* Collapse in value of Iranian rial spurs surge in diesel
* Some opium traffickers switch into newly-lucrative diesel
* Officials allege that Pakistani security forces are
By Hamdan Albaloshi
JOGAR, Pakistan, April 1 Some of the contraband
is spirited across the mountains in Pepsi bottles carried by
child smugglers. Yet more is loaded into pick-up trucks or
siphoned into barrels and strapped onto mules.
So lucrative are the returns that even seasoned opium
traffickers are abandoning their traditional cargo to grab a
share of Pakistan's closest thing to an oil boom: a roaring
trade in illicit Iranian diesel.
As Western powers tighten sanctions on Iran, an unexpected
set of beneficiaries has emerged in the hard-scrabble Pakistani
province of Baluchistan - smugglers lured by surging profits for
black market fuel.
"Why smuggle opium when you can earn as much money by
smuggling diesel? It's much safer," said a former opium trader
from the Pakistani town of Mand, a smuggling hub near the
"Besides, I'm now called a successful businessman -- not a
drug dealer," said the man, who gave his name as Hamid.
Diesel smuggling has long been a part of the illicit trade
in Baluchistan, where a thriving commerce in goods from guns and
narcotics to duty free cigarettes and second hand Toyotas
constitutes one the arteries of the globalised criminal economy.
But a Reuters inquiry into the fuel trade, based on
interviews with participants across the province and a visit to
remote parts of the frontier, has revealed that sanctions on
Iran has made diesel smuggling extremely remunerative.
The findings also raise questions about the possible degree
of complicity in fuel smuggling among Pakistani security forces
stationed in Baluchistan, a vast province sandwiched between
Iran and Afghanistan.
Covering almost half of Pakistan's land area but extremely
sparsely populated, Baluchistan is home to both insurgents
campaigning for an independent Baluch homeland, and drug cartels
shipping Afghan opium and heroin to world markets.
In Nushki, a small town on one of the roads cutting through
Baluchistan's arid moonscape, diesel traders preparing to drive
to the Iran border had little to fear from the law.
"Bringing in fuel this way is so much cheaper and makes
great profits," said one of the transporters, a burly man
wearing a gold watch who had the demeanour of a wealthy
businessman. "Even though there are security check points at all
these border towns inside Pakistan, no one ever stops me. Why
wouldn't I do this?"
TWICE AS MUCH
For years, diesel smuggled from Iran has supplemented the
2.7 million to 3 million tonnes (20 million to 22 million
barrels) of diesel that Pakistan's state oil company buys from
the Kuwait Petroleum Corp each year.
The illegal trade cooled in late 2010 when Iran cut fuel
subsidies, narrowing profit margins for importers. But smugglers
have gone into overdrive since late September, when growing
pressure from Western sanctions caused the Iranian rial to lose
forty per cent of its value against the dollar in a week, making
diesel even cheaper for Pakistani buyers.
Iran sets its diesel price at 4,500 Iranian rials a litre,
(about 15 U.S. cents at the open market rate) - less than the
price of mineral water. In Pakistan, a litre of smuggled diesel
can sell for 104 rupees a litre ($1.06) -- cheaper than the
official price of 112 rupees a litre.
In Baluchistan, diesel dealers are making so much cash that
some passenger transporters are trading in buses to buy pick-up
trucks sturdy enough to make the journey to the frontier across
river fords and forbidding escarpments.
"I sold my mini-bus to buy a pick-up. It earns me twice as
much as the passenger van," said a man called Altaf, who has
started ferrying Iranian diesel to the town of Turbat in
At Jogar, a border pass in granite mountains, children trek
across the hills bearing Iranian diesel in Pepsi bottles. Some
is transported on donkeys. On the Baluchistan coast, smuggling
proceeds on an industrial scale as diesel arrives at ports via
vessels plying the Gulf of Oman.
Like tributaries feeding a river, individual smugglers bring
their barrels to depots, where the cargo is aggregated into
There is no way to reliably measure the amount of fuel
involved, but traders believe that 100-130 tankers -- each
capable of carrying 25,000-40,000 litres -- are filled with
illicit Iranian diesel in Baluchistan each day.
The tankers then deliver the fuel to markets across
Pakistan, or into Afghanistan, whose reliance on Iranian refined
products poses a particular dilemma for Washington.
In January, the U.S. Special Inspector General for
Afghanistan Reconstruction warned that fuel purchases made for
Afghan security forces using U.S. government funds may have
included Iranian petroleum products, which would be a violation
of Washington's own sanctions on Tehran.
Iran's attempts to boost formal energy ties with Pakistan
are also a concern for the U.S. government. Washington has
voiced opposition to plans to build a pipeline through
Baluchistan to tap Iranian natural gas, which Pakistan sees as a
possible answer to its chronic electricity shortages.
The ease with which diesel smuggling has blossomed anew
underscores the tenuous writ of the authorities in Baluchistan,
a region with a long history of independence that has felt
marginalised ever since it was merged into Pakistan in 1948.
So large are the sums involved that many suspect elements in
the paramilitary Frontier Corps, which has primary security
responsibility in Baluchistan, and other agencies are involved.
"The Frontier Corps, coast guards and police provide the
smugglers with protection in return for their share," said a
senior government official in Makran, a southern coastal strip
in Baluchistan and smuggling hotspot.
The Frontier Corps declined comment, but has in the past
denied involvement in illegal trade, saying it has repeatedly
confronted heavily armed heroin traffickers.
Fuel importers and marketers said, however, that Pakistan's
over-stretched security forces turn a blind eye.
"Vehicles loaded with Iranian diesel and petrol provide us
with fuel as a routine matter -- there are no hindrances to its
transportation," said Ghulam Ali, who sells the smuggled
products openly in Quetta, the main city in Baluchistan.
Akbar Baloch, who runs an import and export business from a
village near the Iran border, said influential figures on both
sides of the frontier were involved. "Their armed henchmen
escort the vehicles used for smuggling," he added.
Iran's government, already battling Western moves to
restrict supplies of gasoline and other refined products, has
sought to stem smuggling by introducing a system of smart cards
to ration subsidised fuel.
In Pakistan, authorities admit they are overwhelmed. Ibrahim
Vighio, a senior customs official in Quetta, said the government
plans to form a new 1,000-strong anti-smuggling unit. "We have
lack of forces, proper weapons and equipment to stop the
smuggling," he said.
(Additional reporting by Gul Yousufzai In QUETTA and; Jessica
Jaganathan in SINGAPORE, Writing by Matthew Green; Editing by