Iran imports 40 percent of its gasoline needs, making the Islamic republic vulnerable to trade sanctions in its dispute with the United Nations over its nuclear programme.

The government has put forward plans to ration gasoline and raise the price, currently among the lowest in the world, from May 22. Iran is the world"s fourth largest crude exporter but a lack of refining capacity has made it dependent on gasoline imports.

"The new rationing plan should be seen as a clever move towards gradually adopting market prices, encouraging greater fuel efficiency and curbing demand," the IEA, which advises 26 industrialized nations, said in its monthly Oil Market Report.

"However, the change will entail considerable social and political hurdles, which will need to be overcome if it is to be a success."

According to the IEA, there are 15 million cars on Iran"s roads and gasoline demand is estimated at about 78 million liters per day -- about 5.2 liters per day per vehicle or three-quarters above Iran"s planned three liters per day quota.

"On average, therefore, the quota will last around 17-18 days. Heavy users who are unable to find transportation alternatives will be highly penalized, but there will be some drivers who will manage to curb their own consumption and feed what will likely become a highly profitable black market with their own quota surpluses," the IEA said.

PIN/REUTERS