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Oil Theft is Big Business for Mexican Gangs

imageWritten by  Patrick Corcoran

Theft from Mexico‘s state oil company Pemex appears to have shifted from a small-scale criminal nuisance into big business, with actors such as the Zetas and Sinaloa Cartel increasingly getting involved.

The oil company, which provides the Mexican government with roughly a third of its operating budget, has long been plagued by robberies. In the past, these were typically carried out by small-scale gangs or Pemex distributors, and would involve intentionally mislabeling gasoline products, or selling off gas siphoned from pipelines at below-market prices.

During the Calderon administration, however, both the type of robberies and the perpetrators have changed, as Proceso reports, based on an internal Pemex document. Today, crude oil is being stolen on a wide scale, and the groups behind the theft are not small-scale gangs or businessmen gaming the system, but rather criminal networks like the Zetas. Furthermore, instead of reselling the oil at Pemex stations, the criminal groups are exploiting their international reach to sell it on to US refineries.

The geography of illegal siphons discovered in recent years demonstrates the growing role of organized crime groups — initially the Zetas, and increasingly, it would appear, the Sinaloa Cartel. According to Proceso, the two states where the largest number of illegal siphons were discovered in the first half of 2010 were Veracruz and Nuevo Leon, both of them notorious havens of Zeta activity. Sinaloa was third, followed by Puebla and then·Tamaulipas, which is also a Zeta stronghold.

But according to a recent report from Excelsior, Sinaloa became the state worst-hit by pipeline theft in 2011, leapfrogging the two Zetas-held states that were ahead of it in 2010.

The Zetas are known for their diverse revenue sources, involved in activities like extortion, pirate merchandise, kidnapping, car theft, and other rackets, in addition to oil theft. It is no surprise that Zetas-dominated states have seen a spike in stolen hydrocarbons.

In contrast, the Sinaloa Cartel has a reputation for sticking to drug trafficking. In 2010, for instance, a captured high-ranking member of the Sinaloa Cartel told authorities that the cartel boss Joaquin “El Chapo” Guzman had prohibited his subordinates from supplementing their wages by kidnapping. Other groups also operate in the Sinaloa state, such as the Beltran Leyva Organization, but the scale of the thefts suggests that the Sinaloa Cartel, as the foremost network in the region, is involved. If this is the case, it would seem to represent a significant shift in the group’s modus operandi.

Pemex has discovered 5,000 illegal siphons since Calderon took office in late 2006, with more than 1,300 of those found last year. Some 3 million barrels of hydrocarbons were stolen in 2011, an increase of 52 percent from the previous year. This caused losses of roughly $475 million to the company, which had revenues in 2010 of nearly $80 billion.

In response, Mexican authorities have ramped up investigations into the robberies; just 161 were opened in 2007, but more than 1,000 were opened last year. Most of those arrested for stealing oil have been linked to the Familia Michoacana and the Zetas, though the small-time operations have not entirely disappeared from the game.

In addition to the vast sums to be made, stealing oil and gas is an attractive business for a number of other reasons. Neither Pemex nor the Mexican government have the resources to patrol the thousands of miles of pipelines, meaning that the product can be stolen with relatively low risk. Furthermore, as InSight Crime has pointed out, the large bureaucracy in Pemex also generates a large number of targets for corruption. In many cases, people within the company have taken part in the robberies. And as Excelsior notes, while it may sound sophisticated, robbing oil or gas from a pipeline is a low-tech business.

As InSight Crime has reported, oil and gas theft are a serious issue for Latin American oil companies in countries including Colombia, Venezuela, and Bolivia. Hydrocarbon theft became a big source of funds for paramilitary group the United Self-Defense Forces of Colombia (AUC), with $10 million disappearing from 2001 to 2003 from AUC territory.

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Colombia: ‘Carbon credit’ scheme a cover for land grab

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Sunday, March 4, 2012
By James Bargent

When the paramilitaries of the United Self-Defense Forces of Colombia (AUC) arrived in San Onofre in northern Colombia in the late 1990s, they came after dark, dragging people from their homes and disappearing into the night.

