With Iranians’ view of unlimited cheap petrol as a birthright, rationing was never going to be easy. But the need for change grew as years of a pump price frozen at 9 cents a liter took the import bill to $5 billion with Iran’s refineries way behind increasing consumption.
Finally, the government of Mahmoud Ahmadinejad bit the bullet, first with a price hike to 12 cents a liter and then with the introduction on June 27 of a ration of 100 liters a month per motorist.
The torching of some petrol stations in protest made great television but has obscured, at least internationally, the palpable fact that the policy is beginning to work.
Anecdotal evidence is clear. Tehran’s streets are less congested and the air quality improved. Hoteliers on the Caspian Sea coast complain of a lack of summer guests. “We’re struggling to get petrol for our tour buses,” said one tourist guide, “and motorists are saving their petrol allocation in case they need it later.”
And with all the usual caveats over government figures, the numbers are starting to add up. The Environment Ministry reported after two weeks of rationing there was a daily reduction of 8.7 million liters in consumption previously running at around 75 million a day. This would shave $1.7 billion from an import bill projected to reach $7 billion this year.
More recent figures suggest the reduction in consumption could be higher. Mostafa Pour-Mohammadi, the interior minister, told parliament in mid-July that between 11 and 16 million liters a day were being saved. And Ali Akbar Mehrabian of the government’s fuel committee put the saving at around 18 million liters, which he said would cut $4 billion from the import bill.
In the face of growing international pressure over its nuclear program, the Iranian government has long seen importing around 40% of petrol consumption as a dangerous vulnerability. Israeli prime minister Ehud Olmert was among those arguing the volatile public reaction to rationing showed that existing sanctions against Iran were working and should be extended.
Hence Mr. Ahmadinejad wants the government to go further in reducing imports — shifting vehicles away from petrol to natural gas, improving public transport and increasing the output of Iran’s refineries.
Like many countries that failed to invest sufficiently in refineries in the 1980s, Iran’s capacity has struggled with rising demand. But Mohammad Reza Nematzadeh, managing director of the National Iranian Oil Refining and Distribution company, has said existing plans for improved refining would take production of petrol from today’s 1.6 million barrels a day to 3 million by 2012.
The government is also pushing for conversion of more vehicles to gas, already used by Tehran’s yellow taxis. Kazem Vazeri-Hameneh, the oil minister, said last month the number of gas fueling stations would reach 1000, from the current 250, by the end of the Iranian year, and the number of converted vehicles would rise from 115,000 to 500,000. The government would target Nissan vans, he said, of which there are 500,000 across the country and whose conversion could save 10 million liters of petrol a year.
Rather than collapsing from internal dissent as a result of growing international pressure, the government of Mr. Ahmadinejad is developing a greater sense of purpose. Many of its members, including the president, spent their formative years in the trenches of the 1980-88 Iran-Iraq war and seem to feel at home in a crisis demanding national unity.
Hence, contrary to expectation, the government decided not to allow motorists to purchase petrol above their allocation at a higher price. However unpopular among Toyota Prado drivers of north Tehran and those running unofficial taxis, the decision was not just counter-inflationary but in line with the government’s commitment to “social justice” and its skepticism about market economics.
Rationing is also a major challenge to the vested interests involved in smuggling petrol out of the country to Iraq, Pakistan, Afghanistan and the UAE. Some put the figure as high as 8 million liters a day and while some smugglers use mules others are well-connected enough to drive tankers.
It remains an open question whether Mr. Ahmadinejad will benefit politically from petrol rationing. It has certainly been a major jolt in popular feeling, even though some Iranians say the system is at least “fair.”
The government has asked parliament to allow three months before judging the success or otherwise of the move. Either way, the decision — which the supreme leader, Ayatollah Ali Khamenei called “historic” — is surely one whose consequences, for good or bad, will play out for years to come.
GARETH SMYTH is the Financial Times Tehran correspondent
