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Prices in Iran rise after lifting of subsidies

The austerity measures generate work stoppages and embolden the political opposition. Critics contend that the price increases hurt those with modest incomes while leaving the wealthy unscathed.

December 23, 2010|By Ramin Mostaghim and Borzou Daragahi, Los Angeles Times

Reporting from Tehran and Beirut — The Iranian government's removal of decades-old subsidies for food and energy in an attempt to boost its troubled economy has spurred price increases on everything from fruit and vegetables to gasoline, generated work stoppages and emboldened the political opposition.

In Tehran, the nation's capital, taxi fares that officially were to rise by 10% shot much higher as drivers imposed their own price increases. Some truckers across the country refused to work, complaining of government threats to revoke their permits if they raised their prices to offset higher fuel costs.

Crews on ferry boats operating between Bandar Abbas port and Qeshm island in the Persian Gulf temporarily stopped working, complaining that the ticket prices set by the government had not gone up despite a four-fold increase in the price of fuel, the Mehr news agency reported.

The austerity measures, though long anticipated, have brought mounting public anger since they began Sunday. Government critics contend that they will hurt people with modest incomes while leaving the wealthy unscathed.

Some critics also say the government's plan places the consequences of Iran's confrontational foreign policy and nuclear program, which have provoked international economic sanctions, on consumers. Opposition leaders Mir-Hossein Mousavi and Mehdi Karroubi on Wednesday publicly questioned the wisdom of the new plan, calling it a "burden on the shoulders of the middle and lower classes."

Iranian authorities say the cuts are part of an economic reform package that will contribute to the nation's prosperity by reducing wasteful subsidies totaling as much as $100 billion a year.

Already, the prices of produce, diesel, gasoline, cooking oil, water and bread have risen dramatically. In downtown Tehran, the price of a loaf of brick-oven bread doubled overnight to 40 cents. Security forces have been deployed around the country in case public frustration boils over into civil unrest.

Transportation workers have been particularly affected by the steep rise in the price of fuel.

"We were told by written notification that if we stop transporting cement at the same price our union membership cards will be nullified," 56-year-old Bahman, who owns two cement trucks, told The Times. "That means that non-members of the truckers union can replace us and we lose our stable monthly income."

Like many who spoke, he asked that his full name not be published for rear of retribution.

Another source close to the truckers complained that the price of diesel had risen to almost 10 times more than the previous subsidized price and confirmed that the government had threatened to fire drivers who increase fares without authorization.

Some workers are bucking government demands and raising prices.

Hassan, a 50-year-old who delivers produce from a wholesale market in southern Tehran to the western part of the capital, said he's increasing his fares by 15%. "For sure, grocery store owners will increase their prices even more than that," he predicted.

Utility prices are expected to jump considerably under the government plan. According to local reports, electricity costs are expected to triple this month, and water will nearly quadruple, while the price of heating gas will increase more than fivefold.

The increase in fuel prices is expected to affect the price of food and other commodities as well.

"Until yesterday, every day I paid $2 to take a taxi to campus, but this morning I had to pay $4," said Amir Ali, a 20-year-old student on Kish island, along the Persian Gulf.

The ferry boat employees who stopped working Tuesday won a concession from the provincial governor, who announced in a news conference that ticket prices for 230 ferry boats would be raised by 20%.

But even that may not be enough, according to some. One captain told the Mehr news agency that his boat now needs $44 worth of fuel per trip, but he earns only about $32.

The government has launched an aggressive campaign over the last few months emphasizing the need to raise money by cutting subsidies. But it has proved a public relations challenge for President Mahmoud Ahmadinejad's government, which has worked to build its reputation among poor and working class Iranians, especially in rural areas.

The minister of economics, Shamseddin Hosseini, faced a barrage of questions in a closed-door session of parliament Wednesday from lawmakers who are concerned about what the plan means for agriculture and industry.

Mousavi and Karroubi, presidential candidates and leaders of the dormant protest movement that erupted after Ahmadinejad's disputed 2009 reelection, blamed the government for the country's economic woes, citing an unemployment rate of more than 30%, economic stagnation, inflation and international sanctions.

"Every day, factories are closed down and more workers are laid off and salaries are left in arrears, while the flight of investors, lack of investment security and absence of healthy economic competition paint a very dark picture for the country's future," they said in a joint statement that appeared on a news website with ties to Karroubi. "Meanwhile the government ignored the advice of experts, experienced people and scholars."

The Obama administration this week further tightened sanctions against Iran by imposing restrictions on contacts with two banks, an insurer, a foundation, an energy firm, a shipping company and a businessman, all allegedly linked to the Revolutionary Guard or Iran's state-owned shipping company.

daragahi@latimes.com

Times staff writer Daragahi reported from Beirut. Special correspondent Mostaghim reported from Tehran. Special correspondent Meris Lutz in Beirut contributed to this report.

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