Politically Confident, Iran Cuts Subsidies

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Source: The New York Times

TEHRAN — After months of false starts, dire warnings and political wrangling, Iran has embarked on a sweeping program of cuts in its costly and inefficient system of subsidies on fuel and other essential goods that has put a strain on state finances and held back economic progress for years.

The government’s success in overcoming political obstacles to make the cuts and its willingness to risk social upheaval suggest that President Mahmoud Ahmadinejad may have consolidated power after the internal fractures that followed his bitterly disputed re-election in 2009 — a development that some analysts believe could influence Iran’s position at nuclear talks in Istanbul this month.

“The initial success of the subsidy reform will increase the regime’s confidence generally,” said Cliff Kupchan, a former State Department official who is now a director at the Washington-based Eurasia Group. “This could make them more assertive in the talks. But more importantly, a confident and unified regime is better positioned to reach consensus on some initial agreement.”

Secretary of State Hillary Rodham Clinton said recently that international sanctions had slowed Iran’s nuclear program, and the restrictions do seem to have disrupted sectors of the economy, particularly banking and export-related industries. But the sanctions do not seem to be the driving force behind the subsidy cuts.

Read more: http://www.nytimes.com/2011/01/17/world/middleeast/17iran.html?_r=1&partner=rss&emc=rss&pagewanted=all