Chavez Tells OPEC to Use Politics

Chavez Tells OPEC to Use Politics, Curb `Imperialism'
By Daniel Williams and Maher Chmaytelli
Nov. 19 (Bloomberg)

Venezuelan President Hugo Chavez brought his revolutionary zeal to the cartel that controls 40 percent of the world's oil, urging fellow members at a weekend summit to fight against ``imperialism'' and ``exploitation.''

Chavez used the Riyadh, Saudi Arabia, meeting of the Organization of Petroleum Exporting Countries to advance a struggle for the soul of the cartel. Countering him was the conference host, Saudi King Abdullah, who said the organization's goal was simply to produce prosperity.

Their contrasting visions elbowed aside the usual OPEC talk about production quotas and currency fluctuations. In the short term at least, Abdullah's vision is likely to prevail, said Ihsan Bu-Hulaiga, who runs a private business consulting firm in Riyadh and advises the Saudi government.

``OPEC has to do with oil; it cannot solve the world's problems with a political agenda,'' he said. ``It would be putting its bread and butter at risk.''

Support for Chavez came from President Rafael Vicente Correa of Ecuador and from Iran's Mahmoud Ahmadinejad, whose nation is the target of a U.S.-led campaign of sanctions and pressure over allegations that it is pursuing nuclear weapons and destabilizing the region.

Chavez, 53, and Correa, 44, stopped short of threatening an embargo in case of a U.S. attack on Iran. ``We don't want to speculate,'' Correa said in response to a question about whether a halt in oil sales to the U.S. should be employed in case of war.

Anti-Colonial Roots

Chavez said his call for geopolitical activism takes OPEC back to its anti-colonial roots. He likened OPEC to the Non- Aligned Movement, a group founded in the 1950s to stand outside the Soviet-U.S. rivalry.

Chavez also addressed OPEC's debate over whether to drop the U.S. dollar as its currency for pricing oil. ``The dollar is in a free fall and everyone should be worried about it. The fall of the dollar is not the fall of the dollar. It's the fall of the American empire,'' he told a cluster of reporters outside the OPEC meeting hall yesterday.

King Abdullah brushed off proposals from Chavez and Ahamdinejad to drop the dollar.

To counter Chavez's appeal, Bu-Hulaiga said, OPEC needs the U.S. to help ease tensions with Iran and to resolve the Israel- Palestinian conflict. ``It's not enough to ask Chavez to be quiet,'' he said in an interview. ``We need responsibility everywhere. The United States can help lower the tone.''

OPEC has used oil as a weapon before, when its Arab members stopped sales to countries that supported Israel in the 1973 Middle East war. The actions sent petroleum prices spiraling upward, created long lines at gas stations in the United States and Europe and produced high inflation across the globe.

$250 Barrel

Correa said a new war in the region could drive prices to $250 a barrel. Chavez, in his speech, predicted a figure of $200 ``if the United States is crazy enough to invade Iran.'' On Nov. 16 in New York, crude oil for December delivery closed at $95.10 a barrel.

Ahmadinejad, 51, played down the possibility of a U.S. attack, saying that President George W. Bush's administration lacks the ``economic, political and military'' means to carry one out. ``No war will break out in the region,'' he predicted during a news conference yesterday.

``Iran and Venezuela, because they have ideological differences with the U.S., are trying to drag the other OPEC members into the conflict, by appealing to solidarity against imperialism and aggression,'' said John Sfakianakis, chief economist at the Saudi British Bank in Riyadh and formerly a research fellow at Harvard University's Center for Middle Eastern Studies.

The era of OPEC political activism is over, the cartel's Secretary General Abdalla el-Badri told reporters last week. ``We are not using the oil we sell to the world as a political weapon,'' he said at a Nov. 14 press conference in Riyadh.

Saudi Foreign Minister Saud al-Faisal said OPEC wouldn't take a stand on a possible U.S. invasion of Iran. ``These are issues that can be raised in other forums, not in OPEC,'' he told a news conference yesterday.

In Iran, living in the moment

In Iran, living in the moment

By Kim Murphy, Los Angeles Times Staff Writer
August 23, 2007

MAHMUD ABAD, IRAN -- It is a rare three-day summertime weekend, and that means a headlong rush out of sweltering, smoggy Tehran toward the shores of the Caspian Sea.

The narrow highway is hopelessly jammed; drivers abandon their cars for the kiosks selling sodas, ice cream bars and hand-woven souvenir baskets along the roadside. Families despairing of a hotel room spread out straw mats four rows deep on the sidewalks and parking lots of this beach town, snoozing for the night alongside itinerant rice harvesters.

On the wide public beach, men help their sons build sandcastles and women wearing long nylon coats and flowing head scarves plunge eagerly into the tumbling waves, giggling and shouting like raucous black seabirds in the cool saltwater.

Did someone say there was a gasoline shortage?

Since June, Iran has rationed gasoline to about 26 gallons a month for most private cars, leaving many families doubtful about their summer vacation plans and raising fears of pandemonium when school resumes in September and burned-through ration allocations run dry.

The rationing program is designed to stem the nation's crippling reliance on imported gasoline, in a country that has one of the world's largest proven oil reserves. The dependence on foreign gasoline, a result of the country's shortage in refinery capacity, is costing Iran more than $5 billion a year and rendering the nation vulnerable to the possibility of a new round of international sanctions that could cut off the fuel shipments.

The rationing has become the eventual focus of most conversations in Tehran, and the catalyst for a robust black market in fuel as holiday-makers seek ways to get to the shops and the seashores.

Although bookings have been down 25% to 30% here in the popular Caspian beach resorts since the rationing took effect, the crowd for the three-day holiday weekend this month was as big as ever. Hotels were turning away disappointed carloads of beachgoers well into the night. In restaurants offering plates of grilled sturgeon, Caspian trout heaped with coriander and saffron-sprinkled rice, diners were elbow-to-elbow.

Morteza Zarif Ali Hosseini, a printmaker, was camping in a dome tent along the beach with his wife, child and brother's family (they had crammed into one car for the 3 1/2 -hour journey from Tehran). He said he saved up his gas allocations for the long-planned trip.

"Praise God, once a week we use the car now," he said.

Iranian officials announced that average gasoline consumption had declined by more than 20% shortly after it began the rationing in late June. The rationing program is an effort to reduce the country's vulnerability in the event the United Nations elects to target gasoline exports to Iran when it reviews the nation's nuclear program.

"It's not just a matter of U.N. sanctions. Just to give you an idea, since 10 years ago, we have tripled the amount of gasoline we import. And if we don't stop it, we have no idea what this will lead to," said Mohammed Sadegh Jenan Sefat, an economics writer for the Tehran-based publication Kargozaran, which is allied with the party of former President Hashemi Rafsanjani.

What has many economists and officials worried, though, is that the "smart cards" issued in June with six months' worth of gasoline allocations may already be running close to empty for many families.

Considering that the debut of rationing sparked riots at a dozen gas stations, banks and department stores, officials here are worried -- so much so that parliament is seriously considering upping the allocations.

"To imagine what would happen if the government says, 'OK, this is the ration -- no more allocations.' We cannot imagine this scenario," Sefat said.

"For now, people are just seizing the moment and consuming what they can. They're not thinking about the future. So their behavior is completely unpredictable."

In Tehran, taxi rates have skyrocketed, not only because drivers must buy extra fuel at black-market prices, but because many have elected not to drive at all, finding it just as profitable to sell their ration allocations to other drivers.

"I'd guess that as many as 50% of the sedans in this city have run out of their allocation already, and the rest are about to run out," said Ahmad, a Tehran taxi driver who would give only his first name. He made his living driving a taxi in the capital until recently, when selling his 238-gallon-a-month gas allocation suddenly seemed easier and more lucrative.

On a recent afternoon, he stood at a busy street corner and hopped into a taxi cruising past. He went with the driver to the gas station, where he used his rationing card to fill the man's gas tank and stuffed a large wad of riyals into his pocket before being dropped off down the street.

"There are all these rumors that taxi drivers are misusing these opportunities. But in fact, we're just helping our fellow citizens if they are in distress," he said.

In Tehran, he said, black marketers are selling gas for 300% above the ration price of 42 cents a gallon. "But out in the provincial cities, the price is much, much more. People are desperate there. You have people stalking the streets for gas."

Still unclear is whether the rationing program has stemmed the seepage of subsidized Iranian gasoline across the borders into Turkey and Iraq, where steeply higher prices have contributed to a robust smuggling network.

Bijan Bidabad, a former central bank economist, estimated that half of the fuel savings so far may be from an interruption of smuggling networks. "But ultimately, the rational solution to stop the smuggling is to equalize the prices," he said.

That's something the government, fearful of a backlash, still seems unwilling to do.

Instead, it is increasing production of hybrid cars that use compressed natural gas, moving to increase refinery capacity and preparing, it seems, to dole out more gas allocations.

