250 million Euros lost from fuel smuggling

Annual losses from fuel smuggling are estimated at 250 million Euros, a phenomenon that the government pledged to fight. However, this did not occur and new taxes of up to 500 million Euros were enforced in fuels, while making cuts and income from fighting smuggling are completely missing since there are no systematic checks.

This is a picture of a market where loaded pumps and activities of smuggling rings continue unabated since state mechanisms remain idle, according to representatives of the fuel sector.

Head of Greek fuel sales association, Roberto Karahannas, spoke about smuggling that potentially surpasses 250 million Euros and about recent findings of the Independent Authority of Public Revenue (AADE) that spotted smuggling in 10.1% of collected samples from fuel stations.

If we project this quantity to the market’s total 6,900,000 tonne consumption, there is a “grey” quantity of 697,000 tonnes. Given the fact that according to AADE, 89.5% of illegal samples is about customs violations, we are talking about the smuggling of 624,000 tonnes with profits for the rings ranging according to the tax of each type of fuel.

When, for example, they sell untaxed shipping oil as diesel, they claim 410 Euros/tonne, that is the tax enforced on diesel. When they sell untaxed shipping fuel as fuel oil, they claim 280 Euros/tonne. When the smuggling takes place through the selling of cheap fuel oil (280E/tonne) as more expensive diesel (410 Euros), then the benefit is 130 Euros/tonne.

This means that if all 624,000 tonnes were about mixing shipping oil with diesel, then smuggling reaches 256 million Euros. If they are about mixing fuel oil with diesel, then the profits reach 175 million Euros. If we subtract gasoline (2,333,000 tonnes last year) from final consumption since they are not usually used in mixing and we calculate smuggling on the 2,552,000 tonnes of diesel and the 1,172,000 tonnes of fuel oil sold last year, the number are lower. In this case, smuggling reaches 123 million Euros.

A radical change is expected in the market

“It is a shame that some choose to steal from the Greek consumer, who lives through hard times these last few years”, said Mr. Karahannas and he proposed measures such as the immediate punishing for adulteration or smuggling, with impeccable checks that will be carried out through the presence of a district attorney.

Moreover, he foresees a radical change in the fuel landscape through the enforcement of European directives for energy saving, the reduction of greenhouse emissions and the rise of renewables. “Whoever thinks that after five years they will survive just by selling diesel and gasoline is going to be disappointed”, the SEEPE chairman told ANA-MPA and he underlined that the members of the association want to be a part of the solution for the country’s energy transition and the achievement of set goals.

About the fuel sector, Mr. Karahannas repeated that during the last decade, it has shrunk by about 40% and remains stable in 2018, with tourism being the primary driver behind sales.

His entire interview for ANA-MPA follows:

About the violations, SEPEE said recently that “lately AADE’s actions have made progress, but there are still loose ends”. Where are the actions focused and what are the next steps you would like to see for cracking down on smuggling?

It is perhaps the first time we see an independent authority publish such detailed data about checks on fuel products and this is satisfying. Since we can see who made the checks, we realize that they are executed in many regions and by many services.

Now, about the system of controlling inflows and outflows, I have to say we are a little disappointed. The reason is that there were over 100 million of investments in 2014 by a sector that has lost 40% of its sales and after four years we see that it has not been completed. AADE said that it will be complete by the 31st of December, but today we are in October and we learn that there is no money to certify the systems. I have to say, without any grudge, that if you admit to such a level of violations and you need 1 million Euros to conclude a system that will help raise the public’s earnings, then that money needs to be found. I should remind that last year as part of SEEPE’s 40 year anniversary, we offered a van to conduct checks, under terms that had to do with the voting of laws that could make checks stricter. The van has not yet been received.

Our call is to get over with the inflow-outflow system, to conclude the installation of GPS in the fuel trucks and also to prohibit a truck to load taxed and untaxed fuel in the same route. Also, the inflow-outflow system must be installed in the liquid gas stations that currently are devoid of it and cash registries.

About the legal framework, the basic point is penalties and the way checks are conducted. Today, quantitative and qualitative checks belong to the energy ministry and the trade ministry, while the part about inflows-outflows belongs to AADE. However, we are talking about the same fuel station. Quick actions are needed by a task force that will be able to set immediate and specific penalties. A team with a district attorney must analyze samples and provide a final outcome.

