Courtesy of Bloomberg, a report on the estimated $5 billion trade in smuggled fuel — much of it coming from Russia:
On a clear morning in September 2022, the Queen Majeda, a faded blue and white tanker loaded with marine gas oil worth more than $2 million, left the Libyan port of Benghazi and set off for Porto Romano in Albania, 600 nautical miles to the north.
Zuhair Alkuafi, the 55-year-old Libyan captain, treated the trip like previous ones he had made: He had a signed certificate showing that the fuel originated in Libya from Brega Petroleum Marketing Co., an arm of the country’s state-owned National Oil Corp.
Four days later, as the Queen Majeda entered Albanian waters, Alkuafi saw a small boat come into view, he later recounted. It was a coast guard vessel, and when an officer came aboard, Alkuafi offered him tea while he looked at the cargo documents. “He said there was no problem,” Alkuafi said. Then, a larger coast guard vessel came alongside. “That’s when I knew something was wrong.”
Albanian inspectors found that even the water tanks had been pumped full with thousands of gallons of gas oil. They also suspected that the documents showing the fuel originated in Libya were forged. One red flag: Brega handles fuel inside Libya, while the national oil company is the only entity authorized to import and export petroleum products in the conflict-ridden African nation.
Alkuafi was instructed to take the Queen Majeda to the port in Durres, where a line of police vehicles awaited. He and some of his 10 crew members were driven to a police station and charged with smuggling.
The intended recipient, Albanian prosecutors and crew members said, was Kastrati Group SH.A., an energy company that operates a network of gas stations across the country. It wasn’t charged. Nor was the ship’s owner, Nuri Eldawadi, a Libyan businessman whose Facebook profile shows him posing with foreign cars and yachts. His company, Eldawadi Shipping Ltd., operated the Queen Majeda out of Turkey until early 2022. It is now registered in the Marshall Islands, according to the International Maritime Organization database. In June 2022, he changed the ship’s flag from Libya to Cameroon, deemed a blacklisted registry by the maritime industry for its lack of oversight.
Kastrati confirmed in an email that it had received deliveries of marine gas oil from the Queen Majeda in July and August, contracted through a company in Dubai. But Kastrati said it didn’t have a purchase contract for the cargo the Queen Majeda was carrying at the time of its detainment. “Kastrati Group has conducted every business transaction with the utmost integrity and transparency,” a spokeswoman for the company said. Eldawadi didn’t respond to requests for comment.
The ship’s detention raised more questions about the alleged fuel smuggling than it answered: Who was behind it? How widespread was the theft? Why was it able to happen? Where did the fuel come from? And where was the money going?
It would take almost a year to answer those questions. But a Bloomberg News investigation based on shipping records and interviews with Libyan officials, people familiar with Libya’s oil business and members of the crew found that as much as 40% of the fuel being imported into the country under a government subsidy program — or about $5 billion a year — is leaking out through illicit trade. Much of that imported fuel is coming from Russia. And it’s being diverted to countries in Europe that have banned imports of those same products.
“The closure of European markets following Russia’s invasion of Ukraine and the ensuing Western sanctions drove a sharp uptick in exports for Russian refined petroleum to North Africa, a region with a scarcity of refineries,” said Charles Cater, director of investigations at the Sentry, a Washington-based nonprofit that recently reported on a surge in corruption and illicit activities in Libya and provided research assistance for this story. “This flood of petroleum imports is directly linked to Libya’s thriving fuel-smuggling operations.”
The port in Durres, Albania’s largest, was eerily quiet on a scorching hot Tuesday afternoon in July. The yellow and blue cranes that move containers were idle, and few workers could be seen in the heat radiating from the docks. At the eastern end of the port, the Queen Majeda was tied to Quay 2.
Ten months had passed since the ship was forced into port, and telltale streaks of rust marred its hull. A lone metal chair with a frayed nylon back sat on the foredeck. Closer to the bridge, where the ship’s officers would normally be found, a few t-shirts and towels hung from a jerry-rigged clothesline.
Alkuafi, the captain, had responded to questions over WhatsApp. He denied wrongdoing, saying it wasn’t his job to verify the paperwork. He said he had been hired in April 2022 on a five-month contract for $3,500 a month. “We are workers under a contract between us and the company,” Alkuafi said. “We are not the owners of the ship or the shipment. I don’t know why they are holding us.”
