Zangeneh Rejects Government's Decision on Fuel Rationing or Price Change

Iran's oil minister states that the government of Hassan Rouhani has no plans for fuel rationing or changing fuel prices in the country. This comes after Rouhani recently suggested the possibility of a dual pricing system for gasoline. Bijan Zangeneh, on Wednesday night, December 21, introduced the current government plan as 'clarifying the status of vehicles and their fuel cards.' He emphasized that 'the return of the fuel card is serious,' and the timeline for its mandatory use will be announced after 'coordination' with the government. The oil minister clearly stated that 'the government has no decision for rationing or changing prices.' He had previously mentioned that 'the government's decision is not to increase gasoline prices,' but there is a possibility of rationing this commodity. These statements come in light of Rouhani's remarks on December 19, where he suggested the possibility of dual pricing for gasoline, stating: 'Usually in other countries, gasoline has multiple prices, and on holidays or busy days, the price of gasoline is different, but we have gotten used to a fixed gasoline price.' He suggested that to encourage 'regular drivers,' they should be given 'fuel credits.' Fuel rationing, dual pricing, and the revival of fuel cards in Iran have been issues raised among Iranian government officials in recent months, especially following the fall of the rial's value against the dollar. However, Es'haq Jahangiri, the first vice president, stated in late October that increasing gasoline prices is currently not feasible and 'the society cannot bear it.' After the protests in December 2017, the Iranian parliament opposed increasing energy prices. Although the budget bill for 2018 rejected the government's proposal to increase energy prices, the sixth development plan allowed for such increases. Government officials had previously stated that with a 500-toman increase in gasoline prices, they intended to allocate 17 trillion tomans of revenue from this increase to improve dilapidated urban areas, modernize public transportation, and develop employment. Critics accuse Rouhani of being inclined to increase gasoline prices while being indifferent to the rise in diesel prices following this decision and its direct impact on citizens' livelihoods and the prices of various goods and services. Some parliament members also state that Rouhani's government views collecting taxes from gasoline sales as a reliable financial source for funding its projects while the public currently cannot bear a gasoline price increase. Several experts also suggest that the natural decrease in demand following a price increase will lead to another factor: 'public protests.' Meanwhile, it seems that given the tightening of U.S. economic sanctions against Iran and the natural growth of gasoline consumption by seven to eight percent annually in the country, one of the paths available to the twelfth government for securing its budget is through taxes from gasoline sales. One of the arguments made by government officials for increasing gasoline prices is the rise in fuel smuggling, to the extent that Ali Adyani, a member of the Energy Commission of Parliament, mentioned a 'gasoline disaster' in Iran, stating that currently, 'the minimum amount of gasoline smuggled out of the country is ten million liters per day.' The oil minister also commented on the amount of gasoline smuggling in Iran, saying, 'God knows how much smuggling there is. The figures mentioned are not correct. It has been said that 40 million liters are smuggled. Forty million liters means 30 thousand tons per day, which would require 1,500 trucks of 30 thousand liters to transport, which is impossible.' Zangeneh also added that the amount of gasoline and diesel smuggling in Iran cannot exceed 'four or five million liters per day.' He further explained, 'Signs of smuggling include that consumption in some cities has increased by 50 percent compared to last year, or that the demand for some vessels has increased by 50 percent, while neither imports nor exports have increased.' In another part of his remarks, the Iranian oil minister referred to the 'violation' of the Chinese state company 'CNPC,' which has invested in Phase 11 of South Pars. Zangeneh stated that only the development of Phase 11 remains from the gas field phases, which is equivalent to 'two conventional phases,' and after Total's exit from this contract, this Chinese company was supposed to carry out the development of this phase. He mentioned that the company 'CNPC' must carry out this action according to the contract, adding, 'If it does not do this, it has violated the contract. However, we have thought about what we should do.' Zangeneh did not provide details about Iran's plans in case of this company's violation. Reuters reported yesterday, citing three Chinese oil executives, that the state company 'CNPC' has suspended its investment in Phase 11 of South Pars. According to this report, this action by the Chinese company may be due to U.S. pressure or the company's efforts to reduce tensions amid negotiations between China and the U.S. to normalize trade relations between the two countries. South Pars is the world's largest gas field, currently accounting for 70 percent of Iran's total gas production. Qatar's gas production from this shared field exceeds that of Iran, and the Qatari energy minister recently announced plans to significantly increase gas production from this field to maintain its position as the world's largest exporter of liquefied gas. According to Reuters, the suspension of the Chinese company's investment in Phase 11 of South Pars could turn Iran's efforts to attract foreign investment in the energy sector into despair.