Kamal Daneshyar, chairman of the parliament's energy committee, said the government had been looking at a $9-billion tab to import gasoline this year before the rationing program cut the cost by $4 billion.

"We are pushing in parliament to force the government to announce a free market rate above the rations, so that nobody is in trouble because of the unavailability of gas," he said.

Absent that, he said, "I believe that the government is willing to announce more allocations."

And what if the U.N. eventually elects to block gasoline exports to Iran?

"It's a good excuse for the government to impose stricter rationing," Daneshyar said. "With stricter rationing, with more and more public buses and less high-consumption cars, then we can cope with any restriction."

Iranian gas policy attacked

http://www.engineerlive.com/in-our-opinion/18598/analysis-iranian-gas-policy-attacked.thtml

Analysis: Iranian gas policy attacked
Parliament researchers in Iran urge scrapping of Gas Export Policy. Energy analyst Samuel Ciszuk reports

Iran's influential Research Centre of Parliament has said that potential gas exports ‘are 10 years away’, while a former oil minister claims that the current policy will lead to a ‘catastrophe’, in a weekend of unusually candid challenges to government policies.

Iran's former oil minister, Kazem Vaziri Hamaneh, is reported to have warned President Mahmoud Ahmedinejad of a looming ‘catastrophe’ in the country's energy sector, in his official parting speech during the hand-over ceremony to his successor, caretaker Oil Minister Gholamhossein Nozari.

Warning that the country's high energy consumption created a dangerous situation, Vaziri Hamaneh told the audience that "if we do not find a solution to the energy problem in the next 15 years, the country will face a catastrophe", Iran's student news agency ISNA reported. "I am ready to prove that if the fuel situation continues along current trends we will face an energy crisis in the future," he said. "The current pattern of consumption is a disaster for the country." He also confirmed rumours that he had been sacked by President Ahmedinejad, launching a scathing (in Iranian terms) attack on the president's policies and terms of rule by saying that in the "two years of Ahmedinejad's government, oil managers had been forced to pay for all mistakes made in the past. And I say here if these group's pressures are not stopped, the industry and the country will face crisis."

Vaziri Hamaneh's uncharacteristically candid parting speech (19th August) shows that the technocrat minister, faithfully running his master's errands for well over a year and a half, has not done so without a certain measure of frustration. Iran recently enforced a hugely unpopular fuel-rationing scheme in an attempt to curb wasteful consumer patterns, for which the Oil Minister became the public face, although it seems that his and his ministry's experts were largely overridden when it came to how the scheme should be designed in order to succeed in reversing the country's high fuel consumption growth.

Iran, which suffers both from falling oil export levels of up to 5 per cent annually due to maturing oilfields and inadequate investment in enhanced oil recovery (EOR) technologies and field upgrades, has come to supply its population with hugely subsidised fuels that have to be imported due to the country's lack of sufficient refining capacity.

The recent rationing scheme, while lowering consumption, has failed to bring demand down to the level of domestic production and the lack of a facility for consumers to buy gasoline (petrol) outside the quotas at market prices, advocated by the oil ministry experts, has failed to give the population a grasp of the real value of gasoline. Clearly, by making the point now, Vaziri Hamaneh wants to stimulate media and parliamentary debate on the issue, as Iran still has to budget for gasoline imports at the value of billions of US dollars per year, while export revenues and output are shrinking rapidly.

Iran's oil ministry was also indirectly criticised by the president during the fuel-rationing protests for not building more refineries, while virtually all export revenues have been spent by the president on regional infrastructure and industry projects as part of his populist securing of countryside votes, or on the country's vast offshore gas production projects. This seems to be at the heart of Vaziri Hamaneh's criticism of Ahmedinejad's treatment of his ministry's officials.
A critical parliament

The Iranian parliament's research centre this weekend delivered a further blow to the president's grandiose push for Iranian gas export capacity by claiming that Iran would not have enough gas to sustain exports for another 10 years.

"It seems that for at least the next 10 years there will not be any extra gas for export. Iran is advised to remove gas export from the country's policy due to the limited production capacity," Agence France-Presse (AFP) reported it as saying.

Iran currently exports only small levels of gas to Turkey, offset by a similar amount being imported from Turkmenistan to cover supply shortages in northern Iran, although several vast export schemes are being pursued. US-led financial sanctions against Iran over its alleged nuclear weapons programme and its uranium enrichment has severely hurt its gas development, depriving it of technology access, investments, and credits, and placing the programmes years behind schedule. In a climate of sliding oil export revenues and rising fuel consumption costs, the research body takes the line adopted by a seemingly growing body of parliamentarians, who assert that Iranian gas should be used to supplant the fuel import needs as much as possible, as well as increased volumes being used in reinjection to maximise the oil output. Since oil is easier to market and harder to sanction, and Iran would lessen its vulnerability to gasoline import sanctions, this argument has a national security dimension quite apart from its economic benefits.

Outlook and implications

The criticism seems to herald a new and more unified push by factions opposed to Ahmedinejad's policies in parliament, and it remains to be seen if this debate might come to include Iran's powerful clerics surrounding Supreme Leader Ayatollah Ali al-Khamenei. For Ahmedinejad, the position might be a very hard one from which to climb down, since the development of Iran's gas fields and export capability has been portrayed by him as a matter of national pride and symbolic of Iran's advancement under the Islamic Republic.

As the country is increasingly short of funds, however, and its gas development projects are severely lagging behind, there is a case for a readjustment of the oil and gas policies, both from an economical and security point of view. Iran's showcase development of LNG and gas-to-liquids (GTL) capacity already seems to have stalled due to the lack of international technology and investment, but the country could reroute the gas into its own network instead and promote its use in the country's old and decrepit electricity and heat-generating systems, offsetting oil production and maybe even halting the output fall by reinjecting greater volumes, in order to raise oil export revenues that the United States would not be able to deny Iran through sanctions.

Ahmadinejad has a lot invested in the gas development and export projects, especially since he has pinned much of his high-profile regional diplomacy and policies on them, and it will be very hard for him to turn the policies around. Unless international investments start flowing in, however, Iran's expansionist oil and gas policy literally risks running out of fuel before then, with less oil and no gas being monetised despite huge investments having been made, causing a major meltdown of the Islamic Republic's energy sector and policies.

Samuel Ciszuk is Middle East energy analyst with Global Insight.

Gas Station Owners Protest

Gas Station Owners Protest; Some are in Prison
Amir Hossein Latifi
2007.08.08
Rooz Online

Meanwhile, the gasoline crises is now impacting the agricultural sector in addition to the city and inter-city transportation activities such that the gasoline shortage has forced many businesses involved in the transportation and delivery of farm products to refrain from moving these products. This has already led to contamination of fruits and vegetables, creating some shortages.

In a related report, the ministry of petroleum announced that the import budget for 2007 has already been approved and so it is not clear at this point in time how much money is needed to import gasoline till the end of the current Iranian year (ending on March 20, 2008).

The meeting of the gas station owners on Tuesday and the remarks of the syndicate of gas station owners has surprised many observers because of the express criticism that was raised at the way the government was implementing the gasoline rationing plan and the dealing with gasoline stations.

Bijan Haj Mohammad Reza, the president of the syndicate of gas station owners explained the problems of his trade in clear and explicit terms. “Since the implementation of the gasoline rationing scheme, many gas station owners are now in prison because many lost gasoline cards had been found at the stations. Many syndicate members did not even know of such incidents,” he said. “I can confidently say that half of those present in this meeting are willing to relinquish ownership of their stations and pass them on to the ministry of oil and so we call on the ministry to make a decision on our trade because it has already cheated on us and not provided us with any of the income derived from the rationing scheme.”

Calling the need to have access to unrationed gasoline a necessity, he said, “The ministry of oil must clarify and define the meaning of ‘gasoline outside the (distribution) network’. Does this mean that a gas station is not allowed to provide gasoline – out of kindness which has been the government’s slogan - to individuals who have a need for it beyond the ration card?”

Iran May Give More Fuel Rations to Help Tourism

Iran May Give More Fuel Rations to Help Tourism
August 20, 2007
Reuters

Iran may offer drivers extra gasoline above their monthly quota, a newspaper said on Monday.

Iran may offer drivers extra gasoline above their monthly quota, a newspaper said on Monday, in a move to help boost domestic tourism which hoteliers say has suffered a blow since fuel rationing started in June.

Iran, OPEC's second-biggest oil producer, started rationing gasoline on June 27, as summer holidays began and when Iranians usually leave town, many to Caspian Sea resorts in the north.

The fuel scheme was introduced to curb soaring consumption which far outstripped the country's ability to produce gasoline. Iran was importing about 40 percent of its needs before rationing began, costing it some $5 billion a year.

But many private drivers complain the 100 litres they get each month is not enough to meet everyday needs, let alone holidays. Airline travel has surged since rationing started.

