Iranians are consuming 20 percent less fuel since the government began slashing energy and food subsidies earlier this month, a senior government official said Wednesday, claiming an early sign of success in the controversial program.
Gasoline prices quadrupled and bread prices tripled after the cuts came into effect December 19, part of President Mahmoud Ahmadinejad's bid to boost Iran's ailing economy by reducing the massive drain on the state budget from the subsidies.
The so-called economic "surgery" has long been in the works, but was repeatedly delayed over concerns of a repeat of gas riots in 2007 and serious political infighting during the stand-off with the West over the Islamic Republic's nuclear program.
However, the timing of these first painful steps months after the UN Security Council slapped a fourth round of sanctions on Iran this summer over its refusal to halt uranium enrichment suggests those penalties could be starting to squeeze the nation's economy.
The economic shock of the cuts has brought heavy criticism from reformists and even from some hard-liners Ahmadinejad's political base who say the price hikes are too fast and steep. Security forces flooded the streets of Tehran immediately following the plan's implementation to counter any possible backlash from a population already struggling economically. And while consumers have grumbled about the cuts, there has been no serious outbreak of protests or violence so far.
Saying the country can no longer afford the largesse, Ahmadinejad has vowed to eliminate all of the subsidies by the end of his term in 2013. The government says it is paying some $100 billion in subsidies annually, although experts believe the real amount is about $30 billion.
The current cuts aims to reduce Iran's high fuel consumption, which has forced the country to import about half its fuel needs. One of the world's biggest crude oil producers, Iran lacks refining capacity, meaning it has to look abroad for gasoline, though it has been rushing to increase refining. This is a particularly pressing concern in light of the most recent US sanctions, which seek to block the import of pump-ready fuel to Iran.
Vice President Mohammad Royanian said Wednesday on state TV that "overall, there has been a 20 percent fall in fuel consumption" since the cuts were enacted. Gasoline consumption now stands at 50 million litres (13 million gallons) a day and diesel consumption at 42 million litters (11 million gallons) a day, he said. Before the cuts, subsidies ensured Iranians some of the cheapest gasoline in the world, at about 10 US cents a litre (38 cents a gallon). Consumers have complained about the price hikes, but there have been no signs of the violence that erupted in 2007.
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