TEHRAN, Iran >> After months of false starts, dire warnings and political wrangling, Iran has embarked on a sweeping program of cuts in its costly and inefficient system of subsidies on fuel and other essential goods that has put a strain on state finances and held back economic progress for years.

The government’s success in overcoming political obstacles to make the cuts and its willingness to risk social upheaval suggest President Mahmoud Ahmadinejad may have consolidated power after the internal fractures that followed his bitterly disputed re-election in 2009 — a development that some analysts believe could influence Iran’s position at nuclear talks in Istanbul this month.

“The initial success of the subsidy reform will increase the regime’s confidence generally,” said Cliff Kupchan, a former State Department official who is now a director at the Washington-based Eurasia Group. “This could make them more assertive in the talks. But more importantly, a confident and unified regime is better positioned to reach consensus on some initial agreement.”

Secretary of State Hillary Rodham Clinton said recently that international sanctions had slowed Iran’s nuclear program, and the restrictions do seem to have disrupted sectors of the economy, particularly banking and export-related industries. But the sanctions do not seem to be the driving force behind the subsidy cuts.

Iran’s foreign exchange revenues also sank in recent years as oil prices fell from prerecession highs, creating greater budget pressures. But Tehran has long sought to cut the subsidies — even under the reformist administration of President Mohammad Khatami — and particularly for oil.

The success of the subsidy cuts so far also seems to have contributed to a continuing reassessment of Ahmadinejad. He emerged in the diplomatic cables released by WikiLeaks as something of a sober pragmatist — battling with retrograde forces in the government — rather than as the ranting extremist he seemed when he called for Israel to be wiped off the map. In October 2009, according to one of the cables, he argued for a nuclear compromise promoted by the U.S. that would have sent uranium out of the country for enrichment. And during the protests following the 2009 elections, he is reported to have argued for more freedom of the press — until a general in the Revolutionary Guards slapped him and shouted, “It is you who created this mess!”

The subsidy cuts, which the International Monetary Fund says have amounted to $4,000 a year for the average Iranian family, began in earnest last month when the rationed price of gasoline jumped to about $1.44 a gallon from just 38 cents. With a ration of only 16 gallons a month at the subsidized rate, most motorists buy the bulk of their fuel now at the even higher market rate of $2.64 per gallon, significantly more than the $1.80 that people pay in nearby Dubai.

In recent weeks, subsidies have also been reduced on flour, water and diesel. But the spike in prices has not provoked the angry protests that followed the introduction of fuel rationing in 2007. The price of bread has tripled, on average, the government says; water, which used to be practically free, now costs between 10 cents and 85 cents per cubic meter, based on a sliding scale under which consumers pay a higher rate the more they use.

The government says these are just the first steps in what it calls an “economic transformation plan” that will also include banking reform, sweeping changes in Iran’s tax and customs system, and ever more privatization of state-owned industries. And with officials already reporting drops in the consumption of gasoline, flour, diesel and electricity, even before the prices were raised, Ahmadinejad has been exultant. “I believe that the Imam of Our Time has managed this plan and supports it,” he said in a speech last week, citing the “hidden” 12th imam revered by Shiite Muslims as the embodiment of justice and righteousness.

Iran’s state-directed economy has long been plagued by corruption, inflation, inefficiencies and unemployment, which is particularly high among young people. The problems have damaged Iran’s ability to compete in world markets. Ending state controls and subsidies have long been seen as the first step in reviving a moribund economy that the CIA estimates grew by an anemic 1.5 percent in 2009. Analysts say the unemployment and inflation rates are about 20 percent, nearly double the official figures of 11.8 percent and 12.2 percent respectively.

The public seems to have embraced the program. That includes Shahla, 50, a schoolteacher and mother of two who, like others interviewed, refused to give her last name for fear of the authorities, and who has long been critical of the government on just about everything.

“We’ve become very economical over the past months,” she said. “I heard that it’s a good thing, and that it will help us enter the world market.”

She says she now washes only large loads of laundry and has urged her family to wear warmer clothes in winter instead of lighting a gas fireplace.

During an interview at his home, the financial manager of a medium-size steel-piping manufacturer told his daughter to turn off two lights in the living room right before he described how the subsidy cuts were beginning to show up on his company’s balance sheet.

Transportation costs jumped 20 percent last month after diesel subsidies were cut, he said, and he expected that this month’s electricity bill would be about three times the previous charge, if scheduled cuts go into effect. But he says these are just the latest in a long line of mounting financial pressures he has faced over the past year.

Even before the subsidy reforms began, the manager said, costs increased across the board this year by 15 percent, with scrap steel, the company’s main raw material, nearly twice as expensive as it was a year ago. But despite the rising costs and the anticipation of more shocks to come, the manager fully accepts the logic of a plan that he says will make competition “realistic.”

“We knew many years ago that prices would have to be normalized,” he said after dinner in his modest home in Tehran’s western suburbs. “It should have happened a long time ago.”

“It has to happen; otherwise we will never learn the true value of raw materials,” he said.

Depending on how well Iran’s government can stave off the worst effects of the price shocks, the subsidy reforms could be a political victory for Iran’s new right wing — a success for Ahmadinejad where liberals, now almost entirely excluded from Iran’s political scene, had failed.

© 2011 The New York Times Company