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Iran's Black Market Bull Takes Off

Rationing Brings Less Supply, Same Demand

By Sam Hopkins
Wednesday, June 27th, 2007

Mahmoud Ahmadinejad isn't big on subtlety. The Iranian president and his government peers are also strongly averse to gradualism, as evidenced by the fires that raged Tuesday night throughout Tehran.

At 9 P.M. the government announced that midnight would bring a new gasoline rationing scheme for Iran, which, despite its status as the world's number-three oil producer, is a net importer of refined petroleum products.

Individual motorists are now restricted to 26 gallons per month, at the government subsidized rate of 38 cents per gallon (U.S.). Taxis can pump a maximum of 211 gallons every four weeks.

This comes after the shock of the 25% increase in late May that led to the current 38 cent unit price. As I told you at that time, in my article "Pain at the Persian Pump ," petrol prices are not rising in a consumer vacuum. House prices have recently doubled and basic goods have tripled under Ahmadinejad, leading to increased dissent and defeats in local elections this year.

For reporting on the situation the other night, I turned not to the Islamic Republic News Agency's website but to Iranian blog reports through BBC Monitoring.

As petrol station managers tried to institute what was literally an eleventh-hour recalibration of their pumps, rigging them to shut off after a certain amount is pumped (though I wonder, how would each pump tally a monthly aggregate for each driver?), panicked queues formed.

Some pictures are visible on reform journalist's Ruzbeh Mir-Ebrahimi's website, here: http://www.shabnameha.net/spip.php?article394 . Twenty-seven-year-old blogger Mehdi Mohseni wrote that the "last minute announcement of the start of the rationing caused a predictable psychological shock in society." "However," he adds, "one must admit that an important step has been taken toward the efficient use of energy."

Others speak of a moral responsibility that compels them to curb usage, among them Mohammad Javad Ruh, another reformist journalist. Ruh muses that even if those who are opposed to the current system were to take power, "wouldn't [they] sooner or later be forced to implement similar plans regarding petrol (even though in a different way)?"

But the current step towards energy efficiency (though I would not use this word, as rationing only changes supply and not demand) is not a single-faceted attempt to green Iran or reduce the country's absurd dependence on foreign gasoline and diesel. Instead, Ahmadinejad and the controlling religious order, the Council of Guardians, are pulling the strings to show that they are in control.

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Blogger Siamak Qasemi, in his article "Ahmadinejadism," says that the quicksilver decision-making of the Iranian president has "placed the country in a completely unstable situation."

Those who are thirsty for fuel have, in the meantime, reacted to supply scarcity by setting fire to what little is left. Over a dozen blazes were set at fueling stations across the capital Tuesday, and frustration has brought calls for a general strike from bloggers like Reza Abadi, who in his blog www.younglogph.persianblog.com said, "Let's think for one moment, if, for example, no one goes to work tomorrow what will the government be able to do?"

The response, we must assume, would not be very positive. If the Iranian government does nothing else well, it does crack down efficiently on dissent. Especially if Uncle Sam puts his face anywhere near such a work stoppage, Revolutionary Guard forces that have recently cracked down on Iranian reformists with dual Iranian and American citizenship would be happy to break out their billy clubs.

Maybe the only thing the government cannot stop is the demand. As rationing takes effect and is enforced by security forces, petrol stations will stick to their quotas. But according to these renegade bloggers, as soon as the cap took effect at midnight, the black market kicked into high gear.

With government prices up 25% since May, some drivers were still willing to pay the equivalent of $1.10 per liter ($4.16 per gallon), a 1,100% premium on the official price.

Watch that black market bull run.

Regards,

sig

Sam Hopkins

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