The US economic sanctions, imposed after US President Donald Trump withdrew from the nuclear deal, have caused a large dent in government coffers as oil exports dropped dramatically. The government of President Hassan Rouhani has tried to respond by boosting the petrochemical industry, including increasing petrol exports to neighboring countries since late July.
Iran was a net importer of petrol for decades, but earlier this year oil minister Bijan Zanganeh announced the country had become self-sufficient in production of petrol.
Sayyid Ali Hosseini, managing director of Iran’s Energy Exchange, said on September 23 that the country has earned close to $200 million per week since it started selling petrol in the energy exchange in late July and subsequently exporting it to neighbors.
While the decision to increase the heavily subsidized price of petrol has been four years in the making, the announcement on Thursday night came as a shock to many Iranians who are still reeling from the dire impacts of the US economic sanctions.
The moment the government announced the price hikes, people took to the streets. Demonstrations intensified on Friday night with one protester reported killed as crowds set a petrol station on fire in the central town of Sirjan and attempted to torch the fuel depot in the city. The government even resorted to partially shutting down the internet.
People came out in ten provinces across Iran, chanting anti-government slogans in the cities of Mashhad, Behbahan, Ahwaz, and Chabahar. “Oil revenue has gone missing, it has been spent on Palestine,” protesters chanted in several cities. “Petrol has become more expensive and the poor have become poorer,” others chanted.
Iran is a fervent supporter of Palestinian liberation movements. Supreme Leader Ali Khamenei was unapologetic about Iran's assistance to the Palestinian groups and said on Friday that the aid would continue.
“We need to explain to the people that this step is in their interest,” President Rouhani urged his ministers and officials from across the country on Friday as it became apparent that the fuel price hike was exceptionally unpopular. He stressed that the income from the fuel price change would not go into government coffers. “Despite facing economic problems, the government has no intention of taking from this money and whatever revenue the government earns, it will pay it back to the households.”
Rouhani admitted on Friday that financial pressures have increased on 75 percent of the population over the last two years as tensions have risen with the west over Tehran’s nuclear issue and its malign influence in the region. Income from the new fuel rates will be funneled to the country’s most vulnerable people, he explained.
“According to our calculation some 18 to 19 million households, which is equal to around 60 million people, are entitled to government support … Our efforts are to pay this amount to the households on a monthly basis and the plan is to start paying the first installment towards the begging of Azar [late November],” Rouhani added. The population of Iran is over 81 million.
As protests grew, oil minister Bijan Zanganeh appeared on Iran TV on Friday night offering figures detailing the dire economic situation the country is in and warning about US sanctions. Iranian motorists are officially consuming 93-94 million liters of petrol per day, he said. On Thursday, the subsidized price of fuel was 1,000 tomans per litre. The new rate increases the price by 500 tomans ($0.05) per litre for the first 60 litres bought by motorists each month on their fuel ration cards. Motorists who use more than their monthly allotment of 60 litres, will have to pay double the new price per liter – 3,000 tomans.
He noted that fuel consumption is constantly increasing and the country cannot continue to operate under such conditions. “If we continue at this level of 10 percent, which is 9-10 million liters per year added to consumption, in the year 1400 [April 2021] we need to start importing petrol again, after trying very hard to become self-sufficient,” Zanganeh said.
With the increase in petrol prices, Zanganeh anticipates that “the balance between demand and supply would be good and we could export more.”
With these new rates, the government projects taking in an extra around $3 billion dollars, according to Zanganeh.
“This is our estimate, and I say estimate because we don’t how the consumer will behave” in relation to the higher prices, Zanganeh said.
It did not take long for him to get reaction from consumers. Furious motorists staged protests and caused traffic jams by turning off their cars in the middle of the roads in dozens of cities across the country on Saturday morning. Large numbers of security forces are on standby to deal with any disturbances, according to activists.
Despite government reassurances that the price hikes would benefit the poor, activists warned disadvantaged communities in ethnic minority areas could be devastated.
“Many village girls in Sistan and Baluchestan dropped out of school because of poverty and not being able to pay for the school service,” Navid Borhanzehi from Baluchestan wrote on Twitter. “Now with the increase in the price of petrol, the price of school services would increase and more girls would drop out of school in Sistan and Baluchestan.”
Iran has one of the cheapest fuel prices in the region. This has contributed to large amounts of up to 10 million liters of petrol per day being smuggled across the borders of the southeastern province of Sistan and Baluchestan as well as the Kurdish provinces in the west and northwest.
Khamenei ordered the government to spend 100 million dollars to insulate the Sistan and Baluchestan borders with Pakistan and Afghanistan on November 10, allegedly to stop smuggling petrol and drugs as well as to deal with the Sunni insurgency in the area.
Protests have continued to grow in size throughout Saturday as demonstrators hope to force the government to walk back its price hike. They gained support from an influential cleric. Grand Ayatollah Lotfollah Safi Golpaygani, one of the most senior Shia religious leaders in Iran, called on parliamentarians to annul the government's decision. As of midday on Saturday, the three heads of the government, the judiciary, and the parliament were meeting to discuss the issue.
