Oil minister faces flak over Iran's fuel imports

Gholam Hossein Nozari, the Iranian oil minister, comes under serious criticism from legislators for extra budgetary petrol imports.

Motorcyclists fill the tanks at a petrol station in Tehran. A litre of subsidised petrol costs 1,000 rials.

TEHRAN // Gholam Hossein Nozari, the Iranian oil minister, has come under serious criticism from legislators, with some considering impeaching him for extra budgetary petrol imports. The annual petroleum import budget allocated by parliament to the government was exhausted in July, seven months before the completion of the fiscal year. Since then, as admitted by oil ministry officials, the government has been using oil revenues to import petrol.

Mr Nozari recently promised to place a government bill in parliament asking for extra funds to cover the cost of the additional imports. At least US$5 billion (Dh18.36bn), in addition to the $3.3bn allocated to petrol imports in the current budget, is needed to cover the annual import costs, Akbar Torkan, the deputy oil minister, said on Saturday. The required funds would come from the oil reserve fund.

"When oil prices began to rise, it became obvious that the budget allocated by the parliament to the government for petrol imports would not suffice. The extra money has been extracted from the oil reserve fund without the parliament's approval. This is clearly seen from comparing the Central Bank reports and the budget law," Mohsen Safaie Farahani, a former legislator and member of the parliament's budget committee, said.

The deficit in the petrol import budget resulted from skyrocketing oil prices in the spring and summer months. While greatly increasing the country's revenues from oil sales, they pushed up the cost of imported petrol, the government said. Getting parliament's approval, however, does not seem to be easy for the oil ministry. Many legislators are angry the government has bypassed parliament for so long. The proposed bill is coming too late, they say.

Legislators might be persuaded to try to impeach the oil minister if such a bill is proposed because that will only prove the government's inefficiency in reducing consumption, as has been required by law and long-term national plans, Gholamreza Mesbahi Moghaddam, the chairman of the parliament's economic committee, told reporters last week. The government is using the petrol issue to secure votes for Mahmoud Ahmadinejad, the president, in next June's presidential elections, some government critics allege. "With presidential elections approaching, the government is going to provide petrol at any cost to win the votes of the electorate," Mr Mesbahi Moghaddam said.

Analysts believe there is little chance the government will resort to any stringent measures. "This is a populist government and they will obviously not resort to reducing petrol rations or selling petrol at the free market price. There wouldn't have been a petrol import budget deficit at all if the petrol rations had been reduced to 60 or 80 litres per month from the current 120 litres, or if petrol had begun to be sold at a higher price when the problem emerged a few months ago," Mr Safaie Farahani said.

"But the government has chosen to lavish the petrol and sell it cheaper than mineral water to keep everyone happy." The overall social atmosphere and security concerns make reduction of petrol rations by the government quite unlikely, Saeed Laylaz, a political and economic analyst and editor of the Sarmayeh economic newspaper, said. "The government has to go on like this at least until the election time."

Petrol rationing was introduced in July 2007 to cut down consumption. For each car, an individual is entitled to 120 litres of petrol per month. Bonus rations are dealt out by the government on certain occasions. A litre of subsidised petrol costs only 1,000 rials (about Dh0.364). The introduction of petrol rationing has done little to reduce consumption, partly because more than a million new cars have entered the streets since then. "Rationing has only controlled illegal smuggling of cheap Iranian petrol into neighbouring countries," Mr Safaie Farahani said.

The government is planning to abolish petrol rationing and eliminate energy subsidies soon. The cash equivalent of energy subsidies will then be paid to every individual by the government. The price of petrol is expected to be at least 4,000 rials (Dh1.45) per litre if subsidies are removed. The more than seven million car owners in Iran consume a total of 65 million to 75 million litres of subsidised petrol per day. According to government figures, Iranian refineries produce 40 million litres of petrol per day and the rest is imported.

"I know that we are using what really belongs to the next generation. If only the government had worked out a better and more efficient public transportation system I, for one, wouldn't use my private car. But I have no other choice if I don't want to spend all my day waiting for buses and taxis," Reza Moshfegh, 42, a private company worker, said. [e-mail]