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On mafia involvement in the energy sector

Sigrún Davíðsdóttir, one of Iceland’s best investigative reporters [she blogs in English here] recently broadcast a fascinating report on increased mafia investments in the energy sector, on current affairs radio programme Spegillinn, which airs on RÚV, weekdays at 18.30.

Sigrún bases her information on a report by Europol on the mafia’s involvement in the energy sector. It is well known that organized crime syndicates are attracted to public infrastructure fields like construction or waste removal, due to the interplay of public and private money. The mafia bribes public officials with overt cash bribes or expensive gifts, and in turn receives the lucrative contracts. Sometimes there may even be public grants involved.

Sigrún’s report lists several reasons why organized crime groups the world over are particularly attracted to the energy sector. Meanwhile, the global risk consulting company Kroll Inc. [which advised the Glitnir resolution committee in its legal proceedings against Jón Ásgeir Jóhannesson et al], has pointed out several cases where the mafia has managed to involve itself in the wind generator sector in Italy, France and Spain.

Of course there is a message there for Iceland:

The knowledge that organized crime syndicates are attracted to the energy sector is of particular interest to Icelanders. The world is obviously crying out for energy, and Iceland has an abundance of energy, which moreover is eco-friendly — even better, and even more valuable. There has been a remarkable tendency in the public sector [in Iceland] to let some kind of “feeling” govern decision making, as opposed to hard facts and knowledge. Public officials need to have a complete and comprehensive knowledge of who their collaborators are. This is fairly simple when it comes to Icelandic parties, but more complex when it comes to foreign parties.

When foreign parties come to Iceland looking for investments in collaboration with the public sector it should a natural rule to contact recognized and objective consulting companies for information. It should not be considered sufficient for the Icelandic collaborators of these foreign parties to say that these are “great guys”.

Food for thought, particularly in light of the Magma Energy fiasco.

[Sigrún’s full report for Spegillinn, in Icelandic, is here. Google Translate is here. The Europol report is here.]

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  • Lissa September 5, 2010, 2:51 pm

    Would the way Icelanders tend to do business (based on handshakes, verbal agreements and personal relationships) make it easier for organized crime (which, from what I read, has a similar business style, with added violence and coercion) to work in Iceland?

  • Alexander E. September 5, 2010, 5:49 pm

    Lissa.
    Making business based on handshakes, verbal agreements and personal relationships – is the only way business is done actually.

    The rest – consultants, lawyers, experts, rating agencies are just the decorations to the play (and very expensive one). Do you think Magma deal wasn’t “blessed” by all kinds of auditing and consulting companies? And what about Icesave – was it criminal or legal business? 🙂

  • Kris September 5, 2010, 7:53 pm

    When a politician makes a decision based on “feeling” there is cash in his back pocket, and the back pocket is more often than not, offshore.
    Can we count multinational corps as criminal organizations? They look that way to me: Goldman, Monsanto, BP, and the list goes on and on and on and on.

  • sylvia hikins September 5, 2010, 11:53 pm

    I’m not sure how marketable your geothermal energy is, given how far away you are from a big population. Where your energy is valuable is in its cheap provision for industrial processing, especially when combined with a plenteous water supply. Hence the smeltering business. But the mafia will be keen to invest its laundered drug and other corruptly obtained money into legitimate business, and have you noticed how Greece, Ireland and Iceland are attracting the attention of international speculators. China. The mafia. Who next? Do you have a Government Department working out a strategy for economic recovery?

  • idunn September 6, 2010, 5:09 am

    One consideration with energy, aside from the mafia, is that everything has natural limits.

    Iceland produces no natural gas or oil. 24% of the nation’s energy is derived from geothermal, which also is used to heat 87% of all buildings. About 75% of electricity is produced with hydropower, 0.1% with fossil fuels.

    According to the CIA Iceland produced 16.84 billion kWh of electricity in 2009, which would rank it 74th in the world in this regard. It exported no electricity, but consumed 16.48 billion kWh of electricity in the same year.

    If I am reading this correctly, then Iceland has little excess electricity capacity, or that additional hydropower projects would have to be developed to create more. If relatively green, the use of geothermal and hydropower for electricity production have environmental consequences. The hotly debated Karahnjukar hydropower project comes to mind. It impinges on what was the last largest wilderness area in western Europe. Its projected output of 630 megawatts will be used almost exclusively by Alcoa, the American aluminum company.

    The mafia may have nothing to do with that. But the effect on the environment is no different.

  • Rajan Parrikar September 6, 2010, 9:14 am

    I am surprised that the ‘mafia’ hasn’t gone after Icelandic real estate yet. Watch out, Iceland!

  • snowball September 6, 2010, 10:55 am

    at rajan parrikar

    even the dirty money understands that the icelandic real estate market is far away from having bottomed out and is rigged by the banks. despite what the official propaganda wants you to know. perception management made in iceland. in a non rigged supply/demand market icelandic real estate prices would be at pre-bubble levels. nota bene prices went up by a factor of 3 in the last ten years.

  • Peter London/Krakow September 6, 2010, 11:41 am

    “Would the way Icelanders tend to do business (based on handshakes, verbal agreements and personal relationships) make it easier for organized crime (which, from what I read, has a similar business style, with added violence and coercion) to work in Iceland?”

    Iceland is a country run by a mafia, bribery (negative and positive) and a code of silence. You don’t need violence when you stop someone getting a job or a loan.

    Democracy in itself is insufficient to control politicians, especially is you control who can get to be a politician – which is easier in Iceland but not impossible in other countries. The USA is particularly bad, with little connection between politicians and the electorate and a corrupt business and media environmental. Other countries have varying degrees of corruption, Tony Blair (and others) for example in the UK.

  • kevin oconnor,waterford,ireland September 6, 2010, 12:30 pm

    @Rajan yes exactly right Iceland 200yrs from now with russian street signs, Icelandic language to join Latin in the history books, the Indians sold Manhattan island for a few glass beads and look what happened to them.

  • Rajan Parrikar September 6, 2010, 11:01 pm

    Kevin: “yes exactly right Iceland 200yrs from now with russian street signs…”

    You are off by a factor of 100. A whole stretch of the northern coast in my hometown of Goa is now effectively Ruskie territory thanks to the Russian mafia. It didn’t take them long once they figured out that the local politicos could be bought out cheaply.

    In 200 years, who knows if the human race will survive. If it does, then either Iceland will be an oil rig for the Chinese for all the black gold under the Arctic (those Hans aren’t cozying up to Iceland for nothin’) or if the jihadis get their way, Reykjavík will be dotted with minarets. Then Birgitta Jónsdóttir the queen of world peace will have to figure out a way of eating Svið from the slit in her burqa.