The refining industry in Iran is facing a crisis caused by a growing shortfall in production capacity for gasoline and other light fuels to meet rapidly growing domestic demand. The industry is locked into a repetitive cycle of decline due to under investment in new facilities and total capacity, massive government energy and automotive subsidies that encourage continued growth in demand, and a poor investment climate that discourages badly needed foreign investment in the refining industry. The shortfall in refining capacity causes the government to import fuel, the cost of which are growing beyond the government's ability to control. This refining crisis creates an opportunity for the United States and its allies to exercise strategic patience in trying to influence the Iranian government's behavior in a direction more favorable to our interests. The Iranian government has demonstrated an ability to act pragmatically in order to stave off economic dislocation in the past. It is reasonable to assume they will do so again in response to the economic threat posed by the refining crisis. While a policy of strategic patience carries risk, the available evidence demonstrates that the current program of sanctions and economic pressure are likely to force a favorable change in Iranian behavior.

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