Iran's middle class to be hard hit as subsidy program is overhauled

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By Thomas Erdbrink
Washington Post Foreign Service
Saturday, November 6, 2010; 4:35 PM

TEHRAN - Last year, Tehran's writers, doctors and small-business owners formed the backbone of a grass-roots opposition movement against President Mahmoud Ahmadinejad. Now these middle-class urbanites feel they're being singled out by a government plan that will soon cut off state subsidies and boost the prices of a wide array of everyday products.

Members of Iran's middle class are already bearing the brunt of U.S. and European sanctions intended to curtail the country's nuclear weapons program. But in the coming weeks they expect to be hit again, when the cost of gasoline, bread, electricity and other staples are set to increase to market levels, with some prices possibly rising as much as tenfold. While the rural poor will be partly compensated by direct cash handouts from the state, many in Iran's cities will have to fend for themselves.

The subsidy overhaul lays bare a deep rift between the Islamic Republic's leaders and the influential middle class over what kind of country Iran should be, three decades after the 1979 revolution.

"For our leaders we represent all that has gone wrong with the revolution, so they punish us" said Mehdi, a copper trader, as he steered his 2008 Toyota Corolla through Tehran's chaotic traffic on the way to his office.

Mehdi's father was a well-known revolutionary and a war hero who died on the frontlines of the Iran-Iraq war in 1980. "I am proud of the revolution he supported," Mehdi, 30, said. "But not of what has happened to it now."

What Iran needs, he said, is a responsible government, more personal freedom and friendly relations with the rest of the world in order to move forward. "The middle class has updated itself to modern times," said Mehdi. "Now I want out leaders to do the same." Like most people interviewed for this article, he asked not to be identified by his full name out of fear of retribution.

Controversial plan

The subsidies, which have kept prices here artificially low, are scheduled to be lifted this month, but the exact date is being kept secret to prevent unrest and hoarding.

Government officials have urged people to be ready to tighten their belts, and security officials have warned against any forms of protest. Late last month, hundreds of checkpoints concentrated in middle-class areas of the capital were set up as a show of strength, manned by paramilitaries carrying automatic rifles.

Ahmadinejad has said the program is an attempt to redistribute wealth to the poor. When it is implemented, some 60 million Iranians, including most of the country's poor and lower middle-class residents, will receive the equivalent of $40 a month in their bank accounts to compensate for the steep price increases. But the remainder of the population, some 15 million by government estimates, including many in the urban middle class, will have to fend for themselves.

"The subsidy plan will lead to the middle classes becoming more dependent on the state. They will be poorer and lose influence" said Abbas Abdi, a political analyst critical of the government. "The government will be pleased with this."

The subsidy change comes as Iran's small but vibrant private sector - a haven for the middle class - is being hit by increasingly tough sanctions designed by the United States. Prices for transport, insurance and financing are rising due to the measures and, lacking the financial cushion that state companies can tap, private manufacturers, importers and factory owners say they are being forced to lay off workers.

A cultural shift

Iran's middle class has long been at odds with the country's revolutionary leaders, who dislike their moderate values.


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