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Is Oil Smuggling and Organized Crime the Cause of Greece’s Economic Crisis?

Oil smuggling is embedded into the social, political and economic fabric of Greece, with annual revenues generated from illegal fuel smuggling reaching €3 billion euros as of 2008, and some sources say that although Greece imports up to 99 percent of its fuel needs, it still manages to export more than it imports. 

Greece thrives on its shipping industry and one of its main contraband markets is petroleum. Greek regulations have shipping oil priced at one-third the price of automotive and home heating oil. In response, smugglers transform low-cost “shipping oil” into higher-priced home and automotive oil, generating huge profits. The practice requires a vast criminal infrastructure including illegal depots near ports and major cities for the storage of the shipping oil, which is adulterated and resold as home and automotive oil.

An estimated 20 percent of fuel oil sold in the Greek market comes from illegal trade. Gas stations in Greece are said to offer fuel that is a more lucrative blend of legally purchased fuel and black market fuel, allowing retailers to realize higher profits and avoid excise duties.

Though Greece shows a mathematically impossible volume of petroleum exports to neighboring countries, the bills of laden do not add up, with oil tankers departing for their expressed destinations but then turning around and rerouting the ships back home for illegal sale on the domestic market.

According to one local newspaper, “Greece’s major energy companies still systematically engage in fictitious exports of fuels and illegal re-importations, providing huge profits on which no taxes are paid.”

Greece’s long tradition of oil smuggling and breaking oil embargoes has harmed domestic competition and led to a serious expansion of criminal activities in neighboring countries as organized crime syndicates foray into the energy sector.

The Greek government is working to cut back on oil smuggling through a number of means, such as installing GPS systems on fuel transport vehicles and implementing a new registration process for fuel transporters attempting to hide the true ownership of cargo.

But these efforts will fall short in a country where petroleum smuggling is institutionalized at the highest levels.

In an interview with Oilprice.com, Dr. Panos Kostakos, a Greek political analyst and expert in organized crime and terrorism, reminds us that “Greece is the birthplace of democracy, but the tragedy is that the current political system is a Parliamentary Mafiocracy. We should always keep that in mind when discussing issues of law and order and justice.”

Kostakos, who has spent his career conducting empirical field research on organized crime in Greece, describes oil smuggling in Greece as an illicit enterprise that remains “invisible and untraceable” whose perpetrators remain under the radar and out of the media. “Oil smuggling is organized by actors from the shipping-port community. They have the infrastructure, contacts and technology to organize such illegal schemes. At the top of the pyramid you will find respectable businessmen with political connections, wealth, influence and power.”

For this reason, says Kostakos, the Greek media is not free to report on oil smuggling in any depth. “The majority of private media companies in Greece depend heavily on state funding and have strong political agendas,” and the universities and think tanks are controlled by the political elite. “There is a significant gap in empirical research on organized crime, as if the problem does not exist.”

But what surprises Kostakos most is that no one in Europe seems to understand that the Greek mafia is behind the current economic crisis. “It is a colossal failure of the political elite in Europe who have not communicated this properly to the public.”

“Greece has one of the largest black markets in Europe; the highest corruption levels in Europe; a strong political culture based on patron-client relations; levels of trust amongst people and between people and Institutions are lower than in any other country in Europe and there is a sovereign debt that does not mirror the real wealth of the average Greek family. What more evidence do we need to conclude that this is Greek mafia?” Kostakos asks.

These are the dynamics, he says, that allow oil smuggling to flourish. It is an illegal business that is not stigmatized because the main victim is the state, on the surface, and the people have a hostile attitude towards the state at present.

Fighting oil smuggling in Greece should be a top priority for the International Monetary Fund (IMF) and European lenders, on one hand, but on the other hand, Greece’s lenders must also realize that oil smuggling is so embedded in every aspect of society that in order to maintain political stability they need the smugglers on their side, Kostakos says. “The political dilemma is whether to negotiate with the mafia or confront them.”

By Jen Alic of Oilprice.com

Jen Alic is a geopolitical analyst, co-founder of ISA Intel in Sarajevo and Tel Aviv, and the former editor-in-chief of ISN Security Watch in Zurich.

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Leave a comment
  • magnus on April 16 2012 said:
    A good piece that is correct in most of it's content, however living in Athens teaches us that children in primary school know of this level of corruption. The rabbit hole goes far deeper than this and the sad truth is that your final quote is incorrect - "The political dilemma is whether to negotiate with the mafia or confront them" is a naive statement because there is not, and has not been any difference between the mafia and the politicians for many generations now. Every single adult in Greece is made aware of this every day, in every way - and the most disturbing part is that through inaction we are all systematically made an accomplice. Time seems to be running out and the good people now have not the strength, the time, nor the food to fight against it.
  • Philip Andrews on April 17 2012 said:
    Without wishing to engage in something that may become known as 'catastrophe theory', with respect to Greece there seem to be two alternatives.
    Number one is that the present situation continues to disintegrate into political and socio-economic anarchy after the elections. In the last 200 years of Greek existence outside of the Ottoman Empire (let's not call it independence, it was never that), this is the worst situation the people and the nation have been in since the years of war and occupation and civil war.
    Number two is the 'April 21 solution'. For Greeks living in denial and for their supporters, this solution is taboo and unthinkable. However, for those like Germany who are seeking a way to resolve this dilemma once and for all, a military intervention might seem to be the most logical outcome. The Greek military is the only state institution that has not been entirely ravaged by the economic crisis. It has been reported that the president has appealed to the generals to be ready to intervene if the elections did not produce a government capable of handling the crisis. This is quite likely in the circumstances.
    It is ironic that at least one writer on the web has somewhat ironically commented that Greeks have always wanted to live under some sort of communism, socialism or dictatorship of the proletariat. Greeks are permanent revolutionaries who it seems have gotten used to living off others' largess while playing politics and conflict.
    This may be seen as an uncharitable comment but it is unfortunately only too true. I speak from personal experience (family connections).
    A military intervention would not solve the crisis, it was simply stabilise the situation long enough for Greece to leave the EU (a country under military dictatorship cannot be a member of the EU). Between them the Germans, the military and anyone else involved will then decide whether to leave Greece to her own devices, to her own fate or to attempt to take a hand in reforming the nation and the state.
    How this could be done effectively if at all remains to be seen. It would mean overcoming 2000 years of Byzantine intrigue and 600 years of Ottoman socio-economic attitudes.
    I wish the reformers under whatever system Godspeed. They will need all the help they can get...
  • Oilcon on September 16 2014 said:
    This is what Christine Lagarde of IMF had to say about corruption in Greece, almost two years since the article was published.

    "I better not say too much because, you know, when I have talked about Greece and its taxes before, I got death threats and we had to increase security”.

    It seems to me that the very last quote in the article was spot on.

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