"Following the final decision of decision-makers, 150 to 200 litres of 'travel gasoline' will be added to the quotas of drivers in the country," Tehran Emrouz newspaper reported on Monday, without citing a source for its report.

It said the addition would be offered this week.

"Increasing the fuel quota for drivers is aimed at easing some concerns about a decrease in the number of (tourist) trips this summer. Most likely it will be followed by an increase in trips next week" when there is a public holiday, it added.

Hoteliers in Caspian resorts, a popular getaway particularly for millions of Iranians escaping Tehran, say their businesses have been hit by the rationing scheme and fear worse to come.

"Rationing has definitely had an impact on our hotel. The number of our customers has dropped 30 to 40 percent this summer," Mehrdad Farhat-Tabar, manager of the Caspian's Narenjestan hotel, told Reuters.

He said occupancy had plunged to 10 percent of the hotel's 191 rooms, when it should be around 40 percent or more at this time of year. "When the six months (fuel) quotas finish, it will be even worse," he said.


RESERVATIONS DROP

Motorists can buy their quota up to six months in advance. But many have avoided travelling for fear of using up quotas too quickly. There is no official system for buying extra fuel, even at higher prices, although a black market has emerged.

"The number of tourists coming to this hotel has been cut by half this year," said Esfandiar, a receptionist who only gave his first name, at a five-star hotel near the Caspian town of Chalus.

"We are concerned about our children who want to go to school in a few weeks. There are no cars (with fuel) to take them," he added. Schools restart in September.

Workers at fuel stations, many of which are privately owned, are also complaining about the scheme.

"Our gasoline sale has dropped by 15,000 to 20,000 litres a day compared to the time before rationing began. People try to save their fuel," said Arsalan Jafari, manager of a pump station, also on the Caspian coast.

Iranian officials say fuel consumption has dropped. But, at least in the capital, there has been no obvious easing of traffic jams after roads initially became quieter when rationing was first implemented.

However, some hoteliers said bookings had improved after reservations plunged at the start of the summer.

"The first two weeks were very scary. We were becoming paralyzed in the first week but things have gotten better now. We had many travellers in the past few weeks," said Amir Khazaie, executive manager of Shalizar Hotel in Noshahr city.

Iran says fuel consumption down 27%

Iran says fuel consumption down 27%
30 July 2007
by Reuters

Iran's daily gasoline consumption has dropped by about 20 million litres since the No. 2 OPEC oil producer started to ration motor fuel in June, Oil Minister Kazem Vaziri-Hamaneh was quoted as saying on Sunday.

He did not specify how much fuel Iranian drivers were now using but officials had said Iran consumed 75 million litres a day, 40 % of which was imported, before rationing was introduced on June 27.

"During this time 20 million litres of gasoline was saved per day on average," state television quoted Vaziri-Hamaneh as saying.

The move last month to start rationing gasoline sparked protests by motorists used to cheap, abundant fuel. It aimed to curb consumption in the Organization of the Petroleum Exporting Countries member, which does not have enough refining capacity to meet domestic gasoline needs.

Some Iranian officials had worried costly fuel imports were making the country increasingly vulnerable when world powers are considering ratcheting up United Nations sanctions against Iran over its atomic plans.

Iranian oil official Hojjatollah Ghanimifard said on July 17 his country would cut its gasoline imports by at least 14 % from August.

Private drivers receive 100 litres of fuel a month at the heavily subsidised price of 1,000 rials (11 U.S. cents). Many complain it is not enough and have urged the government to offer more, even if they have to pay a higher price.

But the government fears this would send inflation, now running at about 16 % year-on-year, even higher.

The United Nations has imposed two rounds of sanctions over Tehran's failure to halt disputed nuclear work the West says is aimed at building atomic bombs. Iran dismisses this charge, saying it only wants to generate electricity. A third set of sanctions is now in preparation.

The United States, leading efforts to isolate Iran, has described Tehran's gasoline imports as leverage in the row.

Iran opposed to OPEC output hike

Iran opposed to OPEC output hike
by Safura Rahimi
30 July 2007
Reuters

Iran firmly opposes a possible hike in OPEC's crude oil output aimed at curbing rising oil prices, Iranian state television reported on Sunday.

Iranian Oil Minister Kazem Vaziri Hamaneh has said the recent surge is due to political tensions and a shortage of gasoline in the US, and not linked to OPEC's recent cutbacks.

He added that in the current conditions, boosting oil production will not have an effect on oil prices as ‘political and geopolitical reasons' are driving rise and fall in the market.

The oil price has surged over the past month to near-record highs as supply concerns draw investor interest.

OPEC President Mohammed al-Hamli said last week that the organisation was worried high oil prices might hurt the world economy - remarks that fuelled speculation of a possible OPEC output hike.

OPEC is set to have its next regular meeting on September 11 at its headquarters in Vienna.

However, Oil Minister Vaziri Hamaneh said he did not think OPEC would put the issue of changing its output level on the agenda, according to Iran's Jomhuri-ye Eslami newspaper.

Iran's Radioactive Russian Invoices

Iran's Radioactive Russian Invoices
By Pavel Romanov
Jul. 16, 2007
EnergyTribune.com

Iran’s nuclear aspirations may not end with a bang or even a whimper. Instead, their demise may be due to a stack of unpaid invoices. By the end of May, the Iranian government owed Russia’s RosAtom more than $100 million for work done on the Bushehr nuclear power plant. And the Iranians have no apparent desire to pay their bills. In late May, a RosAtom official said that “it seems that the Iranians have lost interest” in the Bushehr plant, continuing that the “project has become unprofitable for us.”

There have been ongoing squabbles over payment. Under the contract terms, Iran is supposed to pay RosAtom about $25 million a month. In late 2006 after months of non-payment, Iran resumed payments and assured that it would stay current. RosAtom resumed construction at Bushehr, sending 2,000 Russian workers on-site. But the money problems continue. Sergey Kirilenko, the head of RosAtom, has said that the Bushehr plant could be finished within a few months, provided that Iran pays its bills.

Russia delays Iran nuclear plant to 2008

Russia delays Iran nuclear plant to 2008
by Reuters
25 July 2007

Russia has no chance of finishing Iran's first nuclear power station before autumn 2008, a year behind schedule, a Russian subcontractor helping to build the plant told RIA news agency on Wednesday. Russia has used the Bushehr nuclear plant as a lever in relations with Tehran which chilled this year after a row over missed payments for building the plant in southwest Iran.

Completion of Bushehr is likely to trigger a sharp reaction from the United States, which fears Iran's nuclear programme would be strengthened by the delivery of Russian nuclear fuel.

Atomstroiexport, the Russian state firm building the plant, said a shortage of payments from Iran was undermining confidence in the Bushehr project.

"Today we can say for sure that to launch the Bushehr nuclear plant this autumn is unrealistic," said Ivan Istomin, the head of a subcontractor called Energoprogress that is working for Atomstroiexport, RIA reported.

"A realistic time frame for starting the reactor... is moving to autumn 2008," he said.

Russian arms sales and nuclear cooperation with Iran have strained relations with Washington, which suspects Tehran of using seeking to develop atomic weapons under the cover of its civilian nuclear programme.

Moscow says Tehran does not have the capability to make nuclear weapons. But some senior officials are wary of relations with Iran and say Russia's interests are not served by Iran gaining nuclear weapons.

Iran says it has a right to develop its civilian nuclear sector and that its nuclear programme is not aimed at developing nuclear arms.

Mohammad Saeedi, deputy head of Iran's Atomic Energy Organisation, and Javad Vaeedi, Iran's deputy nuclear negotiator, were in Moscow on Wednesday for talks, an Iranian nuclear official told Reuters.

A Russian nuclear official said the talks would focus on "efforts to stabilise the situation around Bushehr."

CONFIDENCE UNDERMINED

Russia has said it will stick to the project, worth about $1 billion. But Atomstroiexport said Iran was still paying just a fraction of the $25 million a month needed to finish the plant.

"Confidence in the project has been undermined," said Atomstroiexport spokeswoman Irina Yesipova. "It is an unstable situation where there are lots of announcements but no money."

Iranian officials insist they have made payments on time and say Moscow is delaying because of Western pressure.

"There is just not sufficient financing and that has influenced confidence, the confidence of the Russian side and Russian subcontractors towards the Bushehr project and towards Iran," Yesipova said.

Russia in February delayed the launch of the plant - planned for September 2007 - citing payment problems. Russia also delayed sending nuclear fuel to Bushehr as it had earlier planned for March 2007.

Russia has traditionally been seen as Tehran's closest big-power ally but senior Russian officials have expressed exasperation with Tehran's negotiating tactics.

They cite the more extreme pronouncements of Iranian President Mahmoud Ahmadinejad, who has called for wiping Israel from the world's map.

