Oil sales are giving the Islamic State of Iraq and Syria (ISIS) a substantial new revenue source, according to the Iraq Energy Institute. ISIS currently earns $1 million per day from the Iraqi oil and gas fields under its control. ISIS’ territory is producing between 25,000 bpd and 40,000 bpd. The crude oil is being sold on the black market at $30 per barrel. The oil is not pegged to international standards for oil prices.
If ISIS takes over the Syrian fields in areas where the group is advancing, its oil profits could reach as much as $3 million per day, with a total of $100 million per month for Iraq and Syria combined. On July 19, ISIS took control of the Shaar gas field near Palmyra, one of Syria’s largest fields, further strengthening the group.
“Reports are the government has recaptured (the field), but ISIS says it has withdrawn or destroyed the field,” said Robin Mills, a Dubai-based energy analyst. “There was nothing ISIS could do with the gas itself unless it continues to sell to the government. They have reportedly had deals with the Assad government to sell them oil and gas.”
Theodore Karasik, research director at the Institute for Near East and Gulf Military Analysis, said it should have been obvious to the Syrian government that energy fields were going to become a source of contention because of their value.
“They are trying to establish a state, and these types of revenues are important for the state’s formation because it makes up a significant chunk of their revenue,” he said. “They can take over eastern Syria without oil revenue, but seizing these types of fields are part of an ongoing plan to develop their own economic system.”
Karasik agreed ISIS is trying to establish a state and wants to have all parts of the government and revenue sources well organized.
“Energy exports are part of this scheme,” he said. “The scheme includes the collection of taxes, but also other black market activities like trade in other illegal goods the group plunders from the land it captures. Given the call by ISIS leader Abu Bakr Baghdadi on the first day of Ramadan asking for consolidation of the state and the recruitment of individuals to help run that state, you have to figure the energy sector figures into his planning.”
According to Mills, ISIS once avoided having direct confrontation with the regime. “They generally tended to turn their fire against other rebel groups,” he said.
“They had been selling to the regime or basically anyone who would pay for it. But recently it seems like they are taking a more aggressive approach, like with the attack on Shaar. Were they just attacking it to destroy it (to hit the regime) or to take it over and continue selling gas? It’s not clear what their intention was.”
One thing that is clear, however, is what ISIS does with the oil and gas it captures.
“ISIS smuggles the crude oil and trades it for cash and refined products,” said Luay al-Khatteeb, visiting fellow at the Brookings Doha Center. “They also have their own small and rudimentary refineries in Syria. Refined oil is returned to ISIS for selling locally in Iraq and Syria. ISIS also uses the oil in their own warfare.
“ISIS controls smuggling routes and the crude transported by tankers to Jordan via the Anbar province, to Iran via Kurdistan, to Turkey via Mosul, to Syria’s local market and to the Kurdistan region of Iraq, where most of it gets refined locally. Turkey has turned a blind eye to this and may continue to do so until it comes under pressure from the west to close down oil black markets in the country’s south.”
Ultimately, ISIS aims to take over the Arabian Peninsula as its epicenter to launch attacks globally. “If this happens, they will be in control of a region that holds 60 percent of the world’s conventional energy reserves and produces 40 percent of global oil and gas production,” said al-Khatteeb.
For more information, visit www.iraqenergy.org or call +44 (0) 208 357 0983.
