Even if the sanctions do not include gasoline exports to Iran, countries might voluntarily reduce their exports as a response to Iran’s stated plan of reducing its crude oil exports. If Iran cuts its exports, its oil revenues will decline, which will in turn force it to reduce its gasoline imports, especially if the cuts result in a sharp increase in oil prices.

Iranian citizens depend on heavily subsidized, imported gasoline, and their gasoline prices are among the lowest in the world. The government buys gasoline from suppliers in the Persian Gulf, India, and elsewhere. It then sells it at about one-sixth the world price. The higher the world price, the larger the subsidy, which exceeded $4 billion in 2006. The results of the subsidies are disastrous: demand continues to rise, efficiency declines, and gasoline smuggling has become a lucrative business. And all the while, the fuel subsidy becomes a bigger and bigger burden for the government.

The politics of subsidies, including gasoline subsidies, have hindered economic reform. With this in mind, gasoline has become Iran’s “time bomb.” It is not a matter of whether it will explode; it is a matter of when. The irony is obvious: the Iranian nuclear program is intended to solve Iran’s energy problem. But it may also cause an energy crisis, at least in the short run. Iran has limited policy options to deal with gasoline. UNSC sanctions might be the spark. In any confrontation with the U.S. or the U.N., gasoline will emerge as Iran’s weakest link.

For the Iranian rulers, liberalizing the gasoline market appears out of the question. Raising prices would be political suicide. Rationing, while it is the lesser of two evils, is also perilous. To implement either, Iran needs political cover, such as UNSC sanctions or an attack on the Iranian nuclear facilities. Therefore, Iran cannot stop importing gasoline. From an economic and political point of view, all the solutions to the problem are long-term. As I see it, the government could slow demand by: raising gasoline prices gradually, expanding domestic production, building mass-transit in large cities, switching vehicles, especially government vehicles, to CNG or LPG, and improving the efficiency of new vehicles produced domestically.

Iran is the world’s fourth-largest crude oil exporter and OPEC’s second largest (after Saudi Arabia). It is also among the top importers of gasoline, purchasing about 40 percent of its total needs. Should the United Nations Security Council (UNSC) impose economic sanctions on Iran in the next few weeks – which might include prohibiting gasoline exports to the country – Iran would suffer from an energy crisis.

Even if the sanctions do not include gasoline exports to Iran, countries might voluntarily reduce their exports as a response to Iran’s stated plan of reducing its crude oil exports. If Iran cuts its exports, its oil revenues will decline, which will in turn force it to reduce its gasoline imports, especially if the cuts result in a sharp increase in oil prices.

Iranian citizens depend on heavily subsidized, imported gasoline, and their gasoline prices are among the lowest in the world. The government buys gasoline from suppliers in the Persian Gulf, India, and elsewhere. It then sells it at about one-sixth the world price. The higher the world price, the larger the subsidy, which exceeded $4 billion in 2006. The results of the subsidies are disastrous: demand continues to rise, efficiency declines, and gasoline smuggling has become a lucrative business. And all the while, the fuel subsidy becomes a bigger and bigger burden for the government.

The politics of subsidies, including gasoline subsidies, have hindered economic reform. With this in mind, gasoline has become Iran’s “time bomb.” It is not a matter of whether it will explode; it is a matter of when. The irony is obvious: the Iranian nuclear program is intended to solve Iran’s energy problem. But it may also cause an energy crisis, at least in the short run. Iran has limited policy options to deal with gasoline. UNSC sanctions might be the spark. In any confrontation with the U.S. or the U.N., gasoline will emerge as Iran’s weakest link.

For the Iranian rulers, liberalizing the gasoline market appears out of the question. Raising prices would be political suicide. Rationing, while it is the lesser of two evils, is also perilous. To implement either, Iran needs political cover, such as UNSC sanctions or an attack on the Iranian nuclear facilities. Therefore, Iran cannot stop importing gasoline. From an economic and political point of view, all the solutions to the problem are long-term. As I see it, the government could slow demand by: raising gasoline prices gradually, expanding domestic production, building mass-transit in large cities, switching vehicles, especially government vehicles, to CNG or LPG, and improving the efficiency of new vehicles produced domestically.

Dr. A. F. Alhajji is an associate professor of economics at Ohio Northern University.