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By ALI AKBAR DAREINI
Source: Bloomberg BusinessWeek
March 10, 2010
TEHRAN, Iran
Iran’s conservative-dominated parliament has slashed much of hardline President Mahmoud Ahmadinejad’s proposed energy and food subsidy cuts, intensifying a battle over legislation that has the potential of stoking more unrest in the country.
The parliament approved $20 billion in cuts, or just half of the savings demanded by Ahmadinejad’s government. Lawmakers have said they feared the full $40 billion in cuts would have prompted a 50 percent surge in inflation.
Iran’s economy is already struggling under double-digit inflation, high unemployment and sanctions imposed by world powers suspicious of Tehran’s nuclear program. The proposed reductions aim at cutting by 40 percent the amount the government spends on subsidies per year.
The vote late Tuesday in parliament followed a refusal by Iran’s Supreme Leader Ayatollah Ali Khamenei to take sides, effectively giving lawmakers the green light to move ahead.
Khamenei, who has the final say on all state matters, was quoted in the Wednesday editions of several newspapers as saying he wants the two sides to resolve the dispute through deliberations, but asked the parliament to allow Ahmadinejad to defend himself in person.
Ahmadinejad spoke for 45 minutes at the parliament, arguing that approving only half the amount would “make the subsidy cut plan fail at the outset,” the government-run daily ‘Iran’ quoted Ahmadinejad as saying.
The president argued that the full $40 billion in cuts would not lead to a surge in inflation.
The semiofficial Fars news agency reported late Tuesday that as the lawmakers began to vote, Ahmadinejad began praying in the chamber for the approval of the full amount.
The government has argued the cuts are aimed at distributing the money directly to the neediest Iranians. But Ahmadinejad’s push for the full figure also reflects the beleaguered state of a country in which the government is desperately trying to cut costs amid criticism that he squandered revenues accrued from oil’s run-up through 2008 on populist projects.
Iran, OPEC’s second largest oil exporter, spends roughly $100 billion on subsidies, or roughly 30 percent of the government’s budget.
On Monday, the Iranian parliament also revised some other key figures in Ahmadinejad’s proposed budget for the next Iranian calendar year that begins March 21.
The parliament approved a $347 billion budget (for March 2010-2011) based on an oil price of $65 a barrel. The approved budget was less than the $368 billion budget proposed by Ahmadinejad based on a price of $60 a barrel.