Will the Economy Be Ahmadinejad’s Downfall?

President Mahmoud Ahmadinejad appears to believe that only desperate measures on the economy can save his presidency when Iranians go to the polls in June, but he suffered a shocking setback on Monday when the legislature dominated by like-minded conservatives blocked his key initiative. Ahmadinejad had proposed legislation in the Majles, Iran’s parliament, that would have summarily withdrawn government subsidies on oil, gasoline and electricity, freeing up about $20 billion in government funds, of which he planned to transfer more than half in direct cash handouts to middle- and lower-income households. But the move would have sent energy prices skyrocketing in Iran, and the Majles was having none of it


It was the poor state of the economy that got Ahmadinejad elected in 2005, on promises to more equitably share the country’s oil revenues. But with the population laboring under record inflation rates and widespread unemployment, the fall in world oil prices from $147 a barrel last summer to less than $40 today has proved nothing short of catastrophic to Ahmadinejad’s government, which faces a $44 billion deficit in next year’s budget, and, for reasons political as well as economic, does not have easy access to international credit. (See pictures of Iran’s revolution)

Despite months of heated debate, Ahmadinejad had been expected to carry the vote on eliminating subsidies, and his supporters were shocked when the legislation was defeated by 132 votes to 102. “This vote … shows Ahmadinejad can no longer count on the unanimous support of the fundamentalists in the upcoming elections,” says Saeed Leylaz, a political analyst in Tehran, adding, “It could even mean that the Supreme Leader no longer unequivocally supports him.”

TIME