Ahmadinejad says food, fuel subsidies will be slashed

Reporting from Beirut —  As security forces swarmed Tehran on Saturday, Iranian President Mahmoud Ahmadinejad prepared his country in a live television interview for deep cuts in subsidies that have kept the price of everything from bread to gasoline artificially low.

Iranian leaders have sought for decades to remove heavy government subsidies on fuel and food. Ahmadinejad has been struggling for months to implement a so-called targeted subsidies law that redirects cash toward infrastructure and the needy and away from middle-class consumers.

He called on Iranians to tighten their belts and get used to paying more for less.

“When subsidies are being distributed generally, the wealth is being distributed wastefully,” Ahmadinejad told an interviewer on state television who praised the economic restructuring plan as “revolutionary.” “Targeted subsidies target the gaps in certain strata of society.”

He declined to spell out details of the targeted subsidies program, saying everyone was aware of it, even though its inner workings and scheduling remain a mystery to even the most well-informed Iranians.

But if Ahmadinejad manages to pull it off, removing subsidies while assuaging enough Iranians with grants and giveaways to maintain social order, it could cement his power and that of his entourage, who are already positioning themselves against challengers in the 2013 presidential election.

“Everything is dependent on the subsidies,” said one Tehran political scientist and former politician, who spoke on condition of anonymity. “If it works, he’s going to elevate himself. If Ahmadinejad is successful economically, he’ll be successful politically.”

Already, Iranians have noticed steep increases in the price of heating oil, electricity and water, exacerbating years of spiraling inflation caused in part by the declining value of Iran’s currency and the increased costs of imports in the face of international sanctions over Iran’s nuclear program.

The changes are palpable. A kilogram (2.2 pounds) of ground beef that cost about $6 five years ago now costs $14.50, while taxi fares that used to cost $2 now cost $5.

The reductions in subsidies are planned over the course of five years, but a fight over the pace of reform continues between Ahmadinejad and rivals in parliament. Among those items to be cut in the first year are utilities, rice, wheat, vegetable oil, sugar, milk, mail services and air and rail services.

The government estimates that it could redirect up to $40 billion toward investment, infrastructure and job creation. But Ahmadinejad has tended to limit spending to flashy projects meant to bolster Iran’s image as technologically advanced and populist giveaways to loyalists. He has choked off funds for construction of Tehran’s badly needed subway network, for example, because both the city’s mayor and the chief of the metro are political rivals.

Ahmadinejad’s rivals in parliament, mistrustful of his spending habits, are setting up a special auditing unit to oversee the redirection of the subsidies funding.

But observers say the chances of the government botching the experiment are high.

Supporters of the opposition movement that sprang up after Ahmadinejad’s disputed reelection last year say they’re waiting to see what will happen once the subsidies are removed, whether the ensuing economic turmoil might weaken Ahmadinejad’s government enough for them to call for demonstrations or strikes.

The easing of fuel subsidies a few years ago sparked fiery riots, and Iranian merchants have been striking over economic pressures caused by increased taxation.

Iranian authorities are acutely aware of the political perils of the subsidies plan. Newspapers have been ordered to soften criticism of the program and avoid stories about economic hardship.

Law enforcement officials, who have warned of a rise of “economic seditionists,” are apparently concerned that discontent with the economy will fuse with the opposition movement led by former presidential candidates Mir-Hossein Mousavi and Mehdi Karroubi, who remain under close watch.

“They are worried that arresting Mousavi and Karroubi would get mixed up with the subsidies issue, that people will come together and mix the two issues,” said one Tehran analyst, who spoke on condition of anonymity.

It wasn’t known whether the large-scale movement of security forces in Tehran was linked to Ahmadinejad’s interview Saturday.

Tehran police commander Gen. Hossein Sajedinia announced that 800 checkpoints would be put in place throughout the capital as part of a “neighborhood watch plan” meant to root out “villains, thieves, drug dealers, people involved in harassing women in streets and those carrying knives and other sharp items.”

Witnesses said the security forces were mostly stopping young men on motorcycles and young couples in high-end automobiles, the same middle-class social strata likely to be hurt by the subsidies removal and inclined to support the opposition.

“This project is aimed at strengthening security and the sense of security in all localities of Tehran,” Sajedinia told reporters.

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Special correspondent Ramin Mostaghim in Tehran contributed to this report.