According to a 2005 report from the Turkish parliament, approximately 3.75 billion liters (or 1 billion gallons) of smuggled oil enter Turkey every year. [1] This volume makes up 18 percent of the national oil market; the smuggling costs the state $3 billion in lost tax revenue. Oil smuggling is a lucrative and sustainable business in Turkey because of the official fuel price, which, due to high tax rates, is one of the steepest in the world at $2.50 per liter. Up to 70 percent of this price goes to state taxes. The Turkish state levies two kinds of taxes on oil products: an 18 percent sales tax and a fixed special consumption tax. Today, the latter tax corresponds to 44 percent of the gasoline price and 34 percent of the diesel fuel price. The extremely expensive gasoline resulting from this taxation forces Turkish consumers to rely on the black market.

Turkey’s proximity to oil-producing countries also contributes to the scale of the smuggling. Its oil-producing neighbors, Iran, Iraq, Azerbaijan and Syria, supply petroleum products to their own national markets at remarkably low prices. The cheap oil rolls by the barrel over the borders into Turkey. According to the 2005 parliamentary report, however, an even greater amount of smuggled oil enters Turkey by sea. And then there is bunkering, the practice of illegal siphoning oil out of the pipelines crossing through the landscape. Black-market oil is sold in Turkey by informal roadside vendors, but also by official gas stations, which usually mix the smuggled or bunkered liquids in with fuel obtained through legal channels.

The illegal oil trade networks operate through cross-border connections of family, tribe, ethnicity and religion, as well as pure business. Along Turkey’s eastern borders, Kurds feel an alternative national affinity with Kurds in Iran and Iraq. Similarly, Azeris in the region adjoining the Azerbaijani autonomous Republic of Nahkchivan mobilize their ethnic and religious (Shi‘i Muslim) connections in operating cross-border trade networks. Although oil smuggling and trading in smuggled oil are illegal, these activities are not necessarily seen as illegitimate or illicit in many locales, where the population accepts them as an ordinary part of the economy.

In the eastern and southeastern borderlands, illegal oil economies have in fact become routine in the wake of the social, economic and environmental damage wrought by three decades of armed conflict between the Turkish army and Kurdish rebels. In this border region, the fighting has brought intensive militarization — military bases, checkpoints and temporary security zones — as well as village evacuations and the forced displacement of millions of people. These conditions have devastated the region’s formal economy, encouraging locals to subsist by smuggling oil across borders. War also explains why the population perceives smuggling as a licit enterprise. What renders oil smuggled is the evasion of state taxes; the locals do not see an ethical problem in withholding taxes from a state that does not uphold its citizens’ right to life or supply basic social services like education and health care. Oil smuggling and illegal oil trading, in other words, have been symbolically reframed as means of protest and resistance to Turkish state authority.

Pipelines on Wheels

“Pipeline on wheels” is an expression first used to describe the oil trade conducted by long-distance truckers moving across international borders. The first highly remunerative pipeline on wheels developed between Turkey and the Iraqi Kurdish region during the 1990s. Following the 1991 Gulf war, a Kurdish territorial and government entity emerged in northern Iraq. Suffering from a double embargo — the trade sanctions imposed by the UN and the regional closure imposed by Baghdad — the Kurdish areas relied on international humanitarian aid delivered from Turkey via the Ibrahim Khalil or Habur border gate, near the city of Zakho on the Iraqi side. The truckers who carried in the aid began putting extra diesel in their tanks for the return trip to Turkey, where they sold the excess fuel in violation of the UN sanctions regime. They subsequently upped the amount of oil entering Turkey by replacing their regular gas tanks with oversized ones. Turkish officials occasionally attempted to rein in the illicit trade, but they never completely stopped it. In fact, the Turkish state regulated — and thus legalized — the smuggling by imposing limits on the amount of oil that a truck or tractor-trailer could carry across borders and taxing the oil. The authorities first mandated that truckers use standard fiberglass fuel tanks placed in their flatbeds, instead of extra or oversized tanks made of sheet metal, which is opaque and resistant to X-ray inspection. In 2000, the state permitted a regular truck to import 5,000 liters of diesel oil per trip from Iraq, while a tractor-trailer could bring in 10,000 liters. Truckers were required to sell all the fuel in their fiberglass tanks to the Turkish Petroleum International Company (TPIC), a state-owned enterprise that would tax, process and then sell the fuel, thus circumventing the UN sanctions. The Turkish authorities erected what is called a border trade regime, a special system that facilitates commerce in particular goods between two borderlands. Under Turkish trade law, the goods imported under a border trade regime must be distributed and consumed in the border region — and nowhere else in the country. TPIC, however, distributed the imported Iraqi fuel nationwide.

