Oil smuggling in Iran

This article is an orphan, as no other articles link to it. Please introduce links to this page from related articles; try the Find link tool for suggestions. (March 2025)

Oil smuggling is driven by factors like international sanctions on Iranian crude and steep fuel price differences with neighboring countries. These conditions have spawned a thriving illicit trade in both crude oil and refined fuels. Smuggling operations range from small-scale overland fuel trafficking to sophisticated global schemes involving tanker fleets. This report examines recent trends and statistics, the methods and routes used, key actors involved, Iran's government response, economic impacts, geopolitical implications, and regional hotspots for oil smuggling in and around Iran.

Despite U.S. sanctions, Iran's crude oil exports have surged in 2022-2023, largely through covert channels. Estimates by the U.S. Energy Information Administration (EIA) indicate Iran earned about $53–54 billion annually from oil exports in 2022 and 2023.^[1]

Volume-wise, Iran's exports averaged roughly 1.4 million barrels per day in 2023, the highest since 2018.^[2] United Against Nuclear Iran (UANI), a monitoring group, tracked 533 million barrels exported in 2023, up 27% from 420 million in 2022.^[2]

China is the dominant buyer (over 80% of Iran's oil), with other shipments going to Syria, the UAE, and Venezuela.^[2] This booming shadow oil trade reflects a marked increase in smuggling of sanctioned Iranian oil in 2023-2024.^[2]

At the same time Iran faces rampant smuggling of subsidized fuels (like gasoline and diesel) out of the country. Iranian officials acknowledge a sharp rise in this illicit flow. In late 2024, an Iranian presidential official stated that 20–30 million liters of fuel are smuggled out of Iran every day, calling it an economic “catastrophe”.^[3]

Earlier in 2024, a member of Iran's Chamber of Commerce estimated 12 million liters of fuel leave Iran daily, worth about $4 billion per year (with about $3.5 billion being pure profit for smugglers).^[4] This represents a huge volume .

For perspective, 12–30 million liters is equivalent to roughly 75,000–190,000 barrels of fuel per day. Such smuggling creates a gap between reported domestic fuel production and actual consumption. For example, Iran's domestic gasoline consumption averaged 124 million liters per day in 2023, but spiked to a record 144 million liters on one day in March 2025, a demand surge partly attributed to cross-border smuggling driven by cheap prices.^[5]

Overall, officials estimate over $3 billion of fuel subsidies are lost annually to smuggling, straining Iran's economy.^[6]

Oil and fuel smuggling in Iran occurs via multiple methods and routes, spanning land borders, maritime paths, and even illicit pipeline connections. Smugglers have developed ingenious techniques to move oil covertly:

Land Routes: Porous land borders enable large-scale fuel smuggling via trucks and other vehicles. Every day, thousands of fuel tankers and pickup trucks ferry Iranian diesel and gasoline into neighboring countries like Pakistan, Afghanistan, and Iraq.^[7][8] For instance, Pakistani officials report that around 2,000 vehicles transport Iranian fuel into Pakistan daily, making up as much as 35% of Pakistan's diesel supply​​.^[9][7]

Smugglers exploit steep price gaps: Iran's heavily subsidized fuel (diesel at ~$0.12 per liter) is far cheaper than in Afghanistan or Pakistan (where prices exceed $1 per liter)​​.^[6] This creates a strong incentive to buy fuel cheaply in Iran and run it across borders for resale.

Common land routes include the southeast border with Pakistan (through Sistan-Baluchestan into Pakistani Balochistan) and routes into Afghanistan's western provinces. Smugglers in these areas often operate in convoys, and the scale is so large that in Pakistan's Balochistan province an estimated 2.4 million people depend on the smuggled-fuel trade for livelihood​​.^[6]

Smaller-scale smuggling also occurs westward into Iraq and Turkey. For example, Iranian diesel is trucked into eastern Turkey (Van province) where it is bartered for goods​. In Iran's northwest Kurdish regions, tankers have illicitly carried crude oil from Iraq's Kurdistan region into Iran to evade Iraqi federal controls, especially after a pipeline closure in 2023​​.^[10]

Sea Routes (Ghost Tankers): A significant portion of Iranian crude oil is smuggled via the sea using a “ghost fleet” of aging oil tankers that operate covertly.

An aging oil tanker with a foreign flag, similar to those in Iran's “ghost fleet” used to covertly ship sanctioned oil. Iran has developed elaborate maritime tactics to hide the origin of its oil. Tankers linked to Iran routinely disable transponders (AIS tracking), conduct ship-to-ship transfers in open waters, and even forge documents and repaint vessels to assume false identities.^[1]​

Leaked emails from an Iranian shipping network (code-named “Sahara Thunder”) revealed instructions to avoid any Iranian markings and to obtain fake certificates of origin to pass off Iranian crude as originating elsewhere​​. This shadow fleet has grown rapidly. UANI identified over 477 tankers involved in Iranian oil smuggling by late 2024, with 132 new vessels added that year alone​​.^[11]

These ships often fly flags of convenience (Panama, Tanzania, etc.) and frequently change names. They carry out complex voyages: for example, Iranian crude is sometimes first shipped to Malaysia or the UAE, blended or rebranded, and then re-exported to buyers in China (by far the largest customer)​​.^[1]

