Iran parliament frees government hand over subsidies

By Reza Derakhshi

TEHRAN (Reuters) - Iran's parliament voted on Sunday to give the government a free hand to spend money saved from cutting food and fuel subsidies, in an apparent victory for President Mahmoud Ahmadinejad.

Removing subsidies would ease a heavy budget burden and make Iran less vulnerable to any new U.N. sanctions on imports over Tehran's disputed nuclear energy programme, which Washington says is a front for building weapons. Tehran denies this.

But higher consumer prices could also hurt the poor and stoke unrest. The introduction of a gasoline rationing plan in mid-2007 sparked riots in Tehran.

Sunday's vote, broadcast live on state radio, means the government of the major oil producer can spend the money in any area it sees fit, though the cash remains linked to the state budget where parliament has oversight powers.

Last week the assembly passed an amendment linking the proposed cut in food and gasoline subsidies to the budget and forced the government to put the money into a special account for public spending.

The vote ruffled Ahmadinejad. He made a surprise appearance in parliament to argue against the change and afterwards threatened to withdraw the bill to cut subsidies altogether.

Parliament's initial approval of the subsidies plan last month was seen as a sign Ahmadinejad was consolidating his position after the huge protests against his June reelection.

Police clashed with supporters of opposition candidate Mirhossein Mousavi last week during a rally marking the 30th anniversary of the storming of the U.S. embassy.