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PP RUEHBC RUEHDE RUEHKUK
DE RUEHDIR #0043/01 1790439
ZNY CCCCC ZZH
P 280439Z JUN 07
FM IRAN RPO DUBAI
TO RUEHC/SECSTATE WASHDC PRIORITY 0139
INFO RUCNIRA/IRAN COLLECTIVE
RUEHDIR/IRAN RPO DUBAI PRIORITY 0132
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEHAAA/NSC WASHINGTON DC
RUEHDE/AMCONSUL DUBAI PRIORITY 0123
RUEHAD/USDAO ABU DHABI TC
RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0089
RUEATRS/DEPT OF TREASURY WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 03 IRAN RPO DUBAI 000043 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL:  6/27/2017 
TAGS: ECON ENGR EPET PGOV IR
SUBJECT: TIMING OF IRAN'S GASOLINE RATIONING TAKES ALL BY SURPRISE 
 
REF: A.) RPO Dubai 0015; B.) RPO Dubai 0037 
 
RPO DUBAI 00000043  001.2 OF 003 
 
 
CLASSIFIED BY: Jillian Burns, Director, Iran Regional Presence 
Office - Dubai, Department of State. 
REASON: 1.4 (d) 
 
1.(C) Summary:  In a surprise move, the oil ministry announced 
the evening of June 26 that gasoline rationing would begin in 
Iran at midnight, with a limit for private citizens of 100 
liters of gasoline per month.  According to reports by AFP and 
BBC, the announcement sparked protests, particularly by angry 
youths, and resulted in long lines at gas tanks, as well as 
fires at two gas stations in Tehran.  Deputy Majles speaker 
Bahonar said on Iranian TV that the reason that rationing was 
implemented without warning was for safety concerns; hoarding 
gasoline would be a potential fire risk.  Iranian analysts 
agreed the Iranian government had "no choice but to" implement 
rationing for economic and security reasons, given the huge sums 
Iran was spending on gasoline subsidies and Iran's vulnerability 
to a gasoline embargo, but predicted corruption would result. 
Last month, the government raised gasoline prices by 25% in an 
attempt to reduce consumption.  It will be telling how the 
government reacts to these protests over rationing, how long the 
protests last, and how rationing will impact public opinion 
towards the government.  End Summary 
 
2.(C) In a move that surprised the Iranian population and Iran 
analysts, the oil ministry announced with only a few hours 
notice on June 26 that gasoline rationing would begin at 
midnight.  While the government had been making noises about 
implementing rationing, the start date has been delayed several 
times, and it was not clear whether the government would 
implement it all, given public resistance. 
 
Risky political decision 
------------------------ 
 
3.(C) In response to the announcement of rationing, angry 
Iranian "youths" reportedly attacked a petrol station in the 
Pounak area of northwest Tehran, burning a car and pumps, 
witnesses said.  The same youths threw stones and shouted 
slogans denouncing President Ahmadi-Nejad.  An Iranian 
journalist told AFP that another gas station in the south of 
Tehran was attacked in the Azadi area.  Anti-riot police were 
called in to disperse the demonstrators, according to AFP.  BBC 
reported that violence broke out in nine separate areas of 
Tehran, it is assumed that the petrol station fires are included 
in the alleged "areas" of violence.  One Iranian professor told 
IRPoffs recently that a primary motivation for the rounding up 
of "thugs" over the past few months was in preparation for the 
implementation of rationing.  These "thugs" are reportedly those 
people suspected by police of being likely to lead street 
rioting. 
 
4.(C) While foreign press has reported on the alleged fires and 
protests by Iranian youth in reaction to the rationing, Iranian 
news agencies have mainly focused on the details of the 
announcement itself.  The sole exception seen so far is Iranian 
state radio which noted long lines of cars waiting to fuel-up 
prior to the midnight deadline.  Its account de-emphasized any 
violence and said car owners were filling up their tanks, 
emptying them into portable containers, and getting back in 
line.  The report also complained of incessant honking of car 
horns.  Other Iranian news reports mention long lines at fuel 
pumps in Tehran and elsewhere, but little else regarding public 
reaction. 
 
First price hike; now rationing 
------------------------------- 
 
5.(U) On May 22, the government raised the price of gasoline by 
25% -- although gasoline is still cheaper than water in Iran -- 
to try to stem high levels of consumption.  It also implemented 
use of smartcards required for purchasing gasoline (reftels). 
The government initiated limited rationing June 14, limiting 
government vehicles to 10 liters of gasoline a day.  Full 
rationing was supposed to be implemented at the same time in May 
but was delayed several times.  The last official statement 
indicated late July, preempted by the June 26 surprise 
announcement. 
 
6.(U) Iranian state television announced that the following 
quotas would be in place: 
 
-- Personal vehicles:  100 liters of gasoline per month 
-- Government vehicles:  300 liters per month. 
-- Taxis:  800 liters per month. 
 
RPO DUBAI 00000043  002.2 OF 003 
 
 
-- Personal people carriers:  600 liters per month. 
-- Agency petrol vehicles:  450 liters a month. 
-- Driving school vehicles:  450 liters a month. 
-- Ambulances:  450 liters a month. 
-- Peykan [Old Hillman cars assembled in Iran] minivans and 
"Mazda":  1,000 liters a month. 
-- Toyota 1600 and Mazda 2000:  450 liters a month. 
-- Nissan and Zamyad and tractors of Saypa variety, trucks, 
minivans, buses, minibuses, trailers and auto-camping vehicles: 
600 liters a month. 
-- Diplomatic vehicles:  600 liters a month. 
 
