There is political smoke on the horizon, and where there is smoke there is fire, fears Amani Maged Less than a week after it reordered its foreign policy priorities, Tehran conducted what observers describe as its harshest ever budgetary surgery. Although the lifting of fuel subsides did not come as a surprise -- the government had been working up to it for a long time -- the timing of its implementation, which began on Sunday, did. The Ahmadinejad government had revealed a plan to phase out government subsidies on foodstuffs and fuel five years ago. But economists maintain that the economic strains on the Iranian economy, in considerable part due to the unilateral and international sanctions on Iran, have forced Tehran to put the plan into high gear. Its aim is to improve efficiency in production and subsidy allocations while simultaneously preserving Iran's huge reserves of oil and natural gas. Iran sits atop $10 trillion worth of oil and between $3.5-4.5 trillion worth of natural gas, according to IMF figures. Subsidies cost the state $100 billion a year, or 30 per cent of GDP. Many economists warn that the lifting of subsidies will trigger rapid inflation and increased unemployment rates. Naturally, it has also strengthened the voice of opposition forces, which have proclaimed that the measures are harmful to the welfare of the Iranian people. Recalling the demonstrations and disturbances in response to the announcement of the plans to remove subsidies five years ago, they also warned of possible outbreaks of violence. Other observers believe this prediction is exaggerated, as the plans also provide for measures to compensate the poor, who are the primary beneficiaries of subsidies. Iranians will have the right to apply for compensation and, if approved, will receive the equivalent of $40 per month. These sums will be paid into some 36 million bank accounts which the government will open for recipients of cash compensation for rising food and energy prices. The number of accounts is equivalent to half the population of Iran. Although 30 per cent of the money saved from the lifting of subsidies will be allocated to industrial loans, the greater part will be redistributed for social purposes in the form of "targeted assistance", as the Iranian government calls it. The tightening economic stranglehold on Iran following the EU decision to prohibit new European investments in technical aid to Iran for oil refineries and natural gas facilities was, according to some observers, the stimulus that pushed the austerity plans forward at this particular time. Tehran has no choice but to cut back spending. That Iran also has to import 40 per cent of its gasoline was certainly another strong incentive. Iran lacks sufficient refineries to fill the demand for local consumption. In addition, although it is the fifth largest oil exporting nation in the world, the government regards this asset as its safety valve for the future. The removal of subsidies sparked acrimonious debate between Ahmadinejad and figures from both the opposition and conservative forces. They charged that the government should have given them more time to study the project, with some adding that stricter enforcements against fuel smuggling would have, in itself, saved a lot of money. While Iran appears to stand on the brink of a domestic volcano, it also appears to have strengthened its resolve to become more "nuclear" to judge from the appointment of Ali Akbar Salehi, who heads the Atomic Energy Organisation of Iran, as foreign minister. This was another surprise, especially to former foreign minister Manouchehr Mottaki who was on a tour of African nations when he heard the news of his replacement, which was widely interpreted as a warning from Ahmadinejad to his adversaries in the conservative camp. Evidently, Ahmadinejad feels that the time has come to bare his teeth, towards the Iranian people living on subsidies, and towards his political adversaries at home and in the West by his surprise appointment of Salehi as foreign minister. Some observers maintain that handing the chief of Iran's nuclear agency the Foreign Ministry portfolio is a signal that Iran will take a tougher stance in forthcoming negotiations over the Iranian nuclear question. Others disagree and suggest that the move was merely Ahmadinejad's way of settling domestic scores with opponents to his government's policies since his re-election in June 2009. At the same time, he might be laying the groundwork for the next presidential elections by removing Ali Larijani's supporters from government and smoothing the way for the rise of Esfendiar Rahim Mashaei to the post of first vice- president of the republic. Mashaei is the father of Ahmadinejad's daughter-in-law. Mottaki's sudden dismissal as foreign minister stirred conflicting responses. Senior presidential advisor Mujtaba Hashemi claimed that Mottaki had been informed of his dismissal prior to his trip to Senegal. Mottaki, a close associate of Ali Larijani, the speaker of parliament and one of the most outspoken critics of Ahmadinejad's nuclear policy, vehemently denies this, and his denial is backed by members of parliament who say that they had no advance notice of the dismissal. Ahmadinejad had undoubtedly been bidding his time until he could deliver this uppercut to Larijani, with whom he has fought many rounds in the political ring. The Iranian president will never forgive Larijani for his victory in a previous battle, when Ahmadinejad tried to secure government appointments for four of his cronies, one of whom was his in- law Mashaei. When the appointments were rejected by parliament, headed by Larijani, Ahmadinejad appealed to Supreme Guide Ali Khamanei, who came down in favour of Larijani. It is doubtful whether the long-seething political and power struggles between Ahmadinejad and Larijani, or more precisely the conservative camp, will end here. In fact, the next round is right around the corner. Salehi's appointment as foreign minister still has to be approved by parliament and, although it is not yet certain which way it will swing on this question, the likelihood is that it will reject the appointment. If Ahmadinejad bares his teeth at them, they will bare their teeth in return, and if he punches they will punch back harder.