The captain had indicated he would be willing to talk more in person, but he had stopped returning messages in June and was nowhere to be found that afternoon in Durres. Instead, the ship’s chief officer, Emad Shaalah, emerged from a doorway at the top of a rusty gangway. He was reluctant to speak at first, saying he didn’t want to upset the ship’s owner, who he said was paying for a lawyer representing the crew.
But over the next few days he shared his despair. After six months in prison, he said, he and other crew members were allowed to return to the ship under house arrest. He missed his daughter, who was born just before he set sail from Benghazi and was approaching her first birthday.
An experienced seaman from Tripoli, Shaalah started working on the Queen Majeda in July 2022. He said the ship had made deliveries to Albania that July and August without incident and that he was surprised when it was detained in September. “It was all the same, same paperwork, same buyer,” he said. “We didn’t do anything wrong.”
Albanian investigators tell a different story. By the time of the Queen Majeda’s last voyage, they had intelligence suggesting that it was sailing with forged documents. They suspected that the fuel, had it entered Albania, would have been sold locally at gas stations and possibly re-exported to other countries, according to a law enforcement official who asked not to be identified because the case is ongoing.
Not far from where the Queen Majeda was docked is a two-story building with an Italian flag at the entrance. It’s an outpost of the Guardia di Finanza, a police force that investigates economic and financial crimes. Italian military personnel there work closely with Albania’s coast guard to monitor suspicious activity on the Adriatic Sea, which separates the two countries.
Over the years, the office has investigated drug and human trafficking. In 2022, officers began seeing another trend: Albanian fishing vessels engaged in ship-to-ship transfers at sea with boats getting deliveries of fuel smuggled out of Libya.
Libya, which has the largest oil reserves in Africa, has little refining capacity. So the national oil company imports fuel at market prices and sells it to citizens at a steep discount, practically giving it away as a social benefit, creating opportunities for smugglers to sell it at higher prices.
In January 2023, the Guardia di Finanza helped catch two fishing vessels, the Albanian-flagged Geni and a Libyan-flagged boat, transferring fuel using rubber tubes. All told, they have busted five fuel-smuggling operations since Russia invaded Ukraine, according to Lt. Col. Davide D’Aponte, who was in charge of the outpost in Durres until last month.
“The problem has become a very pronounced one since the Russian war,” D’Aponte said in an interview at his office overlooking the port. “In the past, it was a small-time crime, fishing boats, fishermen who profited directly. Now we are seeing an increase and internationalization of this phenomenon, with organized crime involved too.”
Ilir Malindi, a lawyer representing the owner of the Geni, said it’s a common practice for Albanian fishing vessels to go to Libya to buy subsidized fuel for about 25 cents a liter. He said almost every Albanian fishing vessel is retrofitted with extra storage capacity to bring aboard fuel. The owner of the Geni, who is Malindi’s son, has made several trips to Tripoli to sell fish and buy fuel to operate his boat, he said. He has pleaded not guilty to smuggling excise-paying goods. A trial date hasn’t been set.
The case of the Queen Majeda suggested something bigger. Albanian prosecutors didn’t say where the fuel had come from, but they allege it was illegally traded. The captain and three crew members face prison sentences of as much as 10 years. Six others were allowed to go home.
Shaalah and the crew members still on the ship were free to come and go as they pleased — an unusual arrangement given the severity of the charges. They used a bicycle to shop for groceries. But mostly they tended to the ship’s generators and other equipment. The Queen Majeda was still loaded with the fuel it never delivered, and they needed to make sure there were no leaks or fire hazards, as they were living with a potentially explosive cargo.
Alkuafi, the captain, had complained via WhatsApp that he and the crew were pawns caught in the middle of a power struggle between competing arms of Libya’s National Oil Corp. “They made me out like I am a mafia guy,” he said. “I could have heaved up anchor and run. If I had something to hide, I would have tried to escape.”
But Alkuafi did heave up anchor, according to prosecutors. He had left the ship one morning in late June and never came back. He hasn’t returned messages since then.
