Gasoline black market thriving in Iran


An Iranian vendor fills gasoline for a customer, in the city of Bandar Abbas, 810 miles (1350 kilometers) southeast of the capital Tehran, Iran, Thursday, Jan. 3, 2008.

Vahid Salemi/The Associated Press
Published: Sunday, January 27, 2008 at 6:24 p.m.
Last Modified: Sunday, January 27, 2008 at 6:24 p.m.

BANDAR ABBAS, Iran - Each day, the boulevard in this port city derisively dubbed "OPEC Street" is lined with dozens of vendors selling plastic jugs of black-market gasoline to desperate drivers who haggle over the price of a tankful.

Iran is the world's fourth-largest producer of oil. But its government imposed gasoline rationing last year in hopes of trimming extensive government subsidies. That has created a booming black market across the country — feeding Iranians' discontent with the economic policies of hardline President Mahmoud Ahmadinejad.

In the capital Tehran and other cities, the black market thrives around gasoline stations and mostly at night as drivers looking to buy fuel approach others who have high gasoline quotas, such as taxis or vans.

But in this city on the Persian Gulf, the boulevard officially named Pasdaran Avenue after Iran's elite Revolutionary Guards operates as an open-air black market in broad daylight. Its new nickname is meant as a sneer by Iranians, bitter at the irony that their country, a leading member of the world oil cartel OPEC, has resorted to rationing.

"Every taxi driver and anyone who needs gas knows where OPEC Street is," said Jabbar Dehqani, a 27-year-old with a stand of gasoline jugs on the roadside. "I'm happy — the number of my customers is increasing day by day."

Iran produces 4.2 million barrels of crude oil each day and sells 2.5 million barrels of it to other countries, making it OPEC's second-largest producer. But because the country lacks adequate refineries, it must spend more than $3 billion a year to import gasoline for domestic consumption.

There are more than 7 million private cars in Iran eligible for the subsidized gasoline, which the government makes available in limited quantities under the fuel rationing system.

The new system began in May with a 25 percent hike in the subsidized price of gas, from roughly 30 cents a gallon to 38 cents a gallon. Then in June came the actual rationing, aimed at reducing demand and thus easing government subsidies that cost billions each year.

The government could have raised prices further to cut subsidies, but that would have been highly unpopular with the public. A slight increase in prices in May sparked attacks on gas stations. So small price rises and rationing was a compromise solution.

Still the system has become a major irritant for many Iranians, who also must deal with spiraling inflation and widespread shortages of gas for heating during a brutal winter that has caused at least 60 deaths.

Ahmadinejad was elected on a populist agenda in 2005, promising to bring oil revenues to every family, help the poor and tackle unemployment — believed to now be over 20 percent. But under his rule, Iran has seen dramatic price increases in housing and basic commodities.

That has provoked growing dissatisfaction with the president and some outright criticism.

Some Iranians critics have said Ahmadinejad should spend less time confronting the West over Iran's contentious nuclear program and more time managing the economy. And many saw the rationing not as an economic tool, but as preparation for more possible U.N. sanctions over the nuclear program.

The rationing system at first allowed each private driver only about 26 gallons of fuel each month at the subsidized price of 38 cents a gallon. Taxis got about 211 gallons a month at the price.

In December, the quota was increased slightly for private drivers, allowing them 32 gallons a month, but reduced for taxis, to 106 gallons a month, apparently in an effort to counter the black market.

Any gasoline purchases above those amounts must be made at a higher price on the black market.

Jabbar says he buys gasoline at about $1.60 a gallon from consumers who don't need their entire ration, then resells it for between $2.80 and $4.80 a gallon.

So far, the government says rationing has reduced gasoline consumption by 5 million gallons, down to 16 million gallons a day.

But the black market continues to thrive. As with many other illegal trades — such as bootleg CDs and satellite TV receivers — authorities mostly tolerate it, although they did recently raid some gasoline stations and detain workers.

For Bandar Abbas, the black market was a natural development.

The city — an important commercial port — overlooks the Strait of Hormuz at the narrow mouth of the Persian Gulf, through which a fifth of the world's oil supplies pass. Residents here prefer to drive even short distances rather than walk because of temperatures of 100 degrees or more much of the year.

About 870 miles south of Tehran, the city sees 6,000 cargo trucks pass through on average days, taking goods from ships to points across the country. The city is also on an ancient sea trading route for dhows —traditional wooden vessels that still ply the waters from various ports along the Gulf.

The black-market gasoline largely comes from large quotas the government allocated to boat owners who travel islands in the strait's waters, said Saleh Soroui, a tall, bronzed 40-year-old man sitting on the edge of his motorboat.

"Since they don't go out to sea every day, they sell their surplus to fuel dealers," he said.

Mostafa Tavassoli, who couldn't find a job after returning from his military service nine months ago, said he now makes good money — about $45 — selling gas on the black market each day from dawn to dusk. A manual laborer would make just one-third of that, on average.

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