Iran's Oil Ministry

Oil Falls a Third Day on Signs U.S. Refiners Increased Output
By Mark Shenk
July 24 (Bloomberg)

Crude oil fell for a third day on speculation that U.S. refineries are increasing their fuel production and a signal that OPEC might be willing to pump more.

A report tomorrow may show refineries operated at 91.6 percent of capacity, a 10-month high, according to a Bloomberg News survey. OPEC will raise output if required, an official of Iran's Oil Ministry said. Hedge-fund managers and other large speculators cut long positions, bets that prices would rise, last week, according to the U.S. Commodity Futures Trading Commission.

``We are seeing a shift in sentiment,'' said Tim Evans, an energy analyst at Citigroup Inc. in New York. ``Rising refinery runs will eventually boost product stocks, and if they are comfortable you don't need a long position in crude.''

Crude oil for September delivery fell $1.57, or 2.1 percent, to $73.32 a barrel at 11:23 a.m. on the New York Mercantile Exchange. Futures reached $76.13 on July 20, the highest intraday price for a front-month contract since Aug. 10. Prices are up 20 percent this year.

Brent crude oil for September settlement declined $1.56, or 2 percent, to $75.30 barrel on the London-based ICE Futures exchange.

``If the oil market needs it, OPEC will inject more oil into it,'' said Javad Yarjani, head of OPEC affairs at Iran's oil ministry, according the Islamic Republic News Agency. Iran is the second-biggest oil producer in the Organization of Petroleum Exporting Countries. Saudi Arabia is the largest producer.

`Only Real Debate'

``The Iranians are normally price hawks, so this is a sign that the only real debate at the next meeting will be about how large the increase will be,'' Evans said.

Oil ministers from OPEC's 12 members will meet on Sept. 11 in Vienna to discuss production targets. The group pumps about 40 percent of global crude supply.

``I have received no complaints from any customers about a shortage of crude supplies,'' Qatari Oil Minister Abdullah bin Hamad Al-Attiyah said in a telephone interview today. ``OPEC should move when there is strong evidence that there is a shortage in crude supplies.''

OPEC members have said that oil markets have plenty of crude oil and price increases were caused by geopolitics and refining bottlenecks. The 10 members that have quotas pledged to trim a total of 1.7 million barrels a day from production in two rounds of cuts, one that started Nov. 1 and another that took effect Feb. 1.

`Critical Point'

``We're at a critical point,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. If we can't break out above $77.50 and test the old highs, prices could be heading to the $60 area. If prices get above $77.50, I see us rising $17.50 higher as we breach the old record.''

New York oil rose to a record $78.40 a barrel on July 14, 2006, on concern fighting in Lebanon between Israel and Islamic militia Hezbollah would spread through the Middle East.

Suncor Energy Inc. said yesterday that its oil-sands production is returning to full strength after a 50-day shutdown at a Canadian processing plant. The shutdown began May 31 and cut output by half, to roughly 121,000 barrels a day, the Calgary- based company said. Canadian oil travels through pipelines to the U.S. Midwest.

The crude-oil market often follows gasoline during the summer driving season. U.S. gasoline demand peaks between the Memorial Day holiday in late May and Labor Day in early September.

Gasoline for August delivery plunged 5.34 cents, or 2.5 percent, to $2.0507 a gallon in New York. Futures touched $2.031 a gallon, the lowest since April 18. Prices are heading for the ninth decline in 10 days.

Oil Revenues Are Alarming, Economists Warn Ahmadinejad

Fariba Sarraf - 2007.07.16
Rooz Online

A group of Iranian economists warned President Mahmoud Ahmadinejad that “oil revenues are alarming, and the government must not increase expenditure simply because revenues have increased.”

The same group of economists wrote a letter last year to President Ahmadinejad criticizing his government’s economic policies. Last month, they published a second letter calling on the President to “review the administration’s economic policies” and “take a fundamental step towards improving the nation’s economic conditions.” In response to that letter, individuals affiliated with the administration accused the economists of engaging in “politicking” and even fabricating data.

According to E'temad Melli daily, however, “After reviewing the letters, officials in the administration decided to invite the economists to the President’s office in order to discuss their concerns.”

In that meeting that lasted more than 5 hours according to a report published by the Iranian Student News Agency [ISNA], economists argued that the country was experiencing a second Dutch Disease as a result of the administration’s expansionary fiscal policies. They also raised their concern about the state’s increasing oil revenues in the past two years – exceeding 120 billion dollars – telling the President that they were worried about “losing an unprecedented opportunity.”

One of the economists present in that meeting, Zahra Karimi, told reporters, “It seemed as if Mr. President only wanted to say that our criticisms were not fair, and that his administration’s performance fares much better compared to that of previous administrations. He said that he looks forward to new data that will prove his administration’s claims.”

Sarmaye, a daily published by one of the disgruntled economists, Hasan Abdeh Tabrizi, quoted an economist present at the meeting – Dr. Meidari – as having said, “oil revenues are alarming. Oil is ominous and the government must not increase expenditure simply because revenues have increased.”

The Donyaye Eghtesad [“World of Economics”] publication quoted another economist present at the meeting: “It appears as if the administration regards two important financial institutions as obstacles facing the implementation of its desired policies: one is the Budgetary Management and Planning Organization of Iran, which oversees planning and budgetary procedures, hence controlling the allocation of resources among public institutions; and another is the country’s banking system, which plays a fundamental role in distributing funds to private and public firms. Perhaps these two institutions, the Budgetary Management and Planning Organization and the banking system, have not performed their duties as well as they should have given the country’s special economic conditions; but we do not approve of the government’s treatment of them either. With this kind of treatment, the country’s financial conditions will worsen even more.”

Iran, Reversing Ban, Will Open Reactor to U.N. Inspectors

July 14, 2007
Iran, Reversing Ban, Will Open Reactor to U.N. Inspectors
By THE ASSOCIATED PRESS

United Nations nuclear inspectors, banned by Iran earlier this year from visiting a heavy-water reactor, will be allowed to inspect it before the end of July, the International Atomic Energy Agency said Friday.

The agency, which is based here, said Iran had also agreed to answer questions on past experiments that could be linked to a weapons program.

For years Iran has failed to cooperate with the agency on the agency’s terms, leaving it unable to ascertain the truth of Iran’s claims that it has no plans to build nuclear weapons and that its atomic activities are meant strictly to generate energy. Its refusal to cooperate or stop enriching uranium prompted the United Nations Security Council to pass two sets of sanctions.

Any Iranian decision to cooperate could weaken a push by the United States and Western allies on the Council to impose new sanctions.

In talks between Iranian officials and the agency’s deputy director general, Olli Heinonen of Finland, “agreement was reached” to allow an inspection of the heavy-water reactor at Arak by the end of July, the agency said in a statement.

The two sides also agreed on how “to resolve remaining issues regarding Iran’s past plutonium experiments.”

Access to the Arak reactor is an important part of any survey of Iran’s nuclear activities because it could produce plutonium once completed, sometime in the next decade.

Because plutonium and enriched uranium can be used in warheads, the Security Council demanded a stop not only to enrichment but also to construction at Arak.

The Council also sought full openness about the work at Arak; more than two decades of nuclear activities went undetected until disclosed four years ago by an Iranian dissident group.

Venezuela Agrees To Sell Gasoline To Iran

Venezuela Agrees To Sell Gasoline To Iran
Jul 4, 2007

Venezuela has agreed to sell gasoline to Iran, the South American county's energy minister said in comments published Tuesday, a week after the Islamic country imposed a fuel rationing program that has sparked violence.

"Yes, Iranians have asked to buy gasoline from us and we have accepted this demand," Rafael Ramirez told the Iranian daily newspaper Shargh. The reformist daily said Ramirez refused to elaborate on the deal.

During a visit to Iran this week, Venezuelan President Hugo Chavez called the two "strategic partners." Ramirez accompanied Chavez on the visit.

Last week, the Iranian government began rationing fuel, causing angry Iranians to smash shop windows and set fire to dozens of gas stations in the capital Tehran and several other cities.

The government says the fuel rationing will free up funding for development projects and make the country "invincible."

Iran is one of the world's biggest oil producers, but it doesn't have enough refineries, so it must import more than 50% of the gasoline its people use from abroad.

© 2007 Dow Jones Newswires

Banning the story

"What can I do with three liters? Set myself on fire? Please let the authorities hear my voice that we cannot live like this. Life has become very difficult for us, I cannot support my wife and children anymore."

http://www.rferl.org/featuresarticle/2007/06/1cf0d8b2-d8e1-421e-9737-48063be9ef08.html

Iran's Gas Riots

Iran's Gas Riots
By Kenneth R. Timmerman
FrontPageMagazine.com
June 29, 2007

This week’s gasoline riots in Tehran were entirely predictable. They are also the clearest measure we have seen in recent times of the remarkable fragility of Iran’s Islamic regime.

