On the lifting of subsidies in Iran
Posted by NMSG Lanka on Thursday, February 24, 2011
Under: AWTW News Service
AWorldToWinNewsService
On the lifting of subsidies in Iran
A World to Win News Service. 21 February 2011. After years of discussion and controversy in Iran's ruling class about the lifting of subsidies on electricity, fuel, water and other basic needs of the people, this measure was finally implemented by the government at the end of 2010.
The price of petrol increased by 600 percent, and the price of diesel fuel was multiplied by 22. The price of petrol went up 7.5 times. The price of electricity increased depending on consumption, so for the average consumption of 200- 400 KWh per month families will have to pay five times more than before, and those who consume more than 600 Kwh will see their bills jump by up to 12 times. There are 16 items subjected to price increases. They represent the most basic needs of the masses, including water, wheat (bread), sugar, rice and cooking oil, as well as petrol, diesel fuel and naptha (for cooking and heating), and electricity.
A much milder bill had been introduced to the Iranian parliament during the Mohammad Khatami presidency, but the conservative-dominated parliament refused to approve it, partly out of concern about the social consequences and partly because of factional contention. So the bill was abandoned until Mahmoud Ahamadinejad re-introduced it toward the end of his first term as president. However parliament, still in the hands of Ahmadinejad allies and concerned about possible unrest, refused to sign the bill. It was still under discussion and investigation during the presidential election in 2009, when the uprising that followed disrupted the process. The issue was left unresolved.
At the first opportunity Ahamadinejad introduced the bill yet again. After months of conflict in which parliament imposed some changes, it was finally approved and became law in March 2010.
The conflict between the government and parliament caused the intervention of Ayatollah Ali Khamenei, the Supreme Guide. In fact, all factions within the regime – the parliament, the top clergy, including the Khamenei faction, the Expediency Council under Ali Akbar Rafsanjani and the Council of Guardians under Ayatollah Ahmad Janati – emphasised the necessity of lifting the subsidies and declared that this was not an option but a must for the Islamic regime. Even the reformist factions of the regime, particularly those led by Houssein Mousavi and Mohammad Khatami, did not oppose the bill but only its timing and pace. They warned that it could give rise to "blind rebellion".
One of the main centres of the bureaucrat bourgeoisie is the economic wing of the Sepah-e-Pasdaran (Revolutionary Guards). During the last few years it has monopolised the most profitable and most sensitive branches of the country's economy.
The main changes that parliament imposed on the bill was to slow the implementation process. The law of "purposeful (focused) subsidies" approved by the parliament and the Council of Guardians in January 2010 says that "the local price of petrol, oil, white oil, natural gas and all other petroleum products… should increase gradually so that by the end of the five year development plan prices must not be less than 90 percent of the export price."
The hypocrisy of the Islamic regime
There is no doubt that the vulnerable sections of society will suffer tremendously from the subsidy cuts.
But Ahmadinejad claims that he introduced this policy to help the poor. He argues that most of the subsidies have benefited the better-off section of the people. By ending these price subsidies, he says, the money saved can be distributed among the poor instead, as "focused subsidies". He said, "Why should 70 percent of the subsidies serve 30 percent of society? If the new plan is implemented we will not find even one poor person anywhere in Iran.” (BBC Website, 3 September 2010)
In fact Ahmadinejad not only tries to hide the real outcome of this policy for the masses but also goes further and calls it "justice". Ahmadinejad is trying to deceive his audience. The government will pay people $40 to compensate them for the $80 more a month to be extorted from them by increasing prices for fuel, electricity and other basic needs.
In fact what Ahmadinejad is trying to sell as a plan for justice and the elimination of poverty with an Islamic or Iranian brand is the same kind of plan that has been imposed on third world countries by the U.S. and its imperialist allies. It is another version of the "Washington Consensus" formulated in the mid-1980s by the World Bank, IMF and other imperialist financial institutions and dictated to India, Egypt, Brazil, Tunisia, Jordan and other countries.
As Haghighat, the publication of the Communist Part of Iran (Marxist-Leninist-Maoist) wrote in issue 53, "Besides the massive increase in poverty due to the sudden increases in daily expenses, the internal economy in the cities and countryside will suffer another big blow because oil and gas are key inputs. So we will witness another round of the collapse of small factories, one of the biggest austerity measures and destruction of economic structures in the recent history of Iran, and it will cause major displacements in the economic and social geography of the country."
