Iraq's Fuel Smuggling Network Generates $1 Billion for Iran

A significant fuel oil smuggling network operating in Iraq has reportedly generated over $1 billion in annual profits for Iran, according to a recent Reuters report. The network, which has been active since Mohammed Shia al-Sudani became Iraq’s Prime Minister, involves diverting fuel oil from Iraqi asphalt plants to Asia. It comprises companies and individuals in Iran, Iraq, and several Gulf states.

The smuggling operation diverts between 500,000 and 750,000 metric tons of heavy fuel oil monthly, equating to roughly 3.4 million to 5 million barrels of oil. This operation has reportedly contributed to a yearly profit of $1 billion for Iran. The illicit fuel trade has long been a point of contention, with U.S. lawmakers raising concerns about Iraq's involvement in helping Iran evade international sanctions.

Earlier this year, a group of U.S. congressmen called for an investigation into Iraq’s Oil Minister, Hayyan Abdul-Ghani, accusing him and other Iraqi officials of participating in the illegal movement of oil, allegedly sold to Iran and further transported to countries such as Afghanistan and Pakistan.

Meanwhile, Saudi Arabia has seen a boost in its oil exports to Asia, with data from LSEG Oil Research revealing a 550,000 barrels per day (bpd) increase in November. Saudi exports to Asia surged to 5.83 million bpd in November, up from 5.28 million bpd in October. This increase came despite the rise in the official selling prices of Saudi grades for Asia, which went up by $0.90 per barrel for Arab Light.

This increase is attributed to recovering Asian refining margins and a decline in the premium of the Dubai benchmark over Russia’s Urals crude. Additionally, rising shipping costs from Russia’s western ports to India have made Saudi oil more competitive. In contrast, Russia’s oil exports to Asia fell by 450,000 bpd in November, primarily due to reduced demand from key markets, China and India.