Following the 2003 invasion of Iraq by the US and its “coalition of the willing,” a new pipeline on wheels began operating between Turkey and the Iraqi Kurdish region. Post-invasion Iraq suffered from a shortage of refined oil, due to wartime damage to water and electricity networks powering its refineries, as well as frequent sabotage and theft from oil facilities. The short-term solution was to export crude oil to Turkey, Syria, Iran and Kuwait, where it could be refined and sent overland back into Iraq. In place of cargo trucks and tractor-trailers with oversized gasoline tanks, this second pipeline on wheels is composed of regular tanker trucks. The new traffic creates new avenues for smuggling and fraud. Common strategies include replacing the refined oil inside tanker trucks with water or pretending that a tanker truck was involved in an accident in which the refined oil was lost. Transport of crude and refined oil back and forth between Turkey and Iraq continues today.

The shortage of refined oil in Iraq has also led to the emergence of new actors in the cross-border illegal oil market. Since 2005, unlicensed local oil refineries have mushroomed throughout the zone controlled by the Kurdistan Regional Government (KRG), where the central government in Baghdad had never built a refinery. The machinery for these makeshift facilities is imported from Turkey via the Habur gate under the label of cooking oil refinery equipment. In fact, it is modified cooking oil refining equipment: The vessels in the local refineries are fortified to be resistant to temperatures of up to 300 degrees Celsius (572 degrees Fahrenheit), allowing diesel fuel to be refined from the crude. Beginning in 2005, the KRG also contracted with a number of international companies to build industrial-scale refineries, and the Khabat and Baziyan facilities have come on line, so several of the local refineries have been closed down. But for several years they helped to fill the gap in the KRG provinces’ supply of refined oil.

The old Iraq-Turkey pipeline on wheels has shrunk significantly in scope since 2004. Due to the shortage of refined oil, diesel prices in Iraq shot up, reducing the profit margin for truckers headed back to Turkey. Additionally, in 2004, Turkish authorities ended the special regime of oil export in the tanks of regular trucks, limited tank sizes and returned to standard regulations. The logic of the government’s moves is not totally clear, since amendments to the special trade regime were made by secret decree to preempt conflict with the UN. As stated in the 2005 parliamentary report on smuggling, the Turkish-Iraqi trade regime was first created in 1992 as a form of compensation to the borderland population for their economic losses during the 1991 Gulf war and the crimping of formal trade by UN sanctions. Termination of the special trade regime is thus perhaps linked to the removal of UN sanctions on Iraq in 2003. As dictated by the standard regulations, a regular truck can now carry 400 liters and a tractor-trailer up to 550 liters of fuel across the Turkish border. Customs agents confiscate any additional fuel. Yet the trade continues: Every day, thousands of cargo vehicles — 101,368 tractor-trailers, trucks and pickups in August 2011, according to the Ministry of Customs and Trade — pass through the Habur gate into booming Iraqi Kurdistan, which is physically safer than the rest of Iraq. Most of the trucks and tractor-trailers are registered to local companies or individuals operating without insurance, since national and international transportation companies are reluctant to pay high insurance costs or to operate in Iraq without insurance. On each return trip to Turkey, the local truckers carry back a few hundred liters of diesel, which is then sold on the black market. To boost carrying capacity, some operators have turned regular trucks into tractor-trailers by cutting one axletree and attaching a trailer in back. Nevertheless, the profit margins along this route are markedly smaller than in the era before 2003.

