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Vol. 73/No. 49      December 21, 2009

Iran parliament votes to
end food, gas subsidies
The Iranian parliament has approved the phasing out of subsidies on food, gasoline, and other necessities, but many capitalist politicians are wary of the reaction from the Iranian population.

Under the dictatorship of the shah, a U.S.-backed monarch who ruled Iran until 1979, workers won limited subsidies. When working people overthrew the shah in a popular revolution that year, subsidies were expanded, drastically reducing the cost of many basic necessities. Covering fuel, water, flour, bread, wheat, rice, oil, milk, sugar, and transportation, the subsidies have largely remained in place.

The parliament’s plan is to gradually eliminate subsidies over five years. Part of the money “saved” by the government is to be distributed to the lower-income half of Iran’s population in the form of cash handouts.

The subsidies have made a qualitative difference in the lives of working people. The cost of riding a bus across town in the capital, Tehran, is less than 5 cents, for example. A loaf of bread costs between 12 cents and 15 cents. Without subsidies the research office of parliament estimates that food costs will rise by 60 percent. Gasoline prices will quadruple.

The government currently spends about $100 billion on subsidies annually. The move to end them comes as Washington and other imperialist powers are increasing threats to tighten the economic noose around Iran because it won’t back down on the development its nuclear program. Sales of gasoline to Tehran are being discussed as targets for additional sanctions. The country imports about 40 percent of its gasoline.

Capitalist politicians in Iran have been trying to get rid of the subsidies for years, long before the current confrontation with imperialist powers over nuclear power. Previous presidents Ali Akbar Hashemi Rafsanjani and Mohammad Khatami tried to eliminate them, but popular opposition made them back off.

President Mahmoud Ahmadinejad has gone the furthest of any Iranian president in attacking what remains of the social wage won by the 1979 Iranian revolution. Using populist demagogy, he argues that subsidies allow the rich to get their food cheap and that it would be better to make them pay more, while providing state charity to those with the lowest incomes. Cash grants to low-income Iranians have been one of his methods of maintaining a popular base and a way to avoid increasing the minimum wage or pensions, steps that would actually advance the workers’ fight for a better standard of living.

In 2007 Ahmadinejad’s administration raised the price of gasoline, provoking an immediate backlash. At least 19 gas stations were burned down.

Since then the economic situation in Iran has worsened, as it has around the world. Mousa Vafayan, head of the chamber of commerce in the city of Sari in northern Iran, reported to the Web site that 30 percent of the city’s factories have closed. Virtually every working-class family in Iran has one or more adults unemployed. The crisis has sparked some strikes and protests by workers for back wages and action by the government to bring relief.

Mindful of this, the question of whether and how to lift subsidies was hotly debated in parliament, but Ahmadinejad prevailed. His opponents are now expressing concerns. Parliament speaker Ali Larijani said December 4 that elimination of subsidies should be done very slowly to avoid “a shock in the society.” Opposition leader Mir Hossein Mousavi, who challenged Ahmadinejad in the last presidential election, said, “Those who reason that the subsidies are bad and must be eliminated … are wrong.” He warned that the end of subsidies “will lead to chaos and corruption.”

The bill adopted by the parliament will now be reviewed by the Guardian Council, a cleric-dominated body that oversees all legislation. Supreme Leader Ali Khamenei, the country’s most powerful political figure, has ultimate decision-making authority.

Side by side with removing subsidies, the government is proceeding with the privatization of industry that was nationalized after the 1979 revolution. Fifty-one percent of the government-owned telecommunications company TCI is now in private hands. TCI is the is the largest cell phone network, main Internet provider, and has a monopoly on fixed-line infrastructure. Thirty-seven percent of each of the two largest car companies, Saipa and Iran Khodro, is scheduled to be sold on the Tehran Stock Exchange.

The Iranian government’s 10-year privatization plan envisions reducing state-owned companies to less than 20 percent of the GDP. Currently about 40 percent to 45 percent is still nationalized.

Some Iranian businessmen anxious to buy up privatized factories complain that companies owned by the Pasdaran, the most politically influential branch of the armed forces—or the Basij, the Pasdaran’s auxiliary militia—get priority in purchasing plants previously run by the government.
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