Iran’s president says subsidized fuel prices are irrational

TEHRAN (Reuters): President Masoud Pezeshkian said in a video published on Tuesday that fuel subsidies made no sense in Iran, a major oil producer with a struggling economy that has faced protests in the past over price hikes.

“There is no rationality in the fact that we buy gasoline with free market dollar prices and we sell it with a subsidized price,” Pezeshkian, elected in July, said in a video broadcast by state media.

“Our economists and experts should stand up to these wrong policies.”

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Iran’s new oil minister, Mohsen Paknejad, said last week that there is currently no plan to change gasoline prices, according to Iran’s state media, indicating that there would not be a policy shift, despite the president’s concerns.

Price hikes for basic goods such as fuel and food are highly sensitive in Iran.

Protests spread across Iran in 2022 over a cut in state subsidies on food, with slogans calling for top leaders to step down.

In 2019, the government introduced gasoline rationing and price hikes of at least 50 percent, drawing sporadic protests in several cities, including the capital Tehran.

Iran, which has some of the world’s cheapest fuel partly due to heavy subsidies, has been fighting rampant fuel smuggling to neighboring countries.

The daily struggle of ordinary Iranians to make ends meet is a persistent challenge for the ruling clerics, who fear a revival of demonstrations that have erupted periodically by lower- and middle-income communities angry at enduring hardship.

The reinstatement of US sanctions in 2018 hit Iran’s oil exports, slashing government revenues and forcing it to take unpopular steps such as increasing taxes and running big budget deficits, policies that have kept annual inflation close to 40 percent.

Although Iran has avoided total economic meltdown, thanks mainly to oil exports to China and higher crude prices, petroleum exports are still below their pre-2018 levels.