Iran's vulnerability--refineries

AP/Houston Chronicle:

Iran is flush with huge oil reserves and cash, but a refinery shortage leaves it heavily dependent on imported gasoline and diesel to keeps its cars and trucks rolling.

That's one reason the country — already beset with economic troubles — is desperate to avoid U.N. sanctions over its nuclear program.

"Oil is where Iran is most vulnerable," said Behzad Nabavi, a former lawmaker who also headed a state-directed oil company, Petropars. "It's one of the great economic paradoxes."

Concern over fuel supplies has become so serious that energy planners are considering an unpopular two-tier pricing system. The plan would limit the amount of gasoline motorists can buy at the state subsidized price of about 32 cents a gallon and establish an unspecified market price for larger purchases. Planners believe that would help offset the cost of imports and curb consumption.

Even a moderate drop in gasoline or diesel imports as a result of sanctions would be a punishing blow for an economy with many soft spots — double-digit inflation, chronic unemployment and cumbersome state controls among them.

Iran has no shortage of oil in the ground or cash in hand. Its oil reserves are estimated at second only to Saudi Arabia's, and Iran is OPEC's fourth-biggest producer of crude. Rising prices pushed Iran's special petrodollar fund to a record $24 billion earlier this year.

What Iran lacks are sufficient refineries to keep pace with its thirst for fuel. Iran is almost fully dependent on trucks to move goods. The number of cars is rising each year as drivers from the baby boom decade after the 1979 Islamic Revolution take the wheel.

Iran imports more than 40 percent of its gasoline and diesel needs. It comes mostly from the Middle East but also from as far away as Venezuela.

Closing the import tap could force Iran to either impose rationing — as it did during the 1980-88 war with Iraq — or raise prices and risk a backlash from a public accustomed to paying more for bottled water than gasoline.

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Iran cannot afford to fuel its war machinery for more than a matter of days if she is attacked. That is propaly another reason why Iran has suggested it would not be able to resist a conventional attack from the US. If it had been investing in refineries instead of a nuclear bomb for the past 20 years, it would be in much better shape and it would not be threatened by the US.