March 6, 2008 / 1:43 PM / 12 years ago

Iranians worry about high food prices before vote

ISLAMSHAHR, Iran (Reuters) - Soaring food prices are the most explosive issue for people in this working-class city ahead of this month’s parliamentary vote, overshadowing concerns over Iran’s nuclear dispute with the West.

“Inflation is the main concern,” said butcher Hashem Hosseini in his virtually empty family shop in Islamshahr, or Islam City, southwest of the capital Tehran. He says the cost of lamb has risen by one fifth in the last month alone.

“Those with limited means are in a much more critical situation,” Hosseini said.

Such words may worry President Mahmoud Ahmadinejad, who won power almost three years ago pledging to share out Iran’s oil wealth more fairly and who faces a popularity test in the March 14 parliamentary election.

“What the hell is the nuclear issue?” scoffed a disgruntled man in another store. “There are people here who go hungry to bed at night. The rich get richer and the poor poorer.”

Like others critical of the government, the 28-year-old did not want to be named for fear of angering the authorities.

Analysts say economic woes are likely to overshadow the nuclear standoff for many voters, even though the election takes place less than two weeks after the U.N. Security Council imposed a third round of relatively mild sanctions on Iran.

More moderate politicians critical of Ahmadinejad’s handling of the $280 billion economy are seeking to seize control of the legislature from his conservative allies in a bid to gain momentum before next year’s presidential vote.

While steadily climbing double-digit inflation could make the hardline president’s camp vulnerable at the ballot box, increased social and development spending aimed at helping the poor since his government took office may limit the impact.

Fazrullah Nemati, 63, also complained of high inflation but said it was a global issue and the government was not to blame.

“Ahmadinejad is not responsible,” the retired engineer said, expressing gratitude to the president for raising his monthly pension to 2 million rials (about $216) while still complaining he could hardly make ends meet.

“NO MONEY”

The government says the world’s fourth-largest crude producer earned about $70 billion in oil revenue in the past year. The economy is growing at an annual rate of more than six percent and hundreds of thousands of jobs have been created.

But there was little evidence of that prosperity filtering down to ordinary people in Islamshahr, a nondescript satellite city some 50 km (30 miles) from Tehran and the scene of violent protests against high prices in the mid-1990s.

Battered old cars and buses clogged its polluted streets. In the shops and markets, people said they were struggling to cope, squeezed by soaring rents and grocery bills, and stagnant salaries.

“There is no money in people’s hands,” said one middle-aged man selling fruit and vegetables. “Business is extremely slow.”

Ahmadinejad, a blacksmith’s son and self-styled champion of the poor, has come under mounting criticism in parliament and in the media for failing to curb inflation officially running at nearly 20 percent. Economists say it is probably higher.

This is in contrast to broad backing for his defiance of U.N. demands to halt nuclear work which the West suspects is designed to make bombs, even if more pragmatic politicians say his anti-Western rhetoric risks further isolating Tehran.

Iran insists its nuclear program is peaceful but its refusal to curb its activity prompted two other sanctions resolutions from the U.N. in December 2006 and March 2007, as well as separate punitive measures from the United States.

Economists blame Iran’s rising inflation on profligate spending of petrodollars, partly on large gasoline, food and other subsidies in the state-dominated economy.

The president, expected to stand for re-election in 2009, has accused his opponents of exaggerating the issue while pledging action to rein in soaring consumer prices.

HAPPY NEW YEAR?

Knut Ostby, a Norwegian who heads the United Nations Development Programme in Iran, expressed concern that inflation was widening the gap between rich and poor.

“We are worried that the inequalities may be increasing because wages are lagging behind inflation and therefore those who have little continue to get less,” he said in Tehran.

He nevertheless praised the authorities for trying to strengthen the social welfare net and launch development initiatives. He said they should also encourage local involvement in these projects.

“There is a decrease in absolute poverty,” he said.

Rising social and other expenditure has weakened Iran’s fiscal position. International credit ratings institute Fitch said Iran and Venezuela were the only major oil exporters running a budget deficit at today’s high crude price.

“Although Iran’s budget deficit is estimated to be only just over one percent of GDP (gross domestic product) this year, it is likely to widen, even with unchanged oil prices, as spending continues to rise rapidly,” Fitch said in December.

“Rising oil prices are a double-edged sword for Iran, as they increase spending on fuel subsidies.”

In Islamshahr, butcher Hosseini said business was much slower than usual ahead of the two-week Iranian New Year’s holidays, which begin on March 21.

“Last year we would not have had time to sit here and talk to you,” he said. “You see no queues now.”

Hosseini said a kg of beef in the family shop cost 75,000 rials, up by almost 60 percent in one year.

This proved too much for a woman who had been told by a doctor to buy meat for her sick seven-year-old son.

“It was too expensive,” the 30-year-old housewife lamented, leaving empty-handed after inquiring about the price.

“It is getting worse every day.”

Writing by Fredrik Dahl; Editing by Clar Ni Chonghaile

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