Pak-Iran Oil Smuggling Impacts: Challenges and Strategies for Effective Solutions

Pakistan-Iran oil smuggling is a decades long phenomenon. Smuggling is a transnational illegal entry of goods and people for financial gain, leading to violation of law. Oil smuggling from Iran to Pakistan is carried out through different land and sea routes; using different payment mechanisms. This research endeavor is undertaken to examine the economic impact of oil smuggling, the key challenges that hinder the efforts of different national stakeholders to tackle the alleged menace and delineate strategies to curb oil smuggling. This study used a mixed method approach: structured approach using a questionnaire as well as Key Informant Interviews (KII). The study also employed Stakeholder Analysis and PESTEL analysis. Oil smuggling has huge economic impact in terms of loss of revenue (tax and duties), distorting domestic fuel prices, reducing private sector appetite for investment in energy sector, environmental pollution, money laundering and terror financing. However, it has some positive externalities: availability of cheaper oil, saving of foreign exchange reserves, and creation of employment for local population. There are a number of challenges in way of curbing oil smuggling like deprivation of local population of Balochistan, complexity of different stakeholders involved, regional geostrategic tensions in the Middle East, Pakistan-Iran cross border skirmishes, fluctuating global oil prices, porous borders, outdated laws for prevention of smuggling, and US sanctions against Iran. Findings of the study indicate that various logistics are used in smuggling with involvement of transporters, local traders, LEA and politically influential people. Payment mechanism is both barter and monetary system. There is no seasonality in oil smuggling. Leading factors behind oil smuggling are competitive prices, limited economic opportunities in Balochistan and weak enforcement mechanism. The study recommends short, medium and long-term strategies to tackle the menace of oil smuggling.