Fuel Smuggling Out Of Iran Is Thriving

Diesel and gasoline are being smuggled out of Iran to neighboring countries where fuel prices are much higher than in the Islamic Republic, according to analysts and officials.

Some 58,000 barrels per day (bpd) of domestic diesel supply is not going for local consumption, Jalil Salari, managing director of the National Iranian Oil Refining and Distribution Company (NIORDC), tells Argus.   

Due to the cheap Iranian fuel, nearly 10 million liters of diesel are smuggled out of the Islamic Republic every day, Salari told the local IRNA news agency last month.

NIORDC pegs Iran’s diesel demand at 528,000 bpd, but the actual domestic consumption is unlikely to be above 470,000 bpd, which leaves a gap 58,000 bpd likely being smuggled out of Iran to countries with much higher fuel prices.

Considering that 8% of Iran’s diesel production of 690,000 bpd is believed to be smuggled, this could mean that there is some level of coordination with authorities in the smuggling business, according to analysts.

“The real smuggling by people and entities not linked to the state are small ? mainly to Pakistan, but also to Afghanistan and [Iraqi] Kurdistan,” Iman Nasseri, managing director for the Middle East at consultancy FGE, told Argus.

“In total, we think these volumes could not exceed 15,000-20,000 b/d of diesel. The rest would be large scale sales by vessels and controlled by the Iran's Islamic Revolutionary Guard Corps (IRGC),” Nasseri added.

Fuel in Iran is cheap thanks to government subsidies for diesel and gasoline. 

“Iran, which has some of the world’s lowest fuel prices due to these subsidies and the plunging value of its national currency amid Western sanctions, has regularly been accused of rampant fuel smuggling to its neighbours in cooperation with regional allies, such as Hezbollah,” according to an analysis on oil smuggling in the Middle East published by the Global Initiative Against Transnational Organized Crime earlier this year.  

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

• Top 10 Countries With Largest Oil Reserves
• Think Tank Says Coal Use In EU Dropped This Winter
• 3 Reasons Why Oil & Gas Is Goldman Sachs’ Favorite Sector