Iran will halt its massive gasoline imports from September 23 and impose fuel rationing, the oil minister said on Friday - a political gamble in a country where subsidised fuel is viewed as a national right.
Parliamentarians in the world's fourth biggest oil producer approved a budget for the year to March 2007 that cut the amount to be spent on gasoline imports to $2.5 billion from $4 billion. This meant President Mahmoud Ahmadinejad's populist government, which draws its support from the poor, was faced with an unappetising choice of hiking petrol prices or rationing, both potential sources of social discontent.
Oil Minister Kazem Vaziri-Hamaneh told state television the government's final ruling would come next week. "Because there is no budget for importing gasoline in the second half of the year, naturally imports will be stopped and gasoline will be supplied by rationing," he said. The second half of the Iranian year begins September 23.
Iranian officials sometimes make sweeping assertions about not importing commodities but then continue to buy shipments undaunted. Iran claims self-sufficiency in wheat but nevertheless buys shipments of the grain.
One proposal was to allow motorists a certain number of rationed litres subsidised at the current price of nine cents per litre. They would then have to pay the full market price for anything above that. But Vaziri-Hamaneh rejected that option: "With 99 percent certainty there is going to be no dual pricing system, just rationing."
Despite holding the world's second biggest oil reserves, Iran lacks refinery capacity and imports more than 40 percent of the 70 million litres (440,000 barrels) of gasoline its motorists burn each day. Iran's oil revenues go to the government which has not shared the state oil company's enthusiasm for refining projects.
Most of the gasoline imports come from western Europe, with trading house Vitol the leading supplier, market sources said. India has also featured as a key exporter, at times supplying up to 25,000 bpd.
Conservative Iranian politicians have dismissed fears that rationing could spark social unrest, stressing how Iranians accepted a coupon system during the 1980-1988 war against Iraq. But political analysts have expressed doubts that Iranians will be so stoical today. Most traded goods move by road and hikes in fuel prices and transportation have traditionally sparked sharp spikes in the cost of basic goods.
Iran's cheap gasoline culture chokes big cities with heavy pollution. Economists identify Iran's subsidies as one of the principal reasons for its flaccid and uncompetitive industry.
Many officials have also argued that Tehran's dependence on imported gasoline threatens national security. It is a sensitive target for any sanctions imposed over atomic work.
Iran has ambitious plans to upgrade refineries over the next five years and lift daily gasoline output to 120 million litres. But investment has been sluggish.
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