Balkanalysis.com

By Ioannis Michaletos*

The following exclusive report from Athens, by longtime Balkanalysis.com contributor Ioannis Michaletos, analyzes new Greek government initiatives in countering pervasive fuel smuggling- and how deeply entrenched this practice is with other kinds of organized crime in Greece and the Balkans.

€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶

The Greek government recently began a significant law enforcement operation, codenamed “Poseidon.” Meant to curb fuel smuggling, it employs a variety of methods based on new technologies. The plan may yet have political ramifications as well, due to the opposition of influential groups involved.

With annual revenues generated from illegal fuel smuggling in Greece reaching a staggering 3 billion euros, the trade has numerous ramifications, including the degradation of competition in the domestic market, the expansion of illegal activities in neighboring countries and the intrusion of organized crime syndicates in the energy sector.

Operation Poseidon

The action plan was developed by the Greek ministry of national economy, which is in dire need of capital. The plan involves techniques centered on the monitoring of the fuel trade in the country, so as to isolate instances of smuggling as they occur.

The financing of this project (further information, in Greek, can be found here) will be jointly shared by this Greek ministry and by the European Union. Further, according to information that is not yet verified, the Greek National Intelligence Service (NIS) will also provide know-how regarding the electronic monitoring of the smuggling networks.

According to Kathimerini, there are five key components that can be described as comprising the operation’s structure. The first is the creation of an online database accessible to the authorities, containing all individuals and organizations involved in the fuel trade in the country. The second is a provision envisioning that all small oil tankers docked at all Greek ports will acquire a unique code, whereby the authorities will be able to monitor their position via GPS-SMS/GPRS technology. The same will be obligatory for fuel trucks.

Third, the Greek customs will have access to scanners that will check special electronic ID’s installed in all fuel transport vehicles. Further, the customs service’s central directory will procure a new helicopter and two speedboats by early 2009, and another five over the coming years.

Finally, the important port of Piraeus near Athens will in the near future get a Command & Control Center, from where the movements of every ship carrying fuel within the port zone can be monitored 24 hours a day.

This center will also be able to merge all electronic information being gathered via sensors in all vessels and fuel transport vehicles across the entire Greek territory. Sensors will be also placed in the taps of every unit that either carries or stores fuel. Thus, every time a transaction takes place, the center will be able to verify the quantity of the commodity that was either extracted or pumped in.

A source within the Greek shipping community in Piraeus states for Balkanalysis.com that “fuel smuggling is a well rooted activity that cannot be easily confronted and the corruption issue of the Greek public servants might well prove to be the strongest obstacle€šÃ„¶ [though] temporary results might be feasible.”

The Backlash

Fuel smuggling is an activity that spans a variety of sectors, like the ports communities, crime syndicates and of course, the legal energy sector. Therefore the recent measures by the Greek administration have already started to arouse certain backlashes from those with vested interests.

Information has been provided by industry and political experts that indicate concern from some in the political opposition- influential figures who have much to lose in case a crackdown begins on a wider scale. The fragile political climate in Athens, and the possibility of yet another general election by early spring tends to confirm the above assessments.

On the other hand, the determination of the government to gain considerable and much needed taxes in light of the world economic crisis, and the pressure by multinationals that are aghast by the present situation in Greece, are factors indicative of a likely vigorous execution of the law enforcement crackdown on smuggling.

Moreover, if ones take into consideration that fuel smuggling networks have already expanded into neighboring countries and are also interrelated with other criminal activities there, such a sustained prosecution of this illicit trade via ‘Operation Poseidon’ might well serve to diversify fuel smuggling into other commodities or into different geographical zones.

A Shadow Trade

Greece, being a major shipping country, is also one of the main markets for contraband shipping fuel. According to existing regulations, the oil for ships must cost one-third the price of home heating oil.

Now, what is actually happening is the fake transfer of oil to ships that in reality gets into the housing and automotive oil market, providing huge profit margins for the smugglers.

There several methods used by smugglers, who have developed a sophisticated criminal infrastructure to sustain their activities. First, they construct a series of illegal depots, near the main ports and metropolitan centers, where the shipping oil they purchase can be stored. Afterwards, they use chemical variants to destroy the substance that differentiate marine oil from housing oil. The final stage is the transfer of the product to the market, thus making a great profit by avoiding taxes.

A second popular method of smuggling fuel is the purchase of excess amount of oil by maritime companies, or by the owners of individual boats. The oil is then transferred on shore via small oil tankers, and placed in the illegal depots; from there it finds its way onto the legal market.

A source in the Greek merchant marine ministry reveals for Balkanalysis.com that small ships and yachts that actually sunk long ago are still being claimed in forged documents as recipients of shipping oil. Thus, when the authorities disentangle the criminal web involved in such cases, “they often find a non-existing vessel and of course no crew or persons responsible.”

Further, “Greece has a long tradition of oil smuggling and breaking of embargoes in war zones such as the former Yugoslavia, certain African countries and the Middle East,” says this source.

