Gasoline Prices Remain Iranian Regime’s Achilles Heel
Iranians seem not to believe government assurances that it currently has no plans to raise gasoline prices, while some officials hint at a possible timeframe.
Iranians seem not to believe government assurances that it currently has no plans to raise gasoline prices, while some officials hint at a possible timeframe.
Iran’s Oil Minister Javad Owji and government spokesman Ali Bahadori Jahromi reiterated in the past two days that the administration would not increase gasoline prices, but oddly claiming that the long lines of cars at gas stations and the consequent black market are only the result of measures to decrease consumption.
Owji said that foreign-based Persian media are behind the rumors of an impending hike, but the government only plans to reduce consumption by restricting fill-ups at gas stations, claiming that “all refineries are operating at full capacity, with 150 million liters of fuel reserves available.”
But actually 150 million liters is a little over one day’s consumption, which means a critical shortage of supplies.
"Last week, we consumed 137 million liters per day, and today we have a consumption of 114 million liters, and nothing unusual has happened in the country," he explained. A source at the oil ministry told Iran International earlier in August that the National Iranian Oil Refining and Distribution Company (NIORDC), a department within the ministry, has released around 900 million liters of strategic gasoline reserves into the market.
Many Iranians, however, are of the opinion that the regime is only delaying a price hike in fear of triggering protests ahead of last year's protest anniversary in September. Iran International reported in late July that the government has postponed tighter fuel rationing implementation due to the same reason.
Iran has been struggling with gasoline shortages since at least mid-2022 and was forced to release one-third of its strategic reserves by the end of the year. The government, which controls one of the world's largest oil and gas reserves in the world, sells gasoline at extremely low, subsidized prices, charging less than 10 US cents per gallon, or less than 3 cents per liter, while neighboring oil-producers have much higher prices, more in line with international market rates. Second only to Venezuela, Iran has the world’s cheapest gasoline price.
For years there has been talk of adjusting prices, but since 2018 Iran’s currency has dropped 12-fold and any increase needs to be huge to be meaningful in US dollars. One of the main reasons that the Islamic Republic has not managed to increase prices amid the current economic crisis is because it faced the worst wave of unrest in years from September 2022 to February 2023.
In November 2019, a government decision to increase fuel prices by 50–200 percent triggered nationwide unrest that lasted for two weeks. Regime forces killed at least 1,500 civilians, in the worst such crackdown in Iran. Iranians are concerned about a repeat of the bitter experience.
Lawmaker Jalal Rashidi Kochi said Tuesday that "People distrust officials and their words. If we touch the gasoline prices, people will take to the streets and protest…Our approach to gasoline was flawed from scratch. It means we are doing something fundamentally wrong, and the more we try to do it right, the worse it gets."
Reformist politician Morteza Moballegh told Hamdeli newspaper that the government is the main loser in the gasoline market because the congestion at the gas stations is proof that people do not trust the government despite their repeated claims of no change in prices. "The distrust is due to fundamental policies... These gentlemen (the current administration) are trying to impose some of their mindsets, which are not in line with the needs of today's Iran and the law, on the people. This situation provokes a reaction from society and has created serious problems for the people."
In the meantime, lawmaker Mohsen Zanganeh, the spokesperson for the budget committee at the parliament, said a rise in prices is not proposed in the budget for this year, meaning that “any possible increase will take effect from the beginning of the Iranian year 1403 (in March 2024).”
“However, the government has included the possibility in the budget that it can achieve energy savings through pricing and non-pricing policies," he emphasized. “Certainly, if the government intends to take such a measure (increase gasoline prices), the parliament will not allow it to happen without prior notice."
Ali Naderi, the CEO of the government’s official news agency IRNA, said earlier in the week that the non-transparent action regarding gasoline prices that took place in 2019 should not happen again, noting that it should be explained to people that “gasoline prices are not expected to remain fixed for the next 10 years.”
"Why do people accept that the price of bottled water reaches its real cost? For gasoline, too, this matter should be accepted, and it should be transparently explained to the people whether an increase in gasoline prices is planned or not,” he added.
Minds are set on a fuel price closer to international rates but there are also opinions fundamentally different, pointing out that the regime is not actually providing cheap fuel for the nation because it gains a huge profit in the prices and taxes on automobiles.
