Petrol smuggling: oiling the wheels of organized crime

Originally Published by the Global Initiative Against Transnational Organized Crime, Available Here.

As night falls the petrol smugglers on the Algerian-Moroccan border get to work. Moroccan villages that are languid by day now buzz with activity, as old Peugeots and Renaults roar down the dusty access roads that parallel the frontier. Closer to the border, long lines of donkeys—each loaded with twenty 30-liter jerry cans—are arriving from Algeria. The commerce is brisk, with petrol exchanged for food, goods, and cash. For those willing to risk crossing the border, the profits are enormous. By morning, the border is again dusty and deserted, as the smugglers wait for the darkness of night to reengage in their lucrative trade.

The theft and illicit sale of petrol is widespread.  Worldwide, organized crime syndicates and petty traders profit off the differences in the price of petroleum, buying petrol where it is cheap—or stealing it—and selling it slightly below market rates in areas where it is more expensive. There is no shortage of customers. Apart from its profitability, petrol smuggling is attractive to organized crime groups due to the ease with which they can procure the product. For most smugglers, their petrol comes straight from the pump at a local service station.  For some the product is procured directly from wholesalers, while in other places —notably Nigeria and Mexico—the petrol is stolen in bulk from pipelines. The sale of the petrol is as easy, either sold at the roadside, or fenced through unscrupulous service station owners. While smuggled petrol usually stays within the region it has been pilfered from, stolen crude oil can go global, fed into refineries half a world away.

Those involved in petrol smuggling are a diverse and divergent lot. The most numerous are local crime networks. These men—and occasionally women—tend to operate in defined areas along international borders, buying and selling in local markets. While these groups are typically small and locally situated, they can have a complex internal organization. As one smuggler along the Tunisian-Algerian border explained “a bunch of different groups function within our network – the buyers, the loaders, the drivers, and the leaders.” The barriers to entry are low, with the same smuggling noting that the major hurdle for him was coming up with enough capital to buy a truck to smuggle with. While some within the local smuggling networks get wealthy off the trade, for most it offers a comfortable though hardly extravagant livelihood.

At the other end of the scale, there are also highly organized, transnational networks active in petrol smuggling. Many of these groups started as local smugglers and evolved—through opportunity or necessity—into highly organized, large-volume smuggling networks. Nigeria’s smuggling networks offer a stark example of just how powerful, large, and sophisticated smuggling networks can become. Operating in the country’s Niger Delta, the smuggling networks reportedly siphon 150,000 barrels a day from the region’s pipelines. The vast majority of the oil—roughly 120,000 barrels—is exported, transported throughout West Africa and onto the international market. In some cases, the networks employ oil tankers to move their ill-gotten gains.

A third type of actor involved in petrol smuggling involves existent transnational organized crime group looking for new opportunities. For these groups, petrol smuggling is usually not their primary illicit business. Rather, it represents an opportunistic expansion by the group into a new business area that presents minimal risk and high-profits. In Mexico, the Zetas and other Drug Trafficking Organization are expanding rapidly into petrol theft and smuggling. In an interesting derivation, the Zetas reportedly both smuggle petrol and levy taxes on any small-scale smugglers seeking to work in areas they control.

Governments and industry are aware that they face a challenge. A number of oil producing countries have begun to combat petrol smuggling. However, in many locations where smuggling is rife there is more official noise than action—petrol smuggling is rarely perceived as existentially threatening to the state, in the same way that drug and arms trafficking may be. Frequently, government officials themselves are believed to be either involved or complicit in the trade. Nonetheless, petrol trafficking can have serious ramifications for those states that it touches. One need look no further than Syria and Iraq, where oil smuggling have helped to bankroll the operations of the Islamic State militant group. As the price of oil edges of up inexorably over the coming decades, it is likely that petrol smuggling will become more profligate and more profitable for the groups involved. International actors need to act soon, creating new forums to coordinate actions against such groups and mechanisms for identify and deterring their operations in order to mitigate the threats they pose.

It’s Always Sunny in Sinaloa

Originally Published by the Global Initiative Against Transnational Organized Crime, Available Here.

