Subsidy Cuts in Iran

On Sunday, December 19, the government of president Ahmadinejhad of Iran officially launched the subsidy removal program.

Riot police guarded gas stations around Tehran as the fuel prices jumped sharply.

A night earlier, president Ahmadinejad had appeared on the Iranian state-run television and had announced that the subsidy for water, bread electricity and fuel would gradually be removed.


Also, as of Sunday people were allowed to withdraw the money that has been deposited in their individual bank accounts for the past couple of months (this money is supposedly the cash back in lieu of the removal of subsidies).


In 2005, Ahmadinejad came to power in part due to the support of sections of the Iranian society that had been hit hard by the neo-liberal policies of his predecessors, former presidents Rafsanjani and Khatami.

With the oil price peaked to $140 in his first years in office, he had a unique opportunity to improve the living standard of the lower class, as he himself promised to “bring the oil revenue to the people’s table”.


But his government precipitated the privatization process that had been going on since the early 90’s and handed over major public enterprises to the small sectors of the new ruling class, who are mostly associated with the Revolutionary Guards.

His monetary distributions seems to have included mostly the sectors of the society that were anticipated to vote for and support his government.

By taking the recent measure, the government plans to spend the money it saves from not paying energy and basic goods subsidies on further enriching the political and military elites.


Hours before the cuts in subsidies took effect, the security forces arrested a prominent leftist and secular dissident, economist and writer, Fariborz Raisdana, who had been a steadfast critic of the privatizations and subsidy cuts all along.

He had maintained that Ahmadinjehad recognized the security risk in pursuing an outright economic shock-therapy during an economic recession and a political crisis.

Therefore, he led people into believing that the distributed cash payments would offset the increased prices of energy and food.

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