By Mariam Karouny
Reuters, 06 February 2006
Iraq will gradually increase state-controlled domestic fuel prices tenfold in 2006 to meet International Monetary Fund demands, an Iraq official said on Monday.
The move is likely to spark public protests. Iraq already increased prices by 200 percent in December, igniting protests and creating a rift between the oil ministry and the government over external political pressure.
"We have to meet demands from the IMF, they said the prices should be equal to the prices in neighboring countries," another source in the oil industry said.
"The price of benzene (gasoline) will gradually increase in 2006 to reach about 600 dinars (41 cents) per liter," said the Iraq official.
A liter of ordinary gasoline before the rise in December cost 20 dinars, or about 1.4 U.S. cents. It climbed to 50 dinars in early December.
One liter of gasoline in oil producer Saudi Arabia costs between 25-30 cents. When Iraq increases the price tenfold a liter will cost between 40-42 cents.
Iraq won a crucial loan accord with the IMF in late December and a $14 billion debt swap with private lenders.
The $685 million IMF standby credit arrangement was the fund's first ever with Iraq and is designed to support the economic program over the next 15 months.
Iraq defended the increase in December and said it was aimed at stopping smuggling of Iraqi oil to other countries and fighting the black market.
Former oil minister Ibrahim Bahr al-Uloum protested against the increase in December and was ordered to take one months leave by the prime minister. Uloum tendered his resignation, which was accepted in January.
Iraq has the world's third largest known oil reserves but decades of war, sanctions, under-investment and now widespread violence and sabotage have left it critically short of fuel. It has to import nearly half of all its gasoline.
The government continues to control prices, fostering a thriving black market in fuel for those unwilling to queue for hours, sometimes days, to fill their vehicles.
An oil industry official said Iraq should not have caved in to all IMF demands.
"Now we have opened this door and it will not be closed easily," he said. "We should have been tougher in negotiations."
Iraqis depend heavily on the state to support them with basic food like flour, cooking oil, tomato paste, rice and state-supported fuel.
-----------------------------
Citation: Mariam Karouny. "Iraq plans tenfold rise in fuel prices in 2006," Reuters, 06 February 2006.
Original URL: http://news.yahoo.com/s/nm/20060206/wl_nm/energy_iraq_prices_dc
-----------------------------