Greek-style Austerity Measures

Iranians Say Goodbye to 10 Cent Gasoline

January 18, 2011

Reuters - Iranians will no longer be able to buy bargain gasoline from Friday as President Mahmoud Ahmadinejad tries to bolster the sanctions-hit economy by phasing out subsidies on basics such as energy, food and water.

The semi-official Mehr news agency said on Tuesday that the ration of gasoline costing just 1,000 rials per liter (about 10 U.S. cents, or $0.38 per U.S. gallon) would be zero from the next Iranian month, which starts on January 21.

When the first phase of the subsidy cut was implemented in December, extra police were posted at gas stations to ensure there was no repeat of the sporadic rioting which happened in 2007 when the government began rationing cheap fuel.

In the event, there was no report of unrest when prices were hiked and the additional changes on Friday will come as no surprise to Iranians who knew the cut was coming.

Mohammad Rouyanian, head of Iran's Transportation and Fuel Management Office, said motorists would still qualify for 60 liters of "semi-subsidized" gasoline, at 4,000 rials, after which they would have to pay 7,000 rials, about $0.70 a liter.

Cutting subsidies which used to cost $100 billion a year has finally happened as Iran gets to grips with tightened economic sanctions over its nuclear program.

The sanctions have made it harder for Iran to import gasoline, and one benefit of the subsidy cut is that higher prices have reduced demand for the fuel which Iran is unable to refine enough of to meet its own needs.

Consumption has fallen to between 52 and 53 million liters per day from around 61 million before the subsidy cuts, Oil Minister Massoud Mirkazemi said on Sunday, announcing that Iran hoped to boost its refining capacity to become self-sufficient in gasoline later this year.

Officials announced in September that an emergency plan to refine gasoline in petrochemicals plants meant Iran no longer needs to import the 30-40 percent of its requirements, but Iranians fear the home-made fuel is of lower quality and has contributed to a big increase in pollution, something the government denies.