Oil smuggled from ISIS-held territories in Libya reaches Italy where it is refined and then resold into European energy markets for three times the price. This exposé was made by the Italian Finance Guard’s classified report dated February 2017 (special police center for currency issues).
The Italian Finance Guard took samples of oil from various Italian refineries and found that oil supplies from Libya and Syria far exceeded the amount of oil declared in official documents.
Annual loss in taxes worth two billion euros
According to Assopetroli, Italian Association of companies in the oil sector, the illegal oil market in Italy caused a loss as high as 2 billion euros in tax revenues in 2016, with over 10 billion liters of gasoline sold on the black market.
An illegal business of this magnitude can hardly survive without a very wide network of operators. Meanwhile, Italian oil giant Eni has reported cases to Italian authorities in which operators offered prices that were too low to be fair and where payment methods were unusual and possibly resulted from illegal activities. This is how ‘Dirty Oil’ investigation by the Attorney General of Catania, Sicily, began.
Last week, nine people were arrested, while 50 were under investigation as part of this probe. Italian officials and members of the Finance Guard believe that between 2015 and 2016 over 30 vessels loaded with 80,000 tons of illegal gasoline worth 30 million euros managed to reach Sicily from Libya. In fact, this seems to be the tip of the iceberg, as the network is much wider.
Daphne Caruana Galizia, a journalist who was working on exposing these oil smuggling networks in Libya, Malta and Italy, was recently killed in a car blast in Malta. Observers believe there could be a connection between the death of the journalist and the ‘Dirty Oil’ investigation.
According to a report published by the Presidential Council of the United Nations, “ships smuggling fuel sail south from Malta to between 40 and 60 nautical miles off the Libyan coast, where they turn off the Automated Identification System. After they are loaded, they return to Malta.”
The vessels remain adrift outside Maltese territorial waters, while they unload the fuel on to other vessels that carry it to the coast, the UN report states. In this way, other countries are believed to be benefiting from the smuggling of subsidized fuel.
Oil smuggling ISIS’s core business
It is believed that brokers in Italy and Malta falsify the necessary documents for cleaning up the smuggling operations. Libyan Attorney General has reportedly stated that almost four billion dollars-worth of gasoline and other subsidized goods are being smuggled annually. A gallon of Libyan gasoline is about eight cents, while just across the sea in Malta that same gallon can reach a price of six dollars (at 7,500 percent profit). In fact, smugglers do not even pay the initial eight cents as they steal it from production plants.
“Operators that don’t pay taxes or that buy smuggled oil can offer prices that are far below market prices and they manage to attract a huge demand” wrote Eni in a statement to Al Arabiya English. “Eni, as all honest and legal operators, suffers heavily in this unfair competition that reduces sales’ margins and volume” the oil giant explained.
ISIS’s core business is now the smuggling of oil. According to Italian Finance Guards, ISIS’s revenues from selling oil, close to the area of production, stands at around 20-35 dollars a barrel. Brokers can then resell it for 60-100 dollars a barrel. Considering the ISIS’s estimated business stands at 50,000 barrels a day, it monetarily amounts to over a million dollars a day.