Russians and Chechens Collude in Oil Trade

Thursday, 10 October, 2002

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Umalt Dudayev

As dusk falls, thin fumes of smoke from illegal micro-oil refineries, dubbed "samovars" or "boilers" by the locals, spew up here and there on the outskirts of Dolinskoe near Grozny. A few hours later, the whole village is suffused in thick suffocating smog.

On October 3, Russia's military commander for the North Caucasus, General Vladimir Moltenskoi, was quoted as saying upwards of 300 such refineries had been eliminated in the previous four days.

Those in the know would question the credibility of such statements. With upwards of half a million tons of oil being illegally extracted in Chechnya each year, too much money it seems is being made for this lucrative but highly dangerous practice to be stopped.

"Illegal oil extraction and refining has become one of the most profitable businesses in Chechnya, and few are prepared to let go of it," said Khamid Isayev, an official with the republic's state-run oil refinery Grozneft. "The shadow industry has developed its own hierarchy of 'tycoons', 'barons' and regular workforce."

Local Chechens go further and say that, far from stamping down on the illegal trade, the Russian military and pro-Moscow police are actively colluding in it. In what is supposedly one of the most heavily policed and guarded regions in the world, every day long convoys of trucks carry the oil cargo out of the republic unimpeded.

"The military and the police actually facilitate the business," said a Chechen "oil refiner" named Adlan. "They provide security escorts for tankers, help us sell our petrol and render many other services. We have to split our profit equally with them. We've been 'boiling' oil not because we are criminals. We are just trying to survive in these horrible times."

The allegations made by a number of Chechens suggest that large numbers of security forces are involved, while the scale of the trade suggests that this is one strong - if little acknowledged -- reason why the Russian military is reluctant to pull out of Chechnya.

A makeshift micro-oil refinery is a very basic contraption, reminiscent of a moonshine kit, consisting of two vessels connected by a long pipe, which should, ideally, be water-cooled but never is. Oil is poured in the larger vessel, and a primitive burner is started underneath it. The natural gas for the burner is usually pilfered from a nearby gas pipe.

As the oil reaches a certain temperature, petrol vaporises and travels through the pipe into the smaller vessel, where it accumulates. The resultant cheap, inferior petrol with an octane number 50 or 55 is highly sought after both inside and outside Chechnya.

"The oil industry in Chechnya goes back to the 19th century," said Denilbek Zumaev, chief engineer at Grozneft. "One of its founders was Nobel himself. Upwards of 1,500 oil wells have been drilled in Chechnya. In Soviet times, Chechnya's oil industry was very powerful, producing millions of tons of quality oil that sold well in the international market. The output peaked in 1971 at 21 million tons a year."

After the fall of the Soviet Union, Chechnya's annual petroleum output dropped to five million tons. Oil theft was never a problem until after the 1994-1996 Chechen war, when the republic's warring factions divided up its wells and started up the micro-refineries.

The hubs of the micro-refinery industry became Dolinskoe, the neighbouring villages of Pervomaiskoe, Pobedinskoe, Goragorsk, Kalaus to the north, as well as the more distant Tsotsan-Yurt and Mesker-Yurt in eastern Chechnya.

Zumaev said Chechnya's petroleum industry has not improved much since. Last year, the republic officially generated some 700,000 tons of oil. At the same time, about as much - 500,000 to 600,000 tons - was produced illegally. This year, official output is targeted to reach 1.2 million tons, but continuing massive theft may interfere with these plans.

Oil workers told IWPR the republic's official petroleum sector is in crisis because of the flourishing illegal trade. Recurrent raids of underground refineries by Russian troops and Chechen police are, if anything, only a palliative. In fact, locals say, both frequently engage in extortion, demanding kickbacks in exchange for letting the shadow oil refiners continue their business.

In a typical raid, Russian military or local militia will sweep into a village where underground oil businesses are known to operate, blow up the refineries, destroy the makeshift tanker trucks and detain the "refiners", only to let them go a few hours later in exchange for a pay-off.

In late September and early October, there were a series of raids on Pervomaiskoe, Pobedinskoe and Dolinskoe, all near Grozny, supposedly to identify and destroy underground refineries. The locals, who have grown accustomed to the operations by now, took it in their stride.

"We've seen it all before," said Said-Hussain Magomadov, a truck-driver from Dolinskoe. "They swooped down on us like locusts, surrounded the village with their armoured vehicles, scared the women and children..burned down a couple of 'samovars' and cars, kicked up a lot of noise and left. What's the big idea? That's not going to stop oil theft. I've been driving oil trucks since 1997. What else is there to do? Got a family and my old parents to feed... There are no other jobs here."

A key reason the illegal oil trade continues to flourish is that it is virtually the only source of income for the residents of Grozny and most of the northern part of Chechnya.

