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Oiling the wheels of war: smuggling becomes the real economy of Iraq
In his second dispatch from southern Iraq, Ghaith Abdul-Ahad investigates how illegal shipments fund militias and corrupt politicians
Saturday June 9, 2007
The Guardian
On the banks of the Shatt al-Arab in southern Iraq, a family business is thriving. For the Ashur, a small clan of about 50 families, it's worth several million dollars a week. Costs are steep, especially for security. But profits are tidy and business is booming.
The Ashur smuggle oil. For years under Saddam Hussein, they worked as mere guards at Abu Flus terminal at the mouth of the Gulf. But as the state collapsed after the US and British invasion in 2003 and economic anarchy set in, they took over the port and became the quasi-official authority there. Never have the family's fortunes flourished as in the last three years. They built their own underground oil tanks in their farms, where fuel tankers empty their cargoes to be pumped later into small pontoons. A cousin of the family estimates that they make about $5m (£2.5m) a week from smuggling oil.
When another tribe tried to take over the ports, the family hired gunmen from outside Basra to defend its fiefdom. "We were paying $250,000 every week for gunmen just to make sure that we keep our terminals and preserve our rights," said the cousin, Abu Harith.
The family operation is a dispiriting example of how large swaths of Iraq's economy and mineral wealth have vanished into a legal vacuum, where the state is absent, law enforcement is non-existent and the spoils are shared by politicians, militias and smuggler gangs.
To insulate their fortune, the clan uses the protection of Fadhila, the ruling party in Basra, which for more than a year ran the oil ministry in Baghdad. But it also takes care to have good relations with the rival Mahdi army.
Abu Harith described a typical operation: "I took a cleric with me, he was one of Moqtada's [al-Sadr, head of the Mahdi army] people, we ran into a police checkpoint, he rolled down the window and told the policeman 'we are on duty, from this car to the last car behind the tankers.' And that was it. We emptied the fuel into private underground tanks for the Ashur family.
"Moqtada's people are in control of Abu Flus port. You can't smuggle your diesel unless you pay them, and they collect a levy of up to $1,500 on each car before it can leave the port."
Contracts
Oil is not the only industry steeped in corruption. Businessmen in Basra say anything connected to the state requires payments to militias and parties. In construction, for example, Abu Harith said: "There are two deals with parties and militia; one, they give you the contract for a price but then you have to provide your own security; the other deal is that for a certain percentage of the contract they will provide you with gunmen. No other militia will attack you." In his last four contracts, he has paid $500,000 in bribes.
But oil is the biggest racket of all in a country with the world's second-largest reserves. Oil worth millions is being smuggled out of southern Iraq every day and sold on the black market. The proceeds fund militias, mobsters and corrupt politicians with cash that far outstrips the state's financial resources.
The smuggling also fuels factional fighting around Basra as each group tries to control its portion of the supply.
One tanker captain, who is in his second decade of oil smuggling and owns his own ship, told the Guardian how lucrative the trade could be. "The big profits are to be made in crude oil," he said. "You rent an oil tanker and after your first trip you can buy the tanker."
The infrastructure of smuggling was set up under Saddam in the late 1990s, during the UN sanctions, when illegal oil shipments became the main method of getting cash into the country. Smuggling was an officially condoned policy.
"We use the same methods we used during Saddam," said Ismail, a veteran smuggler. "Instead of Ba'athists and generals, it is now Shia militias and their cronies who are doing the business."
Several oil smugglers interviewed said the easiest and least profitable oil operations involved diesel and fuel oil. The oil is obtained from Iraqi refineries through official requests from politicians or by diverting fuel shipments for factories or fishing boats.
Another oil smuggler, Hussam, said these shipments were then emptied into small makeshift tanks in the Abu al-Khasib area, the deep river that leads to the Gulf. From there the oil is taken in small quantities to oil tankers at the mouth of the Gulf on al-Faw peninsula, which take it to refineries in Yemen, the United Arab Emirates or as far as India.
Much more lucrative and elaborate, however, is smuggling crude. This is most commonly stolen from the oil terminals, either by adding extra tonnes on top of the officially requested quantity or simply by providing fake paperwork for a phantom order.
The captain, who spe******es in crude smuggling, explained the process: "It depends on the officials manning the terminal when your tanker arrives. Usually it's a committee of three to four; they are all of one [political] party. Your contact with that party arranges everything in advance."
Once the tanker is filled, another official usually arrives - a surveyor hired by the government to inspect the cargo - who is bribed to pass everything off as legitimate. The route of the tanker then differs, depending on its papers.
The main risk is being stopped by patrolling US or British vessels. "If I have official papers then all is fine, even if I am carrying twice the stated shipment," said the captain. "When I don't have papers we cross into Iranian waters, we carry an Iranian flag and bribe the Iranian coastguard. It's a great business for them too. If we are arrested by the Iraqi navy, it's easy. They are involved in the party after all."
The price of the oil depends on how far the smugglers carry it towards deep water, where there is more risk of being caught. Each part of the business is controlled by militias and parties: from getting the oil out of refineries or terminals to getting it safely past the border guards and navy vessels. "You need someone to protect you," said the captain. "You need influence, otherwise you will be killed immediately."
Another Basra oil smuggler said: "When we transport oil on land in tankers we use official police cars to escort us - better to travel at night."
One former Iraqi oil industry insider said dealers made the biggest profits, while militias' took about 30%. "In each step and process of the oil industry in Iraq there is corruption, it's like a triangle: oilfields, depots and refineries.
"Oilfields in the south are under the control of Shia militias and their political parties, they smuggle crude oil through Basra directly. Some of the large depots are in Sunni heartlands, in Yusifiya and Baiji. Sunni insurgent groups, such as the Islamic Army in Yusifiya, take a cut in exchange for 'protection' - a bribe for not attacking the depots.
"Once the oil reaches refineries, we are back into Shia-controlled smuggling. Even when the petrol finally reaches the outlet, the Iraqis are paying extra to petrol station owners and by [doing] that benefiting corrupted militiamen."
