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Iranian Fuel Smuggling Soars After Plunging Currency Value

Iran--At least 14 people were killed on Tuesday following a collision in Sanandaj between a bus and a fuel tanker truck which exploded, seriously burning some of the victims.

As Iran’s national currency has dropped rapidly in value, the smuggling of fuel has soared due to increasing price differentials inside and outside the country.

Iran’s rial has passed the record-breaking point of 140,000 against the U.S. dollar. This means the rial lost about 72% of its value, compared with September 2017, but subsidized fuel prices remained unchanged.

Therefore, the gasoline price in Iran is around 10 cents per liter currently, while the figure in Pakistan, Afghanistan, Turkey, and Iraq is six to 10 times more expensive, paving the way for a smuggling boom.

“The Oil Ministry has stopped releasing gasoline statistics since 22 July, when the demand level hit a record, standing at 122 million liters per day (ml/d),” Tasnim reported Sep.4.

According to the latest official statistics, the country’s average gasoline consumption (including smuggling) in the four months of the current fiscal year (March 21-July 22) rose 9.6% on the year to 86.6 ml/d. The details of the statistics indicate that demand in the fourth month was 91.7 ml/d, higher than previous months, and finally at the end of August the figure soared to around 122 ml/d.

State agency IRNA also reported on September 3 that fuel smuggling to western and eastern neighbors has been booming due to the plunging national currency value. “In the absence of official statistics, the reports from borders areas show a significant increase in fuel smuggling,” IRNA reported.

According to the International Energy Agency, the Iranian government pays a huge amount of fuel subsidies and ranked second to China in 2016 globally.

In that year, Iran spent $16 billion to subsidize oil-based fuels and a further $18.7 to offer cheap electricity and natural gas.

The bitter impact of smuggling for the Iranian government is that the country hasn’t gotten rid of gasoline imports yet.

Last year, Iran imported 12.63 ml/d of gasoline, about 4.5% more than the previous year.

Iran inaugurated the second phase of the Persian Gulf Star Refinery with 12 ml/d gasoline production capacity in June, and its nominal production capacity reached 87.3mn l/d, but even less than the demand level.