Austerity in Iran - The Working Class Face the Biggest Attacks Yet

Image - The banner says: we, the workers of Parsilon, are starving

For every Iranian New Year Ayatollah Khamenei, designates a motto. Last year, commencing 21st March 2010, he announced a year of “Double Endeavour and Double Work” (1) and this year, from 21st March 2011, he pronounced will be a year of “Economic Jihad“ (striving in the way of God - Capital?) (2). As always, posters of the motto are displayed everywhere. They herald the dawn of a new era. The era of empty Islamic sermons and the promise of a bright future, like everywhere else, is over. The road to heaven now has to be paved by even harsher economic activity, the very activity that the founder of the Islamic Republic, Ayatollah Khomeini once dismissed with the words, “economics is for donkeys”. (3)

Despite the ridiculous repeated claims by officials that the Islamic Republic is immune from the crisis, the reality indicates something else. These mottoes are nothing but to subjugate the working class into accepting the newly legislated cuts. These subsidy cuts have been echoing round the corridors of state since at least 1992 and were presented to the parliament in December 2009. The first trick that they tried was to give the bill an appealing name, something they are never short of. They called it “targeted subsidies plan”. (4) Then, for several months rumours of all sorts were spread, some to test the public reaction. Debate in parliament and further consideration in the Council of Guardians and Expediency Discernment Council of the System ... all got involved to give an image of a “carefully considered” bill. For anyone who might still have had doubts about the issue, it was announced by the Council of Guardians that:

The Council of Guardians did not find this bill contradictory to sharia and the constitution (5).

Finally, the subsidy bill was approved by the parliament on 5 January 2010 and on 13 January 2010 it was endorsed by the Council of Guardians.

While all this was happening, more efforts by “impartial” academics were made and “scientific” analyses were brought out to show and to prove the rationality, necessity and inevitability of the proposal. Charts of the growth in energy consumption, gasoline prices ... etc. of different countries were arbitrarily picked and comparisons were made in order to prove that the cuts are vital to combat waste! A quick glance at the data used indicates how superficial and arbitrary it is. For instance, IMF Country Report No. 10/76, March 2010 is one of the many which shows that Iran is at the top of the chart for growth in electricity consumption by households. However, all the selected countries that Iran is compared with are European, where population growth is very low compared to Iran. In other words, this is juggling with the data in order to prove how wasteful the behaviour of the working class is. Here we do not intend to prove that there is no wastage in using energy, far from it, however we would like to draw our reader's attention to something else, which is that putting a stop to waste or reducing the consumptionof energy is not by any means their real intention.

Wastage in Capitalist society

So the idea is supposed to be to save energy and reduce wastage. Presumably once the subsidies are cut people will reduce the unnecessary use of energy so it can be used sensibly by others somewhere else? Would it reduce the working hours of millions of Iranians who work two shifts of 8 hours to make ends meet? Would it be used for clothing or sheltering millions of homeless in Pakistan? Would it be used for the education of millions of illiterate in Africa? Would it be used to warm up the cold room of an elderly woman in Europe? None of it. The saved energy will be traded and will generate profit for them, and as far as the capitalists are concerned that will be the end of waste, regardless of where the saved energy is shifted or how it is used. In a capitalist mind and gene everything revolves around profit and waste is no exception. For capital waste means that a particular process does not generate enough profit. That is how they see it: welfare budgets in the UK or in Greece ... to them these are all waste hence you have to cut. Any other explanation for a system which is based and functions on insane production and consumption, would make talk about the environment and waste just a bit too much for anyone to digest. A system that uses the best part of all human resources to produce destructive arms and weapons, a system that day in, day out, encourages consumerism and which has created shopping culture as a remedy for depression!

The purpose of raising the issue of waste in this context has no other aim than disarming working class resistance. Once the seed of false reasoning are sown in the public's mind, then it will be easier to implement the bill. With or without the subsidy, waste is part and parcel of this system and as long as capitalism continues so will the waste. The purpose for cutting the subsidies lies somewhere else.