Predictable, because they have been debated publicly in Iran for weeks and delayed several times, for fear of adverse public reaction.

A measure of the regime’s fragility because large numbers of Iranians have braved repeated threats to protest gas rationing and price hikes in one of the world’s largest petroleum exporting countries

Mahmoud Ahmadinejad came to power in August 2005 on promises that he would put more of Iran’s oil revenue on the tables of ordinary Iranians.

During the election campaign two years ago, he toured Iranian cities and towns, promising a new high school here, a municipal swimming pool there, a new factory, a new gymnasium, rural development, whatever.

Until now, he has been unable to deliver on those promises, squandering Iran’s windfall oil profits on public subsidies to such un-Iranian groups as Hezbollah and Hamas. People know this, and they resent it. And that is what ultimately led to this week’s gas riots, with petrol stations set ablaze in Tehran and in cities across Iran. http://thespiritofman.blogspot.com/2007/06/petrol-crisis.html

So far, the economic vulnerability of the regime has not translated into regime-threatening political vulnerability; but just wait, says one prominent Iranian businessman encountered in London, who sees similarities in what is happening in Iran today with the final years of the former shah.

During the late 1970s, he reminded me, the Iranian economy, flush with cash from high oil prices, was beset by high inflation, just as it is now. The shah’s answer was to find a few businessmen who had raised prices and throw them in jail, he said.

In April, the Research Center of the Iranian Majlis ( the rough equivalent of our Congressional Research Service) announced that inflation had risen by a stunning 22.4% for the calendar year that ended on March 21, and projected 24% inflation for the current year.

That is an unbelievably bad performance of what is supposed to be a populist government, especially when coupled to double-digit unemployment and the growing scarcity of foreign investment as the U.S.-led sanctions begin to bite.

Just as the former shah, the current regime is also seeking scapegoats: the United States and Israel (surprise, surprise). To make their case more convincing, they have singled out an Iranian businessman who fled the country on February 21, who was recaptured by Iranian intelligence agents three weeks later in a brazen extraterritorial operation in Oman.

Shahram Jazayeri was a cause celebre in Iran by the time he was dragged out of a small tourist hotel in Khasab, an Omani port in the Strait of Hormuz on March 14. Before fleeing Iran, he was sentenced to fourteen years on corruption charges,

Jazayeri made it known at the time that he had documents implementing family members of the Islamic Republic’s Supreme Leader, Ayatollah Khamenei, in business deals described by the court as corrupt. “That connection to the House of the Leader – the very summit of the state - made him radioactive,” Iranian analyst Shahriar Ahy told me.

Jazayeri’s family, whom I contacted in Canada not long after he was recaptured and tortured in Evin prison in Tehran, insisted that he had been framed and that his extensive network of businesses was legally sanctioned by the Iranian authorities. They insisted that he still hoped the courts would exonerate him. Fat chance.

Ayatollah Khomeini, the figurehead who spearheaded the shah’s overthrow, liked to say that the revolution wasn’t about the price of watermelons. It was his way of saying that the Iranian people would endure all kinds of economic hardship, if they identified with the regime.

But this week’s gasoline riots show that Iranians do care about the price of watermelons – at least, when they can see just how rich their country ought to be (because of high oil prices), and how little of that wealth is trickling down to them.

Consider this, the Iranian businessman in London told me.

When Iranians travel to Dubai, they are humiliated. They fly out of Mehrebad airport in Tehran, which was constructed some 45 years ago, and land in a modern, state-of-the-art fantasy-world in Dubai. To make the insult even more grating, unlike their native land, Dubai has no oil. No oil, and yet they are so rich!

The only reason Dubai is prosperous and Iran remains mired in poverty comes down to effective leadership – and the lack of it. And Iranians can see this every time they travel to the UAE.

Working quietly behind the scenes, the Bush administration has won agreement from bankers in Dubai to stop clearing Iranian government financial transactions. Because Dubai has become the economic lifeline connecting Iran to the outside world, this has been a major blow to the regime.

Just last week, sources in London told me, the British government agreed to a U.S. request to put pressure on the HSBC bank to stop clearing Iranian government financial transactions as well. Since HSBC handles approximately 50% of Tehran’s remaining international business, this is an additional heavy blow.

And the economic pressures are about to expand. While in London this week, I learned of a British government proposal, now being discussed as a draft United Nations Security Council Resolution, that would ban Iranian government-owned ships and aircraft from international travel.

According to Lloyd’s List of London, the proposed UNSC resolution, as currently drafted by Britain, would prohibit Iranian ships not only from landing at foreign ports but from transiting international waters. That is an extremely far-reaching sanction that would cut off an estimated 40% of Iran’s daily oil exports, at least in the short run.

The British measure “would effectively strip Iran of the right of innocent passage, enshrined in the United Nationals Law of the Sea Convention,” Lloyd’s List wrote on June 27

The most immediate target of these latest sanctions would be the National Iranian Tanker Company (NITC), which operates a fleet of around thirty http://www.nitc.co.ir/aboutus.htm Very Large Crude Carriers.

Iran could eventually contract with other shipping companies to lift their oil, but they would then have to compete with other exporters in the Persian Gulf and most likely would have to offer significant price incentives to get their oil on board.

All of this points to one simple fact, as far as U.S. policy toward Iran goes: financial sanctions have proven to be a far more effective tool than political pressures or political inducements, as fashioned by the State Department.

This regime in Tehran has never ceased a single act of bad behavior because the West has offered it a bribe. On the contrary: the greater the bribes, the more bad behavior we have seen.

Over the past six moths, as UN sanctions have slowly begun to bite, the State Department continued to hold out hope that the economic “pain” could be ended, if only the regime would suspend its uranium enrichment program.

Until now, the regime has said no. To show their resolve, Iran’s leaders chose instead to impose gasoline rationing, to spread the coast of sanctions across the population.

For the first time, the law of unintended consequences is working in the West’s favor. The popular reaction to the gas rationing has shown the regime’s vulnerability.

Now we need to take the next step and provide serious aid and political support to the pro-democracy forces inside Iran as they step forward to confront the regime.

The alternative to doing so will be war.

Petrol stations burn in protest at Iran rationing

Petrol stations burn in protest at Iran rationing
Nasser Karimi
June 28, 2007
The Guardian

Iranians set fire to a dozen petrol stations in Tehran in the early hours yesterday, angered by the sudden start of fuel rationing, a step that threatens to further increase the unpopularity of President Mahmoud Ahmadinejad.

After the violence security was strengthened at several stations, and there was calm as Iranians lined up to fill their tanks under the new restrictions, which limit private drivers to 100 litres (22 gallons) a month.

The government has been warning for weeks that it would start rationing, but the announcement on Tuesday, only three hours before the measure went into effect at midnight, sent Iranians rushing to fill up.

The rationing is part of a government attempt to reduce billions of dollars in subsidies it pays to keep petrol prices low. Iran is one of the world's biggest oil producers, but has few refineries and imports more than 50% of its petrol needs. The government says money saved from subsidies can go to building refineries, improving public transportation and job creation.

But a rise in petrol prices last month and now the rationing are feeding discontent with Mr Ahmadinejad, who was elected in 2005 on a platform of helping the poor and fixing Iran's ailing economy.

"This man Ahmadinejad has damaged all things. The timing of the rationing is just one case," said Reza Khorrami, a teacher who was among those lining up at a Tehran petrol station.

The short notice appeared to be aimed at preventing a rush to hoard petrol.

Yesterday a group of legislators tried to draft a bill for cancelling the rationing, but failed to win majority support.

Roger Stern on Iran

The U.S. case against Iran is based on Iran’s deceptions regarding nuclear weapons development. This case is buttressed by assertions that a state so petroleum-rich cannot need nuclear power topreserve exports, as Iran claims. The U.S. infers, therefore, that Iran’s entire nuclear technology program must pertain to weapons development. However, some industry analysts project an Irani oilexport decline [e.g., Clark JR (2005) Oil Gas J 103(18):34–39]. If sucha decline is occurring, Iran’s claim to need nuclear power could begenuine. Because Iran’s government relies on monopoly proceedsfrom oil exports for most revenue, it could become politicallyvulnerable if exports decline. Here, we survey the political economyof Irani petroleum for evidence of this decline. We define Iran’s export decline rate (edr) as its summed rates of depletion and domestic demand growth, which we find equals 10–12%. We estimate marginal cost per barrel for additions to Irani production capacity, from which we derive the ‘‘standstill’’ investment required to offset edr. We then compare the standstill investment to actual investment, which has been inadequate to offset edr. Even if a relatively optimistic schedule of future capacity addition is met, the ratio of 2011 to 2006 exports will be only 0.40–0.52. A more probable scenario is that, absent some change in Irani policy, this ratio will be 0.33–0.46 with exports declining to zero by 2014–2015. Energy subsidies, hostility to foreign investment, and inef-ficiencies of its state-planned economy underlie Iran’s problem,which has no relation to ‘‘peak oil.’’

http://www.pnas.org/cgi/reprint/104/1/377

New Gasoline Rationing Behind Fires in Tehran

New Gasoline Rationing Behind Widespread Fires in Tehran
Navid Ahmadi - 2007.06.24

A fire at a house in Tehran’s Modarres Freeway inflicted heavy burns on a woman and a child. Fires have increased in Tehran during the past week, as temperatures have gone up and people have begun to store gasoline in their homes, ahead of a new government plan to ration the fuel.

