Pakistani intelligence exposes billion-dollar Iranian oil smuggling operation

New Delhi, May 08: A recently leaked report from Pakistani intelligence agencies has unveiled a staggering revelation: Iranian oil smuggling into Pakistan amounts to over $1 billion annually, constituting approximately 14% of Pakistan's yearly demand for oil.

Despite stringent Western sanctions, Iran has escalated its oil exports to levels unseen in the past six years, generating an annual revenue of $35 billion, international and local media reported.

On the international front, Pakistan risks facing scrutiny from financial watchdogs like the International Monetary Fund (IMF) and the Financial Action Task Force (FATF), jeopardizing crucial financial assistance and its standing in the global community.

As tensions in the Middle East escalate, the spectre of increased scrutiny from these bodies looms larger, prompting concerns over Pakistan's economic stability and international reputation.

Dubbed "Smuggling of Iranian Oil," the 44-page report, which surfaced through local media after being leaked, sheds light on a clandestine trade that has flourished over the past decade. Following U.S.-led sanctions on Iranian oil exports, Tehran sought alternative markets, thus fostering the cross-border oil trade with Pakistan.

Last year alone, an estimated $1.02 billion of Iranian petrol and diesel infiltrated Pakistan through the 900-kilometer-long Iran-Pakistan border. This illicit activity not only accounted for a significant portion of Pakistan's oil consumption but also inflicted substantial financial losses, approximately $820 million, described vaguely as detrimental to the Pakistan’s exchequer that included taxes and duties, as well as the erosion of legitimate businesses within Pakistan's petroleum sector.

Media reported that the smuggling operation operates, with around 2,000 vehicles crossing the border daily, ferrying oil barrels despite tensions between the two neighbouring nations, which recently escalated into military exchanges.

Baluchistan, the province most affected by the smuggling, is already plagued by a violent separatist insurgency and widespread poverty. Millions of Baluchistan residents rely on the oil trade for their sustenance, viewing it as a vital informal economy. Many Baloch leaders are urging the government to regulate rather than terminate the trade.

The report implicates over 200 individuals, including government and security officials, in facilitating this black market.  While the government has yet to issue an official response to the report, speculations suggest the leak could serve as a pretext for cracking down on the smuggling network.

Domestically Pakistan risks if it disrupts the smuggling route it leads to security challenges, potentially fuelling separatist militancy and criminal activities.