TARGET: MEXICO

More global guerrilla activity in Mexico. Six new attacks by an unknown guerrilla group (an earlier claim by a leftist group was likely a false front) destroyed five PEMEX natural gas pipelines (likely through a timed detonation). 12,000 people were evacuated due to fire risk. This follows on the heals of the July pipeline attack that disrupted operations at 1,200 companies (including Honda, Nissan, and Kelloggs). If the earlier pattern of embedded timer-triggered explosives holds, there will be more explosions next week. Is this the start of the "Breaking Mexico" scenario? The sophistication of the earlier attack (given that it targeted critical valves -- systempunkts) and the ability to repeat the assault (so far, nobody has been caught) indicates that it has the potential to be:

Here's on potential method of how it could happen. Analysis of critical Mexican infrastructure reveals a critical flaw. Due to its history as an oil exporter, nearly all domestic fuels and most of its electricity is generated from oil and natural gas delivered by pipelines radiating from the oil producing region in the southeastern corner of the country. Low tech attacks along a 300-400 mile stretch of pipeline would quickly starve the country of the oil needed to generate electricity and refine fuels (the current system has been inadvertently built to maximize cascading failures across multiple infrastructures if properly disrupted). Further, analysis of the pipeline infrastructure would also quickly reveal junctions and pumping equipment that would be extremely difficult to replace (systempunkts). As we have seen in Iraq, Nigeria, India, Pakistan, etc. these anonymous attacks could be frequent, effective, and nearly impossible to interdict. They would also result in an immediate expansion of black markets for fuels imported from the US, generating a useful feedback loop for continued disruption.

Given the level of gang and criminal violence currently challenging the Mexican state [which has been militarized and thereby converted into a war between the state and non-state groups] for supremacy, there is already a large subset of actors that could quickly seize upon this opportunity. Their access to arms (often much better than the Mexican military) and to sources of income independent of the state's function (smuggling of all types into the US) would allow them to thrive at double and triple digit growth rates as state power began to fail. They also have access to a huge pool of people that would be easily enticed to disrupt infrastructure for a few dollars (enabling the costs inflicted by disruption to top $200,000 for every $1 invested in the activity). In short, the dynamic that is produced would be similar to the models of state failure we have seen elsewhere. It would also be almost impossible to stop once it becomes entrenched.

NOTE: the cascade of failure from these attacks has forced Volkswagen to close its car assembly plant in Puebla for 5 days -- at a loss of 7,200 assembled vehicles. In a JIT (just in time) global economy, the impact from systems disruption can travel quickly.

Comments

[NietzschesGhost]

I've been expecting this.

The run-up in tortilla prices are making people desperate. Your scenario of "a huge pool of people that would be easily enticed to disrupt infrastructure for a few dollars" has already arrived.

I wonder how long it will be until America is forced to deploy troops into Mexico to protect the oil infrastructure. Last I checked, they still exported around 1.6Mb/d, most of it going north.

[AlfredoNarváez]

Nonsense. The tortilla price has been stable since april, at around a dollar...

The recent attack are very sofisticated to be made by a rural guerrilla, and more being a lefty one, since Pemex is the sacred cow of the Mexican left. This is something new:

- It´s made by internal powerful forces so the Mexican Military can be stronger. I doubt it.

- Or it´s the work of some foreign hands. The US doesn´t have interest on a weak Mexico, but maybe some one who wants to see López Obrador soon as president has some special intentions. My bet is on a increasingly powerful South-american autocrat... and since Castro is leaving soon, someone may need having weakness to play around the hood.

[Duncan Kinder]

" MEXICO CITY, Sept 10 (Reuters) - Crude output and exports will not be affected by a new string of sabotage attacks on oil and gas pipelines, Mexico's state-run oil company Pemex said on Monday.

Six attacks burst several major gas pipelines and one 30-inch crude duct on Monday, just weeks after a left-wing guerrilla group bombed Mexico's oil infrastructure.

Pemex spokesman Carlos Ramirez said the explosions would slow the flow of crude to Mexican refineries.

"There is an internal impact in terms of the supply that arrives at the refineries, but there is no effect on output and exports," Ramirez told Reuters.

