On Sunday 18th October, the Iranian government passed a bill that would cut energy subsidies, claiming that this would be necessary to make Iran less vulnerable to international sanctions. This is not the first time Iran has tried to reform its fossil-fuel subsidies, with previous attempts ending in failure after public protest. It remains to be seen whether the appeal to ‘national security’ will be able to sweeten a previously bitter pill.

Two days later, the parliament also voted to phase out food subsidies. According to Reuters, an un-named radio report announced that the bill would apply to “subsidies on food such as wheat, rice, sugar, cooking oil … [which] will be ended gradually in five years.”

In addition to energy security worries, the government argues that these subsidies mostly benefit the rich, President Ahmadinejad himself stating publically that the move would “implement justice and remove discrimination”. It has also been pointed out that reform would incentivize increased efficiency and reduce the profitability of smuggling.

However, some commentators criticize that the removal of subsidies is already a victory for Iran’s enemies and likely to increase inflation. It is also possible that this move might reawaken protest following the controversy over this summer’s elections. According to the Associated Press, an attempt to remove fossil-fuel subsidies in 2007 was met with widespread protest, in which gasoline stations were burned to the ground.

Details on the reform itself are slim. However, it is confirmed that subsidies would be phased out gradually and the current, universal system of subsidization would be changed in favour of one that targeted subsidies towards the poor.

This is big news from the country which grants the largest consumer subsidies in the world, and follows hot on the heels of the G-20’s September announcement to phase out fossil-fuel subsidies. The Associated Press estimate Iran’s yearly spending on fossil-fuel subsidies to be in the region of US$90 billion per year.