According to the National Iranian Oil Refining and Distribution Company (NIORDC), the significant domestic-to-regional price disparity has fueled illegal outflows of petroleum products, imposing heavy costs on the economy. Those costs are ultimately borne through hidden energy subsidies, benefiting organized smuggling networks rather than the public.

Fuel smuggling also directly undermines energy security. Illegal diversion of products from the formal distribution system can lead to localized shortages, disrupt fuel supplies for power plants, industries and transport fleets, and increase pressure on production and distribution infrastructure — risks that become more acute during peak demand seasons.

Combating fuel smuggling has therefore been placed at the center of energy policymaking under the 14th administration. Measures implemented over the past year include tighter oversight across the production and distribution chain, deployment of smart control tools, updated consumption-monitoring mechanisms and closer coordination among executive and supervisory bodies. Together, these steps reflect a proactive, problem-oriented strategy rather than rhetorical commitments.

At the start of the current administration, NIORDC launched a comprehensive project to establish real-time monitoring of the petroleum supply and distribution chain, with fuel-smuggling prevention as its primary objective. The plan also aims to optimize load-balancing systems, improve oversight of refining, transport and distribution operations, expand infrastructure using modern technologies and enhance overall energy resource management.

Major step by NIORDC

A memorandum of understanding for the real-time monitoring and smart management of the national petroleum supply chain was signed in mid-February last year. At the signing ceremony, NIORDC CEO Mohammad-Sadeq Azimifar said the company is seeking to use all available capacities to minimize fuel smuggling, highlighting real-time monitoring infrastructure and smartization of production, transmission and distribution as key tools.

Electronic equipment for fuel tankers

Another ongoing measure is the installation of electronic locks and other control equipment on fuel tankers. The fuel supply chain consists of refineries, transmission pipelines and depots supervised by distribution companies. Each segment must be equipped with metering and monitoring systems to accurately record production, transfer, storage and consumption data.

In this context, Mohammad Meshkinfam, CEO of the National Iranian Oil Engineering and Construction Co., said last February that some meters require upgrades and new meters must be installed at certain points. He added that about 4,200 kilometers (2,610 miles) of new fiber-optic lines are needed along pipelines to detect leaks promptly and transmit data to monitoring centers and operators. Once implemented, all required components will be connected to supervisory systems and relevant authorities, enabling comprehensive oversight of processing, transmission, storage and consumption.

Iran has about 4,500 fuel stations nationwide, all of which are also being equipped with monitoring systems to track the entire chain from crude oil production to final consumption.

Transport sector accounts for about 50% of smuggling

In early May, Azimifar said three databases — intercity cameras, the smart fuel system and freight waybill systems used by road authorities and municipalities — are being used to analyze diesel fleet routes and consumption patterns. Statistical analysis has identified about a 30% deviation in fuel allocation, leading officials to estimate that roughly half of fuel smuggling occurs in the transport sector.

He said that over the past year, changes in oversight methods and detailed consumption analysis have identified more than 400 million liters (about 106 million gallons) of fuel diversion and 50,000 noncompliant vehicles. Once fully implemented, the real-time monitoring plan will track every drop of fuel from production to final use.

Azimifar said about $55 billion worth of fuel is distributed annually in Iran and that proper organization and effective management plans could generate at least $5 billion in additional economic benefits.

Impact on diesel consumption

Continued enforcement measures, expanded use of smart tools and stricter oversight of major non-power-plant consumers have reduced average daily diesel consumption in the Iranian year 1404 by about 5 million liters compared with 1403.

Azimifar said in late July that average daily non-power-plant diesel consumption from the start of the year through July fell to about 81 million liters, down from 86 million liters in the same period last year. As a result, and alongside increased refinery output, diesel inventories are at a favorable level, with power plant stocks up 72% year over year.

He noted that based on past trends, consumption would normally have risen by about 5% this year. Non-power-plant consumption includes transport, agriculture and industry, where tighter management aims to protect national interests and prevent illegal fuel outflows.

Operational results of the Kashef system

The launch of the “Kashef” system is another key initiative by the Oil Ministry and NIORDC. In a short time, particularly in identifying violations, the system has produced notable results, preventing the smuggling of about 360 million liters of diesel over a nine-month period from winter 1403 to summer 1404 and identifying 69,000 noncompliant vehicles.

Implemented under Article 44 of the Seventh Development Plan, Kashef marks a shift toward a smarter anti-smuggling approach. Unlike earlier systems such as “Sepahtan” and “Sipad,” which relied heavily on hardware and faced challenges including fraud risks, high costs and fragmented data, Kashef uses big data analytics and artificial intelligence in a preventive, integrated model.

The system cross-references data from transport waybills, license-plate recognition cameras, smart fuel card transactions and fleet technical specifications. This data integration enables the detection of abnormal patterns and more effective action against fuel smuggling.

Toward lasting energy-sector reform

Taken together, the measures adopted by the 14th administration and NIORDC show that the fight against fuel smuggling has entered a serious, technology-driven phase. The shift from traditional oversight to integrated, data-based systems such as real-time monitoring and Kashef has significantly improved transparency across the production-to-consumption chain and strengthened the ability to identify and prevent diversion.

The sharp drop in diesel consumption, improved inventory levels and reduced waste of subsidized resources suggest that, if sustained and fully implemented, these policies could lead to lasting reforms in Iran’s energy system and strengthen national economic interests.