Is Iran’s Economy about to Collapse?

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Is Iran’s economy about to collapse? It hasn’t been doing well for a while but will the sanctions together with the subsidy cuts throw it over the edge? At least it seems the reformist leaders seem to think so.

Ali Akbar Dareini of Associated Press reported that Iran’s opposition leaders said Wednesday that a “dark future” awaits the economy because the government didn’t listen to economists when it slashed energy and food subsidies in a country already struggling under biting U.N. sanctions.

Former presidential candidates Mir Hossein Mousavi and Mahdi Karroubi support the government’s effort to rein in subsidies but said in a rare statement posted on their websites that it is being implemented badly.

Robert Tait reports that A long-awaited radical overhaul of Iran’s economy that has seen the scrapping of state subsidies is being used to punish and intimidate opponents of President Mahmud Ahmadinejad, analysts say.

Individuals and families deemed politically suspect or disloyal to Ahmadinejad’s government are reportedly being denied cash handouts brought in to replace the extensive subsidy regime.

The claim, based on studies partly conducted by economists in Iran, comes after Ahmadinejad announced the end of subsidies in a move that saw fuel prices soar by 400 percent overnight.

Subsidies on a wide range of products are to be replaced by monthly cash payments of $40 per head, ostensibly targeted to those deemed most in need. The government has presented the plan as necessary to save the treasury up to $100 billion a year at a time when Iran’s economy is under increasing strain from international sanctions imposed in response to its nuclear program.

However, Mehrdad Emadi, an Iranian economist based in London, says the compensation payments are being closely screened by the Islamic Revolutionary Guard Corps (IRGC) and volunteer Basij militia.

“You can see a political screening of people and categorizing them into groups — who are with us and groups who have not made the right level of effort to be with us,” Emadi says.

Between 4 million and 5 million people who should qualify on financial grounds have yet to receive their first handout, according to a study, including many suspected of having participated in opposition Green Movement protests against Ahmadinejad’s disputed reelection in 2009.

According to Emadi, if a family has had a “negative report” filed about it by the local Basij or IRGC office, where a family member “has been seen to be involved in antigovernment activities,” they are being denied payments. “What we’re talking about is not making bombs,” Emadi says, “but participating in street demonstrations or, in some cases, having slogans written on the walls of their houses but they have not made the effort to clean the wall or cover it.”

Ali Chenar in Tehran reports that many on the ground and in the air, worry how long they are going to remain employed.

On Sunday, as President Mahmoud Ahmadinejad was telling the Iranian people that the much debated subsidy cuts were finally being enacted, Farzad, a 28-year-old cab driver in Tehran, had no doubts about the impact on his line of work: “Right away, I knew that I was bankrupt.” Farzad drives a Samand, a vehicle designed and produced by Iran Khodro, in central Tehran. Before the cuts, he paid 1,000 Iranian rials (10 cents) per liter of fuel. Now his ration costs him 4,000 rials per liter; if he needs fuel beyond his ration, he has to pay 7,000 rials per liter. “Overnight my expenses went up four-fold.” He shrugged his shoulders and added, “I do not how long I am going to last.”

Mohammad, a 52-year-old cab driver who has been working in his car for three decades, was shell-shocked by the news. “I get out on the streets every day to support my family. Now I do not know how I can do it.” He was frustrated and angry at the authorities. “I do not work to pay for my fuel; I work so I can put bread and butter on the table for my family. Now the fee does not even cover my maintenance costs. I have two daughters — how I am supposed to support them? The prices are going up and I do not know how to make ends meet.”

All over Tehran, drivers are looking for someone just to listen to their plight. I took a ride in Resalat yesterday and asked Reza, a 36-year-old with a son in elementary school, how he was faring. “Look at my face and see what is going on inside me,” he answered, sounding like a condemned man, hopeless and resigned. He grabbed his maintenance notebook and opened it so I could look at the figures. “See, last month, my oil change cost me 260,000 rials. Yesterday, it cost me 380,000 rials.” He raised his voice in anger. “They tell people that only fuel prices have gone up for us, my ass! I have to pay more for everything now.” He drives a dual-fuel car that uses both gasoline and compressed natural gas (CNG). “Last night I went to fill my CNG tank. It used to cost 7,000 rials. Now it is 70,000.”

CNG still costs less than gasoline, but it is not drivers’ first choice. “CNG hurts the engine, It forces us to check and to change the cylinders more often,” another driver, Djavad, said. Djavad is in his 20s. He used to work in a factory but was laid off after his employers shut down the operation because of competition from China. “I had to support my family, so I took my car and went to work for a taxi service.” He admitted that driving was not his first choice. “What else could I have done? There is no work, no factory is hiring, and all the companies are laying off people.”

Djavad worries that his last line of defense had been breached. “I do not know how to pay for food, rent, and medicine.” He views the direct cash subsidy of 400,000 rials per month as a ridiculous joke. “I want to return the money to the government and put another 500,000 on it and tell them to shove it.” Mohammad shares his anger and frustration: “I want to tell the government to stop thinking we are idiots. They are doing this to us because they are bankrupt. Now we have to pay for their mistakes.”

You can read more here.

12 Comments

FrancisAugust 23rd, 2014 at 11:36 am

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спс за инфу….

ShannonAugust 23rd, 2014 at 6:27 pm

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спс за инфу!!…

arturoAugust 24th, 2014 at 2:55 am

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good info….

fredrickAugust 26th, 2014 at 9:08 am

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спасибо!…

JimmieNovember 20th, 2014 at 9:29 am

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thanks for information….

ShannonDecember 17th, 2014 at 3:18 pm

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tnx for info….

LeroyDecember 20th, 2014 at 4:05 pm

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ñïàñèáî çà èíôó….

TedJanuary 15th, 2015 at 9:59 am

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tnx….

AlexJanuary 15th, 2015 at 10:29 am

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áëàãîäàðþ!…

DarrylJanuary 17th, 2015 at 2:45 am

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ñïñ!!…

RobertJanuary 17th, 2015 at 3:18 am

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áëàãîäàðþ!…

oliverJanuary 17th, 2015 at 3:51 am

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ñïñ çà èíôó!…

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