Some regime leaders have warned about the period of austerity ahead. Mohammad Reza Naghdi, the head of the regime's Basij militia, said, "Those who might be vulnerable to the subsidy reforms when it is first implemented should make an effort to show more tolerance and patience so they can taste the sweet fruits of this law after this stage is over." (Mehr News Agency, 28 October 2010)
Ayatollah Janati, who holds a high-ranking post in the Council of Guardians and was the Imam leading Friday prayers on 17 September 2010 said, "Implementing the subsidy reform law will certainly result in some tensions that the government must minimize, just as it must also minimize the damage to the deprived section. But certainly we are in a period of semi-austerity. We should ask god to help us. Otherwise, if it is not god's will to help, nobody can do anything." (Friday Pray in Tehran, 17 September 2010)
Unlike Ahmadinejad's nonsense, these comments by some of the most reactionary elements of the regime show that they know what they are doing and where the social consequences could lead. Further, they are well aware that their deceitful measures might not work, so they warn the masses not to protest.
Ahmadinejad, from the very first day, warned about those who want to "harm" the implementation of this law. He said, "If anybody sees someone trying to sabotage the market with rumours, he or she should be handed over to the authorities.” (BBC Website, 5 October 2010)
Ahamd Reza Radan, one commander of the security forces, said, "There are some people who want sedition, but they should know that the police will stand by the government with all their power."
Brigadier-General Esmail Ahmadi Moghadam, the top commander of the security forces, said, "Today sedition is continuing in other forms, such as economic forms, and there is a possibility that some people intend to organise strikes here or there and close down some workplaces. But the security forces can overcome all these centres of sedition."
A member of Parliament, Ezatollah Yousefi, even demanded the execution of those who disrupt the implementation of the law. He said implementing the "focused subsidies plan is tied to the existence of the economic well-being of the system." (BBC Persian service, 5 December 2010)
Who benefits?
Haghighat believes that the aim of the "focused subsidies" is to create a concentration of capital to invest in oil and non-oil sectors of the economy. This concentration will be the product of two processes: the limiting of oil and gas consumption in Iran so as to maximize exports, and the increased draining of the people's income by selling them oil and gas at international market prices.
In fact what is implemented by this "focused subsidies" law is an important part of the kind of package that goes along with that dictated by imperialist financial institutions such as the World Bank and IMF for the third world countries in order to facilitate the flood of capital and ensure the profitability of capital when invested in those countries. Such an approach has taken place on a global scale in the last few decades and many countries have been the victims of such programmes implemented by the local rulers.
Ahmadinejad's justification that the subsidies should be eliminated because the well-off are the main beneficiaries has been rejected as baseless even by the Iranian parliament's research centre. It is the middle strata and lower classes who benefit most from subsidies because they are the biggest users of public services and spend the largest proportion of their incomes on most basic needs such as bread, tea and sugar.
According to one IMF expert relating to Iran, the government once argued that subsidies were the best way to distribute national wealth. He says that when oil prices were low, this was less of an issue. Now that prices have surged to almost $150 a barrel he suggests they end the subsidies and sell at market prices. This means the amount of money through sales locally and internationally that would go into government coffers is substantial.
In fact this is what Ahmadinejad is doing. The Iranian bourgeoisie wants a bigger share of the spoils. IMF dictates to end the subsidies coincide with the desires of the regime.
This neo-liberal economic reform started around 1987, after the Iran- Iraq war when Ali-Akbar Rafsanjani became president.
"In that chapter of 'moderating the economic structure' of the country, Sepah-e-Pasdaran Generals, the Grand Ayatollahs and 'their dear sons' converted themselves into the owners of industry and the land and tall buildings, and became the shareholders of the big American, European and Korean multinational companies. The share received by the displaced villagers were the slums, slavery and productions lines, and the search for work in the city centres." (Haghighat)
In today's new chapter of these economic changes, lifting the subsidies is at the centre but there are other aspects also. For example, the government has committed itself to allocating 20 percent of the money saved from eliminating subsidies for reconstruction of infrastructure. However, the infrastructure involved is likely to be sections that would facilitate the transport of the foreign capital, things the Shah had started in 1960s. Also, 30 percent of that income would be allocated to "vulnerable industries" harmed by the lifting of subsidies. But as some of the high ranking officials have hinted, this financial assistance will be conditioned on enterprises modernising their machinery and introducing new technology to increase their competitiveness. The main beneficiaries would be those plants that rely on high technology and not small manufacturers and workshops.
At the same time the regime has committed itself to trimming the government and corporate bureaucracy to make them more efficient. These all are part of a neo-liberal approach to development as advocated by the World Bank, the IMF and the "Washington Consensus" that will mainly benefit the global capitalist network and partly the ruling class at the direct cost of the large majority of the people.
