As Iran grapples with mounting fiscal pressures and the annual challenge of financing cash subsidies, a less visible but increasingly contentious issue has moved to the center of energy policy debates: how much the country should charge its petrochemical industry for natural gas as feedstock and who ultimately pays the price for keeping that fuel cheap.
Speaking on a televised economic program this week, Ahmad Zeraatkar, Iran’s deputy oil minister for planning, offered a detailed defense of the government’s gas pricing framework, arguing that the current system is tightly linked to protecting household welfare and sustaining subsidy payments, Shana reported.
According to Zeraatkar, nearly 3,700 trillion rials ($2.74 billion) of the roughly 10,000 trillion rials ($7.41 billion) allocated annually to Iran’s targeted subsidy program are generated from natural gas sales. Of that figure, around 1,700 trillion rials ($1.26 billion) comes directly from gas supplied to petrochemical plants, underscoring how deeply industrial gas pricing is embedded in the country’s social spending model.
Under Iran’s subsidy reform law, domestic energy prices—including natural gas—are supposed to gradually rise over a five-year horizon to reach 75 percent of export prices, with the gap financing cash transfers and energy-efficiency programs. In practice, however, the petrochemical sector has remained far below that benchmark. Zeraatkar said gas feedstock and fuel supplied to petrochemical units currently amounts to roughly 30 percent of export prices, a level he described as a significant implicit subsidy.
Iran’s export gas is sold at around 31 cents per cubic meter, while the average combined price of feedstock and fuel for petrochemical plants stands near 10 cents. Fuel gas accounts for roughly 60 percent of petrochemical gas consumption and is priced even lower than feedstock, further pulling down the average. Claims that petrochemical companies pay as much as 22 cents, Zeraatkar said, are “simply incorrect”.
The deputy minister stressed that pricing has followed a defined legal formula since 2016, despite periodic volatility.
He also pushed back against calls for additional concessions to petrochemical producers, warning that any reduction in gas prices would come at a direct cost to subsidy funding.
A hypothetical 20 percent cut in government gas revenue, he said, could slash targeted subsidy resources by as much as 55 percent, jeopardizing timely payments to households and support programs run by organizations such as the Imam Khomeini Relief Committee and the State Welfare Organization.
Zeraatkar also highlighted a less discussed issue: arrears. Petrochemical companies currently owe the government about 1,200 trillion rials ($889 million) in unpaid feedstock bills, with collections typically lagging by a year.
While acknowledging the industry’s role in export earnings and foreign currency repatriation, he argued that sustained underpricing and delayed payments raise fundamental questions about fiscal fairness.
