Oil-rich Iran, Iraq smuggle gasoline

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MARZI CHOMAN, Iraq -- 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 increased the price of the subsidized gasoline it sells its people and began looking to ration subsidized gas as a way to lower consumption.

Most of Iran's problem stems from the fact that it has too little refinery capacity. Iranian officials also have bemoaned the illicit selling of subsidized gas to neighboring countries, including Iraq, saying it 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 such as whiskey and beer.

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

Marzi Choman is one of five places on the Iraq-Iran 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 Marez," 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 border has been a key activity in the economies of border communities for decades, but the volume of business is thought to have multiplied since Saddam Hussein's ouster.

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

No figures are available for the value of goods smuggled 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 a few hundred yards away from the border. Men and boys with donkeys often carry the alcohol and other goods into Iran.

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.