Sunday, July 01, 2007

Iran under pressure, self imposed, economically

From the Washington Post:
Rationing Fuels Discontent in Iran

A month after raising gasoline prices by 25 percent, the government began fuel rationing Wednesday, which sparked violence in Tehran. Angry Iranians smashed shop windows and set fire to a dozen gas stations.

With armed guards protecting gas stations Thursday, calm returned to the capital as motorists lined up to fill their tanks. But many were still seething. "Ahmadinejad promised paradise, but his government has made life hell for Iranians," Mohsen Nosrati said as he waited at a gas station in central Tehran.
This month, about 60 economists wrote to Ahmadinejad blaming rising prices on his mismanagement and flawed economic policies.
The international pressure has made it difficult to tackle one of the country's most significant economic problems -- gasoline subsidies that cost the government billions of dollars a year and encourage high demand. Iran is one of the world's biggest oil producers, but it does not have enough refineries, so it must import more than 50 percent of the gasoline consumed domestically. The rationing is part of a government attempt to reduce the $10 billion it spends each year to import fuel that is then sold at below cost to keep prices low.

The Iranian economy was mismanaged before Ahmadinejad came to power; he has only made it worse. International power (sanctions for Iran's nuclear program) have intensified the necessity of reform. While sanctions may have made reforms more difficult they also made them more likely.

The Iranian government has little trust among the populace. The people have learned that the most likely way in which the oil wealth of the country is shared with them is through price subsidies. Subsidies are wasteful of resources, but in the Iranian context (appropriate distrust of government) they make sense.

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Blogger Lirun said...

interesting how fuel prices awaken social conscience..

what about everything else that goes on there? cant they riot against some of those?

4:16 PM  

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