The $20 billion dollars which Western economists estimate are freed up by President Mahmoud Ahmadinejad's deep cuts of state subsidies will help cushion the country's nuclear program against the slowdown caused by the international sanctions imposed this year by the UN, the US and European countries, debkafile's Iranian sources report. They will also make more cash available for the president's personal political plans.
Sunday, Dec. 20, as fuel prices surged 400-900 percent, together with bread and cooking oil, security forces and police flooded the streets of Tehran and other cities to ward off protests like the 2007 gas riots against the harsh austerity program measures Ahmadinejad has introduced to bypass international sanctions.
One of world's richest nations in oil, gas and other natural resources, has an impoverished population whose standard of living has plunged once again. Notwithstanding the denials of the rulers of the Islamic Republic, international sanctions have slashed national income and are pinching the economy.
In the outgoing year, oil revenues have declined by 40 percent, natural gas exports are facing growing obstacles and the Obama administration has managed to seriously curtail Iran's international financial and banking activities. Tehran faces price hikes for its imports and is driven to drop the prices of its exports.
Gas for cars is hardest hit, forcing Ahmadijead to order Iran's backward petrochemical industry to divert production to domestic consumption. The poor quality of its output has caused spreading pollution and severe wear and tear on vehicles. The air pollution in Iranian cities is so bad that the government had to admit it was the cause of 3,500 deaths in 2010 and it is rumored to have increased the prevalence of cancer in Iran's cities.
The price of gas at the fuel pump has increased fourfold (from 100 to 400 Tuman per liter) and is rationed to 50 liters a month per private vehicle. Every liter over this quota costs 700 Tuman (1,000 Tuman equal one dollar). This may sound cheap but not when compared with an average income of $400 per month and the vast distances many need to travel to work.
Heavy fuel for taxis, buses and trucks has increased nine-fold for a quota allocation and 23 times outside the quota. The prices of electricity and water have soared tenfold. Even medicines have suffered from slashed subsidies except for the most basic items and the price of breads has risen 400 percent overnight.
Except for the extremely rich, no class of society has escaped the president's whirling economic axe.
To quiet the grumbling, he ordered the equivalent of $82 paid out two months for every family member (of Iran's 75 million inhabitants) to help them overcome price increases. The government undertook to open bank accounts for citizens lacking them. Economists say this sum is ludicrous and by January 2011, families which tend to be large in Iran, will not be able to afford to buy bread.
Will the people rise up against these harsh measures and topple the government? debkafile's Iranian experts note that the only times popular protests have ever posed a real threat to the regime were those sparked by economic distress, less over human rights or political freedoms. At the same time, this regime has forestalled extreme protests by mass detentions of likely political troublemakers which are still ongoing.
The clerics have pronounced would-be opponents of the new economic measures enemies of Islam. Known opposition leaders such as Mehdi Karrubi and Mir Hossein Mousavi live under house arrest and face worse penalties for any attempt to raise street protests against the regime. Exiled groups are too cut off to be effrective.
In addressing the nation Sunday, Ahmadinejad declared that the Iran's oil and gas resources belong to the Invisible Imam (Messiah), whose coming is imminent, and must not be squandered.
Two years ago, he sacked all the economists who warned him against reckless policies which have already plunged Iran into 20 percent inflation even before the new measures. He now claims he is saving $20 billion with his austerity program, but the ordinary citizen wonders what he is doing with the saved money. No answer will be forthcoming because the president forced the Majlis to forego supervision over this sum, giving him a free hand to spend it at will on his pet projects – arming Iran with a nuclear bomb and boosting his personal standing to a degree that no one dare challenge his authority.