Business

Iran's cut in fuel and food aid raises protest fears

  • 19 December 2010
  • From the section Business
Motorists at Iran petrol station
Car drivers in Iran began queuing for petrol as soon as the cuts were announced

Iran has cut energy and food subsidies, risking a repeat of angry protests which followed fuel rationing in 2007.

The cuts, introduced on Sunday, mean a four-fold rise in the price of petrol and reduced subsidies for bread.

Each car will get 60 litres of fuel per month at a subsidised price of 40 cents per litre, up from 10 cents per litre.

Iran, whose fragile economy has been hit by United Nations sanctions, has said it pays about $100bn (£64bn) in subsidies annually.

In 2007, protesters set alight dozens of petrol stations after the system of fuel rationing was introduced.

News agency reports on Sunday said there was a heavy police presence in the capital Tehran, but there were no reports of trouble.

Iran's President Mahmoud Ahmadinejad said on Saturday that the cuts in subsidies were the "biggest surgery" to the economy in 50 years.

Mr Ahmadinejad also said his government was paying $4bn in bread subsidies, which are being gradually phased out.

Inflation

Iran's oil-based economy has been hit by four rounds of UN sanctions, as well as those from individual countries over its controversial nuclear programme.

The government says that under its Subsidy Smart Plan, money from increased prices will be returned to the people through cash payments.

But some economists fear the increased prices, which also apply to electricity, water, and flour, will fuel inflation, already thought to be running at 20%.

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