Fuel Oil Smuggling in Iraq: A Billion-Dollar Network Benefiting Iran

A complex fuel oil smuggling network in Iraq generates at least $1 billion annually for Iran and its allies. The operation utilizes subsidized fuel policies and involves various entities across Iraq, Iran, and the Gulf. Iranian-backed militias control significant parts of the smuggling scheme, evading U.S. sanctions.

An intricate fuel oil smuggling network that experts estimate generates at least $1 billion annually for Iran and its proxies has been thriving in Iraq since Prime Minister Mohammed Shia al-Sudani assumed office in 2022, according to sources familiar with the matter.

This operation exploits Iraq's policy of subsidized fuel oil allocations to asphalt plants. A network of companies and individuals across Iraq, Iran, and Gulf states manipulates this policy, diverting 500,000 to 750,000 metric tons of heavy fuel oil monthly for export, primarily to Asia, sources reveal.

The operation has expanded since Sudani's rise to power, with Iranian-backed militias in Iraq playing central roles. It poses risks of U.S. sanctions on Iraqi institutions, complicating Baghdad's diplomatic balance between Washington and Tehran as scrutiny over these activities intensifies.