Iran says burden of cash subsidies hampering oil projects
Iran's Ministry of Petroleum announced on Sunday that the financial burden of paying direct cash handouts to Iranian citizens – as required by the subsidy reform plan - is preventing the development of the country’s crucial oil and gas projects.
Mansour Moazzami, the deputy petroleum minister for planning affairs, said the Ministry of Petroleum is currently paying up to Rials 35.5 trillion ($1.2 billion) per month in cash handouts to Iranian households.
“There needs to be a mechanism to change this,” Moazzami said. “If the country has any expectations from the Ministry of Petroleum, it should take the required measures to solve certain problems that the Ministry is currently facing including the collective financial burden caused as the result of paying cash handouts [in line with the subsidy reform plan]”.
The subsidy reform plan was passed by the Iranian Parliament in early 2010. The plan has already been described as the "biggest surgery" to the nation's economy in half a century and "one of the most important undertakings in Iran's recent economic history". Its objective is to replace subsidies on food and energy (80% of total) with targeted social assistance. The government is presently distributing about $15 a month per person to more than 90% of the general population to ease the economic pain of lost subsidies.
Iran's Petroleum Minister Bijan Zangeneh had already warned that his Ministry is short of funds to develop crucial oil projects, especially those that are shared with neighboring countries. Zangeneh has also emphasized that the country needs to invest at least $50 billion to increase oil production to as high as 5.7 million barrels per day.
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