Demonstrations in Iran after the decision to significantly increase fuel prices

Iran on Friday began rationing gasoline distribution and raised prices by 50 percent or more, a new move aimed at cutting costly subsidies that have fueled fuel consumption and smuggling.

Saturday’s demonstrations are taking place in several Iranian cities, the official IRNA news agency reported, a day after the government announced a surprise increase in fuel prices.

The agency said the demonstrations were “large” in the central city of Sirjan, where “people attacked a fuel depot in the city and tried to burn it”.

The Islamic Republic offers the most subsidized gasoline in the world, with a liter of 10,000 riyals (less than nine cents).

From now on, anyone with a fuel card will have to pay 15,000 rials (13 cents) a liter for the first 60 liters of gasoline purchased each month, the National Iranian Oil Refining and Distribution Company said.

Each additional liter will be calculated at 30,000 riyals.

Fuel cards were first introduced in 2007 in an effort to reform the government’s fuel subsidy system and end large-scale smuggling.

The head of Iran’s Planning and Budget Organization, Mohammad Baqer Nobakht, said the proceeds of the price hike would be used to finance the support of 60 million people in need.

He said Iranian President Hassan Rouhani had insisted that “all the extra revenue from the gasoline price adjustment must be repaid to the people”.

“The first payments will be dealt with in the next 10 to 10 days”, Nobakht told the official IRNA news agency.

According to “IRNA”, the decline in gasoline prices significantly increased the consumption with the purchase of Iran’s population of 80 million, an average of 90 million liters per day.

It also caused an estimated 10 to 20 million liters of smuggling a day.

Smuggling has increased at a time when the riyal has fallen against the dollar since Washington unilaterally abandoned the 2015 nuclear deal struck by major powers with Tehran and re-imposed tough sanctions last year.

Inflation now stands at more than 40 percent, while the IMF expects the economy to contract by 9 percent this year and to see a recession in 2020.