On Saturday, February 22nd, an elite force of Marines in the Mexican city of Mazatlan arrested El Chapo. Joaquin Guzmán-Loera, AKA El Chapo, is a key leader within the Sinaloa Federation, the largest and most entrepreneurially innovative drug trafficking organizations currently operating in Mexico. His arrest is a major coup for the Mexican and US law enforcement against one of the most powerful non-state armed groups in Latin America. Guzmán’s arrest is also a coup for President Enrique Peña Nieto’s administration, and will likely mute recent criticism of the President’s record in combatting drug trafficking organizations (DTOs).

Joaquin “Chapo” Guzmán was born in the rural town of Badiraguato, in the Mexican state of Sinaloa. Like many in the older generation of Mexican drug traffickers, Chapo was introduced to the trade through family connections. He started with the Guadalajara cartel in the 1980s, acting mainly as a logistician and manager. With the breakup of the cartel in 1989, Chapo gained control over a small smuggling plaza in the northern state of Sonora. Chapo proved to be both a charming yet brutal tactician. Partnering with traffickers such as Ignacio Coronel Villareal and Ismael Zambada Garcia, Chapo created the organization that would come to be known as the Sinaloa Federation. Also during this time he engaged in a bloody conflict with Tijuana’s Arellano Félix cartel. In one of the most notorious and bloody spasms of the conflict, a Catholic Cardinal was gunned down at the Guadalajara airport, after reportedly being mistaken for El Chapo. The assassination proved too much for the Mexican government to ignore, and after a short but intense manhunt El Chapo was taken into custody in Guatemala. He spent the next eight years managing his organization from prison, before escaping in 2001.

For the last decade, El Chapo has played an intimate role Mexico’s drug war. His forces initiated the conflict in 2005, when they invaded the border city of Nuevo Laredo, aiming to eject the weakened Gulf Cartel. The multi-year battle that followed was far more violent and paramilitarized than previous drug trafficking disputes in Mexico, with hundreds of gunmen deployed by both sides. While Chapo’s Sinaloa Federation is widely seen has having lost the battle for Nuevo Laredo, it did not dent his expansionist tendencies. In 2008 his forces invaded Ciudad Juarez, another border city that served as a vital conduit for drugs heading north. Chapo’s battle with the Carrillo-Fuentes DTO was bloody, with 3,115 murders in 2010 alone, and barbaric, defined by torture, decapitation, and group massacres. The Sinaloa Federation won the battle for Ciudad Juarez, positioning the cartel as one of the most powerful in Mexico. El Chapo also sought to expand his territory outside of Mexico, dispatching operatives to Central and South America, Europe, Africa, and East Asia. Despite his lack of formal education, Joaquin Guzmán-Loera oversaw the creation of a sprawling multinational illicit organization, with financial interests in a host of illicit and licit activities.

Chapo Guzmán’s arrest is clearly a major victory for President Peña Nieto. The President came to office promising to lessen the drug violence, and roll back the highly militarized strategies of his predecessor. Unsurprisingly, these promises have proven difficult to achieve. While violence has abated in some areas of the country, other areas, such as Michoacán, have become far more complex and dangerous. El Chapo’s capture is an important symbolic win for the President, squelching concerns raised by some in the U.S. and Mexico that Peña Nieto’s strategy is weak on organized crime. It will also squash persistent rumors that the Mexican Government has been purposefully soft on the Sinaloa Federation, instead targeting groups such as the Gulf Cartel and the Zetas DTOs.

However, while Chapo Guzmán’s arrest is a win for the President, it is unlikely to be a game changer for the country for several reasons. First, it is unlikely to significantly hobble the Sinaloa Federation. Mexican drug trafficking organizations in general, and the Sinaloa Federation specifically, are resilient and adaptive entities. The elimination of a leader rarely leads to the disintegration of the organization, though it may prompt a violent contention for power amongst key lieutenants. Occasionally these schisms have lead to one or more factions breaking away from the original cartel, and forming their own drug trafficking organization. Chapo was one of several key leaders in the loose confederation of drug cartels that constitute the Sinaloa Federation. It is likely that one of the remaining leaders in the group, such as Ismael Zambada Garcia, will either directly take over Chapo’s faction or intercede in the succession process to minimize violence and instability. Second, Mexico’s drug conflict is a multi-sided fight between DTOs, and is not predominately a fight between individual DTOs and the Government. In Mexico, successes by the Government against a cartel often prompt more violence, as rival cartels seek to capitalize on the momentary weakness of their adversary. The coming months are likely to be bloody.