Khaled Shekshek, head of Libya’s audit bureau, the government’s financial watchdog, was one of the few officials willing to talk about fuel smuggling. He agreed to meet in September at a hotel in Tunis, the seaside capital of neighboring Tunisia, about an hour by air from Tripoli. Clean-shaven and wearing a gray suit, he arrived like a man on a mission, with three aides and a binder of documents he referenced during the interview.
Shekshek, who has headed the audit bureau for the past decade, has been on a campaign to stem the scourge of fuel smuggling. It has been an entrenched problem that has gotten worse since the collapse of Moammar Al Qaddafi’s regime in 2011, which led to an ongoing struggle among rival military factions, warlords and criminal networks.
In 2017, prosecutors in Italy and Malta uncovered an international crime network that smuggled diesel fuel to ships in Malta and eventually on to the European market. The case involved a former Maltese soccer star, an armed Libyan militia, an Italian shipping firm and the mafia, according to Italian prosecutors.
By May 2022, national oil company officials were noticing a pattern of contraband fuel trading from Libya to Turkey but were unable to stop it, according to documents seen by Bloomberg. In a May 10 memo to Libya’s attorney general, then-Chairman Sanalla singled out three vessels, including the Queen Majeda, for illegal fuel shipments and urged the prosecutor to take action.
Libya’s subsidized fuel program, which began under Qaddafi in the late 1970s, has metastasized in the past few years, according to Shekshek’s accounting. It jumped by more than 70% to 62 billion dinars ($12.8 billion) in fiscal 2022 from 36 billion dinars in 2021, he said. That was almost half the national budget, and was on track to be larger in 2023. As much as 40% of that — about $5 billion in 2022 — is being smuggled, according to audit bureau estimates Shekshek shared with Bloomberg.
A Libyan central bank estimate was even higher: It said that the leakage cost the country 30 billion dinars in 2022, or more than $6 billion.
Farhat Bengdara, chairman of the national oil company since July 2022, said in an emailed statement that fuel smuggling is a “huge problem” but that he couldn’t provide an estimate for the scale or value of the theft. He said the company has instructed Brega to install GPS tracking systems to help authorities investigate and has recommended the government reconsider its subsidy program.
Shekshek has called for replacing the subsidies with a lump-sum payment of $1,000 for families to meet their energy needs. “The fuel-subsidy policy as it’s currently applied is a waste of public money and depletion of state resources,” he said. “It spreads crime, inequity in the distribution of resources and undermines democracy.”
In a country with few strong institutions and dominated by militia and tribal allegiances, Shekshek has sought to hold those in power accountable. His audits have led to the suspension or ouster of dozens of officials for corruption, misuse of public funds and governance issues. And he has repeatedly criticized the central bank and the state oil company for their lack of transparency — allegations the bank and the oil company have publicly refuted.
He survived an effort to dismiss him in 2014. In 2017, he called for digitizing the subsidy program as a way of capping expenses. Libyan families would be given a preloaded charge card they could use to purchase fuel at subsidized prices at points of sale throughout the country. Once families used up their monthly allocations, they would be required to buy fuel at market rates. The proposal didn’t go anywhere.
Shekshek said the national oil company has a weak accounting system that’s not in accordance with international standards and doesn’t have a full view of what its subsidiaries are doing. He said Libya continues to import more refined fuel that never reaches the citizens the program was intended to help. And the country has done so even though the economy contracted by 1.2% in 2022, according to the World Bank.
So much fuel is being smuggled, he said, that in some southern and border areas, Libyans stand for hours in long lines to gas up their cars or buy fuel on the black market — at inflated prices. “A large number of citizens and families do not benefit, especially low-income people, which leads to the subsidy program losing its purpose,” Shekshek said. “The real beneficiaries of this subsidy are the owners of companies, factories and luxury cars, which results in an injustice in the distribution of state resources.”
The only activity that accounts for the rise in imports, he said, is the rise in smuggling.
The smuggling can jolt global markets. In January, protests at the Sharara oil field sparked in part by fuel shortages forced the national oil company to shut the facility for three weeks. The closure of the country’s largest oil field, which can produce about 300,000 barrels a day, helped push up crude prices more than 3% that week.
The siphoning of Libyan fuel cost the country about $750 million in 2018, according to then-chairman of the national oil company, Mustafa Sanalla, who didn’t respond to requests for comment. In 2021, when the government refused to allocate more money for subsidized fuel, he implemented a program in which unprocessed Libyan crude could be exchanged for fuel from foreign energy companies. The buyer of the crude would cover any price difference.
