Necessary or not, the transition to a free (or freer) market economy will not be easy. The Iranian parliament’s research wing, the Majlis Research Center, estimated that cutting price supports would push inflation up to 60 per cent, quadrupling the price of gasoline and other goods. Media outlets are hazarding their own guesses about how high prices could go. In January, a headline in the newspaper Bahar quoted “a Power Ministry official” as saying that “consumers’ electricity bills will be multiplied by 21.5 times.” If such price shocks materialize, they will be catastrophic—and will undoubtedly stoke unrest.
As they have in the past. Attempts made in 1992, 2000 and 2005 to slash subsidies were scaled back for fear of opposition. The last try was in 2007, when Ahmadinejad raised the price of gasoline by 25 per cent and introduced rationing. Panic ensued and hysterical crowds set fire to gas stations across the country. This time, Ahmadinejad may be trying to pre-empt violence by promising that a chunk of the projected savings from cutting subsidies will go to “targeted assistance” for the poor, to help them cope with higher prices. But that has also strengthened suspicions that in scaling back subsidies, Ahmadinejad is effectively taking a swipe at the middle class, which formed the core of last summer’s protesters. The poor will get aid, while the upper classes will, conceivably, be fine on their own. But the urban middle class will go it alone. “I personally do not worry about the poor as much as the lower middle class or the middle class,” says Farhi. Indeed, one hardline Iranian lawmaker has said that cutting subsidies would “eliminate the middle class.”
The regime may be hoping that its harsh response to last summer’s disturbances will discourage further unrest. Following the June election, says Farhi, Tehran “was engaged in this rather impressive crackdown of what it called hoodlums in the streets: arresting people and putting them in jail, bullying people.” In recent months, hundreds of alleged dissidents—journalists, students, and reform-minded politicians—have been jailed. A fraction of those have been made the object of elaborate show trials. Some have been handed death sentences—like the two young men who, last month, were hanged for “waging war against God.” (Both were arrested at opposition rallies.)
Such brutality can hardly win hearts and minds. But there is concern that new sanctions—which are being aggressively pushed by Washington—may well play into Ahmadinejad’s hands. In fact, they could provide him with a scapegoat when domestic prices go through the roof as a result of the subsidy reform. “He will blame the West,” Wells says. Writing in the Huffington Post last month, Matthew Sugrue put it most bluntly: “Tehran is about to shoot itself in the foot, and Washington is throwing itself in the way of the bullet.”
In that context, it’s still possible that, within some Iranian circles, Ahmadinejad could walk away the winner. Farideh Farhi has her own worries about the “incompetence” of the government. Still, she says, “If Ahmadinejad can pull it off, he has already done a tremendous service to the Iranian economy.” From the outside, cutting subsidies may appear to be putting Iran on the path to another blowout. But from the inside, Farhi says, “it has to be done.”
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