DUBAI - Iran is preparing a politically risky increase in domestic fuel prices, trying to lighten the burden of multi-billion dollar subsidies on an economy severely damaged by Western sanctions.
Oil Minister Bijan Zanganeh said this week the government was studying plans for the rise, the second in three years, which will affect the welfare of millions of poor people.Since 2011 the sanctions have slashed Iran's oil exports and played a role in persuading Tehran last week to accept new talks on its disputed nuclear program with six world powers.
The government first moved to reduce the subsidy burden on its finances by lifting prices for motorists in December 2010. It then suspended a second wave of price reform, planned for mid-2012, partly out of concern that it could prove too painful with living standards already falling because of the sanctions.
But by shrinking state oil revenues, the sanctions have increased financial pressure on the government to cut the subsidies. Authorities also want to rein in rampant smuggling of cheap fuel to neighboring countries.
"We are studying gasoline prices and will make a final decision after consultation with parliament," Zanganeh was quoted by the ministry's news service Shana as saying.
"We cannot ignore fuel smuggling but the main reason behind considering the revision is the budget law that has tasked the government with paying subsidies."