For decades, Balochistan’s energy landscape has been shaped not by formal market integration but by a parallel and largely informal system of petroleum imports from Iran. In the absence of a formal bilateral energy agreement -- primarily constrained by the US sanctions on Iran -- Pakistan has developed a regulated but informal cross-border trade mechanism that now functions as a critical lifeline for both energy supply and local livelihoods across Balochistan, particularly in bordering towns.
BALOCHISTAN POWER
For decades, Balochistan’s energy landscape has been shaped not by formal market integration but by a parallel and largely informal system of petroleum imports from Iran. In the absence of a formal bilateral energy agreement -- primarily constrained by the US sanctions on Iran -- Pakistan has developed a regulated but informal cross-border trade mechanism that now functions as a critical lifeline for both energy supply and local livelihoods across Balochistan, particularly in bordering towns.
What began as a survival-based border economy has gradually evolved into an institutionalised arrangement. Our recent study findings at the Pakistan Institute of Development Economics (PIDE) reveal that since 2020, the government of Balochistan has formalised parts of border trade through a token-based mechanism in key border districts, including Kech, Panjgur, Chaghi and Washuk. Under this arrangement, residents of border communities are issued permits -- commonly known as Zamyad vehicle tokens -- that allow them to import Iranian petroleum products. The local government manages token allocation based on the district's population. This reflects the government's attempt to regulate what is essentially an informal yet highly structured energy corridor. The allocation of tokens itself illustrates the scale of dependency and administrative prioritisation: 600 tokens in Kech, 600 in Panjgur, 250 in Chaghi and 700 in Washuk. In these border economies, a token is not merely a permit; it is a gateway to income, employment, mobility, local fuel availability and much more.
This system supports a large fuel supply network that helps meet not only local energy needs but also provides livelihoods for many people in Balochistan. Our study shows that daily petroleum inflows are substantial. Approximately 2.4 million litres enter through Kech’s Abdoui border. Chaghi receives around one million liters through the Rajay–Rotiq crossing points. In Panjgur, the Chadagi and Jirak routes collectively supply nearly 2.4 million litres per day. Washuk contributes close to 2.8 million litres through the Guazar and Bacharahi routes, while Gwadar alone records an estimated 3.22 million litres through the Kontani border. Together, these flows exceed 11 million litres per day.
The magnitude of this reliance makes it clear that Balochistan’s energy ecosystem is fundamentally sustained by petroleum imports from Iran. Despite contributing hardly more than 1.0 per cent to national energy consumption, the province handles a disproportionately large share of informal fuel inflows, estimated at around 14 per cent of Pakistan’s overall energy consumption through Iranian channels. Paradoxically, this means that the volume of fuel passing through Balochistan not only exceeds its own consumption needs but also plays a broader role in national energy circulation through informal redistribution networks.
To avoid petroleum disruption in the province, the government must move beyond short-term crisis management and adopt a comprehensive energy security policy
However, despite its scale, this system is inherently fragile. The recent energy disruption across the province exposes the vulnerabilities embedded within an informality-dependent supply chain. Multiple districts in Balochistan experienced significant petroleum product shortages, leading to fuel scarcity, price volatility, and disruptions to transport and small-scale economic activities. Out of 60 registered petrol pumps, only two were operational during the crisis. Subsequently, prices reached Rs600-700 per litre; people had to wait in line for hours, and at times they fought over petrol. The shortage exposed that the majority of petrol pumps were dealing in Iranian petrol rather than the oil imported by the government of Pakistan.
The causes of this shortfall are complex and interlinked. While investigating the underlying drivers of the crisis, Iranian oil dealers from Dalbandin in Chaghi District, along with some media experts and social activists, highlight six key contributing factors that together triggered the oil disruption in Balochistan.
First, the recent rise in the Iranian currency has directly increased the cost of petroleum products in Iran’s border economy, making imports less affordable and reducing supply volumes. Second, a decline in the number of tokens (Zamyad vehicles) allocated by the local government. Given that tokens function as legal entry permits for vehicles carrying fuel, any reduction in their number immediately constrains supply. Third, temporary supply shortfalls on the Iranian side, driven by the US-Iran war, have further limited availability at border points. Fourth, market expectations surrounding the US–Iran agreement also introduced uncertainty into trading behaviour.
Fifth, the extended Eid holidays also disrupted oil supply, with borders remaining closed for over 10 days instead of the usual 4-5. Lastly, petrol pumps selling Iranian petroleum -- rather than imported Pakistani oil -- and the lack of robust energy infrastructure, especially in peripheral areas of Balochistan, compounded the crisis, exposing the region’s vulnerability due to both geopolitical and infrastructural weaknesses.
The recent crisis reveals a profound structural contradiction. The informal Iranian oil trade, which is crucial for energy access and livelihoods in Balochistan, falls outside formal energy planning and national policy integration. This dual status creates persistent uncertainty and challenges the region's energy security.
To avoid petroleum disruption in the province, the government must move beyond short-term crisis management and adopt a comprehensive energy security policy. First, the number of existing tokens should be increased to increase supply on the one hand and employment on the other. Second, the federal and provincial governments should establish petroleum reserves and fuel storage facilities in bordering towns such as Kech, Panjgur, Chaghi, Washuk and Gwadar to help manage temporary supply disruptions. Third, greater investment is needed in formal fuel distribution infrastructure, including expanding the network of licensed petrol pumps supplied through legal channels and strengthening transportation and storage capacity. Fourth, authorities should explore legally compliant bilateral arrangements and border trade frameworks that can stabilise fuel supplies while reducing dependence on informal networks.
The writer is a research economist at the Pakistan Institute of Development Economics (PIDE).He can be reached at: [email protected]
