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Iran's parliament Wednesday approved the rationing of subsidized gasoline from May 22, while raising prices, in moves that aim to cut costly fuel imports but could stoke inflation and arouse public criticism.

Iran is OPEC's second largest oil producer but does not have enough refining capacity to meet its domestic gasoline needs. It therefore has to import about 40 percent of its requirements, which analysts say could make it vulnerable to sanctions.

World powers are considering toughening UN sanctions on Iran because of its refusal to rein in its nuclear activities. But Western diplomats say fuel imports are unlikely to be targeted because it would hurt the public not the government.

"With a positive vote of lawmakers, gasoline will be rationed at a price of 1,000 rials (about 11 US cents) per liter from the start of Khordad (the Iranian month beginning May 22)," Iran's ISNA news agency reported.

It said the government would decide the ration quantity and price of unrationed fuel by April 20.

Motorists currently pay 800 rials (about 9 US cents) a liter, some of the cheapest fuel in the world. Analysts say such a heavy subsidy encourages waste, boosts smuggling to neighboring states and is a hefty drain on government coffers.

Iranian laws have to be vetted by the constitutional watchdog, the Guardian Council. One Iranian oil official said the plan approved by parliament could still be amended before implementation. "The parliament approval is not final," he said.

Iran's gasoline plans are scrutinized by energy traders, who send a gasoline tanker to Iranian quaysides every two days. This cost about US$5 billion in the past 12 months but Iran's energy exports are expected to earn over US$50 billion this year.

In the past, the government has backed away from rationing because analysts say it fears a public backlash in a country where cheap, abundant fuel is considered a national right.

But analysts say the government prefers rationing to hiking prices because it is already facing mounting criticism from parliament and the public for climbing inflation, now officially running at 16 percent, a figure economists say is conservative.

Parliament did not say how much fuel each motorist would receive under the plan but an Iranian official earlier said one idea was to give 90 liters a month to private motorists.

Ordinary Iranians have said this amount is too little. Some also complain about any price hike, questioning why such a big oil producer as Iran needs to raise prices.

Analysts say Iran needs to develop a broader strategy to control gasoline consumption, now rising at about 10 percent a year. This should include improving public transport and more actively encouraging drivers to switch to natural gas, they say.

(China Daily via agencies March 8, 2007)