Lastly, another aspect of smuggling is the actual theft of some 1-2 percent of oil reserved for legal sale to a vessel. This does not even require the knowledge or involvement of any of the crew officers, either; simply, a small amount of oil is not delivered and remains with the supplier, who then illegally sells that amount to other customers. This can be achieved due to the large amounts of oil being supplied daily throughout Greece, which allows for small €šÃ„òmismanagements’s on oil supply that at the end of the year, add up to great profits.

All in all, there are countless methods for clever smugglers to find to divert fuel resources for illicit profit. And they are apt students when it comes to innovation and evasion of the authorities. In this case, the involvement of state officials and energy managers is paramount.

Regional Ramifications

Corruption in the Greek fuel market is also entangled with the wider Southeastern European one, creating a web of shadowy interrelated crime groups in the region. In countries such as Albania, Montenegro, and others; the smugglers create front companies that officially import fuel from Greece- fuel that never actually reaches them, but which is instead kept in Greece to supply the domestic market.

According to reports created by the Greek ministry of national economy, such exports are non-existent and in many cases the fuel shipment is either changed with another commodity (i.e., from oil to water) or mixed heavily with other substances, and a significant quantity again remain in Greece. The involvement of customs official seems certain, since all export shipments are routinely checked, though very few smuggling cases have ever been revealed.

Another source, a fuel market expert, tells Balkanalysis.com that “the fuels to be exported are being bought without duties in Greece. Then the smugglers provide paperwork for alleged exports to neighboring countries. Usually a customs official is being bribed in the process, and finally the front company provides an invoice that it has accepted the fuel from Greece.”

Since Southeastern Europe is characterized by a corrupted public sector and lax financial controls, the Greek smugglers have great interest to expand in these states. Further, Greek-owned front companies are being used to conduct illegal trade between Balkan states, and there are indications that they have expanded their activities in the Black Sea states as well.

The annual turnover of this activity has not been assessed by any organization, but it is estimated that it numbers hundreds of millions of euros per annum.

The Nexus of Energy Smuggling and Organized Crime

The existence of a business climate in the region that hinders lawful investments and competition means heavy costs for local economies, despite the huge earnings of the small number of people involved in smuggling.

Panos Kostakos, an analyst on international organized crime networks and academic at Bath University in England provides several clues on the overall situation regarding fuel smuggling and its wider impact.

In relation to oil smuggling as an international organized crime activity, he states for Balkanalysis.com that “all smuggling and all organized crime activities have global connections. Some are obvious, such as cocaine heroin, marijuana and prostitution; some are less obvious, like extortion, racketeering, economic crime and so on. Fuel smuggling has global connections and it’s also very much dependant on local connections.”

Fuel smuggling is considered a ‘white collar crime’ because “it is conducted by high society, businessmen, shipowners and other respectable individuals,” states Kostakos. “Society does not perceive them as criminals. They themselves have a non-criminal identity. In my interviews with smugglers/businessmen I often hear the excuse, €šÃ„òeverybody does it,’s €šÃ„òit’s a common practice,’s and €šÃ„òit’s not risky.’s

On a second front, the Greek expert contends, Greek smugglers operating beyond Greek borers have made “huge fortunes overnight” by breaking oil embargoes. At the same time, within Greece large multinational oil companies are believed to have their own internal investigators to identify how many barrels of oil get missing each year, when €šÃ„òfreelancing’s employees siphon off the commodity of their own accord.

The port community in Athens, according to experts, is another important group that engages in numerous illegal activities due to the significance and role of shipping. Panos Kostakos notes that his research has found “cases of obvious links between cocaine distribution, oil smuggling, and extortion rackets.” In general, he says, Athens-based criminal rings specializing in distribution activities “have access to various commodities, such as oil, prostitutes, drugs and protection services. If you look at the known €šÃ„òGodfathers’s on the Athenian night-life scene, you will find links between drugs, racketeering and oil. From my own field work, I can also say that they are also dealing with prostitution and trafficking,” states Kostakos.

“There is some overlap, especially in the lower levels,” he adds. “The closer one gets to the consumer, the more diversified is the product that the broker can get hold of and supply to the market.”

From the foregoing, it becomes clear that fuel smuggling is a little-mentioned but very lucrative part of the larger Greek, and Balkan organized crime sphere of activities, and that it has necessary relations with legitimate businessmen, politicians and state agencies. Further, though it is an illegal activity, fuel smuggling carries none of the social stigma with it that results in a public outcry- such as murder, arson, drugs or prostitution trafficking, etc. It is relatively easy for fuel smugglers to slip under the radar.

The Greek government’s implementation of the new “Operation Poseidon” may well have some effect on curbing the trade. However, it will also have potentially dangerous political ramifications, considering the developed relationships between smugglers, men of industry and politicians and public servants. It is unlikely that any police activity will ever fully defeat the smugglers, however, as human ingenuity means they will probably simply find other ways of transporting and selling their product to avoid detection.

€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶

*Frequent Balkanalysis.com contributor Ioannis Michaletos is a Balkan security analyst for the RIEAS Institute in Athens, Greece. He is also Southeastern European Coordinator and Editor for the World Security Network Foundation.