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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