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A Fuel Price Hike In Iran Can Be Dangerous

Iranian President and Hassan Rohani (R), with vice-president Eshaq Jahangiri. File photo
Iranian President and Hassan Rohani (R), with vice-president Eshaq Jahangiri. File photo

Iranian society cannot afford an increase in the price of gas and other oil products, Iran’s Vice President Eshaq Jahangiri.

Jahangiri was speaking October 21 about a proposal from the Rouhani administration to raise the price of gasoline by 5,000 rials (roughly $0.12) per liter in order to raise funds for developing Iran’s dilapidated public transportation network. Defenders of the plan say it would raise an estimated $4 billion for infrastructure projects and create thousands of jobs.

"We should apply managed policies compatible with the society's condition to move forward,” Jahangiri said, according to state-run media.

Iran’s parliament has staunchly opposed raising the price of gasoline since widespread protests against price hikes last August. Any proposal to raise the price of gasoline is especially sensitive since the dramatic fall of Iran’s rial against the U.S. dollar after the Trump administration pulled out of the nuclear deal and reimposed sanctions on Iran in May.

Pressure from U.S. sanctions and long-term economic mismanagement have caused increasing economic hardship for Iranians, analysts say, leading to widespread protests in December and January. Analysts also caution that a rise in gas prices will further fuel public discontent.

While President Rouhani's proposal to raise the price of oil products was rejected at by parliament, Iran’s "Sixth Development Plan" gives the administration the authority to raise the price of fuel if it chooses.

Jahangiri represents one school of thought within the Rouhani administration, while other top economic advisors might be in favor of a price hike plan.

As the Islamic Republic has struggled to rationalize its hybrid state-owned and free market economic system over four decades, the state has subsidized many essential goods, including gasoline and other fuels.

While Jahangiri cautioned about the negative effects of a gas price hike, he was defiant in the face of U.S. sanctions targeting Iran’s oil and gas sector.

"Because of the sanctions, several countries have relented and totally halted their oil imports from Iran, while a number of others continue to buy oil from us,” Jahangiri said, adding, "We have also found new customers for our oil."

Jahangiri had earlier said that U.S. attempts to put pressure on Iran by preventing it from exporting oil via sanctions would fail.

"Trump thinks that Saudi Arabia can compensate for Iran's oil, but it cannot and now the oil prices have increased,” state media reported Jahangiri as saying Oct. 14.

Contrary to Iran’s optimistic declarations, many buyers of Iranian oil have either sharply reduced imports or have stopped completely. Europe, except a small purchase by Italy has ended oil imports from Iran and Asia buyers have reduced purchases.