Plenty of Oil, but Few Refineries for Iran

The Associated Press
Wednesday, May 31, 2006; 3:27 PM

TEHRAN, Iran -- Iran is flush with huge oil reserves and cash, but a refinery shortage leaves it heavily dependent on imported gasoline and diesel to keeps its cars and trucks rolling.

That's one reason the country _ already beset with economic troubles _ is desperate to avoid U.N. sanctions over its nuclear program.

"Oil is where Iran is most vulnerable," said Behzad Nabavi, a former lawmaker who also headed a state-directed oil company, Petropars. "It's one of the great economic paradoxes."

Concern over fuel supplies has become so serious that energy planners are considering an unpopular two-tier pricing system.

The plan would limit the amount of gasoline motorists can buy at the state subsidized price of about 32 cents a gallon and establish an unspecified market price for larger purchases. Planners believe that would help offset the cost of imports and curb consumption.

Even a moderate drop in gasoline or diesel imports as a result of sanctions would be a punishing blow for an economy with many soft spots _ double-digit inflation, chronic unemployment and cumbersome state controls among them.

One of the possible sanctions under consideration Thursday at a meeting in Austria of the five permanent U.N. Security Council members and Germany will be an embargo on exporting refined petroleum products to Iran.

After a flurry of telephone diplomacy, Secretary of State Condoleezza Rice announced Wednesday that the Americans would be ready to join in talks with Iran over the nuclear dispute.

Iran has no shortage of oil in the ground or cash in hand.

Its oil reserves are estimated at second only to Saudi Arabia's, and Iran is OPEC's fourth-biggest producer of crude. Rising prices _ now hovering around $70 a barrel _ pushed Iran's special petrodollar fund to a record $24 billion earlier this year.

What Iran lacks are sufficient refineries to keep pace with its thirst for fuel. Iran is almost fully dependent on trucks to move goods. The number of cars is rising each year as drivers from the baby boom decade after the 1979 Islamic Revolution take the wheel.

Iran imports more than 40 percent of its gasoline and diesel needs. It comes mostly from the Middle East but also from as far away as Venezuela.

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