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Iran Redistributes Wealth in Bid to Fight Sanctions

Posted by alanmirs on July 27, 2011


WSJ

By JAY SOLOMON And FARNAZ FASSIHI

TEHRAN—Iran’s Islamist government may be public enemy No. 1 at the White House. But in the halls of the International Monetary Fund a few blocks away, President Mahmoud Ahmadinejad is being hailed as an economic reformer.

ReutersShamseddin Hosseini, Iran’s Minister of Economic Affairs and Finance,at a news conference in Tehran on Tuesday.

In the face of mounting international sanctions, his government has embraced over the past seven months what the IMF calls one of the boldest economic makeovers ever attempted in the oil-rich Middle East.

Tehran has cut price subsidies on most energy and food products since December in a bid to shave about $60 billion or more off the government’s expenses annually. The move has led to a sharp drop in domestic oil and gas consumption, according to senior Iranian and IMF officials, freeing up a larger portion of Iran’s vast energy assets for export.

Mr. Ahmadinejad’s reforms amount to a massive redistribution of his country’s wealth, since his government and the IMF say the energy subsidies largely benefited Iran’s wealthy ruling classes. The president is using his government’s savings to transfer to most Iranian households the equivalent of $40 per month to offset higher local prices and international sanctions, while trying to stimulate the domestic economy.

“This reform is first and foremost about reducing a waste of resources,” Dominique Guillaume, the IMF’s lead economist on Iran, said in an interview. “But it also creates a greater sharing of Iran’s oil wealth amongst its people.”

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