Smaller ships shuttle between Iran and hubs where oil is offloaded to bigger tankers for long-distance transport. In one documented scheme, a large tanker acted as an offshore collection point in the Persian Gulf, from which oil was siphoned to other vessels over 60 separate transfers to reach end buyers​​.^[1] Smugglers have even repainted ships' names (e.g., a tanker “Remy” operating under the fake name “Deep Ocean”) to avoid detection​.^[1] Aside from crude oil, Iran also covertly exports refined fuel oil (e.g. mazut) by sea. Around 230,000 barrels per day of fuel oil on average during recent years, often to Asia​.^[11]

Pipeline and Fixed Infrastructure: While less common than road or sea smuggling, authorities have uncovered illicit pipelines and tapping operations used to steal or move fuel. In Iran's southern Hormozgan province (a smuggling hotspot), police discovered a hidden 700-meter pipeline on Qeshm Island in 2023 that was being used to transfer fuel from the shore to small vessels for smuggling​.^[12]

Another clandestine pipeline was found in the Bandar Abbas area, indicating organized efforts to siphon fuel and bypass road checkpoints​.^[12] Smugglers have tapped into official oil infrastructure as well for instance, by illicitly drawing fuel from transit pipelines or storage tanks in border regions. In the Kurdistan border area, some reports suggest pipeline taps or direct hose connections have been used to quickly load smuggled crude across the Iran-Iraq border​​. These methods, though riskier, allow moving large quantities out of sight. Additionally, some official pipelines and swaps have been exploited for gray-market dealings (e.g. oil sent from Iraq into Iran for “refining” but then sold). Overall, pipeline-based smuggling is a smaller component, but it underscores the creativity of smuggling networks in exploiting infrastructure.^[10]

Domestic Actors: Within Iran, a mix of actors, from poor individual fuel carriers to powerful officials, play roles in oil smuggling. On the low end, thousands of ordinary Iranians in border provinces engage in fuel smuggling as a means of survival amid poverty and high unemployment. These "sookhtbar" (fuel carriers) drive pickups or motorcycles laden with jerrycans of gasoline/diesel across remote border points. Many have perilous livelihoods, facing accidents or shootings as they haul fuel on back roads​.^[13]

However, the sheer scale of smuggling (tens of millions of liters daily) suggests involvement by well-organized networks. Iran's Islamic Revolutionary Guard Corps (IRGC) has been repeatedly implicated at the center of large-scale fuel smuggling operations. A January 2022 investigative report indicated the IRGC was coordinating major fuel smuggling rings, leveraging its control over border security and oil depots.^[14]

Iranian officials have tacitly acknowledged corruption and collusion; even a state newspaper admitted some government insiders may facilitate smuggling.^[15]

The IRGC or associated firms are believed to divert subsidized fuel to the black market, using convoys of tanker trucks that ordinary people could not operate unchecked.^[14]

In the sanctioned crude oil trade, state-run entities like the National Iranian Oil Company (NIOC) and shadow companies (e.g. the Tehran-based Sahara Thunder firm) manage the logistics. These entities often act as fronts for the government or IRGC, arranging deals with foreign buyers and contracting the “ghost” tankers.^[1] Thus, high-level Iranian actors not only permit smuggling but actively organize it to gain hard currency outside official channels.

International Networks: Oil smuggling from Iran extends beyond its borders, involving transnational networks and foreign facilitators. On the receiving end, foreign buyers and intermediaries knowingly purchase Iranian oil at a discount. For example, a number of small independent Chinese refineries (“teapots”) became major buyers of Iran's sanctioned crude, attracted by discounts of $10–30 per barrel​.^[11]

These buyers often work through brokers in the UAE, Malaysia, or Singapore who help obscure the oil's origin. A fleet of international shipping companies, often registered in countries like Panama, Marshall Islands, or Hong Kong, form the backbone of the maritime smuggling, providing the tankers and falsifying paperwork. Some ships are owned by shell companies linked to Iran, while others are simply paid lucratively to take the risk. Intelligence monitors have noted that hundreds of foreign-flagged tankers now participate in carrying Iranian oil in violation of sanctions.^[11]

In addition, regional smuggling networks play a role, especially for refined fuels. In Pakistan and Afghanistan, local syndicates and even insurgent groups profit from distributing Iranian fuel. A leaked Pakistani intelligence report in 2024 revealed that smuggling on the Iran-Pakistan border is highly organized, with entire communities and businesses integrated into the supply chain.^[7]

This network was so entrenched that Pakistani authorities feared a crackdown could destabilize Balochistan's economy. In the Middle East, Iran's allied militia groups also benefit: a recent investigation found the Iraqi militia Asaib Ahl al-Haq (AAH) was central to a scheme diverting Iraqi fuel oil, which was then sold abroad to generate about $1 billion a year for Iran and its proxies.^[7]

That operation involved companies and individuals across Iraq, Iran, and the Gulf states working together to smuggle heavy fuel oil to Asia.^[7]

This article has not been added to any content categories. Please help out by adding categories to it so that it can be listed with similar articles. (March 2025)