Shadow of 2019 Unrest Looms Over Gasoline Subsidy Reform

After Iranian President Hassan Rouhani’s government announced a 300% increase in gasoline prices at midnight on November 15, 2019 – aimed at reducing consumption and financing welfare benefits – protests erupted in more than 100 cities, leaving over 300 protesters and six government personnel dead. It is therefore understandable that the current president, Masoud Pezeshkian, while seemingly recognizing the need to reform gasoline subsidies, is cautious about implementing changes. At present, Iranians may purchase 60 liters (nearly 16 gallons) per month of subsidized gasoline at roughly 1.3 cents per liter (approximately 5 cents per gallon), and they may purchase an additional 100 liters (around 26 gallons) of “free market gasoline” at about 2.6 cents per liter. Under the new government initiative, anyone wishing to buy over this amount would have to pay 4.3 cents per liter (around 16 cents per gallon). Extending a helping hand to the president, Donya-ye Eqtesad columnists argue for reforming the transportation system and ensuring transparency about how the government spends the revenue generated from such changes to persuade the Iranian public of the necessity of reform.

• November 25: Islamic Revolutionary Guard Corps-affiliated Tasnim News released the Cabinet’s November 4 proposal reforming the use of personal fuel cards and public access to gasoline at state-subsidized rates.
• November 29: In a short opinion piece in economic newspaper Donya-ye Eqtesad, Mojtaba Baharvand, former director of the transportation and logistics committee of the Iran Chamber of Commerce, wrote on reforming the gas price in Iran:
  • “For Iran to escape the vicious cycle of fuel price hikes and public dissatisfaction, it must return to the principles that were established during the reformist period but never continued: Gradual, predictable energy price reform; honesty and transparency with the public; fighting monopolies in the automotive sector; expanding public transportation as a real alternative; importing technology and enabling competition to reduce fuel consumption. Unless these structural changes occur, raising gasoline prices will not solve the problem – it will only deepen the trust gap between the public and policymakers.”
• December 1: In an opinion piece in Donya-ye Eqtesad, economist Hossein Abbasi concluded:
  • “The problem lies in the informal, unwritten contract between the state and the people. If the government can demonstrate that raising energy prices – especially gasoline – can actually improve citizens’ welfare, and if it involves the public in deciding how this revenue is spent, many pathways for changing the current situation will quickly emerge.”

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