Why the subsidy in the first place?

The paragraph below, which is from an IMF Online Survey, gives a good indication why subsidies were introduced in the first place. When the question was posed to Zytek; why are oil and gas subsidised in the first place? He replies:

The government believed, at one time, that subsidies were the best way to distribute national wealth. The price just had to cover the cost of extraction. This was less of an issue when the international prices were low, and the price differential between the extraction cost and the international price was small. But this is no longer the case. International prices for oil and gas, especially oil, have surged, reaching almost $150 per barrel in 2008, and the extraction cost is a small fraction of this, at roughly $5 to $10 a barrel. So giving away for free something that could be sold for a pile of money is not the best policy (6).

So when the price just covers the extraction cost, in other word not much room for profit or a lot of room for profit somewhere else, then it was a good idea. Now that the extraction cost is small, so take them away? Something that could be sold ... this clearly touches the essence of the subject and exposes the illusion that leftists have been spreading with their claim that the subsidies were, and are, part of the achievements of the working class. They certainly are not, even the Iranian President Ahmadinejad knows it:

'Currently, subsidies are not useful and have the reverse effect (of what was intended),' he said in comments carried by the official newspaper Iran, adding that 70 percent of subsidy spending ended up with the country's richest 30 percent (7).

If the current subsidies benefit the capitalist system, then why change it? The answer is in the economic sphere, it lies with the ever deepening of capitalism's crisis, the crisis of the fall in the average rate of profit. This pushes capitalism continuously to explore the possibility of combating the tendency for the fall of profit by any means and at any social cost. There is no barrier to this constant adventure. They are forced to revisit some of their own old visited areas for even more and harsher exploitation. And politically? What else could be more effective and useful than subsidies for diverting a working class revolt in a revolutionary period? We will return to this later on.

Crisis and the Reforms - the Subsidy Bill

Iran spends $90 to $100 billion, 30 percent of its GDP, on annual subsidies which mainly include fuel, water, flour, bread, wheat, rice, oil, milk, sugar, as well as postal and transportation subsidies. Some believe the amount is much less.

The implementation of the new bill will be carried out within the five-year period to 2015. In the first phase of the reform a $20 billion cut in subsidies is envisaged during the six-months from the start date, i.e. 19 December 2010. Of the saved amount, around 50 per cent is for cash handouts, 30 per cent will be made available to industries in the form of loans, and 20 per cent will be used to create a social security safety net.

Considering the fact that the Islamic Revolution's Guards Corporation is the major economic entity in Iran, then it is clear where the 30 per cent to industry and 20 percent for a social security safety net will end up. For the other 50% per cent hand out, this is what was reported:

State TV said about 820,000 rials ($80) was deposited for every family member as a lump sum for the first two months of the subsidy cuts, which are expected to take effect by mid-March.

The recipients will not be able to withdraw the money until the cuts begin, and it's unclear whether the payments will continue after that period. (8)

Following the implementation of the subsidy plan on 19 December 2010, the price of petrol rose fourfold; gas more than fivefold; and electricity almost threefold... (9)

Now when you consider that the official minimum wage is $300/month (10) and official inflation for last year being 12.4 per cent (11) and the rise in unemployment of 11.3 per cent and that the poverty line in Tehran is around $800 per month for a family of four, then it provides a pretty gloomy picture for the coming year.

The Bill and The Oppositions

The Ministry of Economy and Financial Affairs of the Islamic Republic of Iran, in its special issue of a weekly News publication on subsidies 11 October 2009, regarding cutting subsidies wrote, “No one opposes anything about the decision”. When bourgeois pundits say no one literally 'they' do not include the working class, so in that respect they are absolutely right. From different factions of the current government to oppositions, the Green movement, and the western “ enemies”, they are all for it.

‘With the removal of subsidies on oil and gas, domestic demand for energy in Iran is expected to decline, leaving more energy resources available for export. If all goes according to plan, the strategy should serve the dual purpose of generating more revenue for the country and curbing the wasteful use of energy’, IMF mission chief Dominique Guillaume and Senior Economist Roman Zytek told the IMF survey on line (12).

