Anger continues to boil in Iran, police were also unaware of rationing

NY Times:

Unrest spread in Tehran on Thursday, the second day of gasoline rationing in oil-rich Iran, with drivers lining up for miles, gas stations being set on fire and state-run banks and business centers coming under attack.

Dozens were arrested, and the Tehran police chief, Ismail Ahmadi Moghaddam, complained to reporters that the police had been caught unaware by the decision to ration fuel.

The anger posed a keen threat to President Mahmoud Ahmadinejad, who was elected two years ago on a platform of bringing income from oil to the nation’s households. Instead, even though Iran is one of the world’s largest producers of crude oil, it has been forced to import about 40 percent of its gasoline at an annual cost of $5 billion to make up for shortfalls in its archaic refining industry.

Some analysts said the decision to ration gasoline was intended to prepare for the possibility of more United Nations economic sanctions as a result of concern over Iran’s nuclear program.

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“Iran’s dependence on imported gasoline has been a focus of international debate over future sanctions,” according to the Eurasia Group, a political risk consultant. “Rationing will reduce Iran’s vulnerability, and Iran’s leadership explicitly mentioned this goal in commenting on the measure,” it said.

Saeed Leylaz, an economist and political analyst in Tehran, said, “The high gasoline consumption has made Iran very vulnerable, and this is a security decision now.”

“We are importing gasoline from 16 different countries,” he said. “The country would be on the verge of collapse if they suddenly decide not to sell us gasoline. The government has to find a way to lower the consumption.”

In Washington on Thursday, leaders of a bipartisan House panel, led by Representative Mark Steven Kirk, Republican of Illinois, and Representative Robert E. Andrews, Democrat of New Jersey, proposed legislation intended to punish any company that provides Iran with gasoline or helps it import gasoline after Dec. 31. Such a company could lose its access to American customers through sanctions.

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“Iran is in a bind,” said Vera de Ladoucette, an energy analyst with Cambridge Energy Research Associates in Paris. “They have acted too late and too harshly.”

According to Ms. de Ladoucette, Iran is also seeking to increase its gasoline production and has outlined plans to spend $18 billion by 2012 to increase its refining capacity by 1.5 million barrels a day from about 1.6 million. The government’s plan is to build four refineries and expand older ones. But, she added, it is unlikely to achieve that goal by 2012. “The problem will be financing all this,” she said.

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Five gallons of gasoline has been selling for $15 in the black market in Zahedan, in the southeast, the daily Seday-e-Edalat reported.

The Web site Norouz reported that riots had erupted in Ilam on the eastern border and that people had attacked a gas station in Shiraz in the south.

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It appears that the black market price is still pretty close to the world market. What is interesting about this move, is that Iran has decided to preemptively put sanctions on itself in order to prepare for the ones that are coming down the line. The government and the people of Iran are starting to have to pay a high price for their determination to build nukes. The price will get much higher.