TEHRAN, Iran--Iran's constitutional watchdog approved a contentious law that would sharply slash energy and food subsidies -- a move that could provoke more unrest in a country struggling under international sanctions, double-digit inflation and a government crackdown on the opposition.

The bill was formally approved by the Guardian Council, state television Web sites reported Wednesday, roughly a week after Iranian lawmakers signed off on the plan proposed by President Mahmoud Ahmadinejad. The Guardian Council is a hardline body that must vet all legislation before it becomes law.

The law would gradually cut energy subsidies, bringing the heavily discounted fuel prices more in line with international prices.

Officials say the step is needed to recoup some of the roughly $90 billion spent yearly on subsidies by OPEC's second largest oil exporter. Subsidies currently consume about 30% of the government budget at a time when already high spending and the collapse of oil prices last year hammered Iran's economy.

The aim is to channel the funds directly at the poorer segments of the population, as well as funding infrastructure projects.