Over at InsideIRAN, Hossein Askari makes a persuasive case that further sanctions on Iran – including limiting gasoline Iran’s gasoline imports – are unlikely to work.
Akari first traces the history of U.S. sanctions on Iran, demonstrating that none of the myriad schemes employed by successive U.S. administrations have worked.
But the most interesting aspect of Askari’s piece is his analysis of the Iranian gasoline industry and the likely impact of sanctions. From the article:
In my opinion, a gasoline embargo would be difficult to enforce, but much more importantly, it would be counterproductive because it would help the Iranian regime. Consider these facts: Iran imports roughly 30 to 40 percent of its domestic gasoline consumption at world prices, and then sells it to Iranian consumers along with its domestically refined gasoline at a government-subsidized price. Because gasoline is sold at a fraction of the world price in Iran, fuel conservation is not pursued, and gasoline frequently is smuggled by individuals with the backing of the Islamic Revolutionary Guards Corps into neighboring countries and sold there. Over the past ten years, this policy of selling gasoline at government-subsidized prices has cost Iran in the range of 10 to 20 percent of GDP annually, depending on world gasoline prices and on the government mandated pump price.
For years, the government has wanted to eliminate this subsidy, to increase the price to world levels and reduce consumption, but fearing a domestic backlash, it always has moved with caution.
Even assuming that somehow a gasoline embargo could be effective in cutting off Iran’s gasoline imports, what would happen? Consumption of gasoline would decline by 30 to 40 percent and government revenues would go up, because no payments would have to be made for gasoline imports. If the government allowed the reduced supply of gasoline—namely, domestically refined gasoline—to be sold at a price that would equate demand to supply, the price would increase to a level that would eliminate the subsidy (no subsidy for imported gasoline and no subsidy for domestically refined gasoline). The smuggling of gasoline from Iran to its neighbors would no longer be profitable.
Not only would the sanction offer the regime cover to eliminate the subsidy, the regime also could call this turn of events an act of war and a national crisis caused by the United States. A significant number of Iranians would rally behind the regime. This is the last thing the U.S. should want.
You can read the entire article here.
– Ben Katcher
