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Iran : The legitimate fear over a gasoline embargo

© IRAN-RESIST.ORG – September 8, 2009 | Despite the fact that Iran is one of the world’s largest oil producers, it does not have the capacity of refining enough oil for its internal needs. That is why an embargo on gasoline is considered as one of the most efficient ways to put pressure on the regime. In response to an American menace of sanctions against Western suppliers, Tehran announced the signature of an agreement on petrol imports from Venezuela.

The economy is the weak point of the Mullah regime. When the Mullahs took power in Iran, they also took control of considerable resources without having the experience to develop them. The confiscation of Iran’s biggest industries from their owners led the regime into dismantling them in order to sell off the land they were built on for speculative reasons. The gigantic National Oil Company was divided into more than 70 entities to be redistributed to the different families that composed the regime. Each company then started to deal in oil independently not hesitating to sell at much lower prices than the market price in exchange for extremely lucrative commissions. This attitude has personally enriched the Mullahs turned into oil tycoons, but has ruined the Iranian economy. In absence of regular revenues, the regime has launched itself in a desperate never-ending printing of money distributed under the form of allocations or monthly bonuses in order to give a false impression of high buying power. Meanwhile, the dismantling of the oil production has deprived the National Oil Company of a global policy of redistribution of the benefits for reinvestment and the renewal of the oil exploitation facilities.

The gasoline production has been one of the collateral victims of this procedure, for the absence of modernization and renewal of the refineries has destroyed Iran’s production. They are incapable of producing their internal quotas that the Mullahs publish regularly in their false statistics. This dissimulated downfall took the Mullahs by speed and today Iran that exported more than 635000 barrels of oil per day before the revolution has now become an important importer of refined oil and gasoline in a country managed in a near tribal mode.

Very embarrassed by this situation the regime continues to criticize the past and affirms that it only imports 20% of its needs. But by combining the different information given by the regime that claims that its daily gasoline production for internal use is of 44 million litres and that its daily consumption is of 80 million litres, we calculate a daily import of 36 million litres per day to meet their needs. That makes Iran import 45% of its needs and not 20%. But since the official statistics are false and that the daily production is much lower due to the bad shape of the refineries, we can assume that Iran imports even more gasoline making it extremely vulnerable to sanctions.

A shortage in gasoline would be an earthshaking event, for the majority of the Iranian electricity plants use gasoil to operate. Last year, Iran met important electricity shortages. The regime first blamed it on the draught, but since only a marginal percentage of electricity production is hydraulic they had to recognize that the problem came form a shortage in gasoil supplies.

The electricity shortages had caused numerous bankruptcies of medium and smaller industries, and badly hit public services such as the public hospitals. A planned embargo would hit the Iranian society harshly, provoking social unrest that would be fatal to the regime. That is the reason why an embargo on gasoline would be a nightmare for the Mullahs.

Sanctions/Ripostes | The Americans are well aware of this situation. It has been years that the possibility of a gasoline embargo has been discussed, but never adopted for it is not in Washington’s objectives. For the Mullahs are part of the U.S regional agenda and the goal is not to overturn them but to weaken them. The policy to gradually weaken the regime has been inefficient, they have resisted. That is why the U.S. adopted a bill sanctioning companies that supplied gasoline to Iran. In the frontline of the companies concerned three are from U.S. allied countries : Great Britain, India and Turkey. As for all American sanctions, these companies can be barred from the American market if they continue to supply Iran or find themselves banned from the retribution of the Iraqi resources. Tehran guessing that the above countries will cease all exports to Iran in fear of sanctions has turned towards Venezuela, one of its allies and mostly in an open conflict with U.S. and therefore not afraid of the sanctions.

The terms of the contract were announced by Hugo Chavez during his state visit to Iran : “Venezuela will export 20000 barrels of gasoline per day to Iran as of October for a total amount of 800 million dollars.” The settled price per barrel is around 50$ and the engagement has been taken for two years.

The agreement with Venezuela is far from being a solution to an embargo. 20000 barrels per day corresponds to 3.3 million litres per day, which is less that 10% of the quantity imported by Iran. This will not be enough to resist an embargo. The regime has no other oil-producing allies capable of compensating a shortage. Tehran should have remained more discrete on its options. Instead it has demonstrated a lack not only in solutions but maybe even in enough revenues to pay for the needed gasoline.

Other regime initiatives announced in the press are signs of its greatest worry : the announcement that daily rations of gasoline per habitant may be lowered and the anecdotal launch of two small electric vehicles.

The solutions not being the above the regime will be forced to negotiate, it has no other choice. [1]

In order to buy time to increase its gasoline reserves that are of 70 days, we will witness a softening of Ahmadinejad’s discourse. The regime will back off in order to loosen the noose before rejecting its President’s engagements with the scenario of the contestation of Ahmadinejad’s legitimacy by his reformist opponents. To give credibility to this scenario, Tehran will have to allow further demonstrations as per in June 2009. It will then be a unique opportunity for the Iranian people to go back to the streets and push out the regime.

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The french version of this article :
- Iran : La peur fondée d’un embargo sur l’essence
- (8 SEPTEMBRE 2009)

| Mots Clefs | Enjeux : Sanctions Ciblées en cours d’application |
| Mots Clefs | Enjeux : Pétrole & Gaz |

| Mots Clefs | Instituions : Politique Economique des mollahs |

[1With an embargo, the regime could be victim of an uprising due to its poor management of the economy. To avoid such a situation it will have to take risks that could also turn into an uprising.