Oil theft provides billions for terrorists and drug cartels, analysis suggests

PUBLISHED : Wednesday, 22 March, 2017, 1:34pm
UPDATED : Wednesday, 22 March, 2017, 2:24pm

Oil theft is fuelling terrorist groups and drug cartels around the world, according to a new analysis.

Mexican drug gangs can earn US$90,000 in seven minutes from tapping a pipeline of refined oil, while insurgents in Nigeria financially benefit from a share of the third of the country’s refined oil exports that is lost to theft, said the Atlantic Council.

The Washington DC-based think-tank, which mapped the scale of crime in the oil refining and processing end of the sector, said the issue had largely been ignored by authorities and law enforcement agencies so far.

“This has been an invisible issue for many years, people do not recognise downstream oil theft as a problem. It’s a multibillion-dollar thing that affects many people all over the world,” said Ian Ralby, the author of the analysis, a follow-up of a study published in January.

“These are global concerns because they affect the global economy, they affect global security and they affect global security,” he added.

The crimes take many forms, from straightforward theft from pipelines to smuggling to avoid taxes.

In some cases you have a kind of Robin Hood dynamic. You have drug cartels stealing oil from a state-owned oil company and selling it a discount to the poor
Atlantic Council analyst Ian Ralby

Donkeys laden with jerry cans are used to smuggle oil across the closed border between oil-rich Algeria and Morocco. As a result an estimated 660,000 cars in Morocco and Tunisia run on fuel smuggled from Algeria, and border cities have sprung up to provide a real estate market to place some of the funds.

“Many, many drops start to flood a house,” said Ralby of the cumulative impact.

Along with Nigeria, Mexico is one of the biggest oil theft hot spots, where an estimated US$1 billion of oil is stolen each year, with the Zetas cartel controlling nearly 40 per cent of that market alone. Drug barons tapping pipelines in Mexico are also known to leave them open afterwards for farmers.

Europe is not exempt from the problem, with the analysis finding the EU lost about 4 billion in hydrocarbon revenues in 2012. Ralby said a huge industry is taking shape where refined crude from Libya, which has Africa’s largest oil reserves, was being illegally transferred ship-to-ship in the Mediterranean and being passed off as legitimate oil imports to the EU.

“We were somewhat surprised to see the extent of ongoing criminality within the EU. Many people believe this is a developing state phenomenon [but it’s not],” Ralby said.

Part of the reason the crimes are not being tackled is that in many cases those who are meant to be stopping oil theft are sometimes involved – regulators can be perpetrators, and police can be facilitators. Another factor is that oil theft is sometimes seen as benign.

“In some cases you have a kind of Robin Hood dynamic,” Ralby said. “You have drug cartels stealing oil from a state-owned oil company and selling it a discount to the poor. And in some cases, yes, you have criminality that aids the energy poor, but at what cost, at what consequence?”

That cost comes in direct economic losses to the energy industry and governments, the environmental impact of spilled oil and in the instability caused by oil money reaching terrorist groups and insurgents such as Nigerian militants the Niger Delta Avengers, according to the analysis.

Ralby said there are affordable and easy “quick wins” to stem downstream oil theft. The Atlantic Council’s Global Energy Centre proposed molecular marking where criminals cannot see that fuel is marked but authorities can test to see if it is illegitimate, and better tracking of oil tanker trucks.