< Back to Iraqi Dinar in the News June 11th, 2007

Iraq-Iran trade in gasoline booms

By OMAR SINAN, Associated Press WriterMon Jun 11, 3:15 AM ET

The trucks line up at the border each morning, waiting their turn to cross the small Choman river into Iraq and unload their cargos of jerry cans filled with gasoline.

Trade across the Iraq-Iran border is flourishing in this remote corner of northeast Iraq, a rugged mountain area where the lure of making a quick profit dwarfs what little government authority exists. Gasoline is an important part of that.

The trade in gasoline gained new attention recently when Iran hiked the price of the subsidized gasoline it sells its people and began looking to ration subsidized gas — all as a way to lower consumption. Most of Iran's problem stems from the fact that it has too little refinery capacity. But Iranian officials also have bemoaned the illicit selling of subsidized gas to neighboring countries, including Iraq, saying that hurts its economy.

Some of the trade at this border spot is clearly illegal smuggling, outlawed and often strongly opposed by Iranian officials trying to keep out banned goods like whiskey or beer.

But other trade, while still technically illegal, is openly tolerated by local Iraqi authorities, anxious to ease shortages — especially of gasoline — inside Iraq.

Marzi Choman is one of five places on the Iraqi-Iranian border in the Iraqi Kurdish region where cross-border trade takes place. The places are called "Marez" — a Kurdish word that means an illegal free trade zone.

"The government is aware of all trading in fuel in this Marze," said Iraqi border police Capt. Mohammed Mohiedeen, who is in charge of the border stretch near Marzi Choman.

"What is happening here is considered legal trade," he said.

Smuggling across the Iran-Iraq frontier has for decades been a key activity in the economies of border communities, but the volume of business is thought to have multiplied since Saddam's ouster.

Official figures compiled by the Iranian government's counter-smuggling division show that Iraq was the recipient of $1 billion worth of Iranian goods smuggled across the border in 2006, mainly oil products, cheap electrical appliances and food.

There are no figures available for the value of goods smuggled the other way — from Iraq into Iran. Those goods are usually cases of beer and whiskey, cigarettes or satellite dishes, TV sets and other domestic appliances — items that are significantly cheaper in Iraq than Iran.

Items destined for Iran are stored in huts that dot the landscape in Shabadeen district, nestling close to a narrow dirt track that's only a few hundred yards away from the border. Often, men and boys with donkeys carry the alcohol and other goods into Iran.

But it is the fuel trade into Iraq — both gasoline for autos and gas for cooking — that is the most lucrative and busiest here.

Iraq has the world's third-largest proven oil reserves — about 115 billion barrels — but shortages of gasoline and other oil products are chronic because of insurgent attacks on oil installations, plus corruption and black marketeering.

From here, the smugglers of both gasoline and gas canisters sell their goods both nearby and in the Kurdish city of Sulaimaniyah, and from there to other cities across the country.

Delshad Abdul-Rahman Mohammed, the official in charge of oil products in the regional Kurdish government, blames the central government in Baghdad for the flourishing black market in fuel, arguing that Kurdish provinces are not getting their fair share of the country's available gasoline supplies.

Like others, Mohammed credits the "Marez" — the illegal free trade zones — for helping Iraqis cope with the shortages. Ironically, he notes, the Marez played a similar role during nearly 13 years of U.N. sanctions slapped on Iraq in 1990.

Near the border one day — not far from the post of police Capt. Mohiedeen, a 30-year-old Iraqi, Mustafa Rasoul, was busy loading his Korean-made truck with gas cylinders — an item that, along with oil products, has been in short supply in Iraq for most of the past four years of war and disruption.

The gas cylinders, used for cooking in homes across Iraq, had just arrived across the border from Iran, where they had been filled.

Rasoul sells the filled containers in Iraq for $14 apiece, making a $5 profit on each.

"I am not sabotaging anyone's economy," said Rasoul. "I am helping Iraq and Iraqis."

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Associated Press reporters Yahya Barzanji in northern Iraq and Nasser Karimi in Tehran, Iran, contributed to this report.