Hamid Mollazadeh
Fuel smuggling in Iran is a persistent, high-stakes issue, often framed with staggering numbers—30 million liters a day, 25 million, sometimes 16 million. The actual figures in this lucrative business are difficult to verify, but what is clear is that smuggling involves not only gasoline but also diesel.
The incentives behind this illicit trade are deeply rooted in Iran’s fuel pricing system, weak consumption oversight, and fragmented governance, making fuel smuggling one of the country’s most profitable black-market operations.
Not all fuel leaving Iran illegally is truly “smuggled.” A significant portion comes from government-approved quotas allocated to border dwellers through programs like “Razzaq” in Sistan and Baluchestan and Hormozgan provinces. These legal allocations, aimed at supporting local communities, amount to around seven to eight million liters per day.
Because individuals physically transport the fuel, these movements often appear informal and opaque, creating the impression of widespread smuggling. However, a substantial share of fuel leakage is genuinely illicit. Recent efforts to curb this have focused on transportation networks, vehicle tracking systems and close cooperation between law enforcement, provincial authorities, and the Roads and Urban Development Ministry.
These measures have reduced fuel diversion by about five million liters per day—a significant achievement. Yet, officials acknowledge a hard reality: smuggling cannot be entirely eliminated.
Economic Incentive
The economic incentive is simply too strong. Diesel sold domestically at 300 tomans ($0.002) per liter can fetch nearly 50,000 tomans (38 cents) across the border. Such margins make fuel smuggling more profitable even compared to drug trafficking.
The logistics of smuggling further illustrate the scale of the problem. Moving millions of liters daily requires fleets of tankers and trucks, far exceeding the capacity of local border communities.
This suggests that another system also contribute to the leak. In some border regions, fuel cards remain active for tractors and trucks that have not operated for 20 years. These “ghost vehicles” continue receiving quotas that the government does not reclaim, providing an easy channel for diversion.
Power plants represent another vulnerable point. Fuel may be allocated on paper to plants but diverted elsewhere, or delivered and then left unchecked, with no post-winter inventory audits.
Consumption standards are weak and oversight is inconsistent, creating opportunities for misappropriation. The root of the problem is institutional.
Consumption Monitoring
Agencies such as the National Iranian Oil Company, refineries, and the gas company produce and transport fuel but lack full authority over consumption monitoring. Even the anti-smuggling headquarters operates mainly in a supervisory capacity. Everyone is responsible for production; no one is accountable for consumption.
To address this, the government has established a Vice Presidency for Fuel Consumption Optimization and Strategic Energy Management with oversight over the oil, power, and road ministries. Approved by presidential decree, it aims to unify supervision of fuel distribution and consumption. If led by a strong, competent leader, it could finally provide the integrated control that has been missing.
Structural reform is also essential. Policymakers argue that the government should reduce or limit the practice of giving subsidized fuel to everyone, set transparent quotas for citizens and allow excess demand to be met through free market mechanisms.
Fuel smuggling in Iran is not just a law enforcement challenge; it is a symptom of price distortions, weak oversight, and diffuse responsibility. Without systemic reform, the flow of fuel—both legal and illegal—across Iran’s borders will remain one of the country’s most costly energy leaks.
