Fuel smuggling from Iran profitable even if price jumps 6 times - expert

Oil&Gas Materials 10 May 2019 10:41 (UTC +04:00)

Tehran, Iran, May 10


Even if Iran applies all possible measures to prevent fuel smuggling, it will still be carried out, Iranian Energy Expert Javad Nowferesti told Trend.

"If the fuel card system is brought back, the amount of gas smuggling will be somewhat lower. When in 2007 the system was implemented, the consumption and smuggling of fuel dropped to 10 million liters a day," he said.

"There is smuggling of goods at the borders of all countries, and this issue is not specific for Iran,” he said. “But the fuel smuggling in Iran is happening before the fuel reaches filling stations," he said.

"The smaller amount is smuggled by border residents, and the bigger amount is smuggled before the fuel reaches filling stations," said the expert.

"“In June 2015, the removal of the fuel card increased consumption and smuggling, and between 2015 to 2017 the consumption increased from 72 million liters per day to 90 million liters," Nowferesti noted.

He said that bringing back the fuel card system means more transparency and oversight, and the consumption will be under control.

Nowferesti mentioned the research conducted by the government, and said that even if the fuel price is increased twofold, the psychological burden will be much more damaging.

"Even if the price of fuel jumps 6 times, the price in Turkey is more than 7 times higher and the smuggling is still profitable for smugglers,” he said.

Thanks to heavy subsidies, fuel is much cheaper on the Iranian domestic market than it is abroad - as little as 25 cents per liter - creating an arbitrage opportunity for illegal smuggling networks. Most fuel smuggling occurs via tanker trucks and small vehicles crossing Iran's land borders, and the destination markets are primarily neighboring countries in Central Asia.

Iran's currency, the rial, has fallen against the US dollar since the re-imposition of American sanctions on Tehran. This has reduced the already-low cost of Iranian gasoline in US dollar terms, making smuggling even more attractive.