Iran’s government has begun rushing out promised direct payments to 60 million Iranians, in a sign that the regime has been spooked by the scale of protests against petrol price rises announced last week.

In some cases petrol prices are being raised by as much as 300%. Unrest continued throughout Iran on Monday and internet access remained blocked for a second day.

Videos smuggled out of the country showed municipal buildings and banks being torched and large traffic jams as drivers blocked roads. The clashes seemed fiercest in the cities of Shiraz and Ahvaz rather than in Tehran As many as 1,000 people have been arrested.

In announcing the price rise on Thursday, the government said it was not seeking to raise state revenues but instead undertaking a complex switch in government subsidies.

But the increase was introduced without warning and before the subsidies had reached people’s pockets, leading to the wave of protests. The government said the petrol subsidy was costing as much as $2.5bn (£1.9bn) a year and acted as an incentive for smuggling.

The direct payments aimed at the 60 million poorest of Iran’s 80 million population was due to go out from midnight, with a further tranche on Wednesday and a third payment on Saturday.

Under the compensation scheme, eligible Iranians including most civil servants, labourers and pensioners will receive between $13 and $48 a month into their bank accounts, depending on the size of each family, according to Ali Rabiei, a government spokesman.

Rabiei said the public had a right to protest, but not to support agitators. The Revolutionary Guards said of the protests: “If necessary we will take decisive and revolutionary action against any continued moves to disturb the people’s peace and security.”

Hamid Baiidinejad, the Iranian ambassador to London, tweeted: “At a time of cruel sanctions and pressure on the people, the government is courageously pursuing an economic structural reform, demonstrating the confidence of the state and the nation, otherwise it would not be implemented.”

Government officials claimed western influence in the protests, highlighting the role of the BBC in spreading what they called misinformation.

State-backed news agencies said 100 banks and 57 shops were set on fire or plundered. In Isfahan alone, 69 banks were torched.

Iranian intelligence agencies said 87,400 people were involved in the unrest across the country, a figure released seemingly to show the state was capable of maintaining effective surveillance.

The minister of information technology, Mohammad Javad Azari Jahromi, said: “I am working on reconnecting the internet. I am aware about the people’s grievance over the shutdowns. There does not exist a national internet.”