The problem for the regime is that there is no short-term solution to the gas crisis, and all of the conflicts are interconnected and exacerbate each other. The discontent will fuel the political activists. The rising fuel prices will cause more workers to be fired or go unpaid just as they face increasing need for income. The bazaar merchants will be hurt as customers become cash-strapped, the cost of products increase, and they have to pay 15 percent more in taxes to the regime that uses violence and intimidation against them. The regime can try to ration the gasoline and reduce subsidies, but the last time that was tried, in 2007, it resulted in burning gas stations.
The regime is moving quickly to try to close the window of time with which the opposition and the West can exploit this vulnerability. It has signed a $6.5 billion deal with the Chinese company Sinopec to build refineries; it plans to build a pipeline that can deliver gas to Turkey that it hopes to finish in three years; and it is hoping to double the production of gasoline by 2012. The International Energy Agency says Iran can reduce their imports by 75 percent by 2015 by expanding their production and getting rid of subsidies — but the decreasing number of fuel providers will be a major obstacle.
The Revolutionary Guards had to back out of the South Pars gas field that could bring in an additional $130 billion per year, as well as two other refinery projects. They knew it would be tough to find foreign investors for an IRGC venture, and these bold plans will have to be delayed or canceled without foreign investment. The attitude change of the United Arab Emirates is another blow to the regime, as half of Iran’s gasoline imports arrive through its territory and the country is a major trading partner.
The U.S. needs to act quickly to let any company involved in this effort know they will be sanctioned and will lose more money than they gain if they make this unwise business decision. Congress is pushing the Obama administration hard on this, but the president wants the legislation to allow him to shield companies in countries that have begun cooperating with us.
More sanctions are probably on the way. If the West wants to really stick it to the mullahs, it can target the source of about 90 percent of the regime’s export money: oil sales. One report says exports will have to end to meet rising demand inside the country by 2015.
This is not a bump in the road for the regime. The gasoline crisis is not going to end anytime soon and is going to become exponentially worse. It will be years before the regime begins decreasing its reliance upon imports, and the more time passes by, the more demand will grow. As demand grows, the regime will have to decrease its oil exports, ration gasoline, and carry the political hot potato of reducing subsidies.
The regime is on an unsustainable path and no company should be permitted to help them change that.