OIL BELONGS TO THE PEOPLE… UNTIL IT’S SMUGGLED TO THE US

Fuel smuggling and adulteration in Mexico is known as huachicol, a practice which involves stealing gasoline, oil and diesel (primarily from the Mexican state oil company PEMEX) and re-selling it, often in a diluted form which damages cars, or smuggling it across the US-Mexico border. Onexpo, a business group representing Mexico’s gas industry, estimates that one in every three litres of gas sold in Mexico is derived from this practice, while Clúster Energético de Nuevo León, calculates that the illegal huachicol market reached a record of five million liters of fuel, gasoline and diesel daily, resulting in approximately 35 million pesos ($1.8m USD) in unpaid taxes for the Mexican state every day.

This Thursday, Mexico’s Secretariat of Security and Citizen Protection reported a seizure in Tobasco of more than 3 million liters of fuel, 18 vehicles, 3 pieces of machinery and 3,904 fuel containers were seized in an operation in Centro, Tabasco.

These are staggering figures and there are plenty of horror stories about domestic tapping and smuggling operations, like a January 2019 fuel-tapping operation in Tlahuelilpan, Hidalgo, which caused an explosion which killed 137 people, but as staggering as they are, they are just a small sample of the huachicol phenomen, which pales in comparison to smuggling operations of Mexican oil into the US, which, if properly investigated and prosecuted, could have unwelcome implications for a Trump administration in the US that likes to be seen as cracking down hard on “cartels.”

For example, just last month, two politically connected millionaires, James and Kelly Jensen, were arrested by US Marshalls in Utah for conspiracy to buy and smuggle more than 2,800 shipments of stolen Mexican oil into the US. The Jensens own Arroyo Terminals, a Texas company that buys and sells crude oil at a property just miles from the US border in Rio Hondo. As part of the arrest, the Jensens (and their son, Maxwell, a co-owner of Arroyo Terminals) were forced to forfeit their financial assets and property, totaling $300 million. In 2011, Mexican state oil company PEMEX had filed a lawsuit against James Jensen for stealing stolen natural gas condensate, although the lawsuit was dropped. It looks like the Jensens political connections paid off, as the U.S. Attorney’s Office for the Southern District of Texas decided to drop the case “in the interest of justice,” and refused to answer further questions.

This month, the US’ Financial Crimes Enforcement Network published an alert on the practice of oil smuggling, stating that complicit Mexican brokers “smuggle and sell crude oil stolen from Mexico’s state-owned energy company, PEMEX, to complicit, small U.S.-based oil and natural gas companies operating near the U.S. southwest border. Through
these schemes, the Cartels are stealing billions of dollars of crude oil from Pemex, fueling rampant violence and corruption across Mexico, and undercutting legitimate oil and natural gas companies in the United States.”

Amid this expansion of criminal investigations into fuel smuggling, multinational giant Shell has announced it was leaving the country, selling its Mexico operations to the Mexican company Iccon. While it still has to be approved by the Mexican government, the sale would include 47 Shell gas stations, 92 stations operated on the franchise model, and 11 convenience stores.

Is the US government and ruling class willing to undertake what US President Donald Trump pruports to demand: large-scale investigations of cross-border organized criminal activity, if following the leads implicates American businessmen, multinational corporations, and banks? If recent news is anything to go by, and practically the entire history of ‘the war on drugs’, not likely.