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Iran Mulls Gasoline Rationing To Curb Smuggling Amid Economic Downturn

A gas meter is seen at a gasoline station in Tehran. File photo

Iran may start rationing gasoline instead of raising the price, Oil Minister Bijan Namdar Zangeneh announced October 24.

Earlier, the Islamic Republic's Vice President, Eshaq Jahangiri, had also said it would be politically unfeasible to raise gas prices, as Iranians are already suffering economic hardships. Iran’s overall troubled economy, the dwindling value of the national currency, and reimposed U.S. sanctions have exacerbated the problem.

The sanctions, in particular, have hit Iran’s oil and gas sector, with production expected to be significantly curtailed when the second round of sanctions officially take effect November 4.

Amid the economic downturn, some Iranians have turned to smuggling, despite the risks. More than one billion liters (roughly 265,000 gallons) of gasoline have been smuggled out of Iran in the past few months, said Iran's anti-smuggling police chief IRGC, Briadier-General Ali Moayyedi October 10.

The Rouhani administration has proposed raising the price of gasoline by 5,000 rials (roughly $0.12) per liter in order to raise funds for developing Iran’s dilapidated public transportation network. Defenders of the plan say it would raise an estimated $4 billion for infrastructure projects and create thousands of jobs.

"We should apply managed policies compatible with the society's condition to move forward,” Jahangiri said, according to state-run media.

The price of gasoline in Iran is currently $0.24 per liter, while the average price of gasoline in the world is $1.17.

The price of 24 cents per liter is calculated according to the official government exchange rate. On free market rates, the price of gasoline would be closer to 7 cents.

Rejecting the idea of raising the price of gasoline, Zangeneh said the revival of “smart fuel cards,” a rationing system used in the past, is again on the table.

"Fuel cards, if revived, will be issued for the whole country and not limited to Iran's regions bordering its neighbors,” Zangeneh said, speaking to state-run media.

Zangeneh's comments echoed remarks by pro-reform MP Ali Bakhtiar two weeks ago.

"Given the huge difference between fuel prices in Iran and the neighboring countries due to the dramatic rise in foreign exchange rates in recent months, fuel smuggling has increased tremendously. Under such conditions, reviving fuel rationing and issuing fuel cards can help solve the dilemma,” Bakhtiar said.

Bakhtiar said that while parliament has not yet approved fuel rationing, it is “likely to do so in the near future.”

Meanwhile, a member of parliament’s Energy Commission, Jalal Mirzaei, said on Wednesday that a dual price scheme will be set in the next few weeks.

"It is highly likely that 60 to 80 liters of rationed gasoline will be offered at the current price, i.e. 10,000 rials ($0.24), while any amount more than that should be bought on the basis of free market prices,” said Mirzaei.

But in a country where the oil and gas industry is nationalized, there is debate over what a “free market price” means.