7.(U) The Islamic Republic News Agency (IRNA) reported that Oil 
Minister Kazem Vaziri-Hameneh was summoned to the Majles to 
answer questions on the rationing.  Quoting Vaziri-Hameneh, IRNA 
explained that the system would initially be in place for three 
months, after which time the government would evaluate 
rationing.  Deputy Majles speaker Mohammed Reza Bahonar said on 
Iranian TV that more lead-time was not given as there were fears 
that people might stockpile petrol and cause safety concerns. 
Rooz Online reported a week earlier that over 200 fires had 
broken out in Tehran over the last week alone allegedly caused 
by people  hoarding gasoline in their homes in anticipation of 
rationing. 
 
Wise economic decision 
---------------------- 
 
8.(S) In the run-up to the rationing, IRPoffs discussed the 
petrol rationing system, in separate meetings, with an Iranian 
economist, a consultant who worked on the smartcard system for 
gasoline rationing, and a Tehran-based political analyst.  All 
agreed that maintaining current levels of gasoline subsidies was 
not viable, costing the government approximately $30 billion, 
reportedly almost half of its overall expenditures for 
subsidies.  Iran reportedly spends $70 billion annually on 
subsidies, or a third of its GNP.  While Iran is the fourth 
largest oil exporter, it is the second largest gasoline 
importer, on a net volume basis. 
 
9.(S) An Iranian economist said he is generally opposed to 
rationing because it often leads to corruption and smuggling, 
but he admitted that "something must be done" to curb Iranian 
government spending on gasoline subsidies.  Prior to the June 26 
announcement, the economist claimed Ahmadi-Nejad did not "have 
the stomach" to implement a rationing system.  "If he did," 
continued the economist, "it would outweigh all the damage he's 
done to the economy over the last two years."  Unfortunately, he 
said, rationing would likely place a much higher burden on 
law-abiding citizens, but only be a nuisance for others.  He 
claimed that 70,000 people have already been identified in 
Tehran as needing "extra" gasoline as they are involved in the 
public transportation sector, i.e. taxis, buses, etc.  He 
clearly believed that a large portion of the individuals should 
not qualify for such a program.  (Note: many Iranians use their 
cars as unofficial taxis as a second job to make ends meet. 
Endnote)  The economist added that despite the fact that 
smartcard usage was "enforced" as of May 22 (reftels), there are 
still pumps that do not enforce the card rule, and it is easy to 
use someone else's card. 
 
10.(S) A Tehran-based political analyst claimed that 
Ahmadi-Nejad had no choice but to implement a rationing system. 
The analyst said that for both economic and security reasons, a 
rationing system must be enforced.  He claimed that the amount 
of money that the government spends annually on gasoline 
subsidies equals or exceeds the budget of the Ministry of 
Education and could easily pay the salary increases that Iranian 
teachers' associations demanded during strikes this year. 
Iran's representative to OPEC Hossein Kasempour Ardebili 
publicly laid out Iran's security issues regarding gasoline, 
saying June 19 that Iran is concerned about its vulnerability to 
potential US action to cut off its gasoline supplies.  Ardebili 
told Sharq newspaper that Iran needs to adopt appropriate 
measures to address this concern, saying "the domestic 
consumption, for example, must be lowered as much as possible." 
 
11.(U) Implementing a rationing system without a scheme in place 
to meet excess demand would cause a black market to spring up 
overnight, claimed journalist Hamed Qoddusi in a June 14 Sharq 
article.  Qoddusi advocated private-sector control of a 
secondary-market that would meet gasoline needs - at a market 
determined price - should individuals require additional 
gasoline above and beyond the rationed allotments. 
 
Technology behind rationing 
 
RPO DUBAI 00000043  003.2 OF 003 
 
 
---------------------------- 
 
12.(S) Two years and $80 million dollars later, Iran has a 
system in place to facilitate the rationing of gasoline, said an 
Iranian economist.  The technology used to set up the system, 
however, is fairly outdated, alleged a consultant who claimed to 
have worked on the project.  He was doubtful the smartcard could 
be used for complex pricing schemes.  The consultant said that 
the "data dumps" from the separate pump stations to the main 
database are not on-line, but only done via satellite up-link 
periodically.  However, the consultant claimed that the Iranian 
government deserves some credit for installing the technology 
throughout the entire country, even in the most rural of areas. 
Furthermore, consumers will be able to set up debit accounts 
linked to their smartcards to pay for gasoline purchases. He 
also noted that there exists the potential that intelligence 
services will now be able to track people's movements by 
tracking use of their smartcards (Note: Iran does not currently 
have credit cards.  Endnote). 
 
13.(C) Comment.  Iranians in Dubai have heard that "the capital 
city is shut down today," July 27, because of the reaction to 
rationing, but we do not know yet whether this is an 
exaggeration.  Negative public reaction to rationing, 
particularly as other economic indicators worsen, was to be 
expected, and is probably the main reason the government has put 
off this decision for years.  It is likely that the threat of a 
foreign embargo on gasoline imports is the primary motivator for 
swallowing the poison now, particularly for a president who 
promised to economic justice.  The immediate issue to follow is 
how efficiently the government puts down protests, and by what 
means, as well as whether the themes of any further protests are 
generically anti-rationing or become more focused on the 
president.  At a recent university protest against 
Ahmadi-Nejad, the government took no action initially but 
arrested the offenders several months later. 
 
14.(C) Comment continued:  In any case, gasoline rationing is a 
healthy and overdue step for Iran's economy, whatever the 
motivation.  It will not come without a cost, however.  A 
gasoline ration brought about by the Iranian government as 
opposed to by the international community will likely increase 
the government's unpopularity; a rise in gasoline prices 
triggered by a foreign-imposed boycott could, conversely, boost 
solidarity with the government. 
BURNS