Nonetheless, President Peña Nieto and those in the Mexican and U.S. Law Enforcement communities should be commended for finding and arresting Chapo Guzmán. While his detention may not be a game changer for Mexico, it is a demonstration that drug trafficking and murder have repercussions, even for one of the world’s richest men.

Dirty cash for dirty trash

Originally Published by the Global Initiative Against Transnational Organized Crime, Available Here. 

“We’re polluting our own house and our own land. What are we going to drink?”

“You idiot. We’ll drink mineral water.”

Camorra Members discussing the dumping of toxic waste outside of Naples

A public health crisis is brewing in southern Italy. In the countryside around Naples, cancer rates have spiked, while in the city, the U.S. Navy has warned its personnel to avoid drinking the water. For decades the region’s Camorra organized crime group has engaged in a lucrative trash-for-cash racket, disposing of toxic waste for European industry at a fraction of the legal price. Burying the waste in the Neapolitan countryside has earned the clans billions of dollars. However, the Camorra is not alone in its involvement in the illicit disposal of toxic waste. As regulation have grown more stringent, and the cost of legal disposal have mounted, otherwise reputable firms have increasingly become entangled with organized crime groups throughout the world. As the situation in southern Italy shows, it is often innocent residents of the dumping zones who suffer most from the noxious trade.

The trade in toxic waste has existed for decades, with the industrial effluent from the developed world often exported to developing nations. However, two trends have driven the growth of illicit trade in toxic waste, and the involvement of organized crime groups. First, regulations and the cost of disposing of toxic waste have continued to mount. By and large this is a positive development, spurred by civil society and government concerns over the health and environmental impact of toxic waste disposal. However, regulations and the cost of toxic waste disposal differ dramatically between states. Some businesses have sought to financially profit from the regulatory heterogeneity, by shipping their waste to the least regulated, and thus most inexpensive, countries for processing. The second trend, efforts by the international community to restrict the legal trade in toxic waste, has emerged in response to business efforts to dispose of toxic waste on the cheap. However, despite international efforts the global trade in toxic waste continues. Efforts to restrict the legal trade have opened up a vast opportunity for global organized crime groups, who are able and all too willing to smuggle and dispose of the toxic effluent.

Camorra clans in Naples seem to have been early and enthusiastic adopters of the toxic waste business. In 1997, one Camorra member testified that millions of tons of waste were regularly moved to the areas outside of Naples and buried. The financial stakes of the market are huge. One NGO estimated the yearly value of illicit waste disposal in Italy at 16 billion Euros. Reportedly, the Camorra has begun to expand it waste disposal activities abroad, via shipments to Eastern Europe and East Asia.

The illicit trade is toxic waste is not a victimless crime. The toxicity of the products involved pose grave threats to both those involved in the trade, and the public at large. Over 100,000 were sickened in Côte d’Ivoire in 2006, when oil byproducts were dumped in Abidjan. A spectacular photo essay recently published on the largest e-waste dump in Ghana highlights the huge health risks for local workers and resident populations. In Italy, the illicit dumps outside of Naples are believed to have propelled a cancer epidemic. Wiretaps show that Camorra members involved in burying the waste knew the dangers it posed to the local community, yet they buried it anyway. While the Italian government has initiated efforts to clean up the waste, the public health challenge posed by the buried toxins is likely to endure.

Unfortunately, the illicit trade in toxic waste is likely to grow. The financial stakes are too high for international companies, the financial gains for organized crime groups too large to pass up, and the laws to soft to deter either the businessmen or the crime groups from engaging in the activity. As polities in Europe, North America, and East Asia buttress their regulations against toxic waste disposal, it is likely that the illicit trade will be routed to developing countries, posing grave health threats to the populations there. While there is no obvious panacea to the problem, the transnational nature of the illicit trade in toxic waste necessitates the strengthening of laws against illicit dumping in both exporting and importing countries, as well as robust international cooperation to identify what waste is being moved, to where, and who is responsible. Though such steps are only a preliminary effort, they will have a tangible and positive impact on public health for those who would otherwise be victimized by the greed of organized crime groups and their industrial partners.

