“Tehran hopes risky subsidy cuts will target middle class, neutralize sanctions”

“Tehran hopes risky subsidy cuts will target middle class, neutralize sanctions”
November 25-December 1, 2009
     Iranian President Mahmoud Ahmadinejad is pushing a plan to cut fuel and food subsidies, which cost the government $100 billion annually. Cuts to gasoline subsidies would help shield Iran from international sanctions by reducing dependence on imports, but price increases and rationing in 2007 were poorly implemented and led to riots. Iran’s parliament estimates an instant quadrupling of gas prices if subsidies are removed, and while Ahmadinejad has promised to divert the savings to help the poor, the changes would be especially hard for the opposition movement’s support base in the urban middle class (Reuters, New York Times).
     Raymond Tanter details Iran’s dependence on gasoline imports and argues that gasoline sanctions will not change Tehran’s strategic calculus. Tanter doubts that Iran’s major foreign suppliers would sacrifice their lucrative contracts and questions whether China and Russia would risk their investments by supporting sanctions. Iran also has a gasoline deal with Venezuela, and efforts to expand domestic refining capacity could allow Iran to achieve self-sufficiency by 2012 (Middle East Strategy at Harvard).
Reuters | New York Times | Middle East Strategy at Harvard


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