x Abu Dhabi, UAEFriday 28 July 2017

As economy booms, demand for black market fuel soars in Turkey

While the number of cars in Turkey rose by 70pc between 2003 and 2010, the consumption of fuel increased by just 20pc, as 2.7 million tonnes of fuel were smuggled into the country every year, resulting in lost tax revenues of $2.5bn.

ISTANBUL // Turkey's economy is barrelling ahead, with a growth rate of 11 per cent in the first quarter.

Car sales put 2,800 additional vehicles on to the country's roads every day. For every old car that is retired, five new cars enter traffic.

But fuel consumption is falling in some sectors.

Black market fuel, some smuggled by boat and lorry, some produced from components such as old vegetable oil used for frying potatoes, powers millions of cars, buses and lorries, official data suggests.

High taxes and a lack of inspections feeds the black market, according to industry insiders.

Okan Yavas, the manager of a petrol station in Istanbul, said: "They bring in the petrol by boat and sell it for half a lira (Dh1.03) per litre to people who wait for them with tankers on shore.

"Then the tankers go inland and sell it on for two lira per litre."

Other methods include secret underground depots and hidden storage compartments in trucks.

Steep petrol prices have created a demand for illicit fuel. The two lira-per-litre price cited by Mr Yavas is less than half what drivers have to pay at petrol stations.

After the latest price hike this month, drivers in Istanbul pay 4.42 lira for a litre of 95-octane unleaded fuel.

This price is 18 per cent higher than the average cost in wealthier western European nations, according to Europe's Energy Portal, a website tracking energy prices.

Taxes drive up the cost in Turkey, accounting for almost 60 per cent of the price.

A special consumption tax on petrol and natural gas is expected to generate almost 35 billion lira this year, about 12.5 per cent of total state revenues.

To protect that money, the fight to rein in the black market is in full swing.

Raids by the police have uncovered large quantities of black market fuel and authorities have ordered petrol companies to use special chemicals that enable inspectors to tell official fuel from illegal petrol.

Last month, police seized more than 27,000 litres of illegal fuel in the province of Hatay and arrested eight suspects after they stopped a tanker following a tip-off.

Depots with illegal fuel have been found at petrol stations, behind farm houses and in gardens across the country.

In total, 70.5 million litres of black market petrol were seized last year, according to government figures.

Municipalities and other state institutions have problems finding enough storage for the contraband before it is auctioned.

The seized illegal petrol represents just a fraction of the volume being sold around the country, according to official estimates.

While the number of cars in Turkey had risen by 70 per cent between 2003 and 2010, the consumption of fuel increased by just 20 per cent, according to a national police report.

The report, prepared by energy ministry officials, said 2.7 million tonnes of fuel were smuggled into the country every year, resulting in lost tax revenues of US$2.5bn.

"Turkey is surrounded by the sea on three sides and then we have the south-east", with oil-rich neighbour Iraq, an expert on the issue at the Chamber of Commerce Ankara said this month.

The expert asked not to be named because he was discussing a serious failure by state institutions to increase inspections, suggesting that corruption might be part of the problem.

"Somebody is getting rich here," he added.

Data showing a decline in consumption in some sectors despite the overall economic boom offer san indication of how widespread black market petrol is, according to industry sources.

"Total gasoline consumption decreased by 7.7 per cent in 2010 compared with 2009", decreasing to 2.1 billion tonnes, the Turkish Petroleum Industry Association, or Petder, said in a recent report.

One reason behind the drop was the widespread use of black market gasoline, said Tulug Yesilbag of the Association of Petrol Station Entrepreneurs.

As well as the problem of smuggling, a product called "Number 10 oil" represents another headache for the industry and authorities.

This is a legal product for use as machine oil in industry and much cheaper than diesel fuel.

It is not meant to serve as fuel in vehicles but has become so popular with truck companies and other users that it led to a 4.6 per cent drop in diesel fuel consumption, according to Petder.

As demand increases, "Number 10 oil" has become a catch word describing all sorts of fuels mixed together from different sources, including used vegetable oil, Ms Yesilbag said. "The problem is the lack of inspections," she added.

Some reports have said that old tyres are also used as components.

"Number 10 oil" becomes an environmental hazard and also a health risk because it contains carcinogenic substances, Ms Yesilbag said. "But people who use it do not care about that."

tseibert@thenational.ae