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Unannounced Fuel Price Hike Sees Iranians Return to the Streets

Fuel demos iran
Iranians walk past the branch of a local bank that was damaged during demonstrations against petrol price hikes, on November 20, 2019. Photo: ATTA KENARE / AFP

Fuel prices tripled in Iran on 15 November 2019, sparking anger and widespread protests in the country.
Although the hike had been expected for months and Hassan Rouhani’s administration almost implemented it in May before backing off at the last minute under parliamentary pressure, this time the government did not announce the decision beforehand. People woke up to find the price hike had been executed the night before.

The government’s reasons for the price hike can be categorized into three. The first, as officials have acknowledged repeatedly, is to tackle fuel smuggling from Iran to neighbouring countries. As a result of highly subsidized fuel, especially after the drop of the currency rates in the past two years, Iran’s fuel prices became much lower than most of its neighbours. Before the price hike, Iran’s gasoline cost less than $0.09, compared to $0.40-$1.5 elsewhere in the region.

Smuggling became a lucrative business, with 20 to 40 million litres being smuggled across the border per day. In addition, because Iran borders 15 countries, it is almost impossible for the government to control all its borders on a permanent basis. To overcome fuel smuggling, the government resorted to another policy: reducing subsidies.

Another reason given by Iranian officials for the price hike was to reduce internal consumption. The basic argument is that because of the high subsidies, there is no incentive for vehicle owners to control their fuel use. As a result, fuel consumption went up by 7.9 per cent in 2017 and 14.2 per cent in 2018. The subsidy cuts are therefore intended to ‘rationalize’ consumption.

The third and, according to many, main reason for the price hike is to enable the government to reform the economy in a way that will both boost its financial ability to counter the United States’ ‘maximum pressure’ campaign against Iran and, through a redistribution plan announced by the government, ease the financial pressure on the poor. The argument goes that half the car-owning population is being subsidized while the poor other half is not benefiting from those subsidies. To overcome this imbalance, the government said it will use the withdrawn fuel subsidies as hand-outs for those in need. The first round of these hand-outs were paid in late November.

Despite the official arguments, the public had difficulty understanding the reasoning behind the timing and implementation of the price hike. The ensuing anger and criticism did not focus primarily on the price increase itself but on the way it was executed and the government’s economic management more broadly. Additionally, many people were sceptical that the hike would increase the resilience of the economy by redirecting state funds.

On the morning the price hike was announced, calls for demonstrations against it began to appear on social media. There were different ways to voice opposition. The main one on the first day of the demonstrations on 17 November was car sit-ins. In Tehran, two highways were blocked for hours. In other cities, peaceful demonstrations were held.

By the end of the day, however, the demonstrations had turned violent in some cities. Banks and public buildings were set on fire and clashes with security forces were reported. Over the following days, the number of demonstrators declined but small violent groups appeared.

The most significant demonstrations took place in smaller cities and the suburbs of major cities. In Tehran province, for instance, small cities around the capital were the main scenes of demonstrations. Notably, the authorities did not resort to non-regular methods or force to quell the unrest, other than a week-long internet shut-down. In other words, the regular and anti-riot police were the only forces deployed to deal with the protesters, in contrast to previous demonstrations, notably the massive upheaval in 2009 following contested election results. According to the authorities, this reflected the marginal nature of the recent demonstrations.

The internet shut-down, however, indicated the authorities’ concern about the direction the demonstrations would take. While the violence in parts of the country suggests a significant number of casualties, the authorities refrained from announcing any specific numbers, letting different, usually partial parties, speculate. Amnesty International put the number at 208, but an opposition website reported that 366 people had been killed.

The so-called ‘fuel demonstrations’ did not last long after the violence surged. There seems to be three reasons for this: the first is that ordinary Iranians lost their appetite for taking part after seeing the peaceful demonstrations turn violent. The second is that the government’s first hand-outs convinced many demonstrators that the price hike is part of a real economic reform plan aimed at redistributing subsidies. The third is that the security forces arrested many demonstrators, especially in places where the violence was greatest. Many of those arrested were released soon afterwards, but those accused of instigating violence and taking part in it are being held in custody awaiting trial.

Perhaps ironically, the price hike had one of its intended consequences: fuel consumption dropped by 23 million litres out of the 105 million litres consumed daily before the hike. Provided that the redistribution of withdrawn subsidies continues, the policy could well increase the political support for the regime among the poor – which seems to be one of the main political reasons for the hike – especially as the economic pressure resulting from the American sanctions mounts.

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