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Rationing Fuels Discontent In Iran
Ahmadinejad Tries To Curb Gas Subsidy

By Ali Akbar Dareini
Associated Press
Sunday, July 1, 2007

TEHRAN, June 30 -- President Mahmoud Ahmadinejad, who swept to power promising that every family would benefit from the nation's oil wealth, now faces growing domestic discontent over newly imposed fuel rationing and skyrocketing consumer prices.

The anger at home is an unwelcome challenge for a president who also is fending off international criticism over his country's nuclear program.

Analysts said the fuel rationing, imposed this week, may be an attempt to reduce Iran's dependence on foreign gasoline imports that Western governments could eventually use to pressure Tehran.

A month after raising gasoline prices by 25 percent, the government began fuel rationing Wednesday, which sparked violence in Tehran. Angry Iranians smashed shop windows and set fire to a dozen gas stations.

With armed guards protecting gas stations Thursday, calm returned to the capital as motorists lined up to fill their tanks. But many were still seething.

"Ahmadinejad promised paradise, but his government has made life hell for Iranians," Mohsen Nosrati said as he waited at a gas station in central Tehran.

Ahmadinejad portrayed himself as a champion of the poor when he swept to power in 2005, pledging to use the country's oil wealth to eradicate poverty and tackle unemployment.

But joblessness remains high amid surging inflation. The government estimates unemployment at 10 percent, although economists say it could be as high as 30 percent.

Even before the rationing, Ahmadinejad faced growing criticism -- even from conservatives who once supported him -- for dramatically raising housing and food prices over the past year. Prices for fruits and vegetables have tripled in the past six months, and housing prices have more than doubled since last summer.

Many fear that the boost in fuel costs will worsen inflation, which the Central Bank says is 14 percent but which economists say is at about 25 percent.

Conservatives in Iran's parliament, especially those aligned with the national oil company, have long pushed for higher gasoline prices. Still, Ahmadinejad resisted the idea because of his campaign promise to share Iran's oil wealth with the poor.

This month, about 60 economists wrote to Ahmadinejad blaming rising prices on his mismanagement and flawed economic policies.

"Ahmadinejad promised to improve our living conditions, but he has brought us misery and poverty," said Hamid Reza Shokouhi, an Iranian analyst.

Many experts blame the worsening economy on two sets of U.N. sanctions imposed since December in response to Iran's refusal to halt uranium enrichment.

On Friday, diplomats said the United States and its allies were awaiting an Iranian response to a proposal that would commit the U.N. Security Council to hold off on additional sanctions if Tehran stops further development of its enrichment program.

Iran says it is developing its nuclear program to generate electricity to meet growing energy needs. But the United States and its allies accuse it of seeking to secretly develop nuclear weapons, a charge Tehran denies.

The international pressure has made it difficult to tackle one of the country's most significant economic problems -- gasoline subsidies that cost the government billions of dollars a year and encourage high demand.

Iran is one of the world's biggest oil producers, but it does not have enough refineries, so it must import more than 50 percent of the gasoline consumed domestically. The rationing is part of a government attempt to reduce the $10 billion it spends each year to import fuel that is then sold at below cost to keep prices low.

The government tried to curb demand and related subsidy expenditures by raising the price of gasoline in May, but the increase was not enough to significantly curb consumption. After the May price increase, gas sells at the equivalent of 38 cents a gallon.

The rationing system allows private drivers only 26 gallons of fuel a month at the subsidized price. Taxis get 211 gallons a month. Anything more than that will be sold at a higher price yet to be announced.

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