Since last Thursday, more than 200 counts of fires have been reported in Tehran. Though Tehran’s Fire Department has not yet released official figures, one firefighter told Rooz, “In the past five days, the number of our missions to battle fires has increased. Most of the fires are due to explosions connected with gasoline storage.”

The price of gasoline increased by 25 percent two weeks ago, reaching 1000 rials per litre [about 11 cents, up from 9]. The administration of Ahmadinejad initially opposed the idea of a price hike, but was forced to implement it following a Majlis [“Parliament”] bill. Still, another Majlis bill requires the administration to implement a new plan for rationing gasoline consumption. Gasoline rationing officially began last Thursday for all state-owned vehicles: A state-owned vehicle can purchase no more than 10 litres of gasoline per day. The plan has not yet been enforced for private owned vehicles, but people have already begun to store gasoline as the plan is set to kick off this week.

Some Majlis deputies talked about a private meeting they held with the Interior Minister during which the gasoline quota for private vehicles was set to be between 100 and 120 litres per month. The public and the Administration both oppose these numbers. The Administration is also against dual prices for gasoline. The divergent positions on the issue have led the Majlis to send a report to Supreme Leader Ayatollah Khamenei, asking for his direct orders on the issue. The Supreme Leader’s response: “There is no alternative but to ration gasoline.”

With rumors spreading that quotas for private vehicles are set to be announced today, some have begun to store thousands of litres of gasoline in large tankers. This has caused dozens of fires, as most people store gasoline tankers in their basements, and with higher temperatures in the capital, accidents are prone to repeat themselves.

The most notable recent fire was the one at Tehran’s bazaar, which destroyed several business complexes.

Iran Cracks Down on Dissent

Iran Cracks Down on Dissent, Parading Examples in Streets
By NEIL MacFARQUHAR
June 24, 2007
New York Times

Iran is in the throes of one of its most ferocious crackdowns on dissent in years, with the government focusing on labor leaders, universities, the press, women’s rights advocates, a former nuclear negotiator and Iranian-Americans, three of whom have been in prison for more than six weeks.

The shift is occurring against the backdrop of an economy so stressed that although Iran is the world’s second-largest oil exporter [this is incorrect, it is the fourth-largest] , it is on the verge of rationing gasoline. At the same time, the nuclear standoff with the West threatens to bring new sanctions.

The hard-line administration of President Mahmoud Ahmadinejad, analysts say, faces rising pressure for failing to deliver on promises of greater prosperity from soaring oil revenue. It has been using American support for a change in government as well as a possible military attack as a pretext to hound his opposition and its sympathizers.[...]

Young men wearing T-shirts deemed too tight or haircuts seen as too Western have been paraded bleeding through Tehran’s streets by uniformed police officers who force them to suck on plastic jerrycans, a toilet item Iranians use to wash their bottoms. In case anyone misses the point, it is the official news agency Fars distributing the pictures of what it calls “riffraff.” Far bloodier photographs are circulating on blogs and on the Internet.[...]



The National Security Council sent a stern three-page warning to all the country’s newspaper editors detailing banned topics, including the rise in gasoline prices or other economic woes like possible new international sanctions, negotiations with the United States over the future of Iraq, civil society movements and the Iranian-American arrests. [...]

Analysts trace the broadening crackdown to a March speech by Ayatollah Khamenei, whose pronouncements carry the weight of law. He warned that no one should damage national unity when the West was waging psychological war on Iran. The country has been under fire, particularly from the United States, which accuses it of trying to develop nuclear weapons and fomenting violence in Iraq.[...]

The three Iranian-Americans are being held in the notorious Section 209 of Evin Prison, the wing controlled by the Intelligence Ministry, and have been denied visits by their lawyers or relatives. Iran recognizes only their Iranian nationality and has dismissed any diplomatic efforts to intervene. A rally to demand their release is set for Wednesday outside the United Nations.[...]

“People don’t want to come to conferences, they don’t even want to talk on the phone,” said Abbas Milani, the director of the Iranian studies program at Stanford University. “The regime has created an atmosphere of absolute terror.” [...]

Not that everyone has been intimidated. More than 50 leading economists published a harshly worded, open letter to the president saying his policies were bringing economic ruin. High unemployment persists, there has been little foreign investment and inflation is galloping, with gasoline alone jumping 25 percent this spring.

Gasoline rationing is expected within a month, with consumers so anxious about it, reported the Web site Ruz, financed by the Dutch government, that skirmishes broke out in long lines at some pumps on June 17.

Full article

Iran Gasoline Rationing Provokes Panic Buying

by Reuters
17 June 2007

Some Iranians are stocking up on gasoline amid uncertainty over when a delayed rationing scheme will take effect, an official from a body representing pump stations was quoted as saying on Saturday.

Nasser Raisifar said fuel station managers were concerned about the situation in Iran -- OPEC's second largest oil exporter - with long queues forming in some places and even reports of fights breaking out between car owners.

Despite big energy reserves, Iran lacks refining capacity to meet domestic fuel demand, which analysts say is rising at about 10 % a year. Heavy subsidies which drain state coffers make fuel so cheap it encourages waste, analysts say.

The first phase of gasoline rationing started on Thursday, limiting fuel that drivers of government cars can buy. But ordinary Iranians still do not know when the full plan will be implemented and what their quota of subsidised fuel will be.

"Uncertainty and not trusting (government) decisions lead many to fill their tanks continuously and this caused long queues at fuel stations," Raisifar, from the association of fuel station managers, told the semi-official Mehr News Agency.

"This shows people are stocking up," he said.

His comments seemed to be at odds with statements by Iranian officials that consumption has fallen since the gasoline price was increased by 25 % to 1,000 rials (11 U.S. cents) per litre in May -- still among the world's cheapest.

Drivers must also produce electronic "smart" cards to buy any fuel.

Iran has to import about 40 % of daily consumption estimated at 75 million or more litres, a sensitive issue as world powers have threatened to ratchet up U.N. sanctions over Iran's nuclear programme.

Officials have sent conflicting signals about when full rationing would be in place. Some say it might be on June 22. MPs have said fuel above the rationed quota would be offered at market rates but no official announcement has been made.

"Fighting among car owners, very long queues ... have created insecurity," Raisifar said. "Fuel station managers are concerned about the situation."

The United States, which is leading efforts to isolate Iran over its atomic plans, has said Iran's gasoline imports are a point of "leverage". Washington accuses Iran of seeking to build nuclear weapons, a charge Tehran denies.

Cargo ship sinks at Bandar Abbas pier

LONDON, June 10 (IranMania)

Following devastating tropical storm, Cyclone Gonu, which hit Persian Gulf region a cargo ship sank in the coastal waters of Haghani jetty in Bandar Abbas on Wednesday, it was announced, IRNA reported.

Speaking to IRNA, Colonel Asghar Ghotbzadeh said the ship had already been seized by coastal guards for illegal transport of crude oil.

Following the incident, all crew on board were evacuated and are all in good health conditions, he said.

Cyclone Gonu Batters Southern Iran 9:30am Hormuz

By Ryan Flinn and Aaron Sheldrick
June 7 (Bloomberg)

2am EST
7am GMT
10am Dubai
10am Muscat
9:30am Iran

Cyclone Gonu, the worst to hit the Arabian Peninsula in more than 60 years, battered southern Iran, prompting authorities to close schools and universities, cancel some flights and evacuate thousands of people from coastal areas.

The Health Ministry put hospitals on alert in southern Hormuzgan and Sistan-Baluchistan provinces late yesterday as the storm approached, the state-run Islamic Republic News Agency reported. The cyclone's outer winds knocked out electricity power lines in the port cities of Konarak and Chabahar, as people took refuge in shopping malls, IRNA said.

Gonu's center was 88 kilometers (55 miles) south of the town of Jask on the southern coast of Iran at 3:30 a.m. today, according to the latest U.S. Navy Joint Typhoon Warning Center advisory. Gonu's winds fell to 83 kilometers per hour as the storm moved north-northwest across the Gulf of Oman at 13 kilometers per hour.

The storm hit the east coast of Oman yesterday, where the Sultanate declared a state of emergency, ordering people to take shelter and shutting schools and offices until June 10. There were no immediate reports of casualties in either country.

