Iraq Cracks Down on Gas Station Fraud - maybe?

Iraq is notorious for being a socialist country that subsidizes food and utilities for citizens. When I was there in 2004-2006, there was constant discussion about the need for the government to reduce subsidies for food, fuel and utilities and let the prices rise to market conditions. That still hasn't happened.

Thus, as the article below illustrates, the very low cost for gasoline at the pumps has created two problems:

1) There is more demand than the supply of gas pumps, so there are always lines at the gas stations, creating a demand for black market sales of fuel to avoid lines. Most articles on fuel shortages in Iraq fail to mention that there were very few gas stations under Saddam, and when the Coalition invaded Iraq and allowed importing of over 1-million new (or stolen) cars, the demand for fuel went up, but very few new gas stations were constructed. Thus the apparent "shortage" is really a lack of service facilities.

2) Buyers get the gas and sell it on the black market for more money, or they transport it across the border into Iran or other countries to sell the gas for market prices.

The article mentions the BIG spread between legal and black market prices of kerosene. One reason is that almost all Iraqis own generators to provide electricity when the electrical grid is down (which could be 80% of the time due to terrorist damage). One of my translators told me in 2005 about how he had to wait in line almost every day after work to buy jerry cans of kerosene to run his generator at home to provide air conditioning for his new child.

The article says they government is cracking down on allowing anyone like local militia to sit by the gas stations and control who gets gas (maybe after paying a bribe?). Or, is it that other local politicians are angry that they aren't getting a cut? You never know in Iraq.

Finally, if the US government and the State Dept. was on the ball, they would insist on vetted controls to ensure fuel was sold democratically in lines without bribes, etc. But we don't, and we keep providing funds to repair fuel facilities so the Iraqis can skim more fuel for sale on the black market.
vj

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from AP at:
http://ap.google.com/article/ALeqM5jd63v4MNhSHNyWn-yZUOSGqT627wD9016CCG0

Iraq Orders Gas Station Crackdown

By SAMEER N. YACOUB – 21 hours ago

BAGHDAD (AP) — The Iraqi government on Sunday announced plans to crack down on militiamen controlling gas stations and oil distribution in a new move to curb the resources of armed groups.

Iraqi Prime Minister Nouri al-Maliki has given instructions to ban the interference or presence of any unofficial people at state-run and private gas stations, refineries and oil distribution centers, according to a government statement.

"Anyone who interferes in the supply, pricing and working hours mechanisms or who charges money will be subjected to law," the statement said.

It is widely believed that gas stations and distribution centers, especially in eastern Baghdad and some Iraqi southern provinces, are covertly controlled by Shiite militiamen dominated by radical cleric Muqtada al-Sadr's Mahdi Army.

They in turn make large sums of money by selling smuggled gas and kerosene on the black market.

Gas costs about $1.50 per gallon at gas stations and about $2.53 per gallon on the black market — usually vendors peddling it from jerrycans on the side of the road so motorists can avoid long waits and shortages.

Kerosene is sold for 50 cents per gallon through official channels and $3.37 on the black market.

The decision came after bloody fighting between government security forces and militia groups believed to be involved in oil smuggling in the southern oil-rich city of Basra.

"These are part of our continuous efforts to protect our national resources from manipulators and those who make fortunes at the expense of public money and in order to free resources from corruption and smuggling and to combat crime," said the statement.

The statement said the national oil and interior ministries would coordinate on the necessary measures to prosecute the violators "involved in such actions that deemed as economic sabotage."

Iraqi troops were sent in the past to keep militiamen away from gas stations, but they failed to end the problem.