Jomhouri-e Eslami conservative newspaper said on Wednesday, "The people of Iran are paying for gasoline at the same global prices" as they paid a couple of times more than the real price for their cars compared with car prices worldwide. “Calculate the price of the cars you sell to the people as well. Then you will see that you don't offer a cheaper deal to the people of oil-rich Iran,” argued the paper addressing the government that controls the inefficient auto industry making old-model and inferior cars for very high prices.
The paper claimed that if the decision is put to a referendum, people will vote to buy both cars and gasoline at international prices.
The official government news agency IRNA carried a report on the summit headlined by a quote by President Ebrahim Raisi saying, “Iran’s membership in the bloc is opposition to American unilateralism.”
The BRICS group of nations reached a broad consensus to invite six countries - Argentina, Egypt, Iran, Ethiopia, Saudi Arabia and the United Arab Emirates - to join, in a move aimed at increasing the clout of a bloc that has pledged to champion the "Global South".
This is a historic expansion, which reflects the determination of BRICS countries to unite and cooperate with other developing countries, Xi said at the group's leaders' summit in South Africa's Johannesburg.
"This expansion meets the expectations of the international community and serves the common interests of emerging markets and developing countries," Xi added.
Raisi told the summit Iran Iran supports efforts by the BRICS group of emerging economies to move away from dependence on the US dollar.
"The Islamic Republic of Iran very resolutely supports the successful endeavors of BRICS in line with de-dollarization from the trade and economic interactions between the members and also making use of local currencies," he said.
Amid its economic isolation from the West and having few trading partners worldwide, the Islamic Republic views BRICS as a possible savior, with continuous propaganda domestically to present its membership as a critical accomplishment.
However, individual countries make economic decisions based on their interests and they see Iran, which is under US banking sanctions, as a risky proposition. The Islamic Republic has also created a heavily government controlled economic system not conducive to foreign investments.
In his meeting with China’s XI Jinping, Raisi emphasized that the invitation for Iran to join BRICS highlights the bloc’s opposition to the United States, and expressed hope that relations with China will be boosted. Tehran already has a 25-year cooperation agreement with Beijing, with details kept mostly secret, but Iranian officials have often referred to a Chinese pledge to invest $400 million in their country. However, in more than two years after the deal was officially concluded there is little sign of any investments.
IRNA quoted President Xi as having told Raisi that his country hopes to expand bilateral cooperation with Iran “to strengthen multilateralism.”
BRICS - whose acronym was originally coined by an economist at Goldman Sachs, currently comprises Brazil, Russia, India, China and South Africa.
Deepening geopolitical polarization in the wake of Russia's invasion of Ukraine and China's declining relations with the United States are spurring efforts by Beijing and Moscow to forge BRICS into a viable counterweight to the West.
"BRICS has embarked on a new chapter in its effort to build a world that is fair, a world that is just, a world that is also inclusive and prosperous," said South African President Cyril Ramaphosa, who is hosting a summit of BRICS leaders.
Henry Rome, Senior Fellow and Iran analyst at the Washington Institute, commented,“Iran’s invitation to the BRICS group likely will provide little in terms of practical benefits. But, like admission to the SCO, it will probably fuel the conviction among some Iranian leaders that Tehran can escape its isolation absent a nuclear deal.”
Aftab News, a website relatively independent of the current rulers and said to be close to other regime insiders, argued in an article published Thursday, that the outlook for Syria to pay Iran back looks bleak. Iran has a small share of Syria’s trade, roughly one-tenth of what Turkey exports to the country. Annual Iranian exports are less than $1.5 billion.
Both Iran and its ally, the government of Bashar al-Assad in Syria face serious economic challenges. Iran’s finances have steadily deteriorated since 2018 when the United States imposed sanctions after withdrawing from the JCPOA nuclear accord. Syria has remained in political limbo, insecurity, with various military groups roaming in the country and its other ally Russia weakened by its invasion of Ukraine.
United Nations envoy for Syria sounded the alarm to a worsening economic situation on Wednesday. “Prices are now spiraling out of control for essential goods such as food, medicine, fuel, basic commodities. Every part of Syria, every community, is affected,” said Geir O. Pedersen, adding many are struggling to put food on the table and feed their families.
As it usually happens, a man who is broke remembers what others owe him. So, the story goes for the Islamic Republic that aligned itself with Assad in 2011 as antiregime protests flared in the country. The clerical regime seeing its close ties with Assad as essential for its regional plans, supported Damascus with loans, free oil and tens of thousands of Iranian, Afghan, Lebanese, Iraqi and other fighters.
