Iran raises gasoline prices; economic crisis imminent

Officially, 300 people died in these protests, with unofficial reports suggesting thousands lost their lives. The gasoline price hike is an economic flashpoint that intensely provokes public sentiment in Iran and is seen as a critical issue that could threaten the regime's existence.

Past oil exports of 2.5 million barrels have plummeted to around 250,000 barrels.

Due to the naval blockade, Iran is facing difficulties selling these reserves externally and repatriating foreign currency. If this trend continues, reserves are expected to be completely depleted around September or October. This indicates that the Iranian economy has reached a critical juncture.

This indicates Iran is escalating tensions over control of maritime routes.

Iran's official inflation rate reached 80%, and food prices have skyrocketed two to three times, making it difficult for low-income citizens to even consume protein. The Iranian economy is in a severe crisis.

Despite being a major oil-producing country, Iran faces gasoline shortages. Seven or eight of its ten refineries were built before the 1979 Islamic Revolution, resulting in low production quality. Additionally, the government's massive subsidies keep gasoline prices low, leading to some of the world's highest consumption levels. However, a lack of foreign currency prevents securing overseas imports, exacerbating supply shortages.

The Iranian government has operated a quota system, providing 110 liters of gasoline per person per month at ultra-low prices. However, with increasing government fiscal burden and worsening supply-demand imbalance, the price for gasoline exceeding the quota has been doubled. This illustrates the limitations of the resistance economy model and government fiscal pressure.

A second-tier additional quota of 50 liters is priced at 20 won per liter. However, for volumes exceeding 110 liters, the price has doubled from the previous 50,000 rials per liter to 100,000 rials (approximately 60 won). This indicates the severe state of the government's financial difficulties.

Iran's 'resistance economy' model is based on keeping prices of daily necessities, food, and energy low. However, due to outdated refinery facilities, energy prices have been artificially maintained through subsidies. With US economic sanctions cutting off external imports, cracks are appearing in Iran's resistance economy system. Iran's economic model itself is under threat.

In November 2019, when the Iranian government raised gasoline prices by 50%, large-scale anti-government protests erupted, officially resulting in over 300 deaths. This bloodshed was so severe that it threatened the regime's existence. Learning from this, the Iranian government chose to raise prices only for excess consumption this time, leaving the basic quota for low-income citizens unaffected. This is interpreted as an attempt to minimize public discontent.

Iran is connected to Pakistan and China by land, but land transport of crude oil is not cost-effective. In the past, only 4-5% of Iran's total crude oil production was transported by land. Therefore, if sea transport is blocked, the Iranian economy cannot be sustained by land supply alone. A naval blockade has a fatal impact on the Iranian economy.

Based on the experience of the large-scale bloody protests that erupted in November 2019 due to a gasoline price hike, the Iranian government took gradual price increase measures this time, aiming for minimal impact. However, gasoline prices are a sensitive economic flashpoint in Iran, so the mere fact that the government undertook an increase indicates that the Iranian economy has reached its breaking point.

Kia Motors' 'Pride' has been licensed for production in Iran for a long time and served as the national car. Many Pride vehicles still operate on the roads, and Iran's older vehicles emit large amounts of exhaust. Coupled with its topographical characteristics as a high-altitude region, Iran's air pollution problem has reached a serious level.

When Iranian President Hassan Rouhani remarked on the need to 'end the war honorably,' media reported that a national referendum on ending the war was proposed. Hardliners strongly denounced this as a 'dangerous statement that cannot be overlooked,' intensifying internal conflict in Iran. The US blockade strategy may paradoxically strengthen Iran's resistance rather than force its surrender.

Amid intensifying internal conflict between moderates and hardliners in Iran, public opinion in favor of resistance is growing due to the difficult living conditions. It is analyzed that Iran is likely to seek escalation through gradual military actions, such as attacking US vessels, rather than an all-out war. This is interpreted as part of a military response to economic pressure.

With such starkly opposing positions, finding common ground for compromise is difficult. In the current situation, there is a possibility of escalation into a war of attrition or an all-out conflict.

Despite soaring prices for daily necessities and gasoline, Iran is enduring through internal unity against the enemy, the United States. However, economic pressure is reaching a critical point, accumulating social dissatisfaction. While unity is maintained due to the special circumstances of wartime, cracks in the resistance economy are becoming visible, and public patience is nearing its limit.

This aims to induce cracks in Iran's long-term resistance economy through a 'drying out' strategy. However, it is a time to be wary of the possibility of Iran lashing out one last time.