Soon, they did not need the cover of darkness. People were executed in public plazas in broad daylight. Women and young girls were openly raped and abused.

Since the demobilisation of the local AUC bloc in 2005, 42 mass graves have been discovered in the municipality. Locals say about 3000 people disappeared ands tens of thousands fled their homes and abandoned their land to escape what one survivor called a region of “concentration camps”.

Seven years on from the AUC demobilisation, San Onofre is now the site of thousands of hectares of teak trees belonging to one of Colombia’s five biggest companies, Argos S.A.

In February last year, Argos’ commercial monocrop plantation was approved for the United Nations’ Clean Development Mechanism (CDM) carbon trading scheme. This means it can sell carbon credits to industrialised countries trying to meet Kyoto Protocol emission reduction targets.

The company says the plantation will capture 37,000 tones of CO2 a year for 25 years – worth about $12.5 million in the current carbon market. It also plans to use another teak plantation in the nearby municipalities of El Carmen and Ovejas for the CDM.

Argos claims the teak plantation is helping fight climate change and contributing to the sustainable development of a conflict scarred region, but the project has proved controversial.

Survivors from the paramilitary era and land restitution campaigners claim the plantation and its CDM status is not only an attempt to cash in on the lucrative carbon credits market, but also legitimise a mass land grab that followed paramilitary violence, and prevent land restitution to a displaced population.

The municipalities of San Onofre, El Carmen and Ovejas are in the Caribbean region Montes de Maria. A heavy guerilla presence in the area led to the creation of AUC bloc, the “Heroes of Montes de Maria” in 1997. The paramilitaries soon gained complete social and economic control of the region by murdering, torturing and displacing local farmers with the support of local state security forces.

Between 1995 and 2005, 54 massacres were reported in the three municipalities of San Onofre, Ovejas and El Carmen and, says government agency Accion Social, 117,097 people have been displaced there since the paramilitaries first arrived.

The AUC era ended with demobilisation in 2005. However, in 2008 El Espectacor reported a new invasion, of “strange personalities” in bulletproof Hummers.

A land grab ensued, in which desperate, indebted or frightened people were pressured into selling property. Abandoned land was snapped up by speculators.

Next came big business. What had previously been an area of smallholder and subsistence farming rapidly became dominated by large-scale agro-industrial enterprises ― dairy, timber, African palm and teak.

As the land became more concentrated in fewer hands, the landscape of Montes de Maria began to change. Most of Montes de Maria is now owned by just a handful of large businesses, among them Argos, which owns an estimated 12,500 hectares.

Argos claims it bought its land in San Onofre directly from the owners in 2005, after the paramilitaries had left. However, the CDM validation report indicates it first bought land in 2003 and continued to do so until 2008.

Camilo Abello, the vice-president of corporate affairs at Argos, claims the company entered “a completely peaceful zone. The Argos representative who made the purchases was able to go into the zone because there were no paramilitaries, there was no violence.”

“Juan Carlos”, a San Onofre local whose family sold their land to Argos, disagrees.

Juan Carlos’ family owned land close to the El Palmar ranch, headquarters of the infamous local AUC leader known as “Cadena” and site of a mass grave containing 72 tortured and mutilated bodies.

“We had to sell the land because we were in an unbearable situation,” he said, “Our lives were in danger.”

Juan Carlos said his family had to ask Cadena permission to sell to Argos. He said that although he knew of no formal contact between the AUC and Argos, paramilitaries visited the farm while the Argos representative was measuring the land.

Government statistics show that nearly 2000 people were forcibly displaced in San Onofre in 2005, more than in the previous two years. More than 1000 people were also displaced in 2006 and again in 2007.

Murder and displacement rates have dropped sharply since, but government risk reports on San Onofre show a renewed and growing paramilitary presence in the area.

In El Carmen de Bolivar and Ovejas, Argos bought land from the speculators who flooded the region in the wake of the paramilitaries.

