http://www.azcentral.com/news/articles/1228iraq-oil28.html

Fuel prices soar in Iraq, leading to more turmoil Thousands protest government's elimination of energy subsidies

Los Angeles Times Dec. 28, 2005 12:00 AM

BAGHDAD - Iraq's government has sharply raised the price of fuel and other petroleum products this month, sparking discontent and protests and worrying international observers who say the increases could hurt millions of poor Iraqis and throw the country into further turmoil.

Since the Dec. 15 parliamentary election, fuel prices have increased fivefold, mostly because the outgoing government of Prime Minister Ibrahim al-Jaafari has cut subsidies as part of a debt-forgiveness deal it signed with the International Monetary Fund.

The move has shocked Iraqis accustomed to hefty subsidies of gasoline, kerosene, cooking gas and other fuels. Thousands have demonstrated in and around the capital to protest the price hikes. Oil Minister Ibrahim Barh al-Uloum has threatened to quit.

Iraqi and Western officials say the government spends about $5 billion each year on the fuel subsidies. But the Finance Ministry has estimated the total cost at $6.9 billion, or 28 percent of the country's projected gross domestic product this year, because the low prices have encouraged a huge smuggling business, with gas bought in Iraq shipped out at a profit to Iran, Kuwait, the United Arab Emirates and other countries.

Over the summer, gas was selling for about 5 cents a gallon. Now it's about 65 cents, and at the end of the price hikes, gasoline will cost about the same in Iraq as it does in other countries in the Persian Gulf, around $1 per gallon. The price of kerosene, diesel and cooking gas have seen similar or steeper increases. Diesel costs about 38 cents per gallon.

While that may still seem cheap to Americans, wages in Iraq are far below those in the United States. Employees in government ministries, for example, earn about $130 a month on average, putting them among the top earners in Iraq.

Millions of other Iraqis live in poverty, relying on food handouts from the government. About a fourth of all Iraqi households subsist on less than $1 a day.


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