Pubdate: Sun, 13 2009
Source: Washington Post (DC)
Page: A01, Front Page
Contact:  2009 The Washington Post Company
Website: http://www.washingtonpost.com/
Details: http://www.mapinc.org/media/491
Authors: Steve Fainaru and William Booth, Washington Post Foreign Service

MEXICO'S DRUG CARTELS SIPHON LIQUID GOLD

Bold Theft of $1 Billion in Oil, Resold in U.S., Has Dealt a Major 
Blow to the Treasury

MALTRATA, MEXICO -- Drug traffickers employing high-tech drills, 
miles of rubber hose and a fleet of stolen tanker trucks have 
siphoned more than $1 billion worth of oil from Mexico's pipelines 
over the past two years, in a vast and audacious conspiracy that is 
bleeding the national treasury, according to U.S. and Mexican law 
enforcement officials and the state-run oil company.

Using sophisticated smuggling networks, the traffickers have 
transported a portion of the pilfered petroleum across the border to 
sell to U.S. companies, some of which knew that it was stolen, 
according to court documents and interviews with American officials 
involved in an expanding investigation of oil services firms in Texas.

The widespread theft of Mexico's most vital national resource by 
criminal organizations represents a costly new front in President 
Felipe Calderon's war against the drug cartels, and it shows how the 
traffickers are rapidly evolving from traditional narcotics smuggling 
to activities as diverse as oil theft, transport and sales.

Oil theft has been a persistent problem for the state-run Petroleos 
Mexicanos, or Pemex, but the robbery increased sharply after Calderon 
launched his war against the cartels shortly after taking office in 
December 2006. The drug war has claimed more than 16,000 lives and 
has led the cartels, which rely on drug trafficking for most of their 
revenue, to branch out into other illegal activities.

Authorities said they have traced much of the oil rustling to the 
Zetas, a criminal organization founded by former military commandos. 
Although the Zetas initially served as a protection arm of the 
powerful Gulf cartel, they now call their own shots and dominate 
criminal enterprise in the oil-rich states of Veracruz and Tamaulipas.

"The Zetas are a parallel government," said Eduardo Mendoza Arellano, 
a federal lawmaker who heads a national committee on energy. "They 
practically own vast stretches of the pipelines, from the highway to 
the very door of the oil companies."

The Zetas earn millions of dollars by "taxing" the oil pipelines -- 
organizing the theft themselves or taking a cut from anyone who does 
the stealing, according to Mexican authorities. The U.S. Treasury 
Department this summer designated two Zeta commanders as narcotics 
"kingpins," which allows authorities to seize assets.

The Zetas often work with former Pemex employees, according to Ramon 
Pequeno Garcia, chief of anti-drug operations at Mexico's Public 
Security Ministry. The former employees "are highly skilled people 
who have the technical knowledge to extract oil from the pipelines. 
They are now under the control of the Zetas," Pequeno said.

Across the Border

This year, executives of four Texas companies pleaded guilty to 
felony charges of conspiring to receive and sell millions of dollars 
worth of stolen petroleum condensate. U.S. law enforcement officials 
said in interviews that they have no evidence showing that the men 
were connected to drug traffickers.

During his September arraignment in Houston, Arnoldo Maldonado, 
president of Y Gas & Oil, pleaded guilty to receiving about $327,000 
to coordinate at least three deliveries of tankers filled with stolen 
condensate to another Texas company, Continental Fuels, according to 
a court transcript of the hearing.

Asked by U.S. District Judge Ewing Werlein Jr. how the condensate had 
been stolen from Pemex, Maldonado replied: "I have no idea on that, sir."

Donald Schroeder, a former president of Houston-based Trammo 
Petroleum, pleaded guilty in May to buying $2 million worth of stolen 
Mexican condensate, according to a transcript of the hearing. 
Schroeder re-sold the condensate to another company, BASF, for a 
$150,000 profit, prosecutors told the court.

A spokesman for BASF, which has not been implicated in the case, said 
the company was unaware that the material was stolen and is 
cooperating with the investigation.

