One of the common themes about the corruption in Iraq is Oil Smuggling.
"I would say probably between 200,000 and 500,000 barrels a day is probably unaccounted for in Iraq," Mikel Morris, who worked for the Iraq Reconstruction Management Organization (IRMO) at the U.S. embassy in Baghdad, told KTVT, a Texas television station.
How, given the violence and chaos in Iraq, do you smuggle that much oil? The oil tanker trucks/rigs that you see on the highway hold approx 4,000-5,000 gallons. A barrel of oil is 42 gallons, so, 200,000 barrels of oil is approx 2,000 tanker trucks worth of oil.
How do you hide that much oil?
More after the hold
The body of this diary is based on this article: Mystery of the Missing Meters: Accounting for Iraq's Oil Revenue This is the best article on oil smuggling in Iraq, that I've read, by the way.
Some basics, the main, and currently only functioning oil pipeline in Iraq is in the South (the oil pipelines in Northern Iraq are normally non-functioning due to attacks on it). It pumps Iraq's oil into the Gulf to a couple of offshore oil terminals, where the Oil Tanker ships are filled up.
The terminals, Al Basra Oil Terminal and Khawr Al Amaya Oil Terminal pump approx. 1,600,000 million barrels of oil a day.
Since these terminals and pipelines that connect them handle most of Iraq's legal oil business, it follows that the illegal oil business should have some sort of connections. If, for no other reason, then because that's were you find the oil.
So, back to the question above: How do you hide that much oil?
Well...
Lieutenant Aaron Bergman, the U.S. Navy officer in charge of Mobile Security Squadron 7 at ABOT, says export authorities have "guesstimated" how much is being sold, with a back-of-the-envelope formula: Every centimeter a tanker lowers into the water equals 6,000 barrels of oil cargo.
"So you can imagine," he said earlier this month to Stars & Stripes, a newspaper serving the U.S. military, the numbers could be off, "A couple of inches could equal 180,000 barrels of fuel."
So, if you underfill a tanker by a 33+ inches you get that 200,000 barrels of oil that is uncounted, ie smuggled out.(83+ inches for 500,000 barrels). I'm not sure how many ships the two terminals can fill a day. The article says the two terminals can fill 6 ships at a time. Assuming, and I'm guessing here, say, 1 ship per 8 hour shift and assuming a 24/7/364 pumping schedule, then the terminals can fill 18 ships a day. So, if each ship is only underfilled, on paper, by 2 to 4 inches of oil, you can reach the numbers of barrels missing per day that is necessary.
So, the answer is that the oil tanker fills up, totally. But, on paper, the tanker is NOT filled up. The extra unfilled space is where you hold that misssing oil.
Ok, there has to been some safeguards against theft/fraud, why don't they work?
At ABOT, officials at Iraq's state-owned South Oil Company (SOC) that extracts the crude, and at the State Oil Marketing Organization (SOMO) that pipes the crude to the terminals, would have to know about smuggling, even if they were not benefiting from the scheme.
Buyers from Brazil to India, from Thailand to the United States, purchase crude from Iraq at ABOT. The tanker operators would also have to be part of smuggling schemes. They would sign receipts for a lower quantity than they actually receive, and pay the extra directly to the smugglers. The most likely collaborators are either Iraqi or U.S. officials who supervise the production and delivery. Or both.
I wonder who are the US commanders (colonels and above, and what about the US navy) in the area? Knowing who they are, and we're talking about all the commanders from march 2003 to today, and questioning them... That might produce some intresting info, I believe.
Surely there has to been some impartial monitering? Something, you know, to measure the flow of oil?
Heavily armed soldiers spend their days at the oil terminals scanning the horizon looking for suicide bombers and stray fishing dhows (boats). Meanwhile, right under their noses, smugglers are suspected to be diverting an estimated billions of dollars worth of crude onto tankers because the oil metering system that is supposed monitor how much crude flows into and out of ABOT and KAAOT - has not worked since the March 2003 U.S. invasion of Iraq.
Ok, they aren't working.
There should be some sort of work going on to repair/replace them, right?
Officials blame the four-year delay in repairing the relatively simple system on "security problems." Others point to the failed efforts of the two U.S. companies hired to repair the southern oil fields, fix the two terminals, and the meters: Halliburton of Houston, Texas, and Parsons of Pasadena, California.
Ah... Halliburton. I see....
Well, now I know who's getting the oil smuggling money on the US side. And, why it's not being fixed. Sigh...
Is there other ways to smuggle oil? Yes. first a couple of other oil smuggling scams from the article.
Imported fuel. Iraq spends a small fortune to buy fuel from neighboring countries including Iran, Kuwait, Saudi Arabia, and Turkey. Much of this fuel goes to local drivers at a subsidized rate, and constitutes possibly the single most expensive item in the national budget after government salaries. In 2005 Iraq spent $4.2 billion of its $24.2 billion gross domestic product (GDP) on imported oil; the bill for 2006 is expected to exceed $5 billion. Smugglers siphon off a significant amount of the government subsidized fuel to sell back overseas at full price: The Ministry of Oil estimates the value at $800 million.
from a supporting article: Who Will Get the Oil?
At the Kurdish-Turkish border oil tanker trucks wait in rows parked three and four abreast, stacked in lines as long as eight miles. The truckers sit by their rigs for days playing cards, drinking tea and tinkering with their engines, waiting for higher-ups to pay bribes and doctor paperwork so they might pass. The Iraqi Oil Ministry's inspector general recently estimated that a petroleum truck driver willing to brave the country's highways could expect to pay $500 in bribes and would make about $8,400 profit once he resold his load in a safer country.
and the other scam:
Theft of locally-produced gasoline. Iraqi gasoline is stolen from refineries or illegal taps on pipelines and resold within the country or smuggled abroad. Another $800 million worth of black market fuels is sold within Iraq, in places from Penjwin in the far north, to Abu al-Khasib in the south. (see next box)
The U.S. military believes that the money from these operations funds insurgent operations, although evidence suggests that some also goes to straightforward petty corruption.
One of Iraq's refineries allowed up to 33 tanker trucks a day to fill up with gasoline, without filling out any sort of paperwork.
Finally, there's one of smuggling operation I wish to highlight:
Some 600 miles to the south of Penjwin, in the riverside town of Abu al-Khasib, near Basra, a small flotilla of fishing boats sets sail every morning. The boats, filled with fuel supplied by the Iraqi government at the specially subsidized price of just 10,000 dinar a ton (about $7.50), return every night, empty of fish, but stocked with cash. The source of their wealth is Iranian vessels that deliver freight to the harbor of Abu Floos, where prices are almost 100 times higher.
Ironically, Colonel Najim Abdulla, the commander of coast guard patrols in Basra, told a reporter that his force is denied enough fuel to pursue the scofflaws. "I can't chase smugglers who are well aware of our shortages," he said.
Thank for reading
jeff