Another pipeline on wheels has run between Turkey and the Azerbaijani autonomous Republic of Nakhchivan since the 1990s. (Nakhchivan is a majority-Azeri exclave internationally recognized as part of Azerbaijan. The territory is bordered by Armenia to the north and east and Iran to the south and west, but it also shares a sliver of boundary with Turkey.) As at the Iraqi border, the Turkish state allowed oil imports in oversized gasoline tanks under a border trade regime regulating the Nakhchivani-Turkish border gate at Iğdır. Trucks, tractor-trailers, passenger buses, international taxis and private cars ferried extra gasoline or diesel fuel from Nakhchivan to Turkey. For a fee, the Iğdır governorate used to issue a document called a mazot kartı (literally, diesel fuel card) permitting truckers to carry up to 5,000 liters of diesel per trip. As with Iraq, however, this special trade regime was ended in 2004. Again, the government’s logic was unclear — and reintroduction of the trade regime still comes up as an election campaign promise. Today, Turkish and Azerbaijani trucks, passenger buses and taxis cross the border with few hundred liters of Azerbaijani fuel to sell on the Turkish black market. According to the Ministry of Customs and Trade, 22,148 vehicles made the passage in August 2011.

Similar arbitrage economies operate at the Turkish border gates with Iran, Georgia and Syria. It is mainly Iranian truckers who run the pipeline on wheels from their country, since their Turkish counterparts are subject to extra entry and transit taxes on the Iranian side. The scope of smuggling between Turkey and Syria has narrowed due to tightened inspections on the Syrian side. In 2011, the Turkish media has reported cases in which Syrian customs officers confiscated fuel and other goods from Turkish truckers and taxi drivers; reporters linked these cases to inter-government tensions amidst the popular uprising against the Syrian regime.

By Land, By Sea

Refined oil is also smuggled into Turkey inside barrels borne by mules and horses over the mountains on the Iranian border. This brand of smuggling is common in the districts of Van and Hakkari, which make up the majority of the Turkish-Iranian boundary. The smuggling occurs in two main phases: First, packs of mules or teams of horses lug the barrels through the mountains and unload them in mountain villages. Each animal carries two to four 70-liter (18-gallon) barrels. Trained mules can traverse the border by themselves without an attendant.

Smugglers can cross easily as well — there are no walls, fences or minefields. They may, however, attract the hostile notice of Turkish or Iranian border patrols, both of which may shoot and kill smugglers and their pack animals. Although such incidents are mentioned only occasionally in the national media, local media coverage reveals that there are multiple killings of people and animals in these borderlands every month. In April 2011, a court directed the Turkish National Security Ministry to pay compensation for the 2005 death of a smuggler at the hands of the border patrol. In most cases, however, Turkish courts side with the state, since the incidents occur in military zones where security forces reserve the right to use live fire, though not necessarily the right to kill.

Mortal peril has scarcely interrupted this illicit oil trade. According to a 2010 parliamentary report on human rights, mountain villagers raise more than 35,000 mules and horses for use in oil smuggling. The report records that, between January 2009 and April 2010, 301 Turkish citizens and 62 non-citizens were caught in the borderlands and referred to the courts on allegations of smuggling. There were 37 killings and 18 incidents of injury in the same period. In conjunction with the arrests, 895,523 liters of smuggled oil was confiscated in this area in 2009. [2] Although there is no reliable measure of the full scope of oil smuggling in this area, the 2005 parliamentary report estimated that every year 300 million liters of smuggled oil enter Turkey across this border.

In the second phase, the smuggled oil is transferred from the mountain villages into cities by road. The trucks and cars that carry it, however, must pass through a number of checkpoints set up by the Turkish gendarmerie, a branch of the armed forces that often assumes law enforcement tasks in places outside the domain of the regular National Police, such as rural areas. Since these vehicles do not cross national borders, they are not supposed to undergo customs inspections, but drivers can still be asked to document the origins of the fuel in their gasoline tanks. Drivers often escape unmolested, due to the difficulty of identifying smuggled oil when it is mixed with regular oil, along with fraudulent papers. Between 2002 and 2006, in fact, the gendarmerie occasionally overlooked illicit oil carried by road. In 2006, a motor company that equips its trucks with oversized (600- and 900-liter) gas tanks managed to sell more than 6,000 vehicles in the city of Van alone. But since then, with publication of the 2005 parliamentary report and increased media attention, controls have been tightened and strict limits imposed on trucks and cars traveling around the villages.