You mentioned calculations according to which, public losses from fuel smuggling are between 123 and 255 million Euros annually. How do you reach these numbers? Also, much bigger sums have been heard, such as 2 billion. Where is the truth?

Each one of us can calculate according to AADE’s checks and their projecting them to the whole of the market. Our estimations may have been conservative because the ones that supply illegal fuel to the market have lower prices as a rule, therefore less circulation. On the other hand, statements about 2 billion are obviously over the top. However, the point for me is not whether the sum is 200, 300 or 500 million. The point is that we should not accept violations as a society. We have a consumer who wants to buy 50 liters and he gets 45 because of deficient deliveries. He pays 1.70 Euros for something that he once paid 1 Euro. He wants to buy diesel and he buys shipping fuel and the sulfur damages his/her engine. There are, unfortunately, people who are cold in the winter. The circumstances in our country during the last few years are such that it is a shame to steal from the Greek consumer.

The EU’s energy and environment policy leads to the transition of the Greek energy sector. What does this practically mean for the fuel market?

The EU has set three specific targets: Energy saving, rise of renewables and reduction of CO2 emissions. Especially in the transportation sector of Greece, the targets for 2020 is to save 200 ktoe, have renewables contribute by 14% (today it is 6.8%) and reduce CO2 emissions by 6% (1% today). The EU’s policy practically means reduced consumption because savings mean lower sales, while renewables and CO2 targets cannot be achieved without more electric cars or cars with CNG etc. Therefore, the fuel station will be transformed into an energy hub. Whoever thinks that after five years they will only sell diesel and gasoline and be able to survive, is wrong.

The law imposes savings targets to the suppliers. Is the 200 ktoe target realistic? And what are the consequences if you fail to achieve them?

Indeed, we must reach 200 ktoe by 2020 through measures realized by ourselves. If we do not achieve the goal, we must pay half a million Euros per ktoe, which means a penalty of 100 million Euros for the sector. I should remind you that IOBE recently conducted a study about our sector, according to which in 2016 all companies together made 7 million Euros. Obviously we are not against European directives. We want to be part of the solution, not the problem. However, the target is unattainable and this is why in June 2017 and May 2018 we appealed to the Supreme Court for the savings target and we hope to take the case to the European Court.

In order to realize the supply of energy products through fuel stations (natural gas, power) significant investment is required. How will they be financed?

As I described, oil products consumption is expected to drop in the next few years, at least in our country. And the EU targets will not be achieved unless someone pays and says that “in order to achieve the target we must have electric cars and CNG cars”. How will you develop the market with no infrastructure? So what we have to say it this: We want to help you get there, but you must help us transform to energy companies that survive not just through oil, but through energy. And if you help me install chargers and natural gas, then we will have the phenomenon of the chicken and the egg. Because today nobody feels comfortable buying an electric car if he has no place to charge it, nor a CNG car when there are not enough supply stations. There cannot be a market when the supply side is absent. Therefore, we say that it is better to have incentives rather than penalties, much less great penalties that the market cannot withstand.

The fuel market is stable if not dropping. How do you explain that since we have a rise in car sales and more tourism?

According to official data, in the first eight months we have a significant drop of 3.1% in the taxed corporate market. In gasoline, we have -1.2%, in diesel a rise of 4.3% and the rest (fuel oil, liquid gas, asphalt) -15.5%. In the taxed market, the greatest reduction is in fuel oil and it has dropped by 62% since 2008. In gasoline, a part of the drop is because of the turn towards diesel. In the untaxed market, plane and shipping fuels, we have a rise of 2.9%. The untaxed market holds a large part of tourism. We have a rise in “Eleutherios Venizelos” and the peripheral airports, in shipping and cruises, as well as the privatized harbors that turn into commercial hubs, where cargo ships are refueled.

When it comes to fuel consumption, latest technology cars are significantly more efficient than older ones they replace. Therefore, the change in car sales does not necessarily translate to a difference in fuel consumption. Through the same logic, the rise of tourism does not mean an equal rise in fuel consumption. I should remind that Greek islands only consume 16% of the total Greek market.

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