Iran opposition leader criticises subsidy reform

• Last Updated: November 22. 2009 3:09PM UAE / November 22. 2009 11:09AM GMT

TEHRAN // Iranian opposition leader Mirhossein Mousavi has criticised a government plan to phase out state energy and food subsidies, saying it would further increase consumer prices in the major oil producer.

His criticism highlights potential political problems facing hardline president Mahmoud Ahmadinejad’s administration in implementing the bill to gradually end subsidies on goods such as petrol and basic food stuffs over the next five years.

“Subsidies are paid in all world economies ... Those who reason that the subsidies are bad and must be eliminated ... are wrong,” Mr Mousavi told his Kaleme web site.

Mr Mousavi came second in a presidential election in June in which Mr Ahmadinejad won a second four-year term. The moderate opposition says the vote, which sparked widespread street protests, was rigged. Authorities deny the vote fraud charge.

The subsidy bill was approved by the conservative-dominated parliament earlier this month. Critics say it will stoke inflation and that it is likely to anger many ordinary Iranians already struggling to cope with rising living costs.

The government says existing subsidies, which cost at least $90 billion (Dh330bn) a year, or some 30 percent of its GDP, mainly benefit the well-off and that poor people will be compensated for their removal.

Under the plan, energy and other prices will be raised and subsidies will be passed on directly to the needy instead.

Like other critics, Mr Mousavi said it would lead to higher consumer prices. “This bill amounts to raising the price of some consumer products before wanting to target the subsidies (to those in need),” he said.

“The difference in prices here in Iran and those in the international arena should not be viewed as subsidy. Are we ready to pay workers in Iran on the basis of international rates?” asked Mr Mousavi, who has also criticised Ahmadinejad’s policies regarding Iran’s disputed nuclear programme.

Seventy percent of Iranians earn less than 4,500,000 rials (about $450) a month, an Iranian newspaper said on Saturday.

The government will gradually carry out the law upon its approval by the legislative watchdog, the Guardian Council, to head off the anticipated inflationary pressure of the plan.

Authorities believe the measure to end gasoline subsidies will make Iran less vulnerable to possible sanctions targeting its fuel imports over its nuclear programme, which the West fears is a cover to build bombs. Iran denies it.

Iran, the world’s fifth-largest oil exporter, lacks sufficient refining capacity and imports 40 percent of its gasoline.

Fuel, including gasoline for cars, is heavily subsidised in Iran. Gasoline sells at the equivalent of just 10 US cents a litre, although the government in 2007 introduced rationing to limit the amount of subsidised fuel drivers can buy.

*Reuters