He spoke to Iran’s poor - and now they are shouting back

06/30/2007

Gas rationing is just the latest pinch imposed by Mahmoud Ahmadinejad's presidency.


By Ali Akbar Dareini,
Associated Press
June 29, 2007


TEHRAN, IRAN - President Mahmoud Ahmadinejad swept to power promising to bring oil revenues to every family, but he now faces growing domestic discontent over newly imposed fuel rationing and skyrocketing prices.

The anger at home is an unwelcome challenge for a president who already has his hands full fending off international criticism over Iran's nuclear program.

But analysts said the fuel rationing imposed this week may be an attempt by Iran to reduce its dependence on foreign oil imports that other governments could eventually use to pressure Tehran to halt its nuclear program.

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

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

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

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

But unemployment is still high while inflation surges. Although the government estimates the unemployment rate at 10 percent, economists say it could be as high as 30 percent.

Prices for fruits and vegetables have tripled in the past six months, and housing prices have more than doubled since last summer.

Many fear the boost in fuel costs will heat up already high inflation, which is reported running at nearly 14 percent annually by Iran's Central Bank but estimated at 25 percent by economists.

These dynamics made for a difficult environment to tackle one of the country's most significant economic problems -- gasoline subsidies that cost the government billions of dollars per year and encourage unnaturally 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 its people use. The rationing is part of a government attempt to reduce the $10 billion it spends each year to import fuel that is then sold to Iranian drivers at less than cost to keep prices low.

The fuel rationing has triggered widespread discontent, but if it succeeds in reducing gasoline imports, it could help insulate the country from pressure related to its nuclear program.

"We will greatly suffer if they [foreign countries] suddenly decide not to sell us fuel," said Iranian political analyst Saeed Leylaz. "Fuel rationing is a security-economic decision to reduce fuel consumption."