IRAN AND DUBAI LEAD THE WAY109The fact remains that Dubai’s 15 percent increase in electricity tariffs
stayed in place for the majority of citizens, and citizens were— in
principle— expected to pay something for excessive water consumption.
By the end of 2011, the increase in electricity and water prices reduced
power consumption by an average of 3 percent per account and water
consumption by an average of 7 percent. The tariff hike saved Dubai the
equivalent of around six shipments of LNG that year, worth some $300
million.^41
Dubai’s electricity tariff increase breached an important barrier: that
subsidies— once extended— are understood by citizens as rights that can-
not be retracted. Whether or not Dubai citizens felt entitled to their
subsidies on power and water, a portion of that entitlement was taken
away. Only indigent citizens on income support avoided increased elec-
tricity rates, which amounted to targeting the subsidy toward the poor.
Even this result represents a theoretical breach of sorts, as rentier states
are supposed to be unable to retract subsidy entitlements or even restrict
their delivery to only the poor.^42 For households and citizen- owned busi-
nesses that lost benefits, the regime offered no replacement, as Iran did,
nor any increase in political participation, as prescribed by rentier
theory. Citizens protested, but the regime was never endangered. Pub-
lic satisfaction with the rule of the al- Maktoum family appears intact.
Dubai’s reform was also important for another reason. The permissive
emirate holds the unofficial role as the Gulf ’s test bed for controversial
policies and investments. When one of Dubai’s ventures succeeds, one or
more of the surrounding monarchies inevitably copies the idea. Dubai’s
launch of an airline, free- trade zones, and tourism sectors are examples.
Subsidy reform was another Dubai- tested policy that would soon be
adopted by its neighbors.
ERRING ON THE SIDE OF CAUTIONIn their willingness to snatch back long- held social benefits Dubai and
Iran were in the vanguard. Their situations were acute. Dubai’s ruling
family was teetering close to financial default. Iran had boxed itself into