Iran sets up border market

Tehran believes the move will reduce smuggling and bypass sanctions.

ISLAMABAD:

Iran has launched a border market to sell diesel fuel to buyers in Pakistan and Afghanistan. The move has been taken to counter smuggling of fuel through its border areas, Iranian news agencies reported. As the United States and European Union tighten sanctions on Iran, a lucrative cross-border industry of smuggled fuel and goods has emerged, bolstered by a sharp drop in the value of the Iranian currency.

The sanctions, which the US has threatened to follow up, were in response to Iran’s use of nuclear technology ostensibly for power generation. As a result, foreign investment and trade in Iran has plummeted.

Fuel, especially diesel, is being moved illegally out of the country through cities bordering Afghanistan, Pakistan and Turkey for refining and distribution, says Iranian Deputy Oil Minister for Alireza Zeighami. Between 7-10 million litres of petrol and diesel are smuggled out every day, according to Iranian state media. Analysts are attributing a 7% rise in fuel consumption to an increase in smuggling activity. Diesel is priced at 3,500 riyals (14 cents) a litre, but smugglers can sell it at about 7-10 times more to Iran’s neighbours. “Smuggling will decline if prices change,” says Zeighami.

Iran is currently exporting 20 million litres of oil products per day. Strategic reserves of gasoline and diesel fuel will be increased by 1.3 billion litres in the current year.

Published in The Express Tribune, June 9^th, 2013.

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