Murphy's Law: The Gift That Keeps On Giving To The Wrong People

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January 2, 2015: Many countries with natural resources seek to get the most out of the oil or mineral wealth produced by establishing a state owned company to control these resources and funnel most of the income to the state. In most cases this does not work, mainly because of corruption and theft. The exceptions to this are in wealthier industrialized countries that have low corruption to begin with. But in less affluent nations, especially ones with a more entrenched tradition of corruption the presence of all that oil wealth does not work out as expected. Three current examples are Mexico, Indonesia and Nigeria. Although Mexico recently enacted reforms meant to make the state owned oil company more efficient that is not working out because that decision led to revelations that the state oil company was currently losing over half a billion dollars’ worth of oil a year to thieves who tap into the 35,000 kilometers of pipelines carrying crude oil and refined products. This is often done by bribing local police to not intervene and sometimes by cutting in local oil company workers in order to obtain some skilled help with the thefts.

Nigeria has the dubious distinction of being the oil-producing nation suffering from largest problem with theft of crude oil. Not only is this costing the government billion dollars a year in lost revenue, but much of the oil from the plundered pipelines (the thieves just punch a hole to steal the crude) flows into the Niger River delta waterways, polluting the delta and the fishing waters off the coast. In the last decade the government had hired former local rebels to provide pipeline security, but these lads appear to have gone into business with the oil thieves or joined the theft gangs themselves. In southern Nigeria the oil thefts have been going on for decades and because of government efforts (prompted by media and popular pressure) to curb the thefts the losses have increased. The navy was ordered to find and seize the small tankers that collect the crude oil from the thieves and take it to neighboring countries to be sold to brokers who will arrange for the stolen oil to enter legitimate commerce. Naval officers are suspected of taking bribes from tanker owners, who can afford to pay large sums to avoid seizure.

Oil companies believe about 150,000 barrels of oil a day are being stolen by thieves who tap into Nigerian oil pipelines. That’s several billion dollars a year in lost oil revenue. Most of what the government actually receives from oil production is stolen by politicians and civil servants, so people living in the oil producing regions see themselves as double victims. They don’t get much oil income because of all the theft and also suffer from the pollution the oil thieves cause when a hole is punched into a pipe.

In Mexico some police appear to have been corrupted by the oil theft gangs and now the government wants to use the military to do what the police could not handle. This was the same approach Nigeria used. But here there is always the risk that the military will be corrupted as well. This is what happened in Nigeria. Yet the police and military are not always corrupted by oil thieves in less affluent countries. Most Arab states avoid such damaging corruption by making sure all interested parties get paid well. That means local government officials and the local (to the oil production) population are rewarded with the understanding that everyone will do their part (even if it only means reporting criminal activity) to keep the oil production going without interruption or unnecessary loss. Arranging such a deal is not easy and some nations have managed to pull it off and some have not (and have suffered loss of state income and corruption and crippling of their security forces.

This ruinous corruption is always there no matter what the natural resources are. In Mexico even mining caused corruption and the diversion of large sums of money. This non-oil resource corruption in common throughout Africa and Asia as well. Natural resources are not always a blessing, not when they turn into something that makes gangsters and corrupt officials rich and finances all manner of disorder and widespread mayhem.

 

 


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