One of the main sources was a group of powerful businesspeople and ranchers called the Amigos de Montes de Maria. Locals say they pressured campesinos into selling their land and evicted families from land bought for agro-industrial projects.

Testimonies collected for two NGO reports said that in at least one case Argos bought land acquired by Amigos de Montes de Maria from demobilised AUC members who had displaced its owners.

Residents also report how one alleged demobilised AUC member, Silvio Flores, went to work for the company after it bought the land he managed on behalf of a member of the group. Locals claim Flores then began pressuring other campesinos to sell; abusing and threatening them, killing their animals and burning down houses.

In the report, residents of Ovejas also describe being threatened by heavily armed camouflaged men who claimed to be the company’s security.

Argos denies any involvement in pressuring people to sell or buying from displaced people. “What we did was buy from people who wanted to sell,” said Camilo Abello, “without any coercion or pressure”.

Abello also denied any links to paramilitary groups and claimed the company does not use any type of security at the plantations. According to Abello, the company is helping the region by creating jobs.

“We don’t think that we are taking advantage, on the contrary we are supporting the reconstruction of the fabric of society, we are investing in a post-conflict zone,” he said.

The issue of land ownership in Montes de Maria has been complicated further by Colombian President Juan Manuel Santos’ new flagship policy ― the Victims and Land Restitution Law.

The law is designed to address the desperate plight of the estimated 3-5 million Colombians forced from their lands into city slums and squatter camps by conflict and violence. Its main focus is the restitution of lands to the displaced.

Critics of Argos claim the company is using the teak plantations and their CDM status to ward off the danger of losing their lands because of the Victims Law. If Argos faces claims on its Montes de Maria land, it can retain the plantations by exploiting a loophole in the restitution process.

The Victims Law says land will not be taken from companies that are using it for agro-industrial enterprises if the company can prove it bought the land in good faith. Instead, the authorities will try to negotiate a financial agreement between company and claimant.

Colombian Congressperson Ivan Cepeda campaigns on land rights and has raised the issue of Montes de Maria land grabs to Congress.

“The operation [Argos] has done in Montes de Maria is a clear example of how the government’s proposed restitution with the Victims Laws is going to work,” he said. “All of this is a big, sophisticated operation to legalize the lands they have robbed from the campesinos.”

Cepeda is scathing of Argos’ claims to have acted in good faith when it bought the lands.

“[Paramilitary violence] did not happen in isolation,” he said. “It is a fact of public knowledge and frankly it is illogical and incomprehensible that these businesses did not know which land they were dealing with and who had lived on that land.”

He added: “[Argos’ project is] a business that it is presenting as clean when in reality it is a business drenched in blood ― the blood of campesinos that were the victims of massacres.”

The company itself says it welcomes the Victims Law and would cooperate fully with any claims on land owned by the company.

In October, Cepeda wrote to UN Secretary General Ban Ki-Moon urging him to expel Argos from the CDM program and enforce the UN Global Compact, which commits associated companies to human rights, labour, environment and anti-corruption principles.

Ban did not publicly respond, but the CDM board chair Martin Hession said responsibility for the matter lay with the Colombian government.

“Primarily, it is for (them) to resolve issues like this as they certified the sustainable development of the project,” he said in an interview with Point Carbon News.

A spokesperson for the Colombian Ministry of Environment and Sustainable Development said, “Only the CDM Executive Board can take this decision [to remove Argos’ approval].”

Compared with the horrors of the turn of the century, life for the campesinos of Montes de Maria is quiet. But with growing tensions over landownership and the resurgence of paramilitarism, violence and conflict still lurk beneath the surface.

“We believe that it is not going to stay calm,” said “Andres”, a campesino from Ovejas.

“It is going to continue, we are going to see deaths here, we are going to see pressure, we are going to see evictions and displacement because they are going to try to reclaim the land like a debt and we are not going to let them.”

[The names of the campesinos interviewed for this article have been changed to protect their identities.]

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