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Iran : The last resort before sanctions

Last week, the Islamic regime announced that the law about subsidies withdrawal came into force. Officially, such subsidies should be replaced with targeted allowances that would be intended for the poorest people. At that time we told about the regime’s will to cut its expenses. However, in the light of the latest economic news, we can state that it made the choice to cut Iranians’ purchasing power. | Explanations |

One week after subsidies withdrawal, Tehran just announced to Iranian people two much bad economic news.

1 | The first one is related to the clauses that specify who can benefit from those allowances. It’s necessary to know that at present, the minimum wage is 263,000 tomans. However few people earn a legal minimum wage : most Iranians, such as for instance the 5,000 employees of Iran Air earn wages that are inferior to 200,000 tomans. At the same time, the poverty line -i.e. the minimum monthly cost of living- is superior to 800,000 tomans for a family of 4 people in big cities. This means Iranian people dispose of an income that is 3 to 4 times inferior to the minimum income that is necessary for living. This is the reason why we consider that 85% of Iranians are under the poverty line. Despite multiple jobs, those people still found difficult to fulfil their needs with the state-funded prices. Now they are falling into a total misery with price deregulation. They awaited eagerly the announcement of the clauses that specify who can benefit from those allowances.

This a announcement saddened them because the regime announced that any grant would be attributed solely to families of 6 people that would earn monthly more than 780,000 tomans. However, such amount is equivalent to the poverty line of a family of 4 people in March 2009. In other words, the regime chose deliberately criteria that reduce the number of beneficiaries.

At the same time, without even mentioning the definitive amount of those allowances, the regime told about some global budget that appeared much below what was claimed initially. Every beneficiary would receive monthly around 10,000 tomans, i.e. the equivalent of one working day. Thereby, very few people will have access to this tiny allowance and nobody will come out of the poverty line.

2 | After such a bad news, the regime announced the inclusion of the oil industry’s 85,000 employees and 50,000 retired people into the salary new general system.

The interest of such announcement lies in the fact that oilfield employees, who are generally members of the Bassij militia, received for years wages that were 3 to 4 times superior to the ones of other Iranian employees, i.e. wages that are superior or much superior to the poverty line. Actually, Tehran just announced the abolition of the sole wages that are superior to the poverty line.

Decoding | The combination of both measures leads to a frosty conclusion : the mullahs’ regime decided to implement a methodical plan of deliberate cutting of Iranians’ purchasing power.

The regime lacks of income and its situation will get worse. Inflation is all the rage in the absence of any subsidy and if it gives a little bit more purchasing power, people will run to the shops in order to stock up with goods in anticipation of more uncertain times. After few days, the country would face a situation of penury which would be firstly a source of inflation but also a source of Haitian-like insurrection. In order to avoid such hellish trap of panic-penury-hyperinflation-insurrection, the regime opted for a solution that avoids penury in order to avoid any panic : the market will be well-stocked but not affordable.

A situation that appears less bad.

A risky solution for a regime that is on the edge of the abyss.

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The french version of this article :
- Iran : Le dernier recours face aux sanctions
- (20 JANVIER 2010)

| Mots Clefs | Instituions : Politique Economique des mollahs |
| Mots Clefs | Enjeux : Sanctions Ciblées en cours d’application |