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In a June 2010 interview, Caspian Makan, the Iranian film-maker, journalist and fiancé of the late Neda Soltan, commented on the future of the Iranian Islamic Republic: “With every passing moment the awareness of the Iranian people increases, while the regime’s power decreases and comes closer to its destruction.” Caspian predicted that the Iranian people will win their demands for a free Iran before the end of Ahmadinejad’s presidency, and perhaps as early as next year.
Mahmoud Ahmadinejad’s announcement last month regarding the end of subsidies on critical commodities, which millions of Iranians depend on for survival, will no doubt increase the already large segments of the population who are unhappy with the regime and its controversial president.
The Islamic Republic of Iran has been spending nearly $100 billion a year – approximately 10% of its Gross Domestic Product — on artificially maintaining the price of gasoline, gas, electricity, as well as basic commodities such as flour and cooking oil.
In the wake of the government’s decision to end the subsidies, gasoline prices have gone up by 75%, the price of bread has quadrupled and, the increased water and electricity bills will send shock waves through Iranian households.
Bread is more than a staple in the Middle East — it is a “political weathervane” in the Middle East and in Iran. In 1977, Egyptians rioted when President Sadat cut the subsidies for bread; those riots nearly overwhelmed his regime. Recently, the BBC quoted a bakery owner in Northern Tehran as saying, “Officials should not play with the bread of the people. It may be polluted with blood.” He was referring undoubtedly to riots that are expected to take place as a result of the massive price hikes for bread.
The manipulative Ahmadinejad, who in recent months has managed to squash the liberal opposition within the ruling elite, promised cash payments of about $40 a month to 60 million Iranians. Ahmadinejad has risked his political future on finally acting on what both the IMF and economically responsible Ayatollahs understand – that however unpopular the ending the subsidies might be, the move was essential to preserving the economy and making it less wasteful and more competitive. And although the Islamic republic has pondered cutting subsidies for decades, Ahamadinejad is the only one who mustered enough confidence, even as an unpopular president, to go ahead with it.
The economic effects of the sanctions imposed by the United Nations, the European Union and the U.S., coupled with the additional difficulties the subsidy cuts create, could bring the economy to new lows and impact an already fragile political climate affected by the disputed 2009 presidential election. Soaring inflation would deepen poverty, a fact that Ahmadinejad has willingly ignored despite a warning from the Parliament’s Research Center that claim his plan would raise inflation to over 60%.
Previously low energy costs enabled Iranian industries to compete despite their antiquated equipment, but the rise in energy costs has now taken that advantage away. And even though Ahmadinejad has promised Iran’s domestic industries 30 percent in new aid, it is not sufficient to compensate for higher production costs. Iranian industries are already at a competitive disadvantage because of the high cost of labor and overvalued exchange rate.
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