The crude-for-fuel swap, which has been used by other countries, made it simpler to procure products without the use of hard currency and the scrutiny of the central bank or other government institutions. It also made it easier for money to go missing. Shekshek found a $9 billion discrepancy between what the government said it spent on the import of hydrocarbons, including fuel for the subsidy program, and the actual expenditure.
“This crucial change in how Libya procures its fuel has facilitated the vast increase in imports,” said the Sentry’s Cater. “This surplus is diverted by illicit Libyan actors who sell the fuel in the black economy inside and outside of Libya.”
Smugglers capitalize on the price difference between the subsidized fuel and what it fetches on the black market. Though Libya isn’t the only country in the region that offers subsidies, its fuel is so discounted that it makes it a ripe target. Russia’s war with Ukraine has led to an even greater price differential. While Libyans pay just pennies for a liter of gasoline — about 1% of market price — consumers in Europe pay about $2.
The smuggling is costing European countries billions of euros in lost tax revenue, according to Sicpa, a Swiss company that runs a fuel-marking program to identify illicit trading. Italian officials estimate that as much as 20% of fuel used for transport in 2021 came from the black market, mainly through illegal imports that evade about $3 billion a year in taxes.
“This has now become a major corruption issue,” Shekshek said. “It has turned from small-scale smuggling by individuals to organized crime carried out by groups with power and influence using large tankers and trucks.”
In August, an officer at the Zawiya refinery, about 35 miles west of Tripoli, was detained for alleged fuel smuggling. Other administrative and security officials at the plant, which refines oil for domestic consumption, were also being prosecuted at the time, according to Libya’s attorney general. The national oil company didn’t respond to requests for comment about the case.
“It’s clear that the beneficiaries of fuel smuggling have been moving higher and higher up the food chain,” said Tim Eaton, an analyst at Chatham House, a London-based nonprofit that published a 2019 report on fuel diversions at refineries. “Now you have armed groups selling it, and it’s become more and more a transnational crime involving authorities in Libya.”
At a televised meeting in November, Libyan Prime Minister Abdul Hamid Dbeibah accused Brega, which receives imported fuel and delivers it to transport companies for distribution, of contributing to the rise in fuel smuggling by placing big orders for petroleum products. That’s the same company whose name was on the Queen Majeda’s shipping documents. “Brega is to blame,” he said.
Brega Chairman Fouad Ali Bilrahim called the allegation “unfounded.” In an interview with Bloomberg in January, he said Brega gathers, but doesn’t scrutinize, the fuel demands of key government agencies and passes that on for budget approval. Brega also isn’t responsible for transporting fuel once it hands it off to distribution companies. He said there isn’t enough oversight.
“There is no follow-up from any party,“ Bilrahim said. “We are very concerned about fuel smuggling. The situation will get worse in the future unless something is done, but Brega lacks jurisdiction and authority.”
Dbeibah’s office didn’t respond to questions about Brega or the alleged $9 billion accounting discrepancy. Nor did the finance ministry.
Benghazi, the eastern Libyan city where the Queen Majeda took on its cargo, is controlled by Khalifa Haftar, an 80-year-old warlord who helped Qaddafi come to power in 1969 and later allegedly attempted to overthrow him with the blessing of the CIA while in exile in Virginia.
Libyan maritime and security officials, along with Western diplomats, said not much happens in the eastern part of the country without the approval and knowledge of Haftar, who returned to Libya in 2011, and his sons. His military group, known as the Libyan National Army, attempted to topple the transitional government in Tripoli and seize the city in 2019 with the help of Russian mercenaries working for the Wagner Group. That resulted in a ceasefire the following year, leaving Haftar in control of eastern Libya.
Western diplomats and Libyan officials told Bloomberg it’s commonly believed that, in exchange for peace and the resumption of crude production, Dbeibah’s government and the national oil company agreed to look the other way on fuel smuggling. The officials said the Haftars are benefiting from the illicit traffic at the Benghazi port and they suspect the proceeds have been used in part to fund the Wagner Group, the Russian mercenary army that continues to operate after the death last year of its founder, Yevgeny Prigozhin.
