¶ Iran's Fuel Subsidies and Past Resistance
Now, did you know that the world's cheapest petrol can be found in Iran? It's something, though, that is not set to last, as authorities there are planning to scrap generous state subsidies for fuel, which run into the tens of billions of dollars, saying that... current situation is unsustainable. When Tehran last proposed hiked petrol prices in 2019, it resulted in mass protests and the deaths of more than 300 people in the ensuing crackdown.
So could Iran be risking a repeat crisis? Well, I've been speaking to Negar Murtazavi, who's a Washington DC-based journalist and the host of the Iran podcast, as well as senior fellow at the Centre for International Policy. It's generally an economy that does rely on certain subsidies for basic goods and staples. There are also subsidies on some basic food items, on other commodities. But oil prices specifically because...
It is a very oil-rich country. The gas prices, particularly for the consumers, has just turned into a state policy that has been going for decades. And it also has had its economic challenges and issues. and problems, but it's just something that has sort of become part of the policy of the state and also sort of an expectation by the population.
OK, and so now Iran says that for various reasons, including the pressure from international sanctions and some other of its own internal issues, that it can't continue with this. What is the immediate reaction, first of all, from Iranian people? And how are they being sold, this idea? Well, the immediate reaction, first of all, there's... reminder of how this has rolled out in the past once in 2019 when
There was almost an overnight hike in fuel prices, a drastic hike in fuel prices. It was something that the government had been talking about for years, but eventually they did it and it brought a lot of protest. That turned very violent. And the state really repressed them, essentially responded with an iron fist. Hundreds were killed on the street. Thousands were arrested. And it just didn't really...
turn out in any way well for the state. And beyond that, there's also the question, especially for middle classes, working classes, that how is this sort of lack of subsidy or this extra resources for the state going to be distributed? Because the main argument here is to make things, you know, resources more equitable.
for Iranians, the arguments that the state are putting out. And the question would be, how is my life as a working class Iranian, as a middle class Iranian, going to my cost of living going to be impacted if one item... going to have a higher price, while my salary is not going to change, inflation continues, and how is this essentially going to be redistributed, which is the promise of the government.
¶ New Tiered Approach and Economic Rationale
So how does the approach this time compare to 2019? Because there's a tiered approach this time, intended to be a little bit more gradual. So there are three main factors that the government is saying that they want to address. Three issues. One is the issue of smuggling because Iranian gas is so cheap, even compared to its oil producing.
It's oil rich neighbors. Gas is being bought at this cheap price with government subsidies that are meant for Iranian consumers. And it's being smuggled across the border in various ways and large quantities. and then being sold at a more expensive price in Iran's neighboring countries. So the government has been trying to stop that. It's been difficult to stop the smuggling routes. And so they think adjusting the oil price at least somewhat...
comparable to the neighbors is going to discourage sort of that smuggling out of the country using the subsidies. The other issue that they're pointing out is the consumerism. Just because oil is cheap, there's just extra... consuming of this commodity that the government thinks they shouldn't be providing sort of the subsidy or the state resources for, you know, people having multiple cars or having cars with a higher consumption.
The weird approach is also addressing some of that government vehicles, except ambulances, for example, are not going to receive subsidies or a certain cars, more expensive cars, which. signal affluence and a certain economic class are not going to receive the same amount of subsidies or the same price. So there's going to be sort of this gradual and tiered approach.
and with the hope that the resources that the government is going to be able to save from these subsidies is going to be redistributed, at least to the working class and the middle class. That is still to be seen if that's actually going to happen. because there's also a lot of corruption in the country, a lot of mismanagement, but that's the expectation or at least that's the promise that the government is making.
Speaking to me earlier from Washington in America, that was journalist Negar Murtazavi talking about the proposal from authorities in Iran to hike petrol prices. having had a long time of generous state subsidies for fuel, something it says it cannot sustain. You're listening to Newsday from the BBC World Service.