Financial Transparency Coalition

Emily Crowley discusses the disturbing link between petroleum and the drug war in Mexico.

Photo by Fábio Pinheiro

Stolen oil may play a role in arming cartels involved in Mexico’s worsening drug war. A recent article in Oil & Gas Journal reveals that in Mexico, nearly $1 billion worth of oil is siphoned off annually from Mexico’s nationally owned Petroleos Mexicanos (PEMEX). PEMEX is the world’s tenth largest oil company, with its profits contributing to nearly one third of the Mexican government’s budget. Oil is obtained illicitly by tapping in to pipelines using high-tech drills and siphoning techniques to avoid pressure drops which would register as leaks and lead to investigation.

Oil theft is employed as a source of income by the cartel known as Los Zetas and fits in well with that organization’s money laundering techniques. Drug sales operate on a cash-based system which requires drug dealers to find ways of laundering money so as not to raise suspicion. What better way to launder money than open a chain of gas stations which operate on cash-only transactions? Simply combine your drug profits with your gas station profits in your daily deposit and—no questions asked—your money comes out clean on the other side!

Los Zetas has expanded this gas-station based money laundering technique beyod cash, and they are now laundering petroleum products as well. Stolen gas can be purchased at Los Zetas controlled gas-stations, or it can be sold to oil purchasing companies at a discounted rate. In 2009, five Texas oil purchasing companies were charged with knowingly having purchased and sold stolen oil to manufacturers. Indeed, US based Continental Fuels of San Antonio received 22 tanker trucks of stolen fuel between January and March of 2009.

While $1 billion in stolen oil revenue is merely a drop in the barrel compared to the multi-billion dollar drug industry, it represents a significant portion of the Mexican government’s budget, which could be used to fight the drug war, but instead is going towards strengthening and arming drug cartels. When comparing the $1 billion lost in oil theft annually to the $1.6 billion granted to Mexico by the US over a three-year period under the Merida Initiative, it becomes apparent that there is an outflow of money from the Mexican government’s natural resource assets into the pockets of drug cartels. These profits allow drug cartels to purchase weapons, bribe officials, and further undermine the government of Mexico.

Few would dispute that oil is the cornerstone to both the developed and developing world, but is oil just fuel for growing economies, or does it have hidden sinister costs? The explosion of BP’s Deepwater Horizon this past April caused many individuals and policy makers across the world to think critically about how this natural resource is extracted, and the possible environmental damages that botched extraction may cause. However, the realities of this extractive industry go deeper than environmental damage, or the political and social ramifications illustrated above. All too often petroleum and other extractive natural resources fuel government corruption and bribery, keeping developing countries that are rich in natural resources mired in poverty.

Today, congress passed the Energy Security Through Transparency Ammendment (ESTTA) requiring extractive industries that report to the Securities Exchange Commission to make public their payments to governments of jurisdictions in which they operate on a country-by-country basis. The ESTTA will allow citizens to hold their governments accountable for payments received by major corporations which were previously not public knowledge. This represents a major breakthrough in the struggle for global financial transparency.