The scale of Iran’s economic crisis became clear yesterday when the regime increased gas prices by 25% overnight and prepared to introduce fuel rationing.

These measures may damage President Ahmadinejad’s popular standing still further. In a country with 70 million people — at least half of whom are under 25 — the economy is stagnant and failing.

High unemployment means that millions of students are unable to find jobs while prices of basic goods rise every month.

This has combined to undermine Mr. Ahmadinejad’s authority. Four newspapers in Tehran are now openly critical of his performance, and recent local elections saw a heavy defeat for his allies. Parliamentary elections are due next year, and the president’s party is expected to face a new alliance of moderate opposition forces.

Yesterday’s fuel price rise could affect the outcome of this election. Although Iran has the second largest oil reserves in the world and produces 4.2 million barrels a day, it cannot refine enough of this crude oil into gas. Due to the parlous state of its refineries, Iran must import about 40% of its gas. Importing gas and then subsidizing it cost the authorities about $5 billion last year. To reduce this cost and bear down on consumption, Interior Minister Mustafa Pourmohammedi announced that prices would rise to the equivalent of $0.10 a liter from $0.08.

Formal fuel rationing is expected to be introduced on June 5. From then onward, Iranians will be able to buy only three liters a day at the official price. Anything above will be supplied at 10 times the fixed price.