Page last updated at 17:58 GMT, Wednesday, 17 March 2010

Iran tightens petrol rations as economic sanctions loom

President Mahmoud Ahmadinejad
President Mahmoud Ahmadinejad is cutting back hard on subsidised goods

Iran has announced it will cut the volume of its cheap petrol ration by 25% to 60 litres per vehicle per month from 21 March.

Currently, each vehicle is allowed a quota of 80 litres of fuel at 10 cents a litre, with any amount needed on top of that priced at 40 cents.

That compares to a UK price that has been averaging £1.12 a litre ($1.68) and is forecast to reach £1.20.

The move comes as Iran faces potential sanctions on its petrol imports.

Washington has accused Tehran of pursuing a nuclear weapons programme and has asked its allies to tighten sanctions on the Islamic republic.

Nuclear controversy

Tehran denies the allegations, saying its nuclear facilities are for peaceful purposes.

A number of countries, spearheaded by the United Nations, are planning to tighten trade with Iran over the controversial programme.

The Financial Times said last week the energy trading company, Vitol, and its fellow trading giants Glencore and Trafigura, had stopped supplying petrol to Iran after increased pressure from the United States.

General Mohammad Rouyanian of Iran's fuel management committee told local agencies the new rationing was for three months only but it could be reduced further if needed.

Iran consumes around 65m litres of petrol a day, one third of which is imported.

Political pressure

Iran's oil ministry has pledged to increase domestic petrol production by 13m litres a day to counter any future sanctions.

Iran heavily subsidises energy and food - although that is a policy due to change in the next fiscal year.

Iran's parliament this week approved a budget bill set to remove $20bn worth of subsidies - the revenue-starved government of President Mahmoud Ahmadinejad had wanted a cut of twice that amount.

Iranian MPs say they fear further removal of subsidies would triple the country's inflation - which has only recently fallen to 11.3%.

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