In August, U.S. authorities presented the Mexican government with an 
oversize check for $2.4 million as a repayment.
A sophisticated operation

Pemex reported losing $715 million worth of oil to theft last year. 
The company said it discovered 396 clandestine taps. This year, Pemex 
projects it will lose at least $350 million to oil pilfering. Nearly 
half of the thefts occur in the rugged hills around Veracruz, a 
largely rural state situated in a region with 2,136 miles of pipeline 
running from the Gulf of Mexico to refineries in other parts of the country.

To steal the oil, Mexican authorities said, thieves sometimes use 
safe houses from where they build extensive tunnel networks leading 
to the pipelines. They fabricate powerful drills that enable them to 
puncture the highly pressurized steel pipes and extract the oil 
without causing spills or suspicious drops in pressure. Pemex 
officials said they have found clandestine taps with as many as five spigots.

In Maltrata, in central Veracruz, Pemex officials showed a reporter a 
four-foot-deep, six-foot-wide trench ringed by yellow police tape 
that they said had been dug by thieves to reach an underground 
pipeline in a clearing near a federal highway last month.

After perforating the exposed two-foot pipeline using a hand-tooled 
drill and connecting valves to regulate the pressure, the officials 
said, the traffickers ran a 300-yard hose through the brush to a 
tanker and filled it with about 200 barrels of crude oil.

"They are very sophisticated -- in some cases, it's three kilometers 
from the pipeline to the tanker where they deposit the oil," said 
Mauro Caceres, who oversees the pipeline network in the region. "It 
is just constant. They take, and they take, and they take, and they take."

Pemex lost 140,141 barrels of oil to theft last month in the Veracruz 
region alone, the company reported. At $75 a barrel, the current 
market price for Mexican oil, the loss comes to $10 million. The 
company reports that oil rustlers are stealing from the pipelines in 
all 31 Mexican states.

Defending the Pipelines

"When they steal this oil, it's not just a regular crime," said 
Mendoza, the federal deputy. "It becomes a crime against society, 
because the people who steal this oil the next day are using it to 
kidnap us. Tomorrow, with that oil money, they are shipping drugs."

The theft is both a symbolic and financial blow to the Mexican 
government. Taxes paid by Pemex account for 40 percent of the federal 
budget. Pemex still owns and operates almost every gas station in 
Mexico. Juan Jose Suarez, Pemex's chief executive officer, said in an 
interview at the company's headquarters in Mexico City that the oil 
theft is a crime against all Mexican citizens: "This is not taking 
from Pemex; it's taking from the owners of Pemex. This is the net 
worth of everybody."

Mexico has launched an all-out campaign to defend the pipelines, 
drawing in the army, the attorney general's office, the Interior 
Ministry and the customs service. During the past two years, the 
government has conducted helicopter overflights, installed electronic 
detection devices inside the pipelines and beefed up Pemex's private 
security force.

Suarez estimates that Pemex will spend hundreds of millions of 
dollars over the next three years defending its pipelines. With the 
company's maintenance staff overwhelmed, Pemex assembled 20-man teams 
this year to repair breaches caused by theft.

"The teams are working day and night," Caceres said.

Pemex sent out a call for help to the federal government in 2007. In 
June that year, Mexican customs officials informed U.S. Immigration 
and Customs Enforcement (ICE) that they had discovered dozens of 
Mexican companies that appeared to be conspiring with U.S. firms to 
export stolen petroleum products across the border.

Working closely with the Mexican customs service, ICE investigators 
said, they soon uncovered a network of Mexican and American companies 
that shipped stolen oil to the United States in tankers, stored it in 
aboveground containers in Texas and then shipped it in barges to end 
users in the United States.

With oil prices then at record highs, the scheme allowed U.S. 
companies to buy petroleum products at below-market value. The scam 
involved hundreds of people, according to Jerry Robinette, special 
agent in charge of the ICE office of investigations in San Antonio, 
which is overseeing the probe.

"The folks that made the most amount of money are the people who are 
going to harm us the most, and that was the organized crime in 
Mexico," Robinette said.
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MAP posted-by: Richard Lake