Iran Economy NewsResentment builds in Iran over price hikes, subsidy overhauls

Resentment builds in Iran over price hikes, subsidy overhauls


Washington Post: Nearly a week after President Mahmoud Ahmadinejad launched a plan to overhaul a long-standing system of state subsidies, Iranians are reeling from drastic government-ordered price increases for staples such as fuel and bread amid signs of growing frustration and anger.

The Washington Post

By Thomas Erdbrink and Kay Armin Serjoie
Washington Post Foreign Service
Saturday, December 25, 2010; A09

TEHRAN – Nearly a week after President Mahmoud Ahmadinejad launched a plan to overhaul a long-standing system of state subsidies, Iranians are reeling from drastic government-ordered price increases for staples such as fuel and bread amid signs of growing frustration and anger.

Among the first to feel economic pain from the politically sensitive price hikes, which began Sunday, have been truck drivers, taxi owners and bread sellers, and many truckers appear to have stopped working in protest. On the streets of the capital, in offices and on public transportation, expressions of alarm, worry and outrage are heard everywhere. In the past, price increases have led to unrest in Iran.

The government argues that the changes are necessary for Iran’s economy to grow. But parliament has said it opposes the way the overhaul is being implemented and complained that the government has not shared details of its elaborate economic plans. An influential lawmaker, Hamid Reza Katouzian, has called the price hikes “shocking.”

The government says it has fixed the new price rises to prevent runaway inflation. It has employed members of the paramilitary Basij militia to crack down on merchants who are overcharging, the commander of the organization said last week. But those most affected by the price hikes complain that they are losing money, because the government’s fixed prices do not allow them to completely account for the new costs in their products and services.

At the city’s Rah Ahan train station, a sandwich seller who gave his name only as Ali complained that after the price of traditional bread was raised from about 15 cents to 40 cents, he was losing money badly.

“I’m not allowed to increase prices, but the government can,” he said as commuters hurried through the grand hall of the 1920s train station. “We are all losing money. People are extremely upset.”

South of the capital, at the vast Tehran truck terminal near Akbarabad, there were no truckers to pick up goods ranging from fresh tomatoes to cigarettes and bring them to and from Iran’s 31 provinces. After the price of diesel fuel was officially raised from the heavily subsidized price of 6 cents a gallon to $1.32 a gallon, thousands of drivers nationwide simply stopped working.

Farhad Gholizadeh of the Tak Tarabar transportation company said he had never seen the normally bustling terminal so empty. “The government has given small, cheaper rations [of fuel] depending on the type of truck, but they quickly run out,” he said. “Most of the drivers have pulled up their hand brake and stopped working until they are allowed to increase their prices.”

A colleague stepped in and complained that the government itself increases prices tenfold but forbids many others to do the same. “This is crazy,” he said.

Prices for taxis, buses and ferries have also been fixed by the government. Some transportation services, such as city buses, domestic flights and the metro, are not allowed to raises prices at all, while others, including inter-provincial buses and certain taxis, can increase their fares up to 18 percent, the Mehr News Agency reported Tuesday. Incognito inspectors are said to be checking prices, but not many people have encountered them.

“Gasoline becomes 60 percent more expensive, and I get to increase my fare by 8 percent,” said a Tehran taxi driver who did not want to be identified. “Now where is the logic in that?”

Iran has a history of unrest over price hikes. In 1996, helicopter gunships were used to put down riots in the poor Tehran neighborhood of Eslamshahr after the price of bread was increased. In 2007, when the government raised fuel prices and imposed fuel rationing for private vehicles, angry mobs burned down gas stations and supermarkets.

But there have been no reported incidents since Sunday, when the latest round of price hikes took effect.

The government and its supporters have warned for months that opponents of the subsidy overhaul will be labeled as “seditionists,” the name that officials attached to the opposition political protesters who were swept off the streets by security forces after they disputed Ahmadinejad’s June 2009 reelection. Police forces on motorbikes were patrolling the center of Tehran on Thursday evening.

“This plan will make the economy transparent, will break monopolies and will allow the government to invest in the production sector,” Mojtaba Samareh Hashemi, a top presidential adviser, said in a recent interview. “We need to do this in order to make our country competitive.”

More than 60 million Iranians have received approximately $80 each from the government as a financial cushion for the coming two months as new prices for energy, water and dozens of other products are gradually announced. For fuel, the government has set several rates, including extremely low prices for limited rations.

“I never heard the government give money to the people. My dad and granddad also never saw such a thing,” said the driver of a dilapidated orange Mack truck. “When they give away money like this, it means we are in trouble. The fuel price rises are only the beginning, I fear.”

Ali Hosseini, a 22-year-old who runs errands on a motorcycle, sat down with his mother and calculated that even with the government handouts they received, the subsidy changes were bad news.

“It will take a month or so before all the government gifts run out,” he said. “Then people will be faced with the real prices. I really don’t know what will happen after that.”

Serjoie is a special correspondent.

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