Bengdara, the national oil company chairman, said in this statement to Bloomberg that the allegations are “definitely not true.” Neither Haftar nor his son Saddam responded to requests for comment sent through a spokesman.
Fuel smuggling from Benghazi has risen significantly since the Russian invasion of Ukraine in February 2022, according to Shekshek’s audit bureau and a report published in September by the UN’s Panel of Experts on Libya. The report called the illegal traffic “rampant” and said it contributes to destabilizing the country.
The invasion led to a cataclysmic shift in the world’s oil and refined fuel markets. Oil prices soared to a 14-year high of $140 a barrel in March 2022. Western countries responded by imposing sanctions on Russian oil and fuel products to curb Moscow’s ability to raise funds for the conflict. The European Union also blocked the purchase and import of seaborne Russian crude as of December 2022. Albania, which isn’t in the EU, has said it supports the sanctions.
As Europe, which was the main market for Russian hydrocarbons, began closing its doors, it turned to Asia and the Middle East for supply. Russia looked for new buyers. It found one some 6,000 miles away — in Libya.
Russian fuel exports to Libya have surged more than tenfold since the invasion, to 2.5 million tons in 2023 from 260,000 thousand tons the previous year, according to an analysis of AXSMarine shipping data done for Bloomberg by the Energy Security and Transition (EST) Lab @energycenter at Italy’s Politecnico di Torino. Russia is now the top exporter of all refined petroleum products to Libya, edging out Greece and accounting for 28% of Libya’s total supply, the analysis showed. That’s up from 4% in 2021. “Russia suddenly became the main Libyan supplier in 2023,” says Ettore Bompard, the center’s scientific director.
Russia has exported 2.4 billion euros ($2.6 billion) worth of fuel to Libya since January 2023, according to the Center for Research on Energy and Clean Air, which has been tracking energy flows from Russia since the beginning of the Ukraine war. About half of that is diesel, gas oil and gasoline — products that are typically smuggled. Using the Libyan audit bureau estimate that 40% is being diverted, that means about half a billion dollars of Russian fuel products that came into the country over the past year were spirited out to Europe and elsewhere.
Since 2022, Libya has exported diesel, gasoline and gas oil to European countries including Italy, Spain, Malta and France, according to shipping data. “Exports of diesel and gasoline from Libya make no legitimate economic sense, given the country’s enormous imports and insufficient domestic refineries,“ said the Sentry’s Cater.
As many as four ships a week were leaving Benghazi last year loaded with smuggled fuel, according to an official familiar with the port’s operations who asked not to be identified because of the sensitivity of the matter. In September and October, at least six vessels made stops in Russia before discharging at Benghazi and other Libyan ports, according to Brega and ship-tracking data.
“It’s suspicious and sketchy,” said Alan Gelder, head of oil research at Wood Mackenzie. “There’s no structural reason why we would see this huge increase of imports from Russia to Libya.”
The Queen Majeda had engaged in two illegal shipments, loading up in Benghazi and unloading in Turkey, according to the memo. “The NOC has been unable to prevent such illegitimate practices that are taking place openly at Benghazi Sea Port from occurring while these practices go totally unnoticed despite being committed openly and for all to see in daylight outside the control and authority of the NOC and Brega Oil Marketing Company,” the memo said.
Shipping location data show that the Queen Majeda stopped mostly in Greek ports prior to 2022. It was in Greece in March 2022 before proceeding to Benghazi, arriving there on April 11.
Twelve days later, still in the Libyan port, the tanker turned off its automatic identification system, or AIS, and went dark, according to data from MarineTraffic, a company that tracks ship movements. International maritime law requires ships to have their AIS turned on, except for certain safety purposes. Going dark is a telltale sign a vessel is likely engaging in illicit activity, according to the US sanctions office.
On April 25, the Queen Majeda began broadcasting its location again and headed northwest to Malta. Then it went dark again for three more days, giving it ample time to travel the roughly 100 nautical miles to Hurd Bank, part of Malta’s territory and a well-known spot for vessels to conduct ship-to-ship transfers at sea without official scrutiny. By April 29, the tanker returned to Benghazi and, within a couple of days, turned off its AIS again.
A month later, on May 24, the Queen Majeda asked for permission to enter Italian waters. The request was denied. When it entered anyway, coast guard officials inspected the ship and discovered 3 million liters of marine gas oil for which there was no documentation. They detained the vessel at the port of Taranto in southern Italy, according to court documents. After the ship’s owner provided paperwork saying the Queen Majeda would be unloading in Albania, it was allowed to leave on July 8.
