Oil, gas and Iran economic analyst
As Iranian citizens grapple with rising poverty and rampant inflation, officials are attempting to address the budget deficit by raising prices on bread, fuel, and essential goods, aiming to reduce government subsidies and ease the fiscal shortfall.
Mohammad-Reza Bahonar, a member of the Expediency Discernment Council, has suggested a potential 25-fold increase in gasoline prices, while the deputy minister of Economy has urged that the price of bread needs to be raised.
Over the past three years, the Islamic Republic has sharply increased the prices of certain energy carriers and lifted price controls on flour used for non-traditional breads and pasta. Even the price of traditional bread, which is subsidized by the government, has been raised in two stages, amounting to an approximate 70% increase.
This week, the Court of Audit reported widespread government violations in subsidy allocations, specifically noting 730 trillion rials (approximately 1.2 billion USD), related to bread subsidies. Additionally, the government has forced the Central Bank to withdraw 315 trillion rials ($500 million) from the accounts of certain government agencies and illegally allocate it to partially settle the government’s debt to private wheat farmers.
Despite these extensive violations, the government still owes wheat farmers 1,160 trillion rials ($2 billion dollars) as the harvesting season has been completed and producers desperately need money.
Iran’s wheat market
According to The Food and Agriculture Organization of the United Nations (FAO) statistics, Iran consumes 16.5 million tons of wheat annually. Iranian state statistics also show that 10 million tons of this amount is supplied to traditional bakeries, while the rest is sold at free market prices to other consumer sectors, such as free market bread and pasta production units. Farmers sell an additional 3.5-4 million tons on the free market.
In traditional bakeries, 80% of the final bread price is covered by government subsidies, with the citizens paying 20% of the actual bread price.
Last year, Iran imported 2 million tons of wheat, and FAO forecasts this figure will rise to 3 million tons this year.
Over the years, Iranian wheat farmers have preferred to sell their wheat on the free market due to low government purchase prices and delays in settling their debts. Last year, one-quarter of their wheat production was sold on the free market, especially to poultry farms.
Last year, the government paid 130,000 rials per kilogram of wheat to domestic farmers, while the average global wheat price was around 34 cents, equivalent to 160,000 rials (based on last year's dollar rate). Due to sanctions and increased costs of purchasing and transporting wheat, Iranian government also spent 250,000 rials (50 cents) per kilogram for imported wheat, the Iran Custom statistics indicate.
This year, the government has increased the wheat price purchase from domestic farmers by 34% year-on-year, but Iranian rial also has lost 20% of its value comparing to last year. On the other hand, the costs for electricity, fuel, fertilizers, labor, and services in agriculture sector have also seen significant increases.
Islamic Republic officials have accused the public of wasting bread over the years, suggesting that increasing its price is necessary to reduce consumption.
The point is that although Iran's per capita wheat consumption is 2.5 times the global average, but only 60% of this wheat is supplied to traditional bakeries that use government subsidies.
Bread has always been an important staple in the Iranian diet. For context, Iran, Turkey, and Germany have similar populations, yet Iranians consume 27% less bread than Turks and 2.5 times more than Germans. When it comes to rice, Iranians consume nearly six times more than both Turks and Germans. However, Turks and Germans have a much higher intake of meat and dairy products—Turks consume more than twice as much meat and four times as much dairy as Iranians, while Germans consume twice as much meat and 13 times as much dairy.
Therefore, it's not accurate to say that Iranians waste bread; instead, the focus should be on addressing the low consumption of protein-rich foods among Iranians. This disparity is largely due to the decline in per capita income caused by the country's struggling economy.
Gasoline shortage crisis
Over the past three years, Iran has neither launched new refineries nor started building any. Meanwhile, nearly one million domestically manufactured vehicles, known for their low quality and efficiency, are sold to citizens each year. As a result, gasoline production at Iranian refineries last year was about 97 million liters per day (ml/d), while consumption peaked at 115 ml/d.
