Booz-Allen: "Iran's Regime Hoarding Gasoline, Reducing Consumption in Anticipation of US Sanctions"

Booz-Allen's PersiaHouse/ here

"... The dramatic spike in Iran’s gasoline imports in recent months indicates that the Iranian government is seriously concerned about the effect gasoline sanctions may have on the already ailing Iranian economy. In the absence of sufficient refining capacity to meet the country’s domestic gasoline needs, the government is attempting to reduce the country’s vulnerability to gasoline sanctions in the short term by reducing consumption, and increasing gasoline reserves. Based on Tehran’s ability to weather three decades of US sanctions, however, it is doubtful that gasoline sanctions will provide enough leverage to change the Iranian regime’s behavior.

Reducing Consumption

• The government has reduced the amount of gasoline rations (the amount of gasoline available for purchase per vehicle at subsidized prices) it allots to the population, in order to curb consumption. Gasoline rations were reduced from 100 to 80 liters per vehicle per month last fall, and to 60 liters per month beginning March 21 of this year.
• Between the Iranian calendar year 1387 (March 2008 – March 2009) and 1388 (March 2009 – March 2010), gasoline consumption declined by just under five percent.
• As a result of gasoline rationing, first implemented in June 2007, the percentage of the country’s domestic consumption supplied by imported gasoline has decreased. That figure has fallen from 40 percent in 1385 (March 2006 – March 2007) to between 32 and 36 percent in the past three years.

Increasing Gasoline Reserves

• Between November 22, 2009 and February 19, 2010, Iran’s gasoline imports increased by over 1,500 percent in weight, compared to the same period last year. The government has been, in effect, hoarding gasoline.
• Iran’s gasoline imports jumped 150 percent between 1387 (March 2008 – March 2009) and 1388 (March 2009 – March 2010).
• The Iranian government says it increased its gasoline stocks by 58 percent in 1388 over the previous year.

Even before being implemented, the threat of America’s gasoline sanctions is having an effect on Iran’s gasoline imports. Recently, Royal Dutch Shell, and Swiss-based oil traders Vitol, Glencore, and Trafigura announced that they will no longer sell gasoline to Iran. Their decisions were made in anticipation of the Iran Refined Petroleum Sanctions Act, which has passed both chambers of the U.S. Congress.

• The act directs the President to impose sanctions against any company which, among other things, invests more than $20 million over a 12-month period in Iran’s petroleum sector, or supplies Iran with refined petroleum products worth more than $200,000 (or $1 million over a 12-month period).

Sanctions will squeeze Iran but not choke off its gasoline imports. In the September 2009 lead-up to the P5+1 nuclear negotiations with Tehran, for example, Chinese companies increased their gasoline sales via intermediaries to Iran. Russian and Malaysian gasoline sales, as well as gasoline smuggling across Iran’s porous borders, will also enervate any American-led sanctions regime.