Iran General NewsAyatollah supports bid to sharply cut Iran subsidies

Ayatollah supports bid to sharply cut Iran subsidies

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ImageNew York Times: Iran’s supreme leader, Ayatollah Ali Khamenei, offered a crucial gesture of public support Monday for President Mahmoud Ahmadinejad’s effort to enact a sweeping economic reform plan that would sharply curtail the country’s long-established system of state subsidies. The New York Times

By ROBERT F. WORTH

ImageIran’s supreme leader, Ayatollah Ali Khamenei, offered a crucial gesture of public support Monday for President Mahmoud Ahmadinejad’s effort to enact a sweeping economic reform plan that would sharply curtail the country’s long-established system of state subsidies.

After Mr. Ahmadinejad issued his latest call for Parliament to support his proposal, Ayatollah Khamenei, speaking at a meeting of cabinet ministers and other senior figures, urged all parties to help Mr. Ahmadinejad’s administration in “facilitating” passage of a subsidies reform bill.

“I hope that between the Parliament and the administration a desirable conclusion is reached on the implementation of the subsidy reform bill,” Ayatollah Khamenei said, according to the state-run IRNA news agency, in what was widely seen as an important gesture of support for the president.

Lawmakers approved $20 billion in subsidy cuts in January, fearing that deeper cuts would set off uncontrolled inflation — and public anger.

Slashing Iran’s state subsidies, which cost the government an estimated $100 billion a year and encourage overconsumption, has been a goal for decades. Mr. Ahmadinejad clearly hopes to succeed where attempts by previous presidents have sputtered or failed.

He has repeatedly demanded a broader bill to remove $40 billion in subsidies, and lashed out at Parliament for refusing to go along. But many economists say the government lacks the technical expertise to modify the subsidies in the right way, or even to identify those who would receive financial help under the proposed law.

Lawmakers across the political spectrum have warned of catastrophic price shocks if supports are eliminated.

For instance, the price of gasoline would instantly quadruple, and the resulting effects could result in similar increases for basic goods and an inflation rate of 60 percent or more, according to the Majlis Research Center, the research arm of Parliament, which is run by a conservative lawmaker, Ahmad Tavakoli.

After facing resistance from lawmakers, Mr. Ahmadinejad began calling for a public referendum on his subsidies reform proposal earlier this year, in a characteristically brash, populist gesture.

The Parliament speaker, Ali Larijani, a pragmatic conservative and rival to Mr. Ahmadinejad, derided the referendum proposal, and had led calls for the smaller, $20 billion subsidy cut. But on Monday, after Ayatollah Khamenei’s statement of support, Mr. Larijani appeared to change his tone, saying lawmakers would “do their utmost” to cooperate with the president, according to state-owned Press TV.

Still, it is far from clear how the Parliament will proceed with the reform bill, which has provoked anxious debate across Iran for months. There are few precedents for such a broad legislative measure, and despite Ayatollah Khamenei’s open support and Mr. Larijani’s conciliatory words, it is far from clear that the issue will be resolved quickly.

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