In a recent interview published in Amerika magazine, the head of the Chechen government, Stanislav Ilyasov, admitted that the economy is in ruins, and there are no jobs. "How do you deal with people who have no other source of livelihood except stealing oil and making petrol illegally," he said, "We need to give them jobs, let them use the skills that they have to make money."

One way or another, the illegal oil business involves most sections of the population. "The system is very basic," a policeman in the southern village of Shatoi told IWPR. "A person with some money to invest and the right connections in the local military commander's office and law enforcement agencies sets up a 'samovar' and hires some workers, usually two or three, to operate this makeshift refinery.

"They don't get paid a lot for this nightmarishly hard work, only from 5,000 to 10,000 roubles (160 to 320 US dollars) a month. The lion's share goes to the owner. The military and the police get their share, too, usually 50 per cent. The police claim they are doing what they can to stop the illegal oil trade, but the truth is, too many people -- some of them very high-ranking -- have their fingers in the pie."

"If the business goes well, the owner of an underground micro-refinery will be able to afford a new domestic or a used imported truck in three to four weeks," a senior Chechen local official told IWPR. "That means big money. In just a month or a month and a half they make more than a regular worker makes in a year. Fighting the illegal oil trade is like Hercules fighting the Hydra. It grows two new heads to replace each one that's been cut off."

Two years ago, the pro-Moscow government in Grozny tried to pull the plug on illegal refineries, and not without some success. The gnarled carcasses of huge oil tanks on the outskirts of many Chechen flatland communities are a mute reminder of that well-intended effort.

The era of "gigantism" is long gone, muses Judaev. "Enormous tanks from 30 to 80 tons are too easy to find and destroy," he said. " Small tanks, which hold no more than two tons, are easy to hide in a ditch, the trees or your own backyard. It takes about an hour to assemble, and can be dismantled very quickly."

Rows of five to ten-litre tanks of "homemade" petrol and oil line the roadsides in all communities and even along major highways. These are the products of the underground refineries. According to vendors, soldiers and police are paid not to interfere. "Plus they can always fill the tank of their private or service car for free," said Razet Edilsultanova, who sells petrol on the Staropromyslovskaya highway. At a rock-bottom price of four to six roubles (about 12 to 18 cents) per litre, the temptation is hard to resist.

The roadside petrol-mongers sometimes get raided, too, but mostly by soldiers and police from other areas. In the worst case, they will arrest the vendor and seize the goods. However, the next morning you see the same people standing at exactly the same places, selling their wares to passing motorists.

"We are monitoring the situation very closely," said Vladimir Ivanov of the Chechen FSB (Federal Security Service) office. "We know there have been cases when our military, especially area commanders, allowed the locals to engage in illegal oil trade for bribes. Sometimes, soldiers would escort oil transports to the borders of Ingushetia, Stavropol Province and Dagestan, and help them get through the checkpoints. We are working on this now. Military and police servicemen engaging in or facilitating illegal oil business face tough punishment, including dismissal. We have reduced instances of this practice to a minimum."

Vitaly, a police officer manning a checkpoint in northern Chechnya, is less optimistic. "Oil transports cross the border all the time, as they always have," he said, "They usually drive early in the morning, before the traffic gets busy. Sometimes, we escort them for a thousand roubles a truck. That's pretty decent money."

Chechens believe if the civilian and military authorities set their mind to it, they could get rid of all underground oil refineries in a matter of weeks. "Do you really think they don't have the manpower and resources to wipe out all those 'Samovars?'" said Khava Temirsultanova from the village of Tsotsan-Yurt, who is staying with her friends in Pobedinskoe.

But the locals are in no doubt that the military has another vested interest in keeping the business going. They point out that, more often than not, in their notorious "mop-up" operations (or zachistki in Russian), Russian troops are deliberately targeting villages with micro-refineries, in order to extort more money.

"They want them up and running," said Temirsultanova. "They live off of them. They raid my home village, Tsotsan-Yurt, three times every month just because it is jam-packed with 'samovars'. The Russians take our men hostage, and demand a ransom of 3,000 to 5,000 roubles per person. 'You guys are gorging on Russian oil here,' they tell us, 'and never pay a penny in tax. So we'll take your men.'"

Most Chechens do not deny that oil theft and underground trade is a crime deserving the most severe punishment, and doing severe damage to both human health and the environment. Thick smog hangs over Chechen communities at all times. After downpours, the ground is covered with oily blotches, and the water in the rivers is no longer safe to drink.

"The environmental situation was already critical in Chechnya before the first war," said Fatima Kovraeva, head of the NGO Ecofront. " Today, Chechnya is a veritable environmental disaster zone. The underground mini-refineries alone are responsible for tonnes of aerial pollution daily. We are killing ourselves, and everyone seems to think nothing of it."

Umalt Dudayev is the pseudonym of a Chechen journalist