Controversy continues to surround Iran's bill on subsidy reform, with the government and parliament unable to agree on how the saved revenues should be managed. Tension has simmered since the parliament introduced an amendment to the bill in November 2009, which established that revenues would be saved in a special account for public spending. The government did not want any restrictions to be placed on usage of the funds, and on these grounds requested that the entire bill be withdrawn.

On 3 January the Iranian parliament rejected the government's request and, two days later, approved the creation of an "Organisation of Targeted Subsidies", to be responsible for spending the saved revenues.

Iran's President Mahmoud Ahmadinejad has previously threatened to withdraw the bill himself, and it is not yet clear how the situation will be resolved. In the meantime, approval is still pending from the Guardian's Council, Iran's legislative ‘watchdog'. The parliament is currently revising the bill to rectify problems previously identified by the Council. The disagreement takes place against a background of renewed political protest against the regime.

As reported in the December edition of Subsidy Watch, the reform bill proposes phasing out subsidies on energy, water, food and some services over the next five years. A portion of the saved revenues is intended to fund a targeted cash-transfer system that will help low-income families cope with the increased prices. According to the Tehran Times, ‘informed sources' report that 50% of the revenues will be used to fund these cash-transfers, 30% will "be paid to producers" and 20% used to "cover state expenses".

The political motivation behind the reform is said to be concern over potential trade sanctions. In December 2009, the U.S. House of Representatives passed legislation allowing sanctions to be levied on companies supplying fuel to Iran. According to Al Jazeera, Nancy Pelosi, the House Speaker, said the United States should "use all the tools at our disposal, from diplomacy to sanctions, to stop Iran's march toward nuclear capability."