To address this deficit, the government blended 14 ml/d of additives, including 8 ml/d of non-standard petrochemical products, into the gasoline supply—a practice harmful to human health. This increased daily gasoline production to 111 million liters, with the remaining demand met through imports.
Statistics from the Oil Ministry for March 2024, the first month of the Iranian fiscal year, reveal that the government has increased the amount of additives in gasoline to 25 million liters per day, significantly endangering the health and safety of Iranian citizens. This measure comes in response to a 6% reduction in gasoline production at refineries and a 9% increase in gasoline consumption compared to the same month last year. The reasons for the decline in refinery production remain unclear, as does whether this trend has continued in subsequent months.
In 2022, before Iran faced gasoline shortages, only 5-6 million liters per day of additives were blended into the gasoline. Now, as the government becomes a gasoline importer for the second consecutive year, calls for price increases are growing louder. Mohammad-Reza Bahonar, a former parliament representative and member of the Expediency Discernment Council, has stated that if the gasoline imbalance continues, prices could rise to 500,000 rials (over 80 cents) per liter. Currently, subsidized gasoline in Iran is sold at 15,000 rials (2.5 cents) per liter, while non-subsidized gasoline is priced at double that amount.
Kiyani and Alizadeh, who secured bronze for her new country, Bulgaria, shared a long, warm embrace and posed for photos after receiving their medals. Kiyani was also seen kissing her former roommate and friend on the shoulder.
However, this emotional moment was omitted from Iran's state television coverage. The state-run sports commentator referred to Alizadeh only as "she" or "the rival" and described the match as "a historic revenge."
A video of the two old friends embracing, which moved many Iranian fans to tears, has since gone viral on social media.
Many Iranian social media users have condemned the “oppressive” policies of the Islamic Republic that forced Alizadeh and two dozen other athletes sports people leave their homeland and their teams behind to live in exile in recent years. Most female athletes who defect to other countries, including Alizadeh, speak against the Islamic Government's oppression.
Another emotional scene was created in Paris Thursday when Sabah Shariati, an Iranian wrestler who competed for Azerbaijan’s team, lost against Iran's bronze medalist Amin Mirzadeh. Mirzadeh lifted him on his shoulders as a sign of respect when he found out this was Shariati’s last match.
Supporters of the state laud Kiyani for not “turning her back on the motherland” and call Alizadeh a “traitor”.
Kiyani who remained in Iran, as her Instagram posts show, is not a conformist, either. She supported the Woman, Life, Freedom movement of 2022-23 and campaigned against capital punishment on social media. “My silence doesn’t mean I’m happy,” one of her Instagram stories read.
If not for the prospects of a medal, and consenting to wear the hijab, she would not have been allowed to compete in Paris or any other international competitions. She may even face repercussions for embracing her friend instead of turning her back on the “traitor’ in Paris Olympics.
Some others have urged authorities to allow her to return home and join her teammates.
“Iran is the home of all Iranians. I wish Kimia could return to Iran and to be a winner again,” former minister of communication Mohammad-Javad Azari-Jahromi, a close ally of the reform-oriented President Masoud Pezeshkian, posted on X Thursday.
Alizadeh was given a hero’s welcome by Iranian officials in 2016 for winning an Olympic bronze. She was showered with gifts and Supreme Leader Ali Khamenei lauded her for her victory which he said proved that hijab is no impediment to women’s success.
In 2020, however, Alizadeh defected to Germany to avoid competing for the Iranian Olympics team in protest to oppression of Iranian women and discarded her veil. She competed as a member of the refugee team in Tokyo Olympics where she and Kiyani had to face each other. Alizadeh won 3-0 but both were eventually eliminated.
“I’m one of the millions of oppressed women in Iran who they played in whatever manner they wished,” she said after her defection about being used for propaganda by the authorities when she was a member of the Iranian team such as obliging her to dedicate her 2016 medal to Supreme Leader Ali Khamenei and saying that wearing the hijab was created no obstacles to female athletes.
