Thousands in Balochistan, a southwestern province in Pakistan, are involved in smuggling oil across the restive border with Iran every year. While the phenomenon is not new, the Pakistan government has recently ordered a halt to the illegal trade as fears mount about economic losses in the billions of rupees.
The falling price of Iranian oil also has led to increased smuggling, according to Fatemeh Aman is a non-resident senior fellow at the Middle East Institute.
“In a region so economically deprived on both sides of the border, the opportunities for earning a living are often limited to either trafficking drugs or smuggling fuel,” Aman wrote in an article published in March by the Jamestown Foundation’s Terrorism Monitor.
“Fuel carriers lack any other income besides carrying gasoline and diesel fuel from Iran to Pakistan, with the big money going to the organizers. In contrast, drivers and truckers receive only a small share of the profit even though they are the ones who take the most risks.”
Pakistan Today reports that 1.2 million liters (about 317,000 gallons) of oil are smuggled into Pakistan on a daily basis by way of tankers that operate by bribing officials on both sides—12 percent of the total oil smuggled out of Iran.
The illegal sale into neighboring countries’ markets is actually helping Iran to bypass U.S. economic sanctions, according to Ahmed Quraishi, a Pakistani journalist based in Islamabad who has been covering Iran affairs for more than two decades.
“This is especially true in the cases of Turkey, Iraq, Pakistan, and Afghanistan,” Quraishi wrote, adding that Pakistan is unwillingly subsidizing Iran’s budget to the tune of $1 billion a year. Each year, 3.6 billion liters of oil, or 63,000 barrels, are smuggled out of Iran to various countries, according to a report by Pakistan Today.
“The Iranian government is forcing Pakistan to subsidize the violation of U.S. sanctions and is making Pakistan pay for it. This is a huge favor that Tehran is extracting from Islamabad without giving anything in return.”
Within Pakistan, this illicit oil from Iran has caused shortages as well as erratic fuel prices, with authorities attributing a 2020 shortage to it.
Crackdown and Violence
At the beginning of the year, the Pakistan administration took action against oil smuggling, approving a comprehensive plan that listed 2,094 illegal petrol retail outlets in three provinces, according to leading Pakistani daily The Dawn.
Following the approval of the action plan by the Pakistani administration, another incident heightened the issue of the smuggling: On Feb. 22, soldiers of Iran’s Islamic Revolutionary Guard Corps (IRGC) detained and then opened fire on a group of Baluch fuel carriers that were protesting after the Iranian government blocked the passage of their fuel loads into Pakistan.
Two people were killed and six others wounded. One of the wounded was a Pakistani citizen. Pakistani outlet Arab News reported that Iranian forces had also fired at the smugglers inside Pakistan territory, in a separate incident.
The IRGC gains some funding for its operations from the illicit trade that happens through the border triangle where Iran, Afghanistan, and Pakistan meet, Quraishi said.
“Locals say IRGC officers have stakes in oil and diesel trade, smuggling of contraband, drugs, and electronics. Revenue generated from these operations partially funds IRGC’s operations and local proxies in Afghanistan and Pakistan,” he said.
Iran’s underground economy is estimated to be worth at least $140 billion, and the IRGC is its chief controller and beneficiary, Saeed Ghasseminejad, an associate fellow at the Foundation for Defense of Democracies, wrote in a 2015 article. The situation Ghasseminejad describes remains unchanged.
“This income provides the Guards with financial independence from Iran’s civil politicians. It also puts the IRGC in charge of Iran’s underworld and its criminal gangs,” Ghasseminejad wrote.
Can Pakistan Leverage the Situation?
Pakistan and Iran share a porous 560-mile border through which the smuggling of people, drugs, and petroleum products takes place. Pakistan has often accused the IRGC of making repeated violent incursions into its territory.
But oil is a product of geopolitical significance, and Quraishi believes it’s important to find out if Pakistan can use the oil smuggling money to “leverage” cooperation from the Iranian regime in other areas of significance between the two neighbors.
“Islamabad has a number of wanted militants and terrorists hiding in Iran and awaiting extradition. These include ethnic militants from Balochistan, and violent religious extremists from Karachi, and Punjab involved in sectarian violence,” Quraishi said.
“Also, Pakistan has grievances on Baloch and some Sunni extremist groups based in Iran, like al-Qaeda and Uzbek militants, not to mention a long-running Iran-Pakistan competition inside Afghanistan that started after the Khomeinist revolution in 1979,” said Quraishi. He suggested that Pakistan should leverage the continuing of oil smuggling from Iran in return for Iran’s cooperation in Afghanistan.
He also added that this is a hypothetical proposition since Pakistan has currently ordered a crackdown on the smuggling of Iranian oil, but any negotiation in return for cooperation inside Afghanistan would be a win-win for both neighbors.
“The only downside to this hypothesis would be that it would put Pakistan in direct violation of U.S. sanctions on Iran, and that is a risk not worth it for Pakistan to take, in exchange for cooperation from an unreliable partner like Iran,” he said.
The Associated Press contributed to this report.