Iran's petrol prices up 25%

IRAN increased petrol prices by 25 per cent yesterday and said it would begin rationing in two weeks, in a move likely to increase public dissatisfaction with the government of hard-line president Mahmoud Ahmadinejad.

On Sunday, the government had said it would not increase fuel prices "at the moment". So it came as a surprise to drivers yesterday morning to find they had been hiked overnight to 50p a litre, from 40p.

Oil-rich Iran has limited refinery capacity and must buy petrol on the world market. The increase is part of a major plan to reduce state subsidies on petrol and try to stop smugglers who take advantage of the low price to sell it abroad.

Public discontent has been growing in Iran in recent months as housing prices have doubled and prices for basic goods such as vegetables have tripled since last summer.

Mr Ahmadinejad was swept to power in 2005, promising to share oil revenues with every family, eradicate poverty and tackle unemployment.