AFP article TOD June 8th

Cheap Fuel Banned For Luxury Cars in Iran

Iran luxury cars to be barred from cheap fuel
June 8th, 2008
Reuters

Drivers of luxury cars in Iran will no longer be able to buy heavily subsidized gasoline from June 21, official Iranian media reported on Sunday.


It is the latest change of a rationing system launched a year ago under which motorists can buy 120 liters per month at the price of 1,000 rials per liter (around 11 U.S. cents), some of the cheapest fuel in the world.

Iran is the world's fourth-largest oil producer but lacks enough refining capacity for domestic needs, forcing it to import large amounts of gasoline and burdening its finances.

In a bid to curb consumption, it introduced rationing in June 2007. Until then, motorists could buy unlimited amounts of heavily-subsidized gasoline, forcing the state to spend an estimated $5 billion per year on imports.

From March this year, it allowed the sale of extra, higher-priced gasoline at 4,000 per liter outside the rationing system but all motorists still had access to the monthly quota of 120 liters at a quarter of that price.

But under the change announced by caretaker Interior Minister Mehdi Hashemi in the state Iran newspaper on Sunday, owners of luxury brands can from June 21 only buy the higher-priced petrol.

In addition, the price of higher-quality super gasoline will rise to 5,400 rials from 5,000 per liter previously, he said.

He said the new rules applied to Iranian-produced cars with 2,000 cubic-centimeter (cc) engines or more and imported cars of 1,300 cc.

"These are expensive cars that only rich people can buy," he said, adding they included brands such as BMW, Mercedes and Toyota.

Gasoline imports are a sensitive issue at a time when Iran is under increased Western pressure over its disputed nuclear program.

Iran, which rejects U.S. accusations it is seeking to build nuclear weapons, has been hit by three rounds of U.N. sanctions since late 2006 over its refusal to halt sensitive atomic work.

The government had until March been reluctant to implement a system that would offer higher priced gasoline, because of fears it would drive up inflation, which is already running at more than 20 percent.

An Iranian energy official last month said Iran expects to import about 20 million liters of gasoline per day during the 2008-2009 year, less than half the amount it would have imported had it not launched rationing.

But the figure was still 5 million liters higher than an import estimate given by another oil official in February.

($1 = 9,300 rials)