Syria raises fuel prices to snuff out black market, soothe unrest

(Reuters) – Syria has raised fuel prices, cutting back on lavish subsidies, to quell a thriving black market that has led to anti-corruption protests in areas of strong government support.

Worsening fuel and electricity shortages have sparked sometimes violent protests in the last few months in President Bashar al-Assad’s minority Alawite sect’s heartland in the port city of Latakia, residents say.

Protesters say war profiteers and well-connected businessmen are reselling subsided fuel at much higher prices in a black market that most ordinary Syrians now rely on.

Western sanctions do not bar companies from selling diesel to Syria but many firms are weary of dealing with the Damascus government.

The price of diesel used for public transport and heating went up 10 days ago to 125 pounds (58 cents) from 80 pounds per liter in the biggest single hike since the 2011 crisis started.

Syria’s two main oil refineries in Homs and Banyas now process a fraction of their pre-war capacity, officials say.

“The refineries are working at less than 10 percent of their capacity because of the lack of crude oil,” Salman Hayan, deputy economy minister told state television.

Officials say the steep price hikes also eliminate a two-tier diesel pricing system that encouraged corruption and smuggling.

“This reduces corruption and there is no more reason for people to find innovative ways to smuggle diesel since the price is now at cost and close to international prices,” said Talal Barazi, governor of the city of Homs, where proximity to the Lebanese border has spawned a lucrative illicit oil trade in cheap Syrian fuel.

The government has long boasted it had maintained some of the lowest official prices for bread and fuel in the region, despite a war that has killed around 200,000 people and displaced millions.

Before the war diesel was sold for 7 pounds a liter and gasoline for 20 pounds under a lavish subsidy program that then cost $8 billion a year.

Syria’s economy has been devastated with oil and tourism revenues lost and exports falling sharply.

The country produced at least 380,000 barrels per day of crude oil before the crisis, half of which was exported.

“Instead of the oil sector being a major source of financing from the treasury it has now become a heavy burden,” Oil Minister Suleiman al-Abbas told state television.