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Last month, Iranian President Ahmadinejad began phasing out subsidies of fuel and other essential commodities, despite popular outrage from inside and outside the government. Iranians of all social classes are now suffering and workers are going on strike, causing the country’s most intense turmoil since 2009.
Over the next five years, massive government subsidies to the Iranian people will be eliminated. The subsidies accounted for nearly 30 percent of the budget, with a household making $3,600 receiving $4,000 on average in subsidies each year. The Iranian economy is in steep decline and is now suffering extraordinary stress because of international sanctions. In addition, one study found that the regime would have to end exports of oil by 2015 if domestic consumption was not curbed. Luckily for Ahmadinejad, consumption of gasoline has dropped 20 percent since the subsidies were cut.
The economic necessity of cutting the subsidies carries massive risks for the regime. When gasoline rationing was tried in 2007, it resulted in riots that included gas stations and supermarkets being set ablaze. That also happened this time, as reports have come in of gas stations and a mall in Tehran being torched. The regime deployed heavy security and gave over 60 million people about $80 each to help them with the price increases. The government also issued price fixes to prevent inflation, but this is causing even more trouble as the industries try to cope with massively increased expenses, especially in the transportation sector.
The price of gasoline jumped over 60 percent in an instant and the cost of diesel fuel skyrocketed from six cents per gallon to $1.32 per gallon. Thousands of workers have gone on strike because they are forbidden from raising prices above a certain level so they can afford fuel and other necessities. As a result, many trucking and taxi services simply cannot open for business. The number of buses available for public transportation has decreased in places like Qazvin by three-fourths. Taxi drivers taking part in sit-ins and other workers on strike have been arrested to prevent any type of organized strike from taking place. A union of truckers had its officials threatened when they talked of launching a strike.
At the port of Bandar Abbas, hundreds of small vessels and trucks transporting goods have been abandoned. Ferry services have shut down. The case is the same at a truck terminal in Tehran, which now goes mostly unused. Government employees are also hurting as contract workers are laid off. The Education Ministry had to let go 400 workers. A story has come out of Varamin that a school has told students to dress warmer because it is too early in the year to take on the added expense of using its heating system.
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