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Iran loses large amounts of fuel to smuggling

Tehran, September 24, 2009

About 250,000 barrels per day (bpd) of gasoline, diesel and other fuel are smuggled out of Iran every day, a senior official said in remarks published on Thursday.

That is about 15 per cent of Iran's 1.6 million bpd of oil demand. The comments by Deputy Economy Minister Mohammad-Reza Farzin highlight the problems Iran -- the world's fifth largest oil exporter -- faces when it comes to production, consumption and distribution of heavily-subsidised fuel.

'The news and information on smuggling in recent years are very worrisome, and they indicate that a major portion of the country's diesel fuel and gasoline are being smuggled to neighbouring countries (where prices are higher),' Farzin said.

'Despite the fuel rationing in place, 40 million litres of fuel are being smuggled daily out of the country,' Farzin was quoted as saying by the Hamshahri daily.

Government subsidies make Iran's gasoline among the world's cheapest, providing a potentially lucrative business for smugglers to neighbouring countries. Diesel, fuel oil and kerosene are also smuggled.

Cheap fuel has contributed to rapid growth in demand despite fuel rationing, and Iran has been unable to refine enough crude to keep up with domestic needs. The country relies on imports to meet up to 40 percent of domestic gasoline demand.

Imports are a sensitive subject for Iran, as they are a potential target for the United States for sanctions aimed at halting Tehran's nuclear programme.

Smuggling inflates demand and means the country must import more fuel at international prices, at great cost to its  treasury which then has to sell it at subsidised rates.

At some border points, smugglers had even built pipelines to transport the fuel out of the country, Farzin said.

Iran introduced rationing of gasoline in 2007 to curb its consumption, allowing motorists to buy 100 litres per month for the price of 1,000 rials (around $0.10) per litre.

Officials have said in the past that the rationing scheme had reduced smuggling. – Reuters




Tags: Iran | Tehran | fuel | Smuggling |

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