Ships continued to pass through the Strait of Hormuz, a waterway between Iran and Oman at the mouth of the Persian Gulf, Associated Press reported, citing Suresh Nair of the Gulf Agency Co. shipping firm. At least a quarter of the world's oil supplies passes through the strait.

Oil Platforms

Gonu probably won't threaten Iran's oil platforms in the Persian Gulf because they are far from the forecasted path of the cyclone, AP cited Bahram Narimanian, a spokesman for Iran's Offshore Oil Company, as saying yesterday.

In the southeastern coastal city of Chabahar, 4,000 university students were evacuated to higher ground yesterday, IRNA reported.

The Islamic Republic of Iran Air Lines yesterday canceled all flights from Konarak for 48 hours, IRNA added.

Oman closed all its seaports and oil-export terminals two days ago as the government suspended oil and gas exports, shipping executives and oil traders said. They said they didn't know how long exports would remain suspended.

Oman sits on the southeast coast of the Arabian Peninsula and produces about 700,000 barrels of crude a day. It borders Yemen, Saudi Arabia and the United Arab Emirates.

Suspending Operations

Fujairah port in the United Arab Emirates suspended all offshore bunkering operations, including fuel oil and gasoil, and the movement of utility boats two days ago because of the storm. The port is one of world's three largest for fuel oil bunkering, along with Rotterdam and Singapore.

Saudi Aramco, the world's biggest state-controlled oil company, said yesterday it doesn't expect Gonu to hurt production or exports from Saudi Arabia's eastern province.

Crude oil for July delivery on the New York Mercantile Exchange traded at $66.00 a barrel at 8:33 a.m. Singapore time today. It rose 35 cents to $65.96 a barrel yesterday.

Gonu, which means a bag made of palm leaves in the language of the Maldives, is the most powerful storm to hit the Arabian Peninsula since records began in 1945, AP reported.

Earlier this week, it was a Category 5 storm, the strongest on the Saffir-Simpson scale, as it churned across the northern Arabian Sea.

Iran Adding Attack Boats in Persian Gulf

By Tony Capaccio
June 6 (Bloomberg)

Iran is increasing its fleet of small attack boats capable of challenging warships and disrupting oil traffic in the Strait of Hormuz, the sea route for two-fifths of the world's daily supply of crude oil, the U.S. Navy says. xxx

Iran's Revolutionary Guard Corps already has more than 1,000 of the speedboats ``and continues to add boats armed with anti- ship cruise missiles,'' said Robert Althage, spokesman for the U.S. Office of Naval Intelligence. xxx

``Iran still states that the Iranian Revolutionary Guard Corps will employ swarming tactics in a conflict,'' Althage said in an e-mail. Naval intelligence, in its latest report on threats, said an attack against U.S. forces and commercial tankers ``could include over 100 boats in coordinated groups of 20 to 30 approaching simultaneously from multiple axes.'' xxx

The U.S. has two carrier groups in the Persian Gulf. The commander of these forces, Vice Admiral Kevin Cosgriff, said the attack boats have``a significant military capability.'' His fear is that Iran's central leadership might not have enough control over this Revolutionary Guard force to ensure against unauthorized attacks. xxx

``I'm fairly comfortable that the regular Iranian navy and air force has a pretty good command-and-control system -- the key word is`control,''' he said. ``I don't have the same sense with the Revolutionary Guard.'' xxx

``Is there a rigorous, disciplined chain of command where people pay attention?'' Cosgriff said. ``In some instances, the answer would be yes. In other instances I've had some concern that people may be prone to miscalculation.'' xxx

``Somebody who gets fired up based on firebrand rhetoric is what I am speaking about,'' he said. xxx

Mines, Torpedoes, Missiles xxx

The boats -- up to 70 feet long and capable of speeds up to 57 miles per hour -- are armed with torpedoes and rocket- propelled grenades as well as cruise missiles and also are used to lay mines. The U.S. estimates Iran has 5,000 sea mines. xxx

Cosgriff and other U.S. naval officers say they can defend against this threat. Still, attacks on tankers and a few sunken ships could disrupt traffic through the chokepoint of the world's most important oil transit route. xxx

Iran launched a much smaller fleet of these attack boats against U.S. ships and U.S.-flagged tankers in the Persian Gulf in late 1987 through mid-1988 after the Reagan administration sided with Iraq in its war with the Islamic Republic. xxx

The ships were able to lay mines, attack ships and disrupt oil traffic. They damaged at least one tanker traveling under the U.S. flag as well as the frigate USS Samuel Roberts. xxx

Cosgriff said the U.S. now has four minesweepers deployed to the Gulf and the British Navy has two. The coalition ``routinely'' practices minesweeping and ``we are actually quite good at it,'' he said. xxx

Defense Against `Swarming' xxx

Cosgriff, in a telephone interview yesterday from the United Arab Emirates, said the U.S. Navy has ``devised various tactics and other ways of coping with'' the swarming tactics of the small attack boats. xxx

In addition, ``there are some limitations'' to launching an attack by these boats, he said. ``You just don't get 1,000 or 500 or even 20 of anything under way and tightly orchestrated over a large body of water to create a specific effect at a specific time and specific place. They have their own challenges.'' xxx

Officers of the aircraft carrier USS Stennis in the Persian Gulf offered similar assurances in onboard interviews June 1. xxx

``We spend a lot of time making sure we have eyes out for that sort of thing,'' said Commander Chris Rentfrow, director of the Stennis's self-defense nerve center. xxx

Cheney's Warning xxx

The Stennis arrived in the Gulf 12 days after Vice President Dick Cheney spoke on the warship, highlighting the capability of the two carrier groups to protect sea lanes and send a warning that the U.S. won't tolerate Iran developing a nuclear capability. xxx

The Stennis was joined by the Nimitz and the Marine Corps's Bonhomme Richard amphibious assault group in sailing through the Strait of Hormuz to conduct joint training exercises -- nine ships with 17,000 personnel in the largest daylight transit since 2003. xxx

The maneuvers mark the second time in two months that two of the Navy's 11 aircraft carriers are in the Gulf for joint exercises. The Stennis exercised in March with the USS Dwight D. Eisenhower. Before that, the last time more than one carrier deployed in the Gulf was March 2003 for the Iraq invasion. xxx

The current exercise will continue through tomorrow. xxx

Raytheon System xxx

The centerpiece of the Stennis's defenses is a Raytheon Co. Shipboard Shelf-Defense System installed last year that synthesizes data from the carrier's radar and anti-submarine sonar as well as Aegis air defense information gathered by the flattop's escort vessels into a single picture displayed on consoles. xxx

Stennis operators can track up to 200 vessels or aircraft simultaneously, Rentfrow said in an interview. Two large digital maps showed the carrier was in the middle of the northern Persian Gulf about 37 miles from Busher, Iran. There was no significant Iranian naval or
air presence. xxx

The system can ``absolutely'' deal with Iran's small boats, Rentfrow said. ``We practice a lot with these ships in terms of how to defend the zone around the carrier,'' he said. xxx

One method is an old-fashioned .50 caliber machine gun on the vessel's stern, manned by a gunner in a grimy red t-shirt peering through binoculars into a hot, hazy Gulf horizon.
xxx

Senior officers of the Stennis, in interviews June 1 and May 31 onboard the ship, said the strike groups aren't exercising specifically to counter Iran but were practicing generic tactics to counter submarines, aircraft
and missile attacks. xxx

This week the Stennis and Bonhomme Richard groups also planned an exercise practicing earthquake relief. xxx

Stennis Strike Group Commander Rear Admiral Kevin Quinn, in response to a question, said the deployment of the two carrier groups isn't intended to send a message to Iran. ``I don't see it that way, but I'm the tactical guy,'' he said. ``My focus has been on exercising maritime skills'' and providing air support for ground troops in Iraq. xxx

Intrade Airstrike-Iran Options (Update 3)

Airstrike.Iran.Jun07 : $2.60
Airstrike.Iran.Sep07 : $13.70
Airstrike.Iran.Dec07 : $17.40

Average : $11.23, down from $22.00 on March 29th.

The Case for Bombing Iran

The Case for Bombing Iran
I hope and pray that President Bush will do it.
BY NORMAN PODHORETZ
May 30, 2007

[...]Since a ground invasion of Iran must be ruled out for many different reasons, the job would have to be done, if it is to be done at all, by a campaign of air strikes. Furthermore, because Iran's nuclear facilities are dispersed, and because some of them are underground, many sorties and bunker-busting munitions would be required. And because such a campaign is beyond the capabilities of Israel, and the will, let alone the courage, of any of our other allies, it could be carried out only by the United States. Even then, we would probably be unable to get at all the underground facilities, which means that, if Iran were still intent on going nuclear, it would not have to start over again from scratch. But a bombing campaign would without question set back its nuclear program for years to come, and might even lead to the overthrow of the mullahs. [...]

http://www.opinionjournal.com/federation/feature/?id=110010139

Gasoline Rationing in Iran

IEA Monthly Oil Market Report May 2007 - page 15

In our last commentary on Iran’s gasoline market (Oil Market Report dated 11 October 2006), wespeculated about how the country would tackle its galloping gasoline demand, which had led to asignificant surge in imports (some 40% of total demand, given the lack of domestic refining capacity) andwhich was being prompted by possibly the cheapest retail prices in the world (as in many oil producing countries, cheap fuel is almost considered an entitlement). The issue was quite sensitive, we then argued, because the government had to balance financial imperatives (the growing burden of subsidies and imports) and political considerations (triggering social unrest by rationing demand and/or raising prices, which would also likely stoke inflation), not to mention the issue of tackling waste (spills at service stations and the poor fuel economy of most of the Iranian vehicle fleet).