In the aftermath of the Woman, Life, Freedom protests, Alizadeh supported the leadership of Iran's exiled Prince Reza Pahlavi.
Iran's Supreme Leader has imposed a ban on Iranian athletes competing with Israelis. The ban forces athletes to forfeit matches or claim injury to avoid facing Israelis even at the cost of losing medals.
"Legally, Iran has no restrictions or prohibitions on buying or selling conventional weapons. But morally, Iran will avoid transferring any weapons, including missiles, that may be used in the conflict with Ukraine until it ends," Iran’s UN representative said.
Two European sources told Reuters that dozens of Russian military personnel are being trained in Iran to use the Fath-360 close-range ballistic missile system, adding that they expected the imminent delivery of hundreds of the satellite-guided weapons to Russia for its war in Ukraine.
Some experts compare the Fath-360 truck-mounted missiles, that come in batches of six, to the US HIMARS rockets, although their overall range and accuracy is less.
Russian defense ministry representatives are believed to have signed a contract on Dec. 13, 2023 in Tehran with Iranian officials for the Fath-360 and another ballistic missile system built by Iran's government-owned Aerospace Industries Organization (AIO) called the Ababil, said the two intelligence officials, who requested anonymity in order to discuss sensitive matters.
The sources did not specify an exact timeline for the delivery of Fath-360 missiles but but said it would be soon.
The officials highlighted that Russian personnel have visited Iran to learn to operate the Fath-360 defense system. One of the sources said that "the only next possible" step after training would be actual delivery of the missiles to Russia.
The Fath-360 defense system launches missiles with a maximum range of 120 km (75 miles) and a warhead of 150 kg, while the Russian-manufactured Iskander-M ballistic missiles have a a range of 500km, but harder to operate. Iskander is also truck mounted but comes in one or two salvos.
The supply of Fath-360s could allow Russia to use more of its own arsenal for targets beyond the front line, while employing Iranian warheads for closer-range targets, a military expert told Reuters.
A spokesperson for the US National Security Council told Reuters that US and its NATO allies and G7 partners "are prepared to deliver a swift and severe response if Iran were to move forward with such transfers."
It "would represent a dramatic escalation in Iran's support for Russia's war of aggression against Ukraine," the spokesman said. "The White House has repeatedly warned of the deepening security partnership between Russia and Iran since the outset of Russia's full-scale invasion of Ukraine."
A senior Iranian official, speaking on condition of anonymity, told Reuters that while Iran has not supplied Fath-360 missiles, they have sold other missiles and drones to Russia. The official emphasized, "How each country uses this equipment is entirely their decision," stressing that Iran did not sell weapons to Russia for use in the Ukraine war.
Iran's semi-official Tasnim news agency said in July 2023 the system had been successfully tested by the country's Islamic Revolution Guards Corps (IRGC) Ground Force.
Iran has supplied hundreds of Shahed drones to Russia since mid-2022, which have been extensively utilized for targeting civilian infrastructure and urban areas in Ukraine with NATO calling on Tehran to stop its military cooperation with Moscow.
The Shahed drones, however, carry a fraction of the explosives in comparison to the Fath-360 missiles and are easier to shoot down as they are slower than ballistic missiles.
The US, UK, and Canada imposed new sanctions on Iran’s drone industry in April this year, targeting Iranian drones, including their use by Russia in the war in Ukraine.
However, despite global sanctions, Iran imported at least $10 million worth of drone engine parts from countries including China, Turkey, the UAE, Germany, and even the US.
Data from Iran's customs organization, analyzed by Iran International, showed that several items listed under a US advisory guide were imported in the first two months of the current Iranian year, which began on March 20.
In July this year, NATO leaders accused Iran of "fueling Russia’s war of aggression against Ukraine by providing direct military support to Russia, such as munitions and uncrewed aerial vehicles (UAVs), which seriously impacts Euro-Atlantic security and undermines the global non-proliferation regime."