Iranians are nervously waiting to see the impact of
President Mahmoud Ahmadinejad's plan to phase out $100 billion of subsidies
which economists say is a necessary but politically risky step in the world's
fifth-largest oil exporter.
A sudden price rise or scarcity of essential goods could
risk re-igniting popular unrest which flared after the hard-liner was
re-elected in June 2009, analysts say.
The Iranian economy is also under pressure from sanctions
over its nuclear program and, most recently, from a slump in the value of its
currency which prompted the central bank to intervene this week.
Government officials say they have withheld details of the
first phase of subsidy cuts to avoid panic buying. Iranians know $20 billion
will be cut in the second half of the Iranian year which has just begun, but
exactly when and how much prices of essential goods will rise has been unclear.
The head of Iran's Transportation and Fuel Management Office
said on Friday that the biggest subsidy cut in the first phase would be on car
fuel — a sensitive area in an oil-rich nation where people are used to paying
just 10 US cents a liter.
"The final price of gasoline will be much less than
10,000 rials (about $1)," Mohammad Royanian was quoted as saying by the
semi-official Mehr news agency.
The subsidy phase-out — already delayed for six months due
to disagreements between Ahmadinejad and Parliament — was due to start on Sept.
23, but officials said there would be no change in gasoline prices for at least
another month.
Motorists can currently buy up to 60 liters a month for just
1,000 rials (about $0.10) per liter, above that amount they pay a
semi-subsidized price of 4,000 rials. Two lawmakers said they believe the
minimum price will rise to 4,000 rials this month.
People rioted when gasoline rationing was introduced in 2007
and the government will be keen to avoid a similar reaction this time. Poorer
households will receive cash payments to help cushion the blow of price rises.
The International Monetary Fund says the average Iranian
family gets about $4,000 a year in subsidies on oil and natural gas alone, more
than many people's income. The IMF predicts energy prices will rise between
four and 20-fold when the subsidies are cut.
Besides saving the state money, the subsidy cuts are aimed
at encouraging less wasteful energy consumption, particularly of gasoline.
Despite being a major oil exporter, Iran usually has to import at least one
third of its gasoline needs due to a lack of refining capacity.
Sanctions have limited the number of companies willing to
sell gasoline to Iran, prompting the country to convert petrochemical plants
into refineries, something it says has made it self-sufficient and even an
exporter, an achievement analysts say is unlikely to be maintained long-term.
