Despite opposition, ISIS makes more than $50M a month from oilfields

A section of an oil refinery is guarded as it is brought on a lorry to the Kawergosk Refinery, some 20 kilometres east of Arbil, the capital of the autonomous Kurdish region of northern Iraq, on July 14, 2014. The International Energy Agency (IEA) said on July 11, that an offensive by jihadists in northern Iraq had cut output by 260,000 barrels a day in June to 3.17 million, after fighting forced the closure of the country's biggest refinery and slashed production from the giant Kirkuk field.SAFIN HAMED/AFP/Getty Images

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Despite US diplomacy, ground fighting and airstrikes, crude from oilfields under the Islamic State of Iraq and Syria (ISIS) control still generate up to $50 million per month for the extremist group, its largest source of income.

According to the US and Iraqi intelligence sources, this is the main reason why the so-called ‘caliphate’ has been able to maintain power across parts of Syria and Iraq. The money allows them to fund infrastructure and guarantees the loyalty of its fighters. ISIS has even been able to bring in technical expertise and equipment from abroad to keep the oil flowing and, as a result, the US has been making efforts over the last couple of months to stop this.

A senior US official speaking anonymously to the Associated Press (AP) called oil field management by ISIS “increasingly sophisticated” and said various international actors in the region were aiding ISIS both intentionally and unintentionally. This has helped the group to stem the degradation of the oil infrastructure even from US-led air raids.

Four Iraqi officials who also spoke anonymously to AP say ISIS sells crude at discounted prices, usually at $35 per barrel but sometimes as low as $10 compared to $50 per barrel on international markets, to smugglers who in turn sell it to middlemen in Turkey. It is believed the group makes about $40-$50 million per month this way. At first the oil was smuggled out in fleets of giant tankers, but smaller tankers are now being used in response to the airstrikes. They speculate the group manages to extract and smuggle about 30,000 barrels per day from Syria into neighboring Turkey. About 10 to 20,000 barrels per day are smuggled out of Iraq, mostly from two oil fields outside of Mosul, to makeshift refineries the group has set up. This is according to Ibrahim Bahr al-Oloum, former oil minister and a current member of Iraq’s parliamentary energy committee. The Iraqi official also said oil was smuggled into Iraq’s self-ruled Kurdish region, but Ali Hama Salih, a member of the Iraqi Kurdish parliament, denied this saying it is easier for ISIS to move the smaller amounts it produces in Iraq into Syria.

A report by Islamic State’s Diwan al-Rakaaez, its version of a Finance Ministry, says it has 253 oil wells under its control in Syria, of which 161 are operational. The report, seen by AP in Baghdad, showed oil sale revenue from Syria totaled $46.7 million last April. The wells are operated by 175 engineers and 1,107 workers.

In a statement to AP, Turkey’s prime minister’s office said steps have been taken to tighten border security, and this has effectively stopped oil smuggling. According to the same statement, 3,319 acts of smuggling from Syria have been stopped, and more than 5.5 million liters of oil have been seized as of September. The report did not address the issue of oil equipment and experts entering Syria from Turkey.

Oil revenue is estimated at $500 million per year by Daniel Glaser, assistant Treasury secretary for Terrorist Financing in the Office of Terrorism and Financial Intelligence, but is not the only source of income for the group. It is believed the group rakes in hundreds of million of dollars from ‘taxing’ commercial activity in the areas under its control.

All this money comes on top of the money looted from the Iraqi central branch in Mosul, which is thought to have been between $500 million and $1 billion dollars.

US airstrikes in Syria have sometimes hit oil infrastructure under ISIS control while the Russian airstrikes that started last month have not done that yet. In Iraq, the bombing campaign by the US in combination with ground operations had far more effect in countering the oil production by ISIS. In March, fighters were ousted from a major oilfield outside of Kirkuk, and ISIS are not using a large oilfield near Sinjar in northern Iraq because they fear airstrikes. Sometimes small production teams are sent in to pump oil and leave.

Iraqi officials say that overall, the sophisticated operation that ISIS has created around oil production has been barely affected. The output from small, rudimentary refineries set up in trailers partially satisfies domestic needs. Turkish and Kurdish maintenance crews enter ISIS territory under heavy security to work on wells and refineries. Additionally, senior officials from Iraq’s state-owned northern-based oil companies have been known to be employed by the group as well. Iraqi oil engineers are given a daily rate of $300, rising to nearly $1,000 when they deal with technical problems according to Hashem al-Hashemi, a prominent Iraqi expert on the Islamic State. Haji Diaa was pointed out as being in charge of ISIS oil operations and as the point man in dealing with Turkish and Kurdish engineers by two Iraqi officials who refused to provide further information about him.

The money for the bought oil is often wired to female ISIS members in Istanbul and Ankara, presuming women will draw less attention, which is then later hand-carried into Iraq or Syria according to the head of one of Iraq’s top counterterrorism agencies.

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