The policies dictated by the imperialists through their financial institutions have failed to eliminate poverty as it claims; and instead the results have been disastrous for the masses. Skyrocketing inflation, rising unemployment, currency devaluations, the growth of export-oriented agriculture and industry, the increasing importation of basic necessities and luxury goods as well, and the destruction of the national economy, have all given rise to the increasing misery and suffering of the people in many countries. The main beneficiaries of these policies are imperialist finance capital and the native bourgeois bureaucrats who sell out the country and facilitate the imperialists plundering investments.
Islamic regime economically at a dead end
Why is the Islamic regime, despite repeated anti-Western slogans and especially when faced with US-led international economic sanctions, going after a risky programme that has already failed in many countries?
The answer is simple: they are at a dead end and deep in a crisis. The Iranian bureaucrat bourgeoisie can no longer continue in the old way.
The Islamic Republic cannot escape the dictates of the international circuits of capital and needs to adopt these economic measures. For instance, it must allocate more capital to its petroleum industry, where productivity does not meet international capitalist standards precisely because of a lack of new investment. Thus, as the Haghighat article quote above emphasizes, the regime faces an increased need to rob the masses to meet capital's dictates.
In fact the Islamic bourgeois bureaucrats in power have reached their limit and know well that their wealth can grow no further without the help of imperialist capital and are willing to go along with World Bank/IMF dictates, even though they will not admit it publicly.
The Iranian government gained $260 billions in 2007-8 just from rising oil prices. The government considered it cheaper and more efficient to import many items of basic necessity like wheat, rice and tea and goods like household appliances. The profits from this trade spurred the growth of some bureaucrat capitalists, mainly those connected to the ruling power gangs. Farmers cultivating rice and tea in the country could not compete with the imports and most of them were shattered.
By cutting subsidies the government hopes that this will help it be admitted into the WTO (World Trade Organisation). It has applied and been turned down several times before. The bureaucrat capitalists love loans from abroad and will benefit directly or indirectly from them. However this will lead even further to the subjugation of Iran to imperialist capital, as experience elsewhere shows.
-end item-
Corrections
In our 14 February 2011 news service article in Egypt, we incorrectly referred to the head of the U.S. Joint Chiefs of Staff Mike Mullen as a general. He is an admiral.
On the state of emergency in Egypt, we incorrectly said it began after the overthrow of the monarchy in 1952. It has been in force since 1967, with an 18-month interruption in 1980-81.
On the lifting of subsidies in Iran
A World to Win News Service. 21 February 2011. After years of discussion and controversy in Iran's ruling class about the lifting of subsidies on electricity, fuel, water and other basic needs of the people, this measure was finally implemented by the government at the end of 2010.
The price of petrol increased by 600 percent, and the price of diesel fuel was multiplied by 22. The price of petrol went up 7.5 times. The price of electricity increased depending on consumption, so for the average consumption of 200- 400 KWh per month families will have to pay five times more than before, and those who consume more than 600 Kwh will see their bills jump by up to 12 times. There are 16 items subjected to price increases. They represent the most basic needs of the masses, including water, wheat (bread), sugar, rice and cooking oil, as well as petrol, diesel fuel and naptha (for cooking and heating), and electricity.
A much milder bill had been introduced to the Iranian parliament during the Mohammad Khatami presidency, but the conservative-dominated parliament refused to approve it, partly out of concern about the social consequences and partly because of factional contention. So the bill was abandoned until Mahmoud Ahamadinejad re-introduced it toward the end of his first term as president. However parliament, still in the hands of Ahmadinejad allies and concerned about possible unrest, refused to sign the bill. It was still under discussion and investigation during the presidential election in 2009, when the uprising that followed disrupted the process. The issue was left unresolved.
At the first opportunity Ahamadinejad introduced the bill yet again. After months of conflict in which parliament imposed some changes, it was finally approved and became law in March 2010.
The conflict between the government and parliament caused the intervention of Ayatollah Ali Khamenei, the Supreme Guide. In fact, all factions within the regime – the parliament, the top clergy, including the Khamenei faction, the Expediency Council under Ali Akbar Rafsanjani and the Council of Guardians under Ayatollah Ahmad Janati – emphasised the necessity of lifting the subsidies and declared that this was not an option but a must for the Islamic regime. Even the reformist factions of the regime, particularly those led by Houssein Mousavi and Mohammad Khatami, did not oppose the bill but only its timing and pace. They warned that it could give rise to "blind rebellion".
One of the main centres of the bureaucrat bourgeoisie is the economic wing of the Sepah-e-Pasdaran (Revolutionary Guards). During the last few years it has monopolised the most profitable and most sensitive branches of the country's economy.
