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Ahmadinejad cuts Iranian subsidies, quadrupling the price of gas

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“This scheme will continue and will continue for decades, thanks to the divine wisdom, so no one can annul it,” Ahmadinejad claimed. “The people should not hurry in withdrawing this money [or] the market will be disturbed.”

'Ahmadinejad is the right person to do it'

Iran has provided costly state subsidies since the 1979 Islamic revolution. The effort to reduce them has long been a political hot potato. But Ahmadinejad, who has relatively strong backing among those most likely to be affected, has said he hopes to wean Iranians off the subsidies completely by the end of his term in 2013.

“Ahmadinejad is the right person to do it, because the brunt of this adjustment is going to be felt by people below the median income, especially when you get into bread, maybe even medicine,” says Djavad Salehi-Isfanhani, an economist at Virginia Tech and a fellow at the Brookings Institution, contacted in Tehran.

Such Iranians, often called the “pious poor,” have formed the backbone of the populist president’s support since Ahmadinejad was first elected in 2005. Many still support him, despite the disputed reelection in 2009, and the arch-conservative president has taken some unpopular decisions while at the same time enhancing the power of the president’s office.

“He said, ‘I am with the people, I am for the people,’ he kept saying that,” notes Mr. Salehi-Isfahani. “He was so emphatic about the fact that they thought about everything… ‘We know about the truck drivers who operate there,’ it was a confidence-building speech.”

37,000 clerics deployed to make the case

But experts are uncertain about the impact or success of the subsidy reforms, as well as of the ability of the government – which has shown “sheer incompetence” in some economic issues, says Salehi-Isfahani – to carry them out. Making the cash deposits in advance, however, was “very clever” because it helped counter the deep-seated belief that "the government is a thief,” he adds.

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