SYRIANS WAKE UP TO GASOLINE PRICE HIKE

C O N F I D E N T I A L DAMASCUS 001075 SIPDIS SIPDIS STATE FOR NEA/ELA E.O. 12958: DECL: 11/01/2017 TAGS: ENRG EPET SY SUBJECT: SYRIANS WAKE UP TO GASOLINE PRICE HIKE REF: DAMASCUS 949 Classified By: A/DCM Todd Holmstrom for reasons 1.4(b,d) ¶1. (SBU) Syrians awoke on November 1 to find that the SARG had increased the price of gasoline by 20 percent overnight, from 30 to 36 SP/liter (USD 2.27 to 2.72/gal). The increase was less than the 40 SP/liter price many economists had predicted during a heated public debate over the need to eliminate fuel subsidies in late August (see reftel). ¶2. (SBU) Not surprisingly, rumors are again running rampant in Damascus that this morning's price hike portends increases in the price of mazout (diesel) and butane gas in the near future. The debate over fuel subsidies dissipated suddenly six weeks ago with the onset of Ramadan, leaving many Syrians to believe that pro-subsidy regime elements had successfully argued in favor of indefinitely postponing any increase in fuel prices. In January 2006, the last increase in gasoline prices led to similar speculation, but ultimately the SARG decided not to take the more controversial -- and politically difficult -- decision to raise diesel prices. Because of the widespread use of diesel fuel in industry, agriculture and power generation, such a move would have a more profound effect on the average Syrian than an increase in gasoline alone, according to local economists. -------------- COMMENT -------------- ¶3. (C) The timing of this decision seems tied to yesterday's Cabinet approval of the Finance Ministry's proposed 2008 budget, which projected the largest budget deficit in recent memory. Having explained the economic imperative justifying the gas price increase, the real question is whether the regime feels confident enough to now enact additional subisidy cuts. Bashar's domestic standing, while not under the severe strain of two years ago, is still suffering from a loss of prestige in the wake of the September 6 Israeli Air Force attack. CORBIN