Now, when Iran suffers from a serious economic crisis some people in Tehran realize that they have spent tens of billions of dollars in Syria – a significant part of their restricted oil revenues – for a dubious outcome.
Estimates range from $30 billion to more than $50 billion material aid provided to the Assad regime. Tehran’s oil revenues in this period averaged from below $20 billion to above $40 billion annually. Therefore, it is safe to estimate that from 2011-2022 oil revenues hardly totaled $400 billion. If Iran spent $50 billion in Syria, that would be more than 10 percent of its total income from oil.
The $50 billion figure was revealed in May when an opposition hactivist group accessed government information. Minutes from a meeting of Iran’s Supreme National Security Council showed that Syria’s debt goes back to a long-term agreement signed between the two countries in January 2019, under former president Hassan Rouhani. However, the debt has been building for much longer, with roughly $11bn worth of oil given to Damascus from 2012 to 2021.
A combination of aid in the form of military support and cash, the total amount of debt to Iran is estimated to be about $50 billion, though the document said the final amount is still being calculated.
Aftab News listed an array of potentially profitable industries in Syria that Iran is interested to take under its control as compensation for money the Assad regime owes, but so far there has been no movement toward an agreement. A visit by President Ebrahim Raisi to Damascus in early May did not produce any breakthrough.
Among objects of interest to Iran are Syrian oil fields, new power stations, port facilities and mines. But Aftab News said that these need investments to become profitable, money that Iran does not have.
Former Parliamentary Speaker Ali Larijani has been making controversial comments about state affairs, primarily through a couple of interviews with online media sources or in meetings with entrepreneurs in Iran during the past few days.
Hardline daily Khorasan explained Larijani’s behavior as a signal to indicate that he is willing to play a part in the upcoming parliamentary elections although it is clear that he is not a candidate for the March 2024 polls.
Khorasan wrote that Larijani ignored the Interior Ministry’s call for pre-registration, a process that is not part of the formal procedure for announcing one’s candidacy. However, he told likeminded politicians to register their candidacy and run for the parliament.
The daily, which is affiliated to the administration of the holy shrine of Imam Reza in Mashhad and is funded by Khamenei’s office, opined that Larijani will support the candidacy of several moderate conservative politicians and former lawmakers such as his brother-in-law Ali Motahari, as well as others including Mansoor Haqiqatpoor and Ezattollah Yousefian Molla.
As per Rouydad24, Larijani has recently criticized Iran’s foreign policy by saying that these gentlemen [presumably Iran’s top diplomats, or Supreme Leader Ali Khamenei who determines the country’s foreign policy] think it is important to have influence in some foreign capitals. However, he emphasized that our paramount objective should be to ensure our citizens lead stable lives and can chart their future with confidence.
Meanwhile, he cautioned the government against embracing the Marxist notion that nations are merely workers requiring governance by the authorities.
Highlighting that liberalism surpasses Marxism as a governing approach, offering citizens an abundance of choices in various scenarios, Larijani noted the presence of a third path – the Islamic approach. In this path, the government facilitates the populace's productive endeavors, an approach he described as empowering the people. According to him, this strategy holds the potential to propel the nation's progress.
Clearly criticizing Khamenei without naming him, Larijani said: "It is not enough to say where we want to be in 20 years. We need to have a reasonable development plan."
Meanwhile, in a meeting with a group of entrepreneurs over the weekend , Larijani said: "Some politicians define social justice as giving cash handouts to the people. But the main responsibility of the government is bringing about sustainable development." He was clearly referring to populist politicians such as President Ebrahim Raisi and his predecessor Mahmoud Ahmadinejad, who in the absence of satisfactory economic growth offer small monthly cash payments to all or part of the citizens.
Larijani added that sustainable development also ensures better outcomes for economic, social, political and security issues of the country.
Larijani who started his political career in early 1990s as a hardliner coming from the ranks of the revolutionary guards (IRGC), gradually changed into a moderate conservative politician during the past decade, and aligned his political affiliation with politicians such as former President Hassan Rouhani.
In another development, Aftab News quoted Larijani as saying that "Some people have mistaken political power with the use of force."
According to Aftab News, criticizing the government's harsh treatment of artists with a lifestyle different from what hardliners propagate, Larijani said: "What do artists want? They want a [normal] life and the freedom for artistic creation. The government needs to reach a common understanding with Iranian artists."