TEHRAN: Iran said on Sunday it has reached an agreement with Afghanistan to supply it with Iranian fuel and that it has started delivering the products to the neighbour's private sector.

Oil Minister Masoud Mirkazemi said "Afghanistan's private sector buys all its needed products from Iran," the oil ministry news service Shana reported.

"Oil products were already transited to Afghanistan and we hope from now on this country makes all its (fuel) purchases from Iran as there has been an agreement with Afghan officials," Mirkazemi said.

About one-third of Afghanistan's fuel needs, imported from Russia, Turkmenistan and Iraq, transit through Iran.

The transport of the fuel has become a sensitive issue as the Islamic republic has prevented the passage of trucks carrying the supplies to Afghanistan.

Tehran has hinted to Kabul that it suspected the transited fuel would supply US and other foreign troops fighting the insurgency in Afghanistan.

Iran, which is under international sanctions on its energy sector over its nuclear programme, has sought to increase its petrol production capacity.

Higher prices have also reduced Iran's daily petrol consumption from 60 million litres to about 45 million.

Mirkazemi said the Iranian government has "authorised the export of a billion litres of petrol" of its strategic reserves by the end of the Iranian year in March 2011.

"As new refineries come on line and the production capacity increases the current reserves can be exported and replaced," with new production, he said.