1 dead, 2 days off

The Iranian government declared a sudden, two-day national holiday on Sunday and Monday, after a long-simmering dispute between President Mahmoud Ahmadinejad and the Tehran bazaar erupted last week, leaving one prominent merchant dead, according to opposition Web sites.

Shopkeepers in Tehran’s traditional bazaar district called a strike last Tuesday to protest what was rumored to be a planned 70 percent rise in income taxes. The government denied the rumors, calling them a misunderstanding that resulted from a “mistake” in the way the plan was presented.

But a prominent textile trader was killed when pro-government militiamen and police officers raided the bazaar on Wednesday, demanding that shopkeepers reopen for business, opposition Web sites reported. One member of the textile merchant’s guild was said to have been arrested on Wednesday after addressing a crowd and calling for the strike to continue.

Officials cited excessive summer heat and energy consumption as the reason for the holiday

2 weeks and counting

A strike in Tehran’s main bazaar in protest against higher taxes has entered its second week even though the government has backed down in the standoff, moderate website Parlemannews reported on Tuesday.

The strike by the influential Grand Bazaar poses political and economic challenges to President Mahmoud Ahmadinejad, who was re-elected last year in a disputed vote. Authorities deny the opposition’s claim that the vote was rigged.

Merchants in the bazaar went on strike last Tuesday, forcing the government to announce on Monday it would suspend its plan to raise the rate of Value Added Tax (VAT) by as much as 70 percent on certain goods.

"Shops in Tehran’s Bazaar are still closed. It is not clear when merchants will end the strike," the website said, quoting an unnamed merchant.

70% ????

It’s the economy and how it’s being managed

While these incidents are not directly related to the latest round of United Nations, United States and European penalties against Iran – and do not appear to have been coordinated with the opposition Green movement – the new sanctions contribute to a climate of uncertainty that is undermining the Iranian economy and rattling Iran’s leaders.

"Sanctions could be the proverbial straw," says Djavad Salehi-Isfahani, a professor of economics at Virginia Tech who is on sabbatical this year at the Belfer Center at Harvard’s Kennedy School of Government. "These little things can suddenly coalesce."

Salehi attributed Iran’s economic woes primarily to the drop in oil prices and to Iranian government policies: over-stimulating the economy when oil prices were high and then cutting back on spending to reduce double-digit inflation.

Inflation is now down to about 9.4%, but unemployment is officially 14% overall and close to 30% for young people, Salehi said.

Strikes in the bazaar were a major factor in the 1978-79 revolution; bazaars remain an important constituency in Iran although they have been overshadowed in the economy by the Islamic Revolutionary Guards Corps.

Meanwhile, industrial workers are increasingly restive. According to the Iran Labor Report, an Internet publication of Iranian labor activists, 180 workers at the Alborz china company in the northwestern city of Qazvin staged a demonstration July 6, complaining that they had been paid only twice in the past 12 months

Last March …the Iranian budget battle over subsidies

Less than a week to the Persian New Year, lawmakers wrapped up 14 long sessions of debate and passed the much anticipated budget bill allowing the government to eliminate USD 20 billion worth of subsidies rather than the USD 40 billion that President Ahmadinejad had asked for, a Press TV correspondent reported.

This is the first phase of the Iranian president’s major reform plan to make fundamental changes in Iran’s economy, a topic that has sparked debates over the past year.

"Everyone agrees that the current subsidy system is wrong. The question is how to redirect the subsidies. In parliament, we believed that this should be done over a period of five years to reduce the negative effects, particularly on the inflation rate," lawmaker Mohammad Reza Khabbaz said.

The government is currently paying USD 100 billion in subsidies and President Ahmadinejad says the faster changes are made, the easier it will be for the nation to adapt.

Last Tuesday, debates continued behind closed doors, as President Ahmadinejad tried to convince the nation’s representatives in Majlis.

"The president told us that the USD 40 billion would not increase the current 11.8 percent inflation, rather it would reduce it because it will not be adding to the liquidity," another lawmaker, Vali Esmaeeli said.

Only 105 lawmakers agreed, the remaining members of parliament were of the opinion that such a rapid change might trigger a 50 percent surge in inflation.

"If we were to agree with the USD 40 billion, it would definitely affect the calculations regarding the prices of fuel and food," lawmaker Mohammad Taqi Rahbar said.

"It would create a shock so we disagreed….The government should not expect parliament to agree with everything it proposes."

Wanting further cuts in the subsidies, Mahmoud

Ahmadinejad has suggested holding a referendum to approve subsidy cuts that the Islamic Republic’s parliament has repeatedly blocked, a news agency said Saturday.

Parliament this month passed a state budget for the next Iranian year starting March 21 that did not contain radical cuts in subsidies sought by Ahmadinejad.

Delegates had said the cuts could stoke inflation, while analysts say they could also provoke unrest in a country already plagued by tension after street protests by opponents of Ahmadinejad over the past year.

Any such referendum could risk more unrest.

"The solution is to ask people if they want this law to be implemented or not and to hold a referendum on this issue," Ahmadinejad said in an interview on state television Friday evening and carried on state news agency IRNA.

"We should not require the government to do something that hurts people. The government would not do anything that hurts the people …