Though trucks and pack animals have received the most press, the largest amounts of smuggled oil arrive in Turkey by sea. There are three basic methods: The first is illicit trading of marine diesel fuel for the variety of diesel used in automotive vehicles. Since Turkey gives a special fuel tax subvention to seaborne shipping companies, the market price of marine diesel is lower than the price of regular diesel. This price gap sustains private vendors who swap marine diesel bought cheaply in Turkey for the regular fuel coming from abroad. The second, more profitable method of seaborne smuggling is unofficial unloading of oil carried by tanker ships. Large quantities of oil run in tankers between refinery ports in Izmit, Izmir and Mersin. Privately operated tankers may disgorge a portion of their cargo clandestinely at an intermediate port instead of at the official destination. Before proceeding to their final port, these tankers replace their missing oil with purchases of petroleum products from Georgia, Ukraine, Bulgaria or Romania that are sitting in other tankers or ordinary ships anchored offshore. A third and also lucrative practice is that small Turkish vessels buy oil products directly from the ships bringing them in illegally from other countries. These boats then secrete the oil products on shore.

Bunkering and Mixing

In addition to smuggling, the illegal oil trade in Turkey is sustained by bunkering and theft from pipelines. There are two means by which oil is bunkered. By the first and simplest, a pipeline is tapped at one site and the oil is sucked away into a bunker where it can be stored for later sale. But this method is unsustainable, as pressure-measuring cables run inside the pipelines to alert officials to leaks or illicit taps. By the second method, a pipeline is tapped in two different spots. While oil is removed at one location, air or water is pumped in at the second, allowing the oil to be bunkered without detection by the pressure-measuring cables. While this method is sustainable, it requires a more sophisticated and bulky technical setup that must be concealed inside a house. Hence, such tapping mostly occurs in urban centers built atop pipelines.

As the seat of the leading oil production region in Turkey, the southeastern city of Batman has emerged as a primary site of illegal oil bunkering. The municipal administration of Batman was established in 1991. In the early 1990s, the city center resembled a giant oil production site, replete with storage tanks, oil refiners and networks of pipelines, as well as apartment blocks hosting oil company engineers, workers and officials. With the rise of armed conflict between the Turkish army and Kurdish guerrillas, however, the surrounding countryside has been militarized, its villages evacuated and their population expelled. Tens of thousands of forcibly displaced people have made their way to the urban centers in the region and beyond, including the big cities in the west of the country. To accommodate the flow of internally displaced persons in the mid- to late 1990s, the residential areas of Batman expanded haphazardly. Today, most of the pipeline networks around Batman run underneath neighborhoods built in the last two decades. Although the illegal oil bunkering methods were first developed there, they are now used elsewhere—from the central Anatolian city of Konya to Istanbul itself.

In Turkey, there are two types of oil pipeline networks: those carrying crude oil and those bearing refined products like kerosene or jet fuel. Illegal oil traders tap both. In fact, the illegal oil refinery technology later sent into Iraq Kurdistan — the modified cooking oil equipment — was first developed and deployed in order to refine crude oil stolen from pipelines. To avoid the hard work and dangers of refining crude, illegal oil traders prefer to bunker jet fuel. Jet fuel can either be mixed with diesel or used on its own to power diesel engines. Illegal oil traders mainly steal from the “NATO oil pipeline,” an auxiliary pipeline network constructed during the Cold War to carry kerosene and aircraft fuel to military and civilian airfields.

Another channel for the illegal oil trade is fraud in oil trading. Fraud is perpetrated by mixing gasoline or diesel fuel with cheaper petroleum products such as motor oil, heating oil and solvent chemicals. These products are imported legally, but, due to lower tax rates, they are significantly less expensive than gasoline or diesel. According to an annual report published by PETDER, the Turkish Petroleum Industry Association, 800,000 tons of motor oil was imported in 2010 over and above the market demand of 416,000 tons. [3] One type of motor oil — number 10 — has appeared widely in the market as a substitute and supplement for diesel fuel. In February 2011, the Energy Market Regulatory Agency (EMRA) issued a regulation that characterizes the mixing of number 10 with diesel as a form of oil smuggling. While diesel costs $2.10 per liter, until recently, a liter of number 10 cost less than $1. To undermine the black market, in September, the Ministry of Finance increased the special consumption tax levied on number 10.

