* Higher domestic prices in Iran to allow for more exports
* Energy reforms to promote efficiency measures
* Iranians to see significant price hikes in first year
By Jasmin Melvin
WASHINGTON, Sept 28 Iran, dependent on imported
gasoline but squeezed by international sanctions, is working to
eliminate subsidies on oil and natural gas, International
Monetary Fund economists said on Tuesday.
Iran's energy price reform is expected to lower demand as
prices rise in the country. The higher prices will prompt more
efficient energy use within Iran while increasing the supply of
oil and gas available for export, the economists said in an
interview published on the IMF website.
Iran's energy subsidies kept domestic oil and gas prices as
low at 10 cents a liter in an effort to distribute the
country's wealth to its people, said senior IMF economist Roman
But as the gap between the extraction price and prices on
the international market surged in recent years, "giving away
for free something that could be sold for a pile of money is
not the best policy," Zytek said.
Also, the cheap price of fuel spurred energy waste and
magnified pollution in the country. Zytek said the subsidy
allowed Iran's wealthiest people to splurge on gas-guzzling
vehicles and large energy-inefficient appliances, while the
poor saw fewer benefits because they use less energy.
The energy price reform comes as Iran faces tough economic
sanctions targeted at its nuclear program that have already
caused prices to soar in other sectors of its economy.
Iran hopes revenue from increased energy exports will boost
its economy, the world's 17th largest, the IMF said.
"The government is aiming to grow at the pace of South
Korea and other vibrant emerging market countries, and they
realize that the only way to do so is to restore market pricing
of energy," said IMF mission chief to Iran Dominique
Guillaume added that the law adopted in January to cut the
subsidies included a first-year revenue target of $20 billion.
Iranians can expect the first price hike to lift energy
product prices between four and 20 times previous levels,
Guillaume said, with prices surging even higher eventually.
To ease the transition for Iranians, half the added
revenues will go to citizens in the first year. Businesses will
receive 30 percent of the additional revenues to invest in
energy efficient technologies.
(Reporting by Jasmin Melvin; editing by Lesley Wroughton and