The main changes that parliament imposed on the bill was to slow the implementation process. The law of "purposeful (focused) subsidies" approved by the parliament and the Council of Guardians in January 2010 says that "the local price of petrol, oil, white oil, natural gas and all other petroleum products… should increase gradually so that by the end of the five year development plan prices must not be less than 90 percent of the export price."
The hypocrisy of the Islamic regime
There is no doubt that the vulnerable sections of society will suffer tremendously from the subsidy cuts.
But Ahmadinejad claims that he introduced this policy to help the poor. He argues that most of the subsidies have benefited the better-off section of the people. By ending these price subsidies, he says, the money saved can be distributed among the poor instead, as "focused subsidies". He said, "Why should 70 percent of the subsidies serve 30 percent of society? If the new plan is implemented we will not find even one poor person anywhere in Iran.” (BBC Website, 3 September 2010)
In fact Ahmadinejad not only tries to hide the real outcome of this policy for the masses but also goes further and calls it "justice". Ahmadinejad is trying to deceive his audience. The government will pay people $40 to compensate them for the $80 more a month to be extorted from them by increasing prices for fuel, electricity and other basic needs.
In fact what Ahmadinejad is trying to sell as a plan for justice and the elimination of poverty with an Islamic or Iranian brand is the same kind of plan that has been imposed on third world countries by the U.S. and its imperialist allies. It is another version of the "Washington Consensus" formulated in the mid-1980s by the World Bank, IMF and other imperialist financial institutions and dictated to India, Egypt, Brazil, Tunisia, Jordan and other countries.
As Haghighat, the publication of the Communist Part of Iran (Marxist-Leninist-Maoist) wrote in issue 53, "Besides the massive increase in poverty due to the sudden increases in daily expenses, the internal economy in the cities and countryside will suffer another big blow because oil and gas are key inputs. So we will witness another round of the collapse of small factories, one of the biggest austerity measures and destruction of economic structures in the recent history of Iran, and it will cause major displacements in the economic and social geography of the country."
Some regime leaders have warned about the period of austerity ahead. Mohammad Reza Naghdi, the head of the regime's Basij militia, said, "Those who might be vulnerable to the subsidy reforms when it is first implemented should make an effort to show more tolerance and patience so they can taste the sweet fruits of this law after this stage is over." (Mehr News Agency, 28 October 2010)
Ayatollah Janati, who holds a high-ranking post in the Council of Guardians and was the Imam leading Friday prayers on 17 September 2010 said, "Implementing the subsidy reform law will certainly result in some tensions that the government must minimize, just as it must also minimize the damage to the deprived section. But certainly we are in a period of semi-austerity. We should ask god to help us. Otherwise, if it is not god's will to help, nobody can do anything." (Friday Pray in Tehran, 17 September 2010)
Unlike Ahmadinejad's nonsense, these comments by some of the most reactionary elements of the regime show that they know what they are doing and where the social consequences could lead. Further, they are well aware that their deceitful measures might not work, so they warn the masses not to protest.
Ahmadinejad, from the very first day, warned about those who want to "harm" the implementation of this law. He said, "If anybody sees someone trying to sabotage the market with rumours, he or she should be handed over to the authorities.” (BBC Website, 5 October 2010)
Ahamd Reza Radan, one commander of the security forces, said, "There are some people who want sedition, but they should know that the police will stand by the government with all their power."
Brigadier-General Esmail Ahmadi Moghadam, the top commander of the security forces, said, "Today sedition is continuing in other forms, such as economic forms, and there is a possibility that some people intend to organise strikes here or there and close down some workplaces. But the security forces can overcome all these centres of sedition."
A member of Parliament, Ezatollah Yousefi, even demanded the execution of those who disrupt the implementation of the law. He said implementing the "focused subsidies plan is tied to the existence of the economic well-being of the system." (BBC Persian service, 5 December 2010)
Who benefits?
Haghighat believes that the aim of the "focused subsidies" is to create a concentration of capital to invest in oil and non-oil sectors of the economy. This concentration will be the product of two processes: the limiting of oil and gas consumption in Iran so as to maximize exports, and the increased draining of the people's income by selling them oil and gas at international market prices.
In fact what is implemented by this "focused subsidies" law is an important part of the kind of package that goes along with that dictated by imperialist financial institutions such as the World Bank and IMF for the third world countries in order to facilitate the flood of capital and ensure the profitability of capital when invested in those countries. Such an approach has taken place on a global scale in the last few decades and many countries have been the victims of such programmes implemented by the local rulers.
