The Hidden and Visible Issues of Gasoline in Iran

There is much discussion about gasoline prices, rationing, and their impact on household economies, but why do these fluctuations resonate across news outlets and the emotional landscape of public opinion? Where does this importance stem from? First, let’s address the question of how much Iranians benefit from gasoline subsidies and where you stand in the pyramid of justice. According to statistics from 2016, 43% of Iranian households owned gasoline-powered vehicles, while 57% did not, and 45% of Iranian households lacked motorcycles. The wealthiest Iranians, referred to as the top decile in economic literature, benefit from gasoline subsidies eleven times more than the poorest compatriots, known as the bottom decile. The reality becomes shocking when we see that the wealthiest urban households typically own at least one gasoline-powered vehicle, while less than 1% of the poorest rural households in the first income decile own such vehicles. Another issue concerning gasoline is the problem of smuggling, which has led to significant corruption within the government and national economy, exploited by organized groups. What is the extent of gasoline smuggling in Iran? Currently, various estimates are provided regarding the amount of smuggling. The government estimates fuel smuggling, including gasoline and diesel, to be between 30 to 40 million liters per day, of which only 10 million liters is attributed to gasoline smuggling, while the remainder pertains to diesel. If we calculate this annually, it amounts to approximately 3.65 billion liters per year. What is the profit margin for fuel smugglers based on this figure? Assuming a hypothetical dollar price of 12,000 tomans, the price of each liter of fuel in Iran is slightly over eight cents. In contrast, considering the average price at the final destination for smuggled gasoline from Iran—Turkey, Turkmenistan, Azerbaijan, Pakistan, Iraq, Afghanistan, and Armenia—we arrive at an approximate price of $1.23, equivalent to 14,760 tomans. The net profit from smuggling each liter of gasoline is about 13,760 tomans, although officials have reported a profit of 9,400 tomans per liter for smugglers. The profit for smugglers per Iranian, based on government calculations over the year, is 423,580 tomans, which certainly does not end up in your pocket. However, an important question arises regarding the origin and destination of these smugglers. We should not perceive this vast amount of smuggling as individual or attributed to a non-organized group and simplify it. Gasoline smuggling in Iran is not merely through filling personal vehicle tanks or pickup trucks; many institutions, such as rural organizations or certain gasoline-consuming industries, are also involved, which undoubtedly has roots in the country's administrative system, and the use of these quotas is not limited to small or household groups. Another aspect that is less discussed is the security implications of the profits from gasoline smuggling. It should not be forgotten that a country under financial sanctions, which wants to continue its aid policies to aligned groups and faces challenges in budget provision or conventional budget delivery, can resolve this issue by illegally exporting this commodity and laundering the money to aligned groups. This is fundamentally a governance issue, so we should not expect a definitive and real solution to gasoline and fuel smuggling. Now, we must see what plans the government has to address these issues, both in terms of justice in subsidy distribution and combating smuggling, and when government think tanks will operationalize the per capita quota system and its buying and selling within the structured fuel market. In this context, the inauguration of Phase 3 of the Persian Gulf Refinery; 'self-sufficiency in gasoline production' continues to present contradictory statistics regarding the amount of fuel smuggling from Iran. Iran has 'stopped' importing gasoline from abroad since October 2018. Iran and the U.S. oil sanctions; what has happened and what could happen. Zanganeh: There is no alternative but to ration and increase fuel prices. Severe government repression and the risk of 'underground' protests. What doctors and eyewitnesses recount about the injured in the protests. The limitations of China-Iran relations becoming apparent amid protests.