In an unprecedented event at the Iranian Parliament (Majles), Deputy Commander of revolutionary guards (IRGC) Ali Fadavi spoke on Monday October 7 during a closed-door session on fuel and energy subsidies.
Oddly enough, Iranian news agencies did not mention the presence of a cabinet minister in the session debating a sensitive economic and political issue.
The Majles and its presidium have not offered any explanation as to why an IRGC deputy commander had to be present and take part in a political and economic discussion at the Parliament. It is also not clear what Fadavi said to lawmakers, but it is clear that parliament is moving to reduce subsidies.
In recent years, every attempt by the Majles to discuss the omission of fuel and energy subsidies have led to protests and long lines at gas stations in Iran.
Economists have said on many occasions that any rise in the price of gasoline in Iran will have a domino effect and lead to an uncontrollable rise in other prices.
This comes while according to a commentary by Abbas Abdi in the reformist Etemad newspaper on Saturday, fuel and energy prices in Iran have been frozen for the last 54 months, while other prices have risen exponentially.
It is estimated that Iran spends $40 billion annually on fuel and energy subsidies. Gasoline and electricity in Iran are the cheapest in the world. The only explanation for such a policy lies in the government-controlled economic system, which controls prices of many essential commodities and goods. Within such a system, fuel and electricity, which is government produced is also price controlled in sync with.
Another reason might be concern than any rise in fuel and energy prices will lead to popular discontent, which the Islamic Republic can ill afford.
The reason why the Majles is discussing the matter in spite of its awareness of adverse implications, is probably the dire situation of the Iranian economy as a result of backbreaking U.S. sanctions that have extremely limited the country’s oil exports and revenues since the United States reimposed sanctions following its May 2018 withdrawal from the Iran nuclear deal.
Regardless of the absence of cabinet ministers at the closed door session of the Majles, Assadollah Abbasi, a spokesman for the presidium said that ministers are expected to present a report to the parliament about the extent of hidden subsidies in the energy sector and the impact of the decline in oil exports.
The discussion is to be sugar-coated in the lofty goal of "gradual reduction of the budget's dependency on oil revenues."
Meanwhile, Majles Speaker Ali Larijani said at the end of the session that "no decision has been made about the subsidies," adding that "reviews of the matter will continue until the time when Majles begins to discuss next year's budget," which is usually sometime between December to March.
Larijani stressed that "changes in subsidies must be absolutely controlled and in the interest of low-income strata."
Doing away with subsidies on fuel and energy has been previously discussed at the Majles in various occasions, always in a confidential manner, most recently in July.
The omission of the subsidy on fuel and energy has been already approved in a meeting of the heads of the three bodies of the government on September 21, Iranian agencies said.
At that meeting, President Hassan Rouhani was quoted as saying that "low-income strata should benefit the most by this measure, so that the weakness of their purchasing power as a result of rising inflation would be compensated."
In spite of the absolute secrecy around today's meeting at the Majles, Iranian agencies reported that the discussions revolved around "doing away with the hidden subsidies" the government pays in order to keep the price of energy and fuel low.
Iranian press have often criticized that such subsidies are not fairly distributed as wealthier parts of the population who consume more energy and fuel benefit from them more than poorer people with low consumption.
For energy exporting countries, the subsidy on the price of energy equals the difference between the price of fuel inside the country and in international markets.
Rationing of fuel and increasing the price of gasoline were among the initiative Iranian officials had earlier suggested to tackle the problem. However, the Iranian Parliament voted against a price rise in May. The Majles also rejected another price rise mentioned in the current year's budget.
In the meantime, in another austerity measure, the Rouhani administration announced that it has cut off cash subsidies to some 200,000 high-income families.