Early in the broadcast, the interviewer asked Ahmadi-nejad when the phase out of subsidies would begin. Ahmadi-nejad brushed him aside.
Three-quarters of the way through the program, well after 10 p.m., the interviewer again asked the president the “date and time” when subsidies would begin to be pruned back.
In the middle of a long and meandering response, Ahmadi-nejad let drop, in passing, that the lifting of subsidies would begin at midnight, less than two hours away. He urged people not to rush out and stockpile gasoline in their houses because that might start a fire and they might be burned like a boy and girl he had met who have required three years of plastic surgery so far with more to go.
Presumably, few people heard all of that long story as they drove off to the nearest gasoline station to fill up before midnight.
Elsewhere in the interview, Ahmadi-nejad said, “If the people are kind to one another, have love for each other, and care about each other, then God will support them. There will be rainfall, snowfall and blessings.” The bulk of president’s remarks in the interview were along that style, sounding like a sermonette.
In 2007, when the government first instituted gasoline rationing, there were riots and at least 19 gasoline stations were set afire. This time, police in riot gear deployed around Tehran’s gasoline station while the president was speaking. That may have been the reason the president didn’t announce the lifting of subsidies when he was first asked; he may have known the police needed more time to deploy.
There were no reports of any riots or attacks on gasoline stations anywhere in the country.
The accompanying table shows a number of the price hikes that have taken effect as a result of the phase out in subsidies. It looks like all or most of the subsidies have already been eliminated, not just a small portion as anticipated. But the government has not said what proportion of the subsidies have been ended and whether any more price hikes are to be expected.
For example, the price of regular gasoline (after the small rationed amount has been purchased) is now $2.55 per US gallon. The average retail price of gasoline in the United States this week was $2.98, which includes an average of 45.6 cents in state and federal taxes. Without taxes, the US price is $2.52, or 1 percent less than the new price in Iran.
Ahmadi-nejad said his plan called for the total elimination of subsidies by the end of his term, which is 2 1/2 years away. That is half the phaseout time the Majlis demanded in the legislation it approved. Ahmadi-nejad had originally proposed a three-year phaseout and was angry when the Majlis extended that. As in many other instances of which the Majlis has complained, the president is choosing to simply ignore the law.
In his television interview, Ahmadi-nejad also announced that the public could now withdraw from their bank accounts the welfare payments that the government has deposited in those accounts. Those deposits as the first two months of welfare payments to make up for the loss of subsidies. That comes to 810,000 rials per person or about $40 a month.
Ahmadi-nejad said he is planning to at least double the welfare payments. The interviewer asked when that would be done and the president said, “I hope we will take this step next year.”
Later, he told the interviewer that next month the government will start to add 40,000 rials ($4) per month per person in welfare payments to cover the lifting of wheat subsidies.
Ahmadi-nejad estimated that the poorest 60 percent of the population would gain income by the shift from subsidies to welfare. In other words, he said, the poorest 60 percent do not benefit much from subsidies. In fact, the biggest subsidies are on gasoline, for which poor villagers with no vehicles gain no benefit while wealthy Tehran families with a car for every family member get the most benefit.
Under the law enacted by the Majlis, every Iranian can qualify for a welfare check. But Ahmadi-nejad appealed to wealthy citizens not to file the applications for welfare or to cancel their requests if they have already filed.
According to the government, 60.5 million of Iran’s 75 million people have filed for monthly welfare payments.
The money saved by eliminating subsidies is supposed to fund the welfare payments.
Around the world, many commentators said Iran was dropping subsidies as a response to the imposition of tougher sanctions by much of the world since the new UN sanctions were approved in June.
Actually, however, there is no link. The work on eliminating subsidies began years ago and the Majlis bill laying out the end of subsidies was approved last January. The phase out of subsidies was then expected to begin at Now Ruz but has been delayed numerous times, apparently because of bureaucratic problems getting the program together.
The decision to start the shift Sunday seems to have been made by a very small group and not widely communicated. In fact, on Saturday morning, only 12 hours before Ahmadi-nejad announced the shift, the head of the office that handles gasoline rationing, Mohammad Royanian, announced that the price of gasoline would remain unchanged for another month.
