Lebanon is once again mired in a worsening energy crisis, after a fuel shortage forced the shutdown of the country’s main power plants. The situation was so serious that the state power grid actually failed for 24 hours before the army stepped in with enough fuel to temporarily restart supplies.
The nation’s two main power plants – Deir Ammar and Zahrani – ground to a halt as beleaguered state-run electricity producer Electricite du Liban (EDL) scrambled to restore power to affected areas and angry residents took to the streets in protest over the increasingly frequent blackouts and associated water shortages.
Anxiety among Lebanon’s 6.8 million residents remains high as homes, hospitals and other vital public services, experience daily power cuts and are forced to fall back on private generators for electricity. There are myriad causes of the current crisis, including decades of institutional cronyism, political corruption and hyperinflation, but its effects are also being exacerbated by rampant fuel smuggling across the region.
High gasoline prices in neighbouring Syria – where a perfect storm of prolonged conflict and widespread Western sanctions has led to ongoing fuel shortages in government-controlled areas – have made it an easy target for criminal gangs looking for easy gains. At first, buying highly subsidized fuel in Lebanon and then selling it on the Syrian black market made smuggling a highly profitable cross-border venture.
But with the Lebanese government scrapping the subsidies for petroleum products in August, leading to a 66 percent price hike, fuel theft is rampant and is only causing a deepening of the crisis. The situation is so extreme that valets are even rumoured to be siphoning gasoline from parked cars, all the while fuel is being desperately peddled in bags and plastic bottles.
It’s obvious that fuel smuggling represents a vicious cycle that is difficult to break, and it’s a global problem – from the MENA region to the heart of Africa and Asia, fuel smuggling is sapping tax revenues, enriching the coffers of organised crime groups, and degrading the environment along the way. An estimated $133 billion is lost to theft, adulteration, fraud, tax evasion and subsidy abuse every year, depriving governments of funds that could be invested in vital public services. It’s an especially destructive force in emerging economies which are often the worst hit by fuel fraud.
While some fuel is stolen directly from the service station pump, some is procured instead from wholesalers or taken in bulk from producers’ pipelines. Many deals involve fuel passed through local and regional groups – like those that flourish along the Maputo Corridor, linking South Africa, Swaziland and Mozambique – while others operate efficient, high-volume smuggling networks, moving fuel thousands of miles in tankers.
In Nigeria, for example, it’s estimated that 150,000 barrels a day are siphoned illegally from pipelines in the Niger Delta. For an increasing number of criminal networks, fuel theft represents a lucrative side hustle – an opportunistic expansion into a high-profit area with relatively low risk. For the same reason, it’s a venture that’s becoming increasingly commonplace among existing trafficking gangs in Mexico.
In light of this growing threat scenario, some countries have stepped on the offensive when it comes to undermine illegal fuel siphoning operations, and have subsequently seen notable success in cracking down on the illicit fuel trade by implementing comprehensive molecular fuel-marking programmes, in which a chemical marker is introduced into the fuel to trace it through the market. The Philippines, for example, have implemented such a system—a high-tech solution provided by Switzerland-based security expert SICPA—which has allowed Manila to uncover large quantities of illicit fuel and rack up hitherto lost tax revenues. In the two years since the fuel marking programme was instituted, Manila collected P299.27 billion in duties and taxes and has seized a number of illegal shipments.
Similar schemes have been successfully implemented in a number of African countries, including Mozambique, Tanzania and Uganda. In 2020, a report on fuel theft indicated that Mozambique’s ‘fuel integrity’ programme had prompted a 32 percent increase in fuel-related tax revenues in just six months, while in Tanzania, government revenues increased to USD 200 million between 2010 and 2013. Uganda, meanwhile, reduced fuel adulteration from more than 29 percent in 2008 to just 0.5 percent.
These countries’ successful initiatives offer a blueprint on how to crack down on the scourge of fuel smuggling on which Lebanon’s ongoing energy crisis has shone a global spotlight. The illicit fuel trade not only risks a nation’s financial stability and environmental credentials, but it represents an existential threat with potentially disastrous ramifications. The acute fuel and energy crisis in Lebanon – and the economic fallout that has followed in its wake – has once again highlighted the potentially devastating consequences of the illicit fuel trade. It should give governments around the world fresh motivation to take whatever measures are necessary to stamp it out for good.
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