Iran has joined its partner Russia – the US maritime blockade in Tehran has caused long lines at gas stations, writes the newspaper Financial Times (FT).
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Fear that the war may resume
The twenty-liter limit per car forces drivers to return again and again, a worker at one of the capital’s gas stations told the newspaper. According to him, people rush to replenish fuel supplies “while their tanks are not yet empty, fearing that the war may resume or prices may rise.”
The State Fuel Consumption Optimization Organization warned of a “critical” gasoline shortage. According to its data, Iran lacks 15 million liters to meet the daily demand of 135 million liters. This means the deficit exceeds 11%.
Even worse in Russia
The situation in Russia is even worse. According to Rystad Energy, refining volumes are one-third below the seasonal norm, as more than 10 oil refineries have been attacked since early August, at least five have stopped operations (and some companies have not resumed activity after the June-July wave of Ukrainian bombings).
According to the International Energy Agency (IEA), in July Russia produced 8.76 million barrels of crude oil per day, although the OPEC+ quota is 9.82 million barrels. However, due to lost refining capacity, it not only banned fuel exports but also began buying it from India, Morocco, and Turkey, and increased gasoline imports from Belarus 25 times.
Iran lacks sufficient oil refining capacity
In Iran, some oil refineries were also damaged during Israeli and US strikes at the start of military actions this spring. Moreover, Iran, producing 2.6 million barrels of crude oil per day (IEA data for July – with capacity at 3.8 million barrels), lacks sufficient refining capacity. Therefore, a large part of the gasoline was imported, but now this is almost impossible due to the maritime blockade renewed by the US on July 14, writes FT.
US Treasury Secretary Scott Bessent stated on Monday that in conducting economic warfare against Iran, its trading partners will be given “a certain deadline” to terminate commercial relations, and organizations helping Tehran launder money or circumvent sanctions may be “disconnected from the US financial system.” Similarly, on the same day, French President Emmanuel Macron proposed to allies to stop fuel supplies to Russia.
The problem – Iran’s gasoline subsidy system
The fuel deficit in Iran is deepened by the subsidy system, due to which gasoline remains one of the cheapest in the world – 15,000-50,000 rials (0.0075-0.25 US dollars). The government, which has had to actively use strategic reserves in recent months, says the current mechanism is no longer sustainable due to nearly 90% inflation, the rial’s exchange rate falling to historic lows, and war-induced supply disruptions, notes Financial Times.
Iranian President Masoud Pezeshkian stated in August that selling gasoline below market prices drains government resources needed for food subsidies and employee support.
“Who said the government has to buy gasoline at 1.3 million rials per liter and then sell it for 15 thousand rials?” he said.
However, a recently conducted pilot gasoline price increase project in Kerman province was stopped just a few hours after it started. The country remembers well the events of 2019, when a sudden price jump caused protests in many cities, ending in deaths.