Organized crime looks East

Originally Published by the Global Initiative Against Transnational Organized Crime, Available Here.

In 2013, international attention began to fixate on the organized crime challenge in East Asia. The region is no stranger to organized crime; groups such as Japan’s Yakuza and Hong Kong’s Triads have long exercised a strong influence over East Asia’s criminal underworld. However, the region’s breakneck economic growth has changed the stakes of the game. No longer is East Asia a peripheral market for drug traffickers, cyber criminals, and human smugglers, too small in scope and value to be a target in its own right. Increasing affluence in China, Indonesia, Vietnam, and the Philippines have opened up a market for organized crime figures comparable in value, and larger in absolute population size, than the traditional high-value organized crime markets in Europe and the United states. One estimate notes that by 2025, China’s middle class alone will number 520 million. As East Asia’s licit market booms and beckons, so too does East Asia’s illicit market. Transnational criminal groups have moved rapidly to gain an advantage.

East Asia, and particular China, has become an increasingly lucrative market for drug trafficking organizations. In China, the number of narcotics users is, according to some estimates, above 15 million. Even this huge population of heroin and amphetamine users represents an extremely low usage prevalence rate, both compared to international levels and China’s historic averages. China’s user population is destined to grow. Throughout the region, tens of millions of others regularly purchase and consume narcotics. Historically, producers in the region have supplied East Asia’s narcotics market. This is starting to change. Now, amphetamines are being imported to Japan and China from West Africa, while cocaine is increasingly filtering across the Pacific and into the clubs of Melbourne and Shanghai.

The profits to be made in drug trafficking are huge, and have prompted drug trafficking crime groups from Africa, Latin America, and Europe to try and get involved in the East Asian market. Individuals associated with Mexican drug trafficking organizations have been turning up in increasing numbers in China, including at least one case where one was arrested at a meth lab in the country. Further south, Outlaw Motorcycle Gangs have continued to expand in Australia and South-East Asia, peddling methamphetamines and coercive violence wherever they go. Increased efforts by external organized crime groups to penetrate East Asia’s drug market are likely to accelerate in 2014, propelled as much by the stagnation of narcotics sales in Europe and the US as by the dynamism of the East Asian market.

In addition to drug, human trafficking is increasing throughout the region. The trafficking of persons for labor and sexual trafficking has been an endemic problem for generations. However, the China’s gender imbalance – with tens of millions more males than females – is propelling an increasingly vibrant market in “wife” trafficking. These victims are often trafficked from Laos, Vietnam, and Myanmar; enjoying few rights and high-levels of risk in China, they are vulnerable to domestic violence and forced prostitution.

East Asia has also spurred a sharp rise in ivory trafficking over the last decade. While some consumers are interested in ivory products as evidence of their social status, many have come to view ivory as an investment. In China, there are indications that an Ivory “bubble” has emerged, whereby investor demand and the increasing rarity of ivory producing animals prompt a continual rise in price. In turn, the rapid appreciation in price increases the attractiveness of ivory as an investment vehicle, spurring yet more demand. It is a vicious value circle, and one which, given the finite amounts of ivory in existence, is difficult to deter.

The increased importance of East Asia’s criminal market for criminal organizations makes cooperation with regional governments a vital reality for those seeking to counter those same groups. Cooperative endeavors against ivory, for example, will not succeed without buy in from China. How international actors’ structure their outreach to East Asian governments, and perhaps more importantly how East Asian governments respond, will be a key area to watch in 2014.

Finally, East Asia’s organized crime challenge will not be restricted to the large and rich countries that comprise the dominant markets for illicit goods – such as China, Japan, Korea, and Australia. The poor and peripheral countries of the region will be far more threatened.Limited government capacity in these countries will attract organized crime groups, looking for uncontrolled space in which to establish bases and production facilities. It is quite possible that nations in south-east Asia and western Oceana will be buffeted by high levels of criminal violence in the coming years, similar in scope and challenge to what Central American countries are currently dealing with. Signs of violence and corruption related to organized crime in the less affluent areas of East Asia should be monitored closely, lest ripples of violence further destabilize an economically vital yet precarious region.