Iran sanctions spur boom for Pakistani diesel smugglers

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 Iranian border.

"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.