Has Smuggling of Goods into Iran Really Decreased?

Smuggling has destructive effects on domestic production, investment, and naturally reduces economic growth and employment rates. The effects of smuggling on economic transparency and political and social spheres are also negative. The use of 'dirty money' in elections signifies the expansion of economic corruption into electoral and political corruption. Despite these negative effects, government officials claim that Iranian society is witnessing a kind of widespread and organized smuggling. Government officials, including state officials and parliament members, have recently claimed in consecutive interviews that smuggling of goods into and from Iran has decreased. For instance, Habibollah Haghighi, head of the Anti-Smuggling Headquarters, stated in an interview: 'In 2013, based on estimates that were made and documents available at the headquarters, the volume of smuggling was $25 billion, which is a very alarming figure, and from this amount, which is equivalent to 50% of the country's official imports, only 1% was discovered, which is really negligible.' This official also added: 'And here I proudly announce that under the emphasis of the Supreme Leader and the mobilization of all involved agencies in the fight against smuggling and the emphasis of the esteemed President, we have managed to reduce the volume of smuggling by 50%, from $25 billion in 2013 to $12.6 billion in 2016.' In this context, Abolqasem Khorshidi, spokesman for the Anti-Smuggling Headquarters, stated in a press conference: 'There may be a question about where the $12.6 billion of smuggling comes from. In this regard, statistics show that 23% of smuggling comes through travelers, 29% through porters, 12% of prohibited items, and 16% through ship's hold. Additionally, $12.6 billion of smuggling enters the country through official channels.' Meanwhile, a parliament member, Behrouz Namati, referring to a non-public meeting regarding smuggling, said: 'Unfortunately, in the past, we witnessed an amount exceeding $25 billion in smuggling of goods and currency in the country, which has been reduced to $10 billion with the cooperation and actions of relevant agencies.' Thus, there is undeniable inconsistency in the statistics presented by officials. Supporting this, Mohammad Dehghan, a parliament member, stated: 'There is a website that shows the precise export statistics of countries to Iran, which contradicts the Anti-Smuggling Headquarters' statistics by $10 billion.' Additionally, recent reports have remained silent on fuel smuggling from Iran and the share of free zones in smuggling. Billions of dollars—whose statistics are questionable—are smuggled into Iran as goods. Furthermore, about 10 to 15% of Iran's informal banking and credit system is either under the control of military and security institutions and 'fire-at-will' groups or influential ruling bands. According to a report by the Swiss Basel Institute, Iran ranks high in international money laundering, and the Iranian banking system poses a significant risk of money laundering. In such circumstances, accurately assessing the volume of goods smuggled into and out of Iran is very difficult. Smuggling is correlated with the opacity of the economy, widespread financial and managerial corruption, an informal banking system, money laundering, a dual clerical economy, and an inadequate tax system. According to government officials, a significant portion of Iran's economy, estimated at 40 to 60%, is opaque and does not fall under tax oversight. Part of the statistical inconsistency is also due to this complexity. Therefore, the images presented by officials regarding smuggling in Iran are inadequate and may only show the tip of the iceberg. A large portion of information and statistics about smuggling naturally remains hidden due to the nature of smuggling activities. However, another part of the statistical inconsistency relates to the methods used for estimating and assessing smuggling. Reducing the share of smuggling in Iran's economy is conditional on resolving bottlenecks such as financial and managerial corruption, the tax system, money laundering, and improving the banking system. Open smuggling routes, free zones appear to be a channel for smuggling goods, and besides the aforementioned bottlenecks, one of the incentives for smuggling in Iran is the openness of its official channels. Confirming this, Behrouz Namati, a member of parliament and spokesman for the parliamentary board, stated: 'Currently, we are facing 700 smuggling entry points that the government bill must consider solutions to close these entry points.' In this context, Ahmad Moradi, a parliament member from Bandar Abbas and a member of the Energy Commission of the Islamic Consultative Assembly, believes that '90% of smuggling occurs through legal channels in the country's customs with misdeclaration, under-declaration, or forgery of documents, which has caused a vast amount of smuggled goods to enter the country through legal channels.' This parliament member believes that '90% of smuggled goods enter the country through free trade-industrial zones.' Iran has seven free trade-industrial zones in various parts of the country: Kish, Qeshm, Chabahar, Aras, Anzali, Arvand, and Maku. Although it cannot be said that free zones have had a positive effect on the economy of these areas, various assessments by domestic institutions indicate that their positive effects are limited, and conversely, due to economic and political instability, international tensions, corruption, and managerial inefficiency, and the lack of the aforementioned conditions, these areas have often turned into import areas and potentially channels for smuggling. The positive impact of free economic zones is conditional on certain conditions; otherwise, the negative aspects and misuse of these areas outweigh their positive effects. Furthermore, in the previous government, measures were taken under the pretext of circumventing sanctions to encourage bypassing laws. Thus, part of the oil export activities has been unprecedentedly tainted with smuggling, and the passage of goods and gold has also become part of the agenda of influential ruling gangs. In conclusion, the inadequate and contradictory statistics presented regarding the reduction of smuggling are not convincing. Although it cannot be denied that part of these statistical inadequacies is related to technical or managerial issues, political factors also play a role in this problem. Therefore, transparency in production and the smuggling sphere is conditional on the transparency of the governing system. A government that is accountable and overseen has a greater capacity to provide transparent and acceptable statistics.