Tehran Parliament Rejects Fuel Rationing.

The Islamic Majlis (parliament) on Nov. 1 abandoned plans to ration fuel and instead increased the budget for the import of gasoline and allocated US$1 billion towards improving the public transport system.

The parliament had on Oct. 31 given tentative approval for the spending of an extra US$2.2 bn on gasoline imports, slashing by more than a third the $3.5 billion requested by the government, and mooted the rationing of fuel effective from Dec. 22. On Nov. 1, however, the rationing option could not obtain sufficient "Yes" votes from lawmakers in an intense polling session and was abandoned.

Other fuel-saving measures such as a dual-pricing mechanism, an increase in the gasoline price and payment of direct subsidies to consumers were also not able to muster enough support. Instead the legislature voted to add US$300m to the $2.2 bn it had already approved for the import of gasoline. It also passed a law to spend an additional $1 bn "to improve the national transportation grid, in particular purchase of public vehicles and expand the subway system".

In February, parliament approved a US$2.5 bn budget for gasoline imports which ran out by late September due to higher oil prices, rising consumption and the smuggling out of the country of millions of liters of gasoline every month. Iran's refineries with a capacity of 43.2m litres/day of gasoline cannot cover the lavish national consumption of 80m litres/day.

Lawmakers in agreeing to allocate funds for improving public transport argued that preconditions for rationing laid out in the budget law had not yet been met. The law obliges the government to expand the public transportation fleet, increase the number of natural gas-fuelled cars and provide "smart cards" to monitor individual consumption before resorting to fuel rationing. Announcements of "smart cards" had been made repeatedly since late 2005 and nothing has happened so far.

Lawmakers in this gas-guzzling country had originally slashed the budget for fuel imports to $2.5 bn from $4 bn for the financial year to March 20, 2007, but high oil prices meant the amount approved was spent well before the end of the year. Iran is the world's fourth largest crude oil exporter but lacks refining capacity and has to import almost half the gasolines it burns each day. All fuel is then heavily subsidised at the pump for motorists. Speaking after the vote in a debate broadcast live on state radio, MP Hamidreza Hajibaba'i said parliament had approved expanding the budget from "$2.5 bn to $5 bn, and this is the change that we have made".

A senior oil ministry official said in August the government had allowed the ministry to continue importing gasoline until parliament decided on a new budget. The government had proposed increasing the budget for gasoline imports by $3.5 bn. But parliament said the $1 billion they had cut from the government's proposed amount would be spent on improving infrastructure and public transport. If imports stopped, the government had suggested fuel rationing, a sensitive move in a country where cheap, abundant gasoline is considered a national right. "There will be no rationing this Iranian year. Parliament will decide about rationing next year", Iran's Oil Ministry website SHANA reported after the vote.

Such cheap fuel - when international gasoline prices have been soaring - encourages waste and a thriving trade in contraband fuel to Iran's neighbours. Iran's dependency on fuel imports makes it vulnerable to sanctions which might be imposed over its nuclear dispute with the West. But diplomats suggest the West would be wary of a step that would likely hurt the public more than the government.