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Page added on December 22, 2010

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Gas prices in Iran went up overnight by 400%


The price of gasoline in Iran rose four-fold on Sunday while a heavy police presence ensured there was no repeat of rioting seen the last time the government restricted access to heavily subsidised fuel.

Motorists had been expecting the rise for the last three months as part of President Mahmoud Ahmadinejad’s policy to phase out subsidies on essentials like energy, food and water, so the midnight price hike was accepted with grim resignation.

“Are people happy? Sure, the Iranian people always welcome high prices,” said one employee at a Tehran petrol station, raising an eyebrow to emphasise the sarcasm.

Reuters witnesses saw a heavy police presence at several gas stations on Saturday night as Ahmadinejad announced the start of the subsidy reform plan on a television programme.

But, unlike in 2007, when riots erupted when cheap fuel rationing was introduced, there were no reports of trouble and things were calm on Sunday, a busy business day in Iran.

Ahmadinejad told the nation that the subsidy cuts would reduce wasteful consumption, save the state money and reduce the unfairness whereby richer people, who spend more, benefit more from subsidised prices than the poor.

But some politicians warned that any leap in overall inflation due to the subsidy reform could be disastrous and some motorists said they would no longer be able to afford to drive.

“I won’t be able to use my car from now on with these high prices,” said a 56-year-old Tehrani, filling his Pride, a compact made by Iran’s Saipa, based on the South Korean Kia model, which is the car of choice for middle-income Iranians.

“As we don’t have a good public transportation system it won’t be easy for people. It will be better for me to stay at home,” he said.


Up until Sunday, subsidies had allowed Iranians — who see cheap fuel in the oil-rich country as a birthright — to pay just 1,000 rials (about 10 U.S. cents) per litre for the first 60 litres they buy per month. Beyond that they paid 4,000 rials per litre.

The price hike pushed the 60-litre ration price up to 4,000 rials and the higher price to 7,000 rials.

At a Tehran gas station, a hired driver was filling up his boss’s BMW, which, as a high-powered imported luxury brand, did not qualify for the subsidised fuel even before the cuts.

“I am just a driver, the new prices will change nothing for the owner of this car, but what should a person like me do?” said the 48-year-old who, like many Iranians, preferred not to be identified by name in the foreign media.

The government has denied that the current inflation rate of around 10 percent will soar due to the subsidy cuts which will also increase prices of utility bills and food items including wheat flour, the key ingredient of Iranians’ staple, bread.

The subsidy cut has been discussed by politicians for years and it is finally being implemented as the Iranian economy is under greater strain from tougher international sanctions imposed over recent months by countries which fear Iran’s nuclear programme may be aimed at making atomic bombs.

Opposition website Iran Green Voice quoted lawmaker Bahman Akhavan as saying Iran’s economy could suffer if the subsidy cuts are not implemented carefully.

“If we are unable to undertake a clear and radical surgery, the reaction of this living creature would be inflation, a wave of bankruptcies and likely protests,” he said.

Officials have said they will prosecute hoarders or people trying to profiteer from the price rises and Ahmadinejad called on Iranians to show “solidarity”.

“I do not see any problem or difficulty obstructing the implementation of the plan,” he told state TV on Sunday. “We will move forward with solidarity and unity to the last stage of the plan to make it a big achievement for the Iranian nation.”

Also on Sunday, Iranians started to receive in their bank accounts the direct cash payments the government has offered to offset the price rises.

Each and every Iranian qualifies for 800,000 rials (around $80) to cover the first two months of the plan. The government had previously said the payments would vary depending on income.

The semi-official Fars news agency quoted one man withdrawing his cash at the first possible opportunity.


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