Anti-Smuggling Efforts

The attempts to police the number 10 trade are only some of the steps taken by Turkish authorities to reduce oil smuggling over the past decade. The authorities have become more serious about combating oil smuggling on a national level, for a number of reasons. With the increasing prices of crude oil in global markets, the extremely expensive national gas prices and growing black market in oil have attracted more attention in the Turkish media. Some media reports depict the black market in the eastern borderlands as an unfair economic advantage for those regions, emphasizing the plight of citizens living in the western part of the country who must spend significant portions of their paychecks on gasoline. These stories dovetail with the popular notion that illegal armed organizations like the Kurdistan Workers’ Party (PKK) profit from oil smuggling, either by engaging in it or by taxing it. The resulting discourse linking smuggling to “terrorism” has pushed the government to take a stronger anti-smuggling stance. The government has also received stern warnings from European states about the illicit traffic in drugs and human beings (smuggled and trafficked) across the permeable Turkish borders. Still another reason lies in the government’s latest cycle of neoliberal market reforms.

The Oil Market Law of 2003 authorized EMRA to govern oil market standards autonomously, as well as conduct market inspections. In 2004, EMRA, the National Police, the gendarmerie and the Ministry of Industry and Trade signed a protocol to establish a coordination mechanism and joint anti-smuggling measures. In 2007, a new anti-smuggling law was enacted. The new law dictates heavier punishments for illegal traders, but also offers informants providing details about oil smuggling cases up to 25 percent of the smuggled oil’s market value as a reward for their collaboration. Since January 2007, to overcome the difficulty of marking smuggled oil as distinct from the legally imported oil, EMRA has introduced the national oil marker. This substance is a chemical blend that is supposed to be mixed with oil products before they are sent to market. EMRA has started referring oil traders whose oil products fail the national marker analysis to the courts on charges of smuggling. Since July 2011, EMRA has also initiated a central monitoring system by installing electronic devices at each official gas station to record its stocks.

The amount of smuggled oil confiscated by the National Police doubled each year between 2008 and 2010: 3,754,089 liters in 2008, 7,652,838 in 2009 and 14,388,204 in 2010. [4] The gendarmerie carries out its own raids to capture smuggled oil, and its take is not counted in these figures. Considering that 3.75 billion liters of smuggled oil cross into Turkey every year, however, the success of these anti-smuggling efforts is debatable.

Each type of oil smuggling takes place in a different material and technological setting, involving various networks of family, tribe, ethnicity and religion that often view the lawfulness and ethics of smuggling very differently from the state. Some smugglers frame their enterprise as redistribution of wealth, supplying affordable oil products to the needy; others consider oil smuggling as the sole means of livelihood available to them. And strikingly, because it involves tax evasion, oil smuggling is regarded in certain circles as an act of civil disobedience to the Turkish state, which is not believed to serve its citizens.

Endnotes

[1] Parliamentary Research Commission on Oil Smuggling’s Damage to the Economy and to Human and Environmental Health (10/238), available online at: http://www.tbmm.gov.tr/sirasayi/donem22/yil01/ss978m.htm. [Turkish] [2] Activity Report of the Parliamentary Investigation Commission on Human Rights, October 2009-October 2010, accessible at: http://www.tbmm.gov.tr/komisyon/insanhaklari/rapor_donem23.htm. [Turkish] [3] Turkish Petroleum Industry Association, Sector Report 2010, available online at: http://www.petder.org.tr/default.asp?path=editor&id=7&sira_id=3&menu_id3=7&menu_id=3. [Turkish] [4] Ministry of Interior, Department of Anti-Smuggling and Organized Crime, Annual Report 2010, available at: http://www.kom.gov.tr/Tr/KonuDetay.asp?BKey=61&KKey=738. [Turkish]

How to cite this article:

Firat Bozcali "The Illegal Oil Trade Along Turkey’s Borders," Middle East Report 261 (Winter 2011).
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