Rhein on Energy and Climate

Iran is one of the world’s big polluters and C02 emitters. It

consumes more gasoline per automobile than any other country except the USA. The reasons are simple: Car owners pay only 10 US cents for a litre of gasoline, less than in any other country.

In the middle of the 1970s during the Iraq war, Iran had introduced a lavish system of food and energy subsidies, from which is has been unable to disentangle itself since, despite repeated efforts. Its bourgeois urban elite, the principal beneficiary of the subsidies, has used its influence in the Majlis to thwart all government efforts to phase out the excessive subsidies.

The subsidies constitute a heavy burden on the government budget and induce citizens to waste oil, gas and food in a way unacceptable for any country in the face of growing global energy and food scarcities.

In 2009 the government budget of $ 347 billion had to support around $ 100 billion for energy and food subsidies.

Feeling the growing pinch of international trade restrictions on the supply of gasoline, most of which needs to be imported, President Ahmedinejad has taken the matter in his hands since early 2010 and submitted a programme for phasing out subsidies for a total amount of $ 40 billion. Fearing negative reactions from the population and an increase of inflation, from around 10 percent presently to more than 20 percent, The parliament has so far consented to a cut of only $20 billion.

But the pressure on the government to finally act decisively keeps mounting. Growing budget deficits, substantial smuggling of cheap gasoline/diesel to neighbouring countries where prices are seven to ten times higher than in Iran, unsupportable pollution in the capital and health problems due to pollution will leave the government no choice but to put an end to the energy subsidies and replace them by more directly targeted social subsidies for the poor.

This will be in the interest of Iran and humanity. The international community should therefore support those forces in Iran that are determined to phase them out.


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  1. Iran has found its economy facing pressure from the rapidly declining price of oil, which has plummeted to $46 per barrel in early January 2009 from a high of $147 per barrel in early July 2008.

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