In Mexico's central-southern region gas infrastructure is limited and the attacks will have a serious impact on local gas supplies.

In July, a shadowy leftist guerrilla group claimed responsibility for bombing energy pipelines, cutting gas supplies to thousands of businesses. "

http://uk.reuters.com/article/oilRpt/idUKN1033478220070910

[NietzschesGhost]

Posted by: AlfredoNarváez:

"Nonsense. The tortilla price has been stable since april, at around a dollar..."

Maybe you should do a little bit of research on the topic, before you declare my supposition to be "nonsense".

According to this article in the Economist:

http://www.economist.com/world/la/displaystory.cfm?story_id=8633178

The price of tortilla doubled from October of last year. The price was $0.87 at the time of the article (February). That means that the year over year price increase is approaching 300%. If my grocery bill tripled over the course of a year, I might be inclined to start a riot or blow up an oil pipeline for a few bucks too.

This position is further supported by the food riots earlier this year, which had to be put down by the military.

Posted by: AlfredoNarváez:

"The recent attack are very sofisticated to be made by a rural guerrilla, and more being a lefty one, since Pemex is the sacred cow of the Mexican left."

It doesn't take a lot of sophistication for someone to say "Here's the device. Place it here *points to a map* and set the timer for 0600."

As has been indicated here, the narco gangs in Mexico have been rising to prominence and challenging the government lately. I believe they the most likely agents responsible, but there's no reason they couldn't outsource placing the devices to someone who's tired of using 1/3 of his salary to put food on the table.

As for PENMEX being a "Sacred cow of the left", you would see tremendous benefit from studying nationalized oil companies. Particularly the reason they become nationalized in the first place.

Posted by: AlfredoNarváez:

"My bet is on a increasingly powerful South-american autocrat..."

While your supposition is not entirely without merit (Chavez might very well benefit from establishing a leftist, anti-American government in Mexico), I don't think this is the case. Nor do I believe it's any other foriegn actors, excepting the foriegn members of the aforementioned narco gangs.

In this instance, Mexico's own internal instability caused by the decline of it's oil production (Approximately 5% per year overall, with Cantarell approaching 14%) are more than sufficient to fuel the collapse.

This decline has a far broader impact than simply bankrupting those "sacred leftist" institutions. Those oil revenues also fund institutions such as the military and police forces. Basic infrastructure like roads, water and yes, the very oil and natural gas pipelines that were destroyed.

[AlfredoNarváez]

The Economist was right on February, but the federal government brokered a deal so the price has been stable: at around 1 dollar the kilogram of tortillas.

This is not the typical attack from a Mexican guerrilla group from the 1970s.

This means people that have access to maps of the ducts, that know the routines of Pemex and that do this when the President is out of the country, as was the case last July... who benefits from a weak Mexico?

If it is not the far left from the South, why not the far right from the North? The US has elections next year, and the Amero is gaining ground since the recent markets chaos. The anti globalist far right hates NAFTA and hates more the idea of a common currency. To portray Mexico as chaos could be the best PR strategy to derail the Amero, and to give more money to far right groups, since the Dems are seen more and more as the winner of 2008. Mexico could be just the exchange currency the far right can play to not loose more power since Iraq mess...

[Duncan Kinder]

Here is the Oil Drum's take on the Mexican pipeline sabotage:

http://www.theoildrum.com/node/2752#more

It seems generally similar to John Robb's characterization ( as I understand it ). Indeed, Indeed, it would be interesting if John might comment on how he actually differs from the Oil Drum's interpretation.

[johnnn]

From Reuters:

http://uk.reuters.com/article/oilRpt/idUKN1024841020070910

A series of attacks that caused explosions on Mexico's oil and gas pipelines on Monday will cost state oil monopoly Pemex "hundreds of millions of dollars", Pemex Chief Executive Jesus Reyes Heroles said.

Reyes Heroles also told Mexican radio that disruption to Pemex's natural gas pipelines would hit around 25 percent of the country's natural gas supply for at least a day.

