A dramatic rise in the price of flour in Iran has raised fears that the authorities’ recent decision to end subsidies for imported wheat could come at the cost of social unrest.
Since the Iranian government ended subsidies for imported wheat on May 1, the cost of flour has soared by around 500% and is expected to rise further. With the rising cost of flour, the cost of staple foods like bread and pasta as well as confectionery and other flour-based products are also rising, resulting in images of empty shelves in bakeries and grocery stores.
The suddenness of the situation has led lawmakers and loyalists to Iran’s clerical regime to warn that mass protests could follow.
The Student Basij, a sub-group of the Basij militia which is itself a branch of Iran’s Islamic Revolutionary Guard Corps, issued a stern warning to radical President Ebrahim Raisi.
“We strongly advise you that the company is not prepared for such a sudden price increase at this level,” says the group in a May 5 statement. “The turbulence in the markets in recent weeks, and especially the shocking decision by the Ministry of Agriculture to increase the price of flour for industrial producers, could have social consequences and unrest.”
The statement describes the decision to end subsidies as a “serious shock” to trades and industries that depend on subsidized wheat and flour, and advises the government to refrain from making such decisions without first considering of public opinion.
“A huge mistake”
Reform politician Jalil Rahimi Jahanabadi also criticized the decision, taking to Twitter to say that eliminating subsidies and allowing flour prices to float at global dollar-determined rates “was a huge mistake by the government.”
“People’s tolerance threshold,” he added, has already been “low for years.”
Many Iranians are struggling to make ends meet in an economy that has been crushed by crippling US sanctions and years of mismanagement.
Iranians have been rocked by soaring inflation, which stands at around 40%, according to government statistics, and is said to be even higher for food. Iranian media reported that the price of rice, a staple whose rising prices in recent years had already pushed many consumers towards alternatives like bread, rose by 130%. Bean prices, meanwhile, are said to have soared 120%, and the costs of cooking oil and sugar have also increased.
To deal with a growing deficit, Raisi’s cash-strapped administration has sought to cut major government subsidies, including on drugs.
But the government, which is currently drawing up Iran’s budget for the coming year, also faces harsh realities.
Mohammad-Reza Mortazavi, the head of Iran’s Flour Producers Association, said on May 2 that the country was more dependent than ever on foreign grain and expected to import more than 20 million tons of grain in 2022.
Wheat imports account for about a third of local demand, Mortazavi said, and with world wheat prices soaring amid the Russian invasion of Ukraine, a major wheat exporter, the foreign product won’t be cheap.
With Ukrainian grain exports hampered due to the war and the reported theft of Ukrainian grain stocks, Mortazavi said Iran could not expect rising agricultural commodity prices to fall and turn increasingly towards “Russia or the Baltic States, and even [Western] Europe” for supplies.
According to the Ports and Maritimes Organization, Iran imported about 16.5 million tons of grain last year, of which about half was wheat and the rest barley, corn and rice.
Iran is one of Russia’s major grain importers, one of the world’s leading wheat producers.
The two countries, each facing economic hardship and trade barriers due to international sanctions, reportedly agreed in March to a deal that would see Iran import 20 million tonnes of food and fodder for the livestock – including vegetable oil, wheat, barley and corn – From Russia.
While an increase in subsidies to domestic grain producers is being considered for the next budget, in line with Iran’s timetable, it would still mean that local suppliers would receive far less than Tehran pays for imports.
Mortazavi, from the Association of Flour Producers, said in late April that industrial bakeries and other food producers had been given notice the impending loss of government subsidies and the effect that the rising cost of flour would have on their products.
To ease concerns about rising prices, a senior Economy Ministry official announced on May 5 that a new program will be introduced under which consumers will be able to receive subsidized bread.
“When people buy bread, they pay the same price as before, and the government will pay the difference,” said Ebrahim Siami, director general of the ministry’s Future Research, Planning and Management Department.
Siami did not say when the new program would launch, although it is expected to start in the next few days.
The announcement follows Agriculture Minister Seyed Javad Sadatinejad’s promise on May 4 that subsidies would be provided to offset rising flour prices.
Sadatinejad also echoed comments from other officials that wheat and flour had been smuggled out of the country, alleging that the subsidies had lined the pockets of foreign neighbours.
“Great social upheavals”
Warnings about the threat of public unrest are not without merit.
Last summer, mass protests over water shortages in western Iran turned deadly. Authorities used force to quell the protests, which took place in several cities and lasted for days.
Water shortages, an ongoing problem in Iran, are believed to be the result of prolonged drought and government mismanagement of water supplies, which hamper Iran’s agricultural industry.
In 2019, the government’s sudden decision to raise gasoline prices sparked protests in more than 100 Iranian cities and towns. The government responded with lethal force, with rights groups recording the deaths of more than 300 protesters and bystanders.
In January, Conservative lawmaker Ahmad Naderi warned that the government was taking the wrong path by proposing to cut food subsidies in its effort to tighten next year’s budget.
“I warn that if these approaches continue, we will reach a point where we will see great social upheaval,” he said.