October 08, 2021
![GREETINGS – The new British ambassador to Iran, Simon Shercliff, a Farsi-speaker, presented his credentials to President Raisi September 26 and received a lecture about Iranian “independence” from Raisi. The president asked the ambassador to use his knowledge of Persian to convey the real sense of the word “independence” as understood by Iranians to his superiors in London. “Whenever they [Iranians] sense that other countries are being bullies, [the Iranian people] refuse to submit and they react,” Raisi said. “Our country is truly independent and independence is not just a claim.”](https://iran-times.com/wp-content/uploads/2021/10/NewBritAmb.png)
Actually, there is nothing new about this. Such talk began in 1989 when Ali-Akbar Hashemi-Rafsanjani became president. The talk has continued for a third of a century but the regime has had little success in making real change.
The problem is that the government has no way of knowing who the poor are. Unlike in most countries, few households in Iran report their income on income tax forms.
Since the Raisi Administration took office in August, the head of the Plan and Budget Organization, Masud Mirkazemi, has spoken out about the wastefulness of broad subsidies, much of which goes to the wealthy. The subsidies are so great now that the government has very little maneuver room.
In addition, the Majlis Research Center has recently issued a paper lauding the system used in the United States of providing quasi-cash subsidies, like Food Stamps, that go only to the poor, or in-kind support, like housing built by the government and available only to the poor.
The Rafsanjani Administration started out tackling gasoline costs in 1989. It was spending a fortune to provide very cheap fuel at gasoline stations. But many of the poor lacked cars and even those who owned cars did not use them as often as the wealthy. So, the bulk of the subsidies went to those didn’t need them.
Rafsanjani convinced the Majlis to begin raising the price of gasoline annually with the goal of eventually selling gasoline at global market prices. But the Majlis soon wearied of the political cost of raising gasoline prices. And, with decades of inflation, Iranian gasoline is again one of the cheapest in the world today, the Rafsanjani effort having cratered.
(According to the website Global Gasoline Prices, four countries sell gasoline for less than $1 a gallon Venezuela at 8 cents a gallon, Iran at 23 cents, Syria at 87 cents and Angola at 95 cents.)
President Mahmud Ahmadi-nejad pressed for direct cash payments to the poor. The idea was to pay a full welfare allowance to the poorest one-tenth of the population with lesser amounts to each higher tenth and none paid to the richest three-tenths. But the government had no way to tell who was in which tenth, so the Majlis just decided to pay everyone the same amount 455,000 rials per month, a payment that was once worth more than $40 a month, but now is worth a mere $1.70.
The Rohani Administration tried to solve the problem by requiring everyone to re-register for welfare payments and asking the rich to just not register. It ran spots on television with movie stars and soccer players saying they didn’t need welfare and were proud not to register for any payment. But the effort was a complete flop as more than 95 percent of the population registered for the monthly payments.
In the last year, the Rohani Administration tried a new technique. It now provides free electricity to every household that uses a small amount of power. That encourages families to economize and stay under the cap so they pay nothing. But that can only work with a few utilities like electricity and natural gas piped into homes.
Mirkazemi, the head of the Plan and Budget Organization, says Iran’s total subsidies gobble up the equivalent of $63 billion annually or 150 percent of the state’s operating budget.
One of the biggest subsidies is that which holds down the price of bread, the basic food of the Iranian family. The government buys wheat and provides it to bakers for less than what it paid farmers. That keeps bread cheap so cheap, in fact, that many farmers buy bread to feed their livestock!
Some Majlis deputies have joined in the debate over the wastefulness of the current system. They have proposed abolishing ALL the current subsidies and replacing them with direct, cash payments only to those most in need. What they didn’t say, however, was how they would determine who was most in need.
