Gas Station Riots in Iran Fuel Rationing Introduced in Oil Giant

Despite being one of the world's largest oil producers, Iran has introduced gasoline rationing. The move caused long lines at the pumps -- and rioting.


You might think it would be easy to fill up your gas tank in the country that exports more oil than almost any other country in the world. But as of Tuesday evening, Iranians are no longer free to buy as much subsidized gas as they want due to a rationing system introduced by the government in Tehran.

The new system is likely to result in a jump in gas prices -- but the most immediate result has been attacks on a number of gas stations in the capital and, according to some news reports, around the country.

According to Raja News, a Web site closely linked to the government, nine stations were attacked in the Iranian capital. There were also reports of chants lampooning President Mahmoud Ahmadinejad, who came to office promising an economic upturn but has so far been unable to live up to the pledge.

There were long lines at the pumps on Tuesday night as people tried to get one last full tank of gas before the new measures kicked in. The rationing, which the government had been planning for weeks and which was originally supposed to go into effect on May 21, was only announced three hours before taking effect at midnight local time.

"Is this good timing, to announce rationing only three hours before it starts?" Ahmad Safai, one of those waiting in line, told the Associated Press. "I had no gas in my car's tank when I heard the report."

Iran is the second biggest oil exporter in OPEC, but has limited refining capacity, meaning that it has to import more than half of the gasoline consumed in the country. Until now, the government has subsidized gasoline to keep prices down, but the program has proven exorbitantly expensive in a period when the Iranian economy is struggling. The new rules mean that car owners can only buy 100 liters (26 gallons) of subsidized fuel per month -- at a cost of 1,000 rials per liter, which works out to 7 euro cents per liter or 38 US cents per gallon. Taxi drivers will be able to buy 800 liters a month.

The rationing comes amid growing dissatisfaction with Ahmadinejad's handling of the economy. Inflation is high and rising gas prices will likely only spark further price increases. A reduction in gasoline subsidies in May led to a 25 percent jump in gas prices.

Iran is hoping to increase its refining capacity in the next five years from 1.625 million barrels a day to 2.94 million barrels per day, according to the AP. An investment of $12 billion is needed to do so however, said Iranian Minister of Petroleum Kazen Vaziri Hamaneh recently. He also said that for Iran to up its oil and gas production capacity as planned, the country would have to pump $43 billion of its own money into the industry in addition to $93 billion in foreign investment.

But things aren't likely to get any easier for Iran. United Nations sanctions passed in two resolutions in December 2006 and March 2007 have made deep inroads on the country's foreign trade, according to a report in this week's DER SPIEGEL. According to Western intelligence agencies, the sanctions have had a much harder impact than expected, leading to capital flight and rising inflation.

In addition, the US Congress seems to be moving toward even more onerous restrictions on doing business with Iran. On Tuesday, the International Relations Committee in the US House of Representatives passed a bill that would force President George W. Bush to sanction oil and gas companies doing business with Iran. The measure passed 37 to 1 in committee, but would still have to pass in the full House and Senate to become law.

The bill would also get rid of tax breaks still in place for countries doing business with Iran and would decrease US contributions to the World Bank should the bank loan money to Iran. Nuclear cooperation with Russia would likewise cease should Moscow continue helping Iran with its nuclear program.

Iran insists that its nuclear program is for civilian use only but much of the rest of the world suspects the country of trying to develop nuclear weapons.

cgh/ap/reuters

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