And this is what the leaders of the Green Opposition had to say:

Following the meeting between Moussavi and Karoubi, they discussed important issues of the country and the difficulties that people are facing. They expressed their concern over the implementation of the targeted subsides Plan during this economically difficult time and called for the scheme to be implemented with “expertise”, involving no panic or hype (13).

The Response So Far

Unlike the national and the international media, the opposition’s predictions and the Iranian government’s expectation, there was no immediate reaction by the public, not in a riotous manner anyway (14)

As elsewhere, the bill was implemented under a huge cloud of confusion. No one knew when and how it would affect them and the immediate consequences were not clear to anyone, particularly by the way the public was informed on the amount of the hand outs. On top of all this, it was implemented under a very militarised atmosphere, following the crackdown on the previous Green movement opposition, as was reported by a member of parliament recently:

Ahmad Tavakoli, Tehran's MP and the head of parliament's research centre said:

The targeted subsidies plan was implemented under the atmosphere created by the security forces and the producers were told that they should not raise the goods’ price … for instance one high ranking official gathered all ... and told them that all our political packages are available, as well as prison ... he goes on by saying further that “I do not think such a statement has ever been said in Iranian history... (15)

However, no matter how much they try and whatever tricks they use, the capitalists will never be able to overcome the contradiction that is inherent to their system. Recently Ahmadinejad claimed that Iran is the only country that no one starves in. In a recent state-organised and managed welcome for the president to the province of Khoramabad, one banner says “we the workers of Parsilon, are starving”. (15) If the “supporter” of the president can, in broad daylight, state on the record that they are starving, then it provides a fair idea of what the rest of the working class may have to say.

Comrades workers

As we mentioned earlier, politically subsidies have been used by the ruling class to divert the working class revolt in a revolutionary period. But what could be the political motivation in the absence of the revolutionary working class combat? It seems that the Iranian government, through controlling the hand-outs, that is who would be eligible to have it or otherwise, is trying to increase its control over the working class. This is more useful during a period of unrest, where part of the working class will be actively mobilised against another part, as it was used during the 2009 disputed election crisis. This phenomena, to some degree has been used in recent Arab revolts in Egypt and Yemen and Syria. A peripheral country’s crude version of the creation of a labour aristocracy. This could be a serious issue when capitalism could afford to have such manoeuvres. However, during the full blown crisis this will turn out to be as ridiculous as those camel riders who turned on the Egyptian demonstrators. Even so, that will not stop the ruling class trying it, no matter how murderous that might be.

Two years on from the Green movement, we are now in a position to look back and see what has been achieved! The working class not only has not gained anything from it, on the contrary the growing working class opposition and resistance which was sidelined by the activity of the Green movement has suffered a considerable setback. The pundits who day in and day out were preaching on reforms, either have left the country or are in prisons. They were so adamant that the system can be reformed through voting and parliament that any talk of revolution was sneered at. But now what have they got to say?

The recent revolt in the Arabic-speaking countries manifested the global nature of the crisis and showed mass resistance can overthrow seemingly all-powerful regimes. It also indicated that when resistance simultaneously takes place in several countries, it makes it more difficult for international capitalism to respond, as we witnessed in the case of Egypt.

Capitalism can be pro-apartheid or anti-apartheid, racist or anti-racist, religious or secular, .... depending on which it best serves its essence, that is making profit, but it is never for the working class, that is in contradiction with its being. The workers, the gravediggers of capitalism are the only force capable of putting an end to its prolonged murderous existence !

The water mill of capitalism rotates by labour and workers’ suffering. Whether its political representative has a crown or turban on his head, whether he wears a tie or has a red star on his hat, it makes no difference. They all act in the same way. The working class has no other choice but to dismantle it.

Damoon Saadati




(4) in Farsi






(10) in Farsi

(11) in Farsi


(13) in Farsi

(14) in Farsi

(15) in Farsi


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