Turmoil at home is Iran's top priority this year
The most important challenge will be economic reform as the country is under strain from a host of sanctions
Tehran: In Washington and European capitals, top New Year priorities on Iran may be Tehran's nuclear programme, and the next round of talks in Istanbul in late January.
But for Iran's leadership, 2011 promises to be a year of significant domestic challenges, as President Mahmoud Ahmadinejad presides over a precipitous series of subsidy cuts, imposed on an inefficient economy already under strain from a host of sanctions.
Undergirding the turmoil in the Islamic Republic are questions of legitimacy that remain unresolved since the contested June 2009 presidential elections, which brought millions of Iranians into the streets in sometimes deadly protests of fraud.
Economic reform
The most important challenge in Tehran in 2011 will be economic reform.
After decades of expensive subsidies that drained the treasury of anywhere between $30 billion (Dh110.34 billion) to $100 billion per year, Tehran's cold-turkey withdrawal of subsidies on gasoline, fuel, and bread — which last week quadrupled the price of gas overnight and made diesel prices skyrocket much higher — is an "extremely drastic" measure, says Farideh Farhi, an Iran specialist at the University of Hawaii.
Indeed, the changes amount to the most serious economic retooling since the 1979 Islamic revolution, which toppled the pro-West Shah but created an oil-driven welfare system that provided cheap utilities and services.
While there have been few reports of unrest so far, taking away such subsidies after a generation can be politically explosive.
The fact that prices have risen so abruptly — with the most needy Iranians set to receive a payment of just $40 per month from the government to fill the gap — has raised the risks.
"So much of the focus of this programme has been on mollifying the population," says Farhi.
"It's been done extremely systematically [but] there is a huge question to be asked: Why on earth, under these very difficult circumstances, with Iran under tremendous pressure from outside and a shaky position inside, the government would go for such a drastic effort?
"And I don't have an answer," adds Farhi.
"I'm just holding my breath that it will work out. Because if it doesn't work out, it has very, very serious consequences for Iran — we're not just talking about the Islamic Republic."
The new measures announced by Ahmadinejad seek to address longstanding problems in Iran that have existed for decades, and 2011 will prove a decisive year.
"This kind of inequality and accumulation and power has been here forever in this country," says Djavad Salehi-Isfahani, an economist at the Brookings Institution in Washington.
New reality
In some ways "inflation is a good thing, it's the lubrication you need to get the economy to adjust to the new reality", says Salehi-Isfahani, contacted in Tehran.
"Unfortunately, even if the government wants to allow some inflation, it has to pretend it is not going to allow it, because Iranians have a low tolerance of inflation," which he says is now at 10 per cent but perceived by average Iranians to be 50 per cent. Even if the price of just a few items goes up in Iran, he says, it can "create a panic", which could prompt the government to cap some prices "in order to calm people".
— Christian Science Monitor
