Transnational Crime and the Developing World

Small-scale oil theft and refining is typically cash-based, which can easily be laundered through bulk
cash smuggling and cash-intensive businesses, whereas sizable transactions with foreign entities are
likely to involve the use of the formal financial system, such as wire transfers, trade misinvoicing, or
the purchase of luxury goods or real estate. 408 An estimated 80-90 percent of stolen crude in Nigeria is
smuggled out of the country. 409 Groups involved in the large-scale sale of crude use a series of boats
to transfer stolen crude onshore to larger ships waiting offshore, which is normally destined for the
international market. 410
D. Developing Countries
The damage of crude oil theft extends beyond lost revenues since governments are forced to expend
additional funds to combat theft as well as to repair damages and clean up pollution. Oil theft and
refinement is a dangerous profession and the involvement of OCGs, guerrilla groups, and terrorist
organizations escalates insecurity and furthers risks to those involved. Crude oil theft frequently results in
long-term environmental damage from oil spills, which in turn have serious impacts on the ability of local
communities to secure income, employment, and clean food and water. Damage to communities can
also undermine support for the government, often to the direct benefit of insurgent groups.
Crude oil is an incredibly valuable natural resource that can serve as an important revenue source
for developing countries. The theft of crude oil can therefore have serious impacts on oil exporting
countries’ ability to mobilize domestic resources. Mexico’s Pemex estimates that the company loses
as much as US$5 billion each year to fuel theft, a serious loss of income as oil revenues customarily
subsidize roughly a third of the government’s budget. 411 The loss of substantial amounts of revenues due
to illegal oil theft has direct impacts on the government’s budget and, by extension, its ability to provide
public services, invest in infrastructure, manage public debt, and fulfill other roles and obligations.
Oil theft also causes significant indirect financial losses to companies and governments due to increased
expenses attributable to repairs, security, and environmental cleanup. The theft of refined products
from pipelines seriously interrupts delivery, which can trigger domestic fuel shortages. 412 Sustained,
unmitigated theft can drive private companies to suspend production, minimize development, and
terminate in-country operations, further harming foreign direct investment. 413
The efforts of OCGs, guerrilla groups, and terrorist organizations to maintain control of territory and
resources inevitably produces security threats to communities as well as legitimate operators. The theft
and sale of crude oil is used to finance, and therefore perpetuate, conflict, terror, and insecurity. Stolen
crude oil has been a significant source of financing for ISIL, providing the group with billions of dollars in
funding that has been particularly challenging for the international community to combat. When active,
the FARC received indirect financial benefits from crude oil theft, since the crude was refined and then
used in the processing of cocaine. Governments have a difficult time in combating TOC and terrorism if
they are unable to separate OCGs, guerrilla groups, and terrorist organizations from their financing.
Oil theft and refining typically involve rudimentary methods that endanger the safety of those involved as
well as local populations. Oil thieves generally tap pipelines using simple tools such as hacksaws and
blades, which increases the risk of accidents. 414 In the small Mexican town of San Martin Texmelucan,
a leak from an illegal pipeline tap set off a large explosion; the resulting fire decimated the town and
killed many of the residents. 415 Makeshift refinery operations are equally dangerous because the refining
process produces noxious fumes as well as unstable fuel products which can also lead to explosions.
408
Katsouris and Sayne, Nigeria’s Criminal Crude, 38.
409
Ibid., 28; Akinleye, “As Oil ‘Bunkering’ Rises in Nigeria.”
410
Katsouris and Sayne, Nigeria’s Criminal Crude, 8, 33–34.
411
“Pemex to Stop Sending Finished Fuels”; “Mexico Plans Fresh Budget Cuts in 2017 as Oil Slump Bites,” Reuters, April 1, 2016, http://www.
reuters.com/article/mexico-budget-idUSL2N17502A.
412
“Ten Mexican States Hit by Gasoline Shortages, Pemex Blames Theft from Pipelines,” ETEnergyworld, December 25, 2016, http://energy.economictimes.indiatimes.com/news/oil-and-gas/ten-mexican-states-hit-by-gasoline-shortages-pemex-blames-theft-from-pipelines/56165181.
413
Elisha Bala-Gbogbo, “Shell to Chevron Move Offshore as Nigerian Risks Mount,” Bloomberg, July 31, 2013, https://www.bloomberg.com/news/
articles/2013-07-30/shell-flees-to-nigerian-offshore-fields-amid-onshore-woes; Amy Stillman, “Mexico’s Fuel Market Is Open, But the Imports Aren’t
Flowing,” Bloomberg, June 28, 2016, https://www.bloomberg.com/news/articles/2016-06-28/mexico-s-fuel-market-is-open-but-the-imports-aren-tflowing.
414
Gambrell and Associated Press, “Oil Bunkering Threatens Nigeria’s Economy, Environment.”
415
Grillo, “Stolen Oil.”
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