Iran makes more cheap fuel available for summer

TEHRAN, July 9 (Reuters) Iranian drivers will now be able to secure up to six months' rations of cheap motor fuel, rather than the four months first proposed, in a concession designed to ease summer travel, a minister was quoted today as saying.

But President Mahmoud Ahmadinejad said that, at least for now, they would not be able to buy fuel at higher prices above the quota, which for private drivers is 100 litres a month.

Iran, OPEC's second-largest oil producer but which lacks refining capacity and imports 40 per cent of its fuel, began last month to ration its heavily subsidised gasoline. Drivers were initially allowed to buy four months quota in advance.

Lawmakers called for a review of the gasoline allowances after the introduction of rationing on June 27 sparked protests during which more than a dozen pump stations were torched by motorists who have become used to abundant cheap fuel.

Some angry Iranians also looted some state-owned shops.

Dozens behind the unrest have since been arrested.

''To facilitate people's summer trips, the government has decided to expand the consuming period of gasoline from four to six months,'' the Iran newspaper quoted Interior Minister Mostafa Pourmohammadi as saying.

But Ahmadinejad said the government had no plans ''for the time being'' to allow drivers to buy extra fuel at higher, market prices for fear it would stoke inflation, now about 17 per cent.

''In the current situation, having a free market price for gasoline is a deadly poison,'' Iran's students news agency ISNA quoted him as saying.

Motorists, who complained that 100 litres a month was inadequate, pay 1,000 rials (11 US cents) a litre for rationed fuel. The government had planned to allow drivers to buy up to four months' quota, or 400 litres, during a 120-day period. Now they can effectively buy up to 600 litres.

Parliament had argued for offering unsubsidised fuel outside the rationing scheme. The Oil Ministry had said it would consider such a plan in two months or so but Ahmadinejad's comments suggest this might now be on hold.

Economists say the inflationary impact cannot be avoided because they say a black market in higher priced fuel outside quotas has already emerged, as many predicted would happen.

Legal or illegal, such pricier fuel will push up inflation.

The Islamic Republic's reliance on imports, which cost the government 5 billion dollars last year, is a sensitive issue when Iran faces a possible third round of sanctions for failing to heed UN demands to halt sensitive nuclear activities.

The West accuses Iran of seeking to build an atomic bomb, a charge Tehran denies. The United States, Iran's arch foe, called Iran's gasoline imports leverage in the atomic row.

''The enemies wanted to threaten Iran using gasoline imports,'' Iran's official news agency IRNA quoted the president as saying.

The president said that if everyone abided by quotas the country could cut usage by 25 million litres a day. Prior to rationing, daily consumption was 75 million or more litres.

Analysts blame subsidies for encouraging waste and smuggling.

Ahmadinejad came to power in 2005 promising to share out Iran's oil wealth more fairly but economists say his policies, such as spending windfall oil earnings and forcing banks to cut interest rates, have fuelled inflation that is hurting the poor.

REUTERS SBC VV2104