The government, though, prevaricated for a few months, releasing instead extra funds in January 2007 (about $2.5 billion) to finance gasoline imports until March (the end of the Iranian fiscal year). In late March, however, both the Majlis (parliament) and the Council of Guardians finally approved a long debated scheme to ration supply and raise prices, which will reportedly be implemented from mid-May. Under the scheme, private car owners will be allocated 90 litres per month (300 litres for taxis), priced at Rials 1,000 per litre (approximately 12 cents) instead of Rials 800 per litre (that is, a 25% price increase). Supply above the quota will be priced at Rials 5,000 per litre (five times more than subsidized prices and roughly equal to gasoline’s import cost). In addition, the National Iranian Oil Refining and Distribution Company (NIORDC) intends to launch a five-year refinery upgrade and expansion plan, aimed at raising throughput to 2.9 mb/d from the current 1.6 mb/d.

Ahmadinejad Says Nuclear Work Nearing "Peak"

Iran's President Says Nuclear Work Nearing "Peak"
By REUTERS
May 24, 2007

Iran's nuclear work is nearing a ``peak,'' President Mahmoud Ahmadinejad said on Thursday, while the U.N. atomic watchdog chief said Tehran was probably at least three years from making atom bombs even if it chose to do so.

Ahmadinejad dismissed Western pressure on Iran to halt its nuclear drive. ``With God's help the path to completely enjoying all nuclear capacity is near its end and we are close to the peak,'' he told a rally in the central town of Isfahan.

``The Iranian nation today has industrial nuclear technology and ... it will never retreat even one step from this path.''Iran denies seeking nuclear weapons, as the West suspects, saying its program aims purely to generate electricity.

Underlining what he called the growing risk of a major confrontation between the West and Iran, International Atomic Energy Agency head Mohamed ElBaradei appealed for the two sides to restart negotiations on a compromise as soon as possible.

``I tend, based on our analysis, to agree with people like John Negroponte and the new director of the CIA, who are saying that even if Iran wanted to go for a nuclear weapon, it would not be before the end of this decade or sometime in the middle of the next decade. In other words three to eight years from now,'' ElBaradei told a news conference in Luxembourg.

``Iran needs to suspend its enrichment activities as a confidence-building measure but the international community should do its utmost to engage Iran in comprehensive dialogue,'' he told a conference on nuclear non-proliferation.

In a report on Wednesday, the IAEA said Iran was making substantial advances in uranium enrichment, but repeated there was no evidence it was trying to ``weaponise'' nuclear material. Several months ago, ElBaradei predicted Iran was four to eight years away from being able to produce an atom bomb.

U.S. President George W. Bush said Washington would work with European, Russian and Chinese leaders to impose a third, stronger round of U.N. Security Council sanctions against Iran.

``The first thing these leaders have got to understand is that an Iran with a nuclear weapon would be incredibly destabilizing for the world. It's in their interests that we work collaboratively to continue to isolate that regime.''

CAUTIOUS ON SANCTIONS

Asked at a news conference whether he felt more stringent sanctions should now be discussed, Russian President Vladimir Putin stressed the need for more diplomacy.

``We shall work in cooperation with our partners, as we have always done in the past, not to prevent Iran from developing modern technology but to prevent it from creating a nuclear weapon,'' he said in Luxembourg.

Big powers last year offered Iran trade, technical and other incentives if it stopped enriching uranium first. But Iran refused that precondition and talks were called off before the U.N. Security Council imposed
a first set of sanctions.

EU foreign policy chief Javier Solana is assessing the scope for returning to negotiations. He is expected to meet Iranian nuclear negotiator Ali Larijani in Madrid late next week.

But ElBaradei voiced concern Tehran was moving toward confrontation with the world by speeding up its nuclear work. He said his priority was a compromise capping Iranian enrichment short of ``industrial-scale'' to minimize the risk of bombmaking.

He has angered Western powers by saying, in published remarks, that their strategy of insisting on no enrichment at all to prevent Iran gaining nuclear knowledge had been ''overtaken by events'' since Tehran could already refine uranium.

Diplomats said the U.S., British and French ambassadors to the IAEA planned to meet ElBaradei in his Vienna office on Friday to deliver a ``demarche'' over his remarks, which they saw as questioning Security Council strategy.

A diplomat close to the IAEA said ElBaradei was not trying to undermine the Security Council or United States.

``He's just asking these leaders to deal with reality. He is pleading for direct dialogue, between the U.S. and Iran in particular, to resolve the situation now ... instead of posturing while the number of (enrichment) centrifuges goes up.''

Pletka

http://www.aei.org/publications/filter.all,pubID.26209/pub_detail.asp

Klare On Naval Maneuvers

By Michael T. Klare

May 3, 2007

Today, the Nimitz is rapidly approaching the Persian Gulf, where it will join two other U.S. aircraft carriers and the French carrier Charles De Gaulle in the largest concentration of naval firepower in the region since the launching of the U.S. invasion of Iraq four years ago.

Why this concentration now? Officially, the Nimitz is on its way to the Gulf to replace the USS Dwight D. Eisenhower, which is due to return to the United States for crew leave and ship maintenance after months on station. But the U.S. Central Command (Centcom), which exercises command authority over all U.S. forces in the Persian Gulf area, refuses to say when the Eisenhower will actually depart -- or even when the Nimitz will arrive.

For a time, at least, the United States will have three carrier battle groups in the region. The USS John C. Stennis is the third. Each carrier is accompanied by a small flotilla of cruisers, destroyers, submarines, and support vessels, many equipped with Tomahawk land-attack cruise missiles (TLAMs). Minimally, this gives modern meaning to the classic imperial term "gunboat diplomacy," which makes it all the stranger that the deployment of the Nimitz is covered in our media, if at all, as the most minor of news stories. And when the Nimitz sailed off into the Pacific last month on its way to the Gulf, it simply disappeared off media radar screens like some classic "lost patrol."

http://www.motherjones.com/cgi-bin/print_article.pl?url=http://www.motherjones.com/commentary/tomdispatch/klare_constantino_nimitz.html

Klare Predicts War with Iran

Three Charges in the Case for War
By Michael T. Klare
March 2007

Sometime this spring or summer, barring an unexpected turnaround by Tehran, President Bush is likely to go on national television and announce that he has ordered American ships and aircraft to strike at military targets inside Iran. We must still sit through several months of soap opera at the United Nations in New York and assorted foreign capitals before this comes to pass, and it is always possible that a diplomatic breakthrough will occur -- let it be so! -- but I am convinced that Bush has already decided an attack is his only option and the rest is a charade he must go through to satisfy his European allies. The proof of this, I believe, lies half-hidden in recent public statements of his, which, if pieced together, provide a casus belli, or formal list of justifications, for going to war.

http://www.tomdispatch.com/index.mhtml?pid=169271

Background

Known as Persia until 1935, Iran became an Islamic republic in 1979 after the ruling monarchy was overthrown and the shah was forced into exile. Conservative clerical forces established a theocratic system of government with ultimate political authority vested in a learned religious scholar referred to commonly as the Supreme Leader who, according to the constitution, is accountable only to the Assembly of Experts. Iranian-US relations have been strained since a group of Iranian students seized the US Embassy in Tehran on 4 November 1979 and held it until 20 January 1981. During 1980-88, Iran fought a bloody, indecisive war with Iraq that eventually expanded into the Persian Gulf and led to clashes between US Navy and Iranian military forces between 1987 and 1988. Iran has been designated a state sponsor of terrorism for its activities in Lebanon and elsewhere in the world and remains subject to US economic sanctions and export controls because of its continued involvement. Following the election of the reformist Hojjat ol-Eslam Mohammad KHATAMI as president in 1997 and similarly a reformist Majles (parliament) in 2000, a campaign to foster political reform in response to popular dissatisfaction was initiated. The movement floundered as conservative politicians prevented reform measures from being enacted, increased repressive measures, and made electoral gains against reformers. Starting with nationwide municipal elections in 2003 and continuing through Majles elections in 2004, conservatives reestablished control over Iran's elected government institutions, which culminated with the August 2005 inauguration of an ultra-conservative layman as president.