Iran doubles price of fuel to offset impact of US sanctions

The Iranian government has increased the price of fuel by nearly 50 per cent in an effort to offset the impact of US sanctions on the Islamic Republic. The unpopular move, which suggests that punishing sanctions imposed by President Donald Trump are beginning to hurt Tehran’s economy, was introduced yesterday to help generate income to pay for essential services.

According to the Financial Times, authorities in Tehran announced that each motorist could get 60 litres of petrol at 15,000 Iranian rials ($0.45) per litre, a 50 per cent price increase. Extra fuel would be still available but at 30,000 Iranian rials ($0.90) per litre.

The price increase is likely to be met with cheers in Washington. The hard right Trump administration will see this as an indication of Tehran’s retreat having vowed to resist the toughest US sanctions ever and not to back down from its controversial nuclear programme and foreign policy in the region.

The income generated from the rise in fuel price will give the Mullahs in Tehran some breathing space and enable them to pay for basic commodities, medicine and the salaries of civil servants, workers and pensioners.

The drastic measure, announced days after the uplifting news that Iran had found a new oilfield with 53 billion barrels of crude, can, however, prove to be a double edged sword as it is also likely to put Iranian families under more pressure. Inflation is already said to be above 40 per cent and according to the International Monetary Fund (IMF) the economy is under “severe stress.” The IMF has predicted that Iran’s economy will contract by nine per cent this year.

READ: US imposes new Iran sanctions, but waives others

Highlighting the pain the move will have on the average Iranian, the FT explained that many of the unemployed rely on cheap petrol to work as private taxi drivers. Breadwinners from smaller towns go to big cities during the week and sleep in their cars at night to work for ride-hailing apps.

Iran’s vice-president for budget affairs, Mohammad Baqer Nobakht, is reported saying that about 60 million people out of the 82 million population would enjoy extra monthly bonuses to compensate for the rise in petrol prices.

“The president insists that all extra income should be paid back to people,” Nobakht is reported saying at midnight, in what is described as a move to allay public concerns about further decline in their purchasing power.