In a video released on Tuesday, Iranian President Masoud Pezeshkian criticized the country’s long-standing policy of subsidizing fuel prices, labeling it as irrational given Iran’s current economic challenges. Pezeshkian, who took office in July, questioned the logic of purchasing gasoline at free market dollar prices and then selling it domestically at heavily subsidized rates.
“There is no rationality in the fact that we buy gasoline with free market dollar prices and we sell it with a subsidized price,” Pezeshkian said in the video broadcast by state media. He called on economists and experts to challenge what he described as misguided policies.
Despite the president’s concerns, Iran’s newly appointed oil minister, Mohsen Paknejad, indicated last week that there are no immediate plans to alter gasoline prices, suggesting a continuation of the current subsidy regime.
Fuel prices have long been a contentious issue in Iran, a major oil producer facing persistent economic hardships. Previous attempts to reduce subsidies have sparked widespread protests. In 2022, the government’s decision to cut food subsidies led to nationwide demonstrations, with protestors calling for the resignation of top leaders. Similarly, in 2019, the introduction of gasoline rationing and a significant price hike triggered sporadic protests across several cities, including Tehran.
Iran’s fuel is among the cheapest in the world due to these subsidies, which have inadvertently fueled rampant smuggling to neighboring countries. The country has been grappling with economic instability, exacerbated by the reinstatement of U.S. sanctions in 2018. These sanctions severely impacted Iran’s oil exports, slashing government revenues and forcing it to implement unpopular measures such as tax increases and budget deficits. As a result, annual inflation has hovered around 40%.
While Iran has managed to avoid a total economic collapse, largely due to oil exports to China and rising crude prices, petroleum exports remain below their pre-2018 levels. The economic strain has continued to weigh heavily on ordinary Iranians, with many struggling to make ends meet, raising concerns about the potential for renewed social unrest.
As the debate over fuel subsidies intensifies, the ruling clerics are keenly aware of the potential for protests, especially among the lower- and middle-income communities most affected by economic hardships.