[P-]

This is huge! I wouldn't be surprising if an event such as this ever happened BUT that's it is happening now?! Amazing! Just pulled up the price of crude on the chart. This could potentially be a cycle that could break the $80 barrier. I seen articles that what stands between $100 oil and what oil is right now is just an event. Whether this and subsequent events catagorizes and qualifies as such remains to be seen. The fact that it is already happening in the North American continent is just very surprising! You would thing these guerillas had a couple of cycles of evolution to catch up on compared to the organization and sophistication of state military systems. There is that remote possibility that these forces are timing their attcks to the cycle of oil price. It has happenened a few times before on the Nigerian platform of oil based events in the recent past.

invest_mavin

[NietzschesGhost]

Posted by: AlfredoNarváez:

"The Economist was right on February, but the federal government brokered a deal so the price has been stable: at around 1 dollar the kilogram of tortillas."

Which is still nearly triple the price from October 2006. When you consider that the minimum wage in Mexico sitting around $4.60/day, that makes for a lot of very desperate people.

Posted by: AlfredoNarváez:

"This means people that have access to maps of the ducts, that know the routines of Pemex and that do this when the President is out of the country, as was the case last July"

It's not necessary to have maps. The valve stations are all aboveground. They are plainly visible to anyone who knows what they are looking for. Even the pipes, while mostly buried, are easily identified by the 300m wide meadows sitting atop them in perfectly straight lines stretching over kilometres.

As for the routines of PENMEX security, that's hardly difficult. Many of those security guards are locals, some of whom might even know someone who's trying to get by on $4.60/day.

And knowing when the President is out of the country is a simple enough matter. Not that it's really necessary, as evidenced by the most recent attacks.

Posted by: AlfredoNarváez:

"who benefits from a weak Mexico?"

That's the real question, isn't it? Unfortunately, there is more than one answer. Lots of people benefit. Just off the top of my head:

narco gangs
leftist revolutionaries
multinationals who depend on slave wages
NAFTA government types
terrorist organizations
organized crime
oil service companies

And that's just with 5 seconds of thought. More detailed analysis could probably reveal many more.

Posted by: P-:

"There is that remote possibility that these forces are timing their attcks to the cycle of oil price."

While I'm certain there is a certain amount of manipulation going on behind the scenes, I don't think it's the main driving factor.

More likely is that these disruptions are viewed as a means to an end - destabilization. Profit-taking and insider trading are a byproduct of that effect.

[P-]

Got this from the newsfeed...

>>McClatchy Newspapers
WASHINGTON — Bombers attacked at least six oil and natural-gas pipelines in Mexico's southeastern state of Veracruz overnight Monday, sparking concern that the energy sector of the second-largest supplier of oil to the United States may be increasingly vulnerable to attacks from a fledgling Marxist rebel movement. ...<<

It is the first piece at least that i've come across that ties the attack to what Mexico means to us in terms of our oil, in the larger context of the oil crunch. Big oil cos are marketing the availability of more reserves laid below the artic territories but such effort doesn't give much credence to our efforts to the avenue of weaning ourselves from nonrenewable energy sources, the "ONLY PERMANENT SOLUTION." Such is the morass of our intractable problems associated w/ our foreign policy of securing oil rather than alleviating our need for it! What's needed is a much better policy and not revolving resolutions.

This attack certainly may give the idea that the previous attack on the businesses in Mexico industrial zones may ***no longer be an isolated*** incident. I hope this is not the case going forward.

http://seattletimes.nwsource.com/html/nationworld/2003878660_mexpipeline11.html

[Britmex]

Alfredo just happens to be correct and quoting the Economist isn't going to impress anyone. Least of all me, because I buy tortillas several times a week. The price in the local Walmart is $8.50M.N. per kilo, so at almost 11 pesos to the dollar, that works out at just under one dollar per kilo. The tortillerias sell 'em at the official price which is a bit higher.

Secondly, people on the minimum wages - plural because they are regionally based - do not live alone. Like almost all Mexicans they live in enormous family groups, so quite a few wage-earners in that family will be contributing to the budget.

Finally, many Mexicans don't actually buy tortillas, they buy the dough and make them at home.