The energy mob

Think back to April, when the US announced its new strategy for fighting international organized crime. “International organized criminals control significant positions in the global energy and strategic materials markets,” said US Attorney General Michael Mukasey. “They are expanding their holdings in these sectors, which corrupts the normal functioning of these markets.”

What did he mean? An article this week in Forbes explains. These energy criminals, according to the article, range from the bad guys with Russian mob connections that control Ukraine’s gas supply, to petty hoods siphoning gasoline from vehicles in the US. It seems no country is clean.

“Corruption and smuggling have diverted government revenues potentially available for (Iraq) rebuilding efforts,” the Government Accountability Office said in a report last year. More troubling is that the Iraqi insurgency has been partly funded by oil-sector corruption. Insurgent and militia groups in Iraq have profited from the theft and illicit sale of oil to fund their activities, says the U.S. Defense Department. It claims that as much as $2 billion a year in fuel processed at Iraq’s biggest refinery is lost to the black market.

For international oil companies it has become even more difficult to stay on the right side of the Foreign Corrupt Practices Act, the U.S. law forbidding bribery of foreign officials. The U.S. Justice Department has become much more aggressive investigating such bribery cases while oil companies are scavenging the world for reserves, often ending up in the most unruly and corrupt places.

Baker Hughes, a Houston oil services company, pleaded guilty last year to making improper payments to secure work in Kazakhstan. The company also admitted to making illegal payments in Angola, Indonesia, Nigeria, Russia and Uzbekistan. Baker Hughes paid $44 million in fines and forfeitures, the biggest FCPA penalty ever.

While it’s worrying, to say the least, that someone like Simyon Mogilevich – a Russian mob boss who was arrested last winter – may influence the natural gas industry in much of the former Soviet Union, one could ask whether oil companies or freight-forwarding companies that find themselves on the wrong side of the FCPA when doing business the Nigerian way could be doing business in Nigeria any other way. Here’s a snapshot of the Nigerian oil industry, from an interview last year with author Lisa Margonelli, whose book Oil on the Brain describes the global oil supply chain:


Some of the most arresting sections of the book are about the oil industry in Nigeria. We might assume the oil business is just rough and dirty and hard work for anybody working into it. It's something else beyond that, even, in Nigeria. It's criminal. It's rough, in a sense, it's violent ...

It's very violent. I think that our conception of the oil industry is that well-trained technicians pull up to a spot and suck the oil out and it comes over here on tankers and it never really touches ground. But what happens in Nigeria is that it's part of a political system that involves gangs of young men who are mostly unemployed who remove oil from the pipelines and sell it. And it's quite violent, quite dangerous, and it has a big effect on our lives. Whenever there's an upset of violence in Nigeria, it affects the price here. We may complain about the price, but the actual price that's paid by the people in Nigeria is very high — higher than we can comprehend.

Animal Heads and Wiretaps

Pity the honest cops and politicians in Italy. Giuseppe Basile, a councilman and member of the small anti-crime and anti-corruption political party Italy of Values, had received threats, including a bullet in the mail and a severed animal head outside his door. Most people would let well enough alone after that – we’ve all seen The Godfather – but Mr Basile, 61, unfortunately met a sad end on Saturday night, when he was stabbed to death outside his home in southern Italy. The region is no stranger to the mob-related murders of politicians, the 2005 fatal shooting of a local politician at a polling station being the most recent audacious killing.

Meanwhile, the Italian government has proposed a bill that would limit the use of wiretaps to serious organized crime cases, terrorism and corruption.  Italy, one of the West’s most phone-tapped countries, should better protect the privacy of its citizens, noted the Italian justice minister. Critics of the bill – which has to pass parliament before it becomes law – say it will hurt the fight against organized crime.

Mexico Mayhem Continues

Mexican troops deployed to the northern border town of Ciudad Juarez several months ago as part of Mexican officials’ attempt to retake control of the country from the drug cartels are there for the foreseeable future, officials told the El Paso Times last week. (El Paso, Texas, is just across the Rio Grande River from Juarez, Mexico.)

One of the front lines in the drug war shifted to Juárez in March, when Mexico special forces soldiers carrying .50-caliber rifles and shouting cadence marched out of green C-130 Hercules transport planes when the army arrived in the besieged city.

The outbreak of violence in Juárez has claimed more than 450 lives this year, due in large part to what is believed to be a war between the Sinaloa and Juárez drug cartels for control of the region's lucrative smuggling corridor into the United States.

Other Juarez statistics are equally grim: around 2,000 soldiers and 500 federales have been posted to the city of 1.3 million, and three headless bodies were found around the town at the end of May. Over the weekend police found 22 bullet casings at the scene of the fatal shooting of a Juarez police officer. Chihuahua state has the highest per-capita rate of drug killings in Mexico.

But the town’s mayor, faced with these numbers, is a master of understatement. When asked by the El Paso Times on Monday how the violence had affected Juarez, Jose Reyes Ferriz told the paper, “There is a lack of tranquility.”

US lawmakers last week also promised to tone down a version of a billion-dollar bill that would help Mexico and other countries fight drug cartels – if those countries’ militaries and police passed muster on human rights and corruption. The aid provisions irked Mexican officials. US Senator Christopher Dodd told Bloomberg that several lawmakers that had met with Mexican counterparts agreed to drop “anything that smacks of certification.”

European Round-ups

Spanish police arrested 20 alleged Russian mobsters last week, after more than 300 cops raided houses in several towns throughout the country, seizing 23 luxury cars, more than €200,000 in cash, weapons, art and a yacht. The suspects are believed to have been using front companies to launder money from drug dealing, arms dealing and contract killings across the former Soviet Union.

The suspects are believed to be part of the Tambov group that operates in and around St Petersburg, but have been living in luxury in Spain for the past 12 years. The photos used by the Moscow Times here are highly recommended.

In less glamorous organized crime news, five Norwegians were charged Monday with insider trading as an organized crime network. Involved are $20 million worth of shares from a Scandinavian investment house. If convicted, they’ll face up to 11 years apiece in prison.