Ahmadinejad's justification that the subsidies should be eliminated because the well-off are the main beneficiaries has been rejected as baseless even by the Iranian parliament's research centre. It is the middle strata and lower classes who benefit most from subsidies because they are the biggest users of public services and spend the largest proportion of their incomes on most basic needs such as bread, tea and sugar.
According to one IMF expert relating to Iran, the government once argued that subsidies were the best way to distribute national wealth. He says that when oil prices were low, this was less of an issue. Now that prices have surged to almost $150 a barrel he suggests they end the subsidies and sell at market prices. This means the amount of money through sales locally and internationally that would go into government coffers is substantial.
In fact this is what Ahmadinejad is doing. The Iranian bourgeoisie wants a bigger share of the spoils. IMF dictates to end the subsidies coincide with the desires of the regime.
This neo-liberal economic reform started around 1987, after the Iran- Iraq war when Ali-Akbar Rafsanjani became president.
"In that chapter of 'moderating the economic structure' of the country, Sepah-e-Pasdaran Generals, the Grand Ayatollahs and 'their dear sons' converted themselves into the owners of industry and the land and tall buildings, and became the shareholders of the big American, European and Korean multinational companies. The share received by the displaced villagers were the slums, slavery and productions lines, and the search for work in the city centres." (Haghighat)
In today's new chapter of these economic changes, lifting the subsidies is at the centre but there are other aspects also. For example, the government has committed itself to allocating 20 percent of the money saved from eliminating subsidies for reconstruction of infrastructure. However, the infrastructure involved is likely to be sections that would facilitate the transport of the foreign capital, things the Shah had started in 1960s. Also, 30 percent of that income would be allocated to "vulnerable industries" harmed by the lifting of subsidies. But as some of the high ranking officials have hinted, this financial assistance will be conditioned on enterprises modernising their machinery and introducing new technology to increase their competitiveness. The main beneficiaries would be those plants that rely on high technology and not small manufacturers and workshops.
At the same time the regime has committed itself to trimming the government and corporate bureaucracy to make them more efficient. These all are part of a neo-liberal approach to development as advocated by the World Bank, the IMF and the "Washington Consensus" that will mainly benefit the global capitalist network and partly the ruling class at the direct cost of the large majority of the people.
The policies dictated by the imperialists through their financial institutions have failed to eliminate poverty as it claims; and instead the results have been disastrous for the masses. Skyrocketing inflation, rising unemployment, currency devaluations, the growth of export-oriented agriculture and industry, the increasing importation of basic necessities and luxury goods as well, and the destruction of the national economy, have all given rise to the increasing misery and suffering of the people in many countries. The main beneficiaries of these policies are imperialist finance capital and the native bourgeois bureaucrats who sell out the country and facilitate the imperialists plundering investments.
Islamic regime economically at a dead end
Why is the Islamic regime, despite repeated anti-Western slogans and especially when faced with US-led international economic sanctions, going after a risky programme that has already failed in many countries?
The answer is simple: they are at a dead end and deep in a crisis. The Iranian bureaucrat bourgeoisie can no longer continue in the old way.
The Islamic Republic cannot escape the dictates of the international circuits of capital and needs to adopt these economic measures. For instance, it must allocate more capital to its petroleum industry, where productivity does not meet international capitalist standards precisely because of a lack of new investment. Thus, as the Haghighat article quote above emphasizes, the regime faces an increased need to rob the masses to meet capital's dictates.
In fact the Islamic bourgeois bureaucrats in power have reached their limit and know well that their wealth can grow no further without the help of imperialist capital and are willing to go along with World Bank/IMF dictates, even though they will not admit it publicly.
The Iranian government gained $260 billions in 2007-8 just from rising oil prices. The government considered it cheaper and more efficient to import many items of basic necessity like wheat, rice and tea and goods like household appliances. The profits from this trade spurred the growth of some bureaucrat capitalists, mainly those connected to the ruling power gangs. Farmers cultivating rice and tea in the country could not compete with the imports and most of them were shattered.
By cutting subsidies the government hopes that this will help it be admitted into the WTO (World Trade Organisation). It has applied and been turned down several times before. The bureaucrat capitalists love loans from abroad and will benefit directly or indirectly from them. However this will lead even further to the subjugation of Iran to imperialist capital, as experience elsewhere shows.
-end item-
Corrections
In our 14 February 2011 news service article in Egypt, we incorrectly referred to the head of the U.S. Joint Chiefs of Staff Mike Mullen as a general. He is an admiral.
On the state of emergency in Egypt, we incorrectly said it began after the overthrow of the monarchy in 1952. It has been in force since 1967, with an 18-month interruption in 1980-81.
In : AWTW News Service
Tags: "iran"