Two days later the vessel again went dark as it neared Sicily. The UN panel, which also examined the Queen Majeda’s movements, reported it received documentation showing the ship supplied two other vessels via ship-to-ship transfers on July 11 and July 13. Shipping data also show that the Queen Majeda stopped at Albania’s Porto Romano on July 26 and discharged.
Cargo documents obtained by the panel showed the fuel was loaded in Benghazi on May 8, with a certificate of origin from the Ras El Mungar Terminal, which was set up only to receive fuel, not supply it to ships. The panel didn’t say where the fuel had come from.
Bilrahim, Brega’s chairman, said the cargo documents the Queen Majeda presented to Albanian authorities two months later were fake. Brega wouldn’t use the National Oil Corp. logo and seals on any of its documents, he said, and most of them are in Arabic. The ones the captain had were in English.
It wasn’t until November that a crucial piece of the puzzle emerged. That’s when two people helped answer the question of where some of the money was going. The two, who asked not to be identified to protect their safety, said that in recent months they had been in the vicinity of the Al Jufra Airbase about 300 miles southwest of Benghazi. Haftar’s militia captured the base in 2017, and since then Russian aircraft and several hundred Russian mercenaries have been operating there.
Russia has been expanding its military presence in Libya, as well as in other African countries such as Mali, Sudan and the Central African Republic. Wagner, a private military company controlled by longtime Vladimir Putin ally Prigozhin before his death in August in a plane crash in Russia, had been spearheading the effort. Since then, the Russian defense ministry has moved to take over Wagner’s lucrative security, gold mining and oil services contracts, as well as its relationships with African leaders such as Haftar.
Haftar met with Putin in Moscow in September, underscoring Russia’s influence. The US special envoy to Libya, Richard Norland, has called the Russian military’s role in Libya “destabilizing,” and US officials have pressed Haftar to remove foreign forces.
The threat is being taken “very seriously” by the US administration, Jonathan Winer, a former US special envoy to Libya, told Bloomberg in November. He was especially concerned about reports that Putin and Haftar were hammering out a defense accord that could lead to a Russian naval base in eastern Libya. “Keeping Russia out of the Mediterranean has been a key strategic objective,” Winer said. “If Russia gets ports there, that gives it the ability to spy on all of the European Union.”
The two people familiar with activities at Al Jufra said they wanted to speak out against fuel smuggling and Wagner’s presence in Libya. They described an airbase still so tightly controlled by Russian militia that Libyan National Army troops cannot enter on their own. They said they overheard conversations in Russian, saw deliveries of Russian alcohol and observed Russian soldiers barbecuing meat in a desert city where few locals can afford it. They also said they spotted Haftar’s son Saddam, who commands a brigade, entering the base, sometimes several times a month.
Since mid-2022, trucks full of fuel that was supposed to go to nearby gas stations for use by Libyans were sent instead to Al Jufra, according to one of the people.
The deliveries, each comprising dozens of trucks, brought in far more fuel than the base needed for its operations. Some of it was put on planes and sent to Russian-controlled air bases in Mali, the person said military leaders at the base told him. He said he also saw fuel trucks headed for Sudan.
“All of this smuggling activity, including the Russian activities, is made possible by the absence of rule of law and accountability in Libya,” said Stephanie Williams, who served as head of the UN Support Mission in Libya until 2021. “Smuggling is an endemic problem that’s corrosive to society. It’s part of the underground network that feeds into the kleptocratic network that keeps the ruling class afloat. The lion’s share of the blame is on the Libyan ruling elite who allow this to happen and line their own pockets.”
In January, Dbeibah said his government would work to revise the fuel-subsidy program and would poll Libyans on a proposal similar to Shekshek’s that would give citizens a lump-sum payment or a coupon.
Meanwhile, in Durres, the Queen Majeda remains tied to Quay 2, loaded with fuel, 17 months after it was brought into port. Another crew member left the ship in November, according to prosecutors. On Monday, prosecutors charged Shaalah with trading and transporting smuggled goods and asked for a five-year prison sentence. Shaalah is scheduled to appear again in court later this month.