How Oil Fuels ISIS

ISIS acts like a state that owns an oil company. Notice, at the bottom right, that the non-ISIS market for ISIS oil is local, meaning civilians, and also includes anti-ISIS rebels in Syria and Iraq (click to enlarge; source).

by Gaius Publius

ISIS is a complex entity, in part a state and in part a jihadist insurgency. To the extent that they're a state, they hold territory and govern (including, ironically, offering free government-provided health care). Here's a look at ISIS-held territory, including the location of oil fields and refineries within that territory.

ISIS-held and -supported territory in red; anti-ISIS territory in blue. Note that even the rebels are customers of ISIS oil (click to enlarge; source).

The U.S. and its allies are in a bind. ISIS finances its operations from its oil revenue. Most of its oil isn't sold on the international market, but the local one. That is, millions of people in the region depend on ISIS oil for their energy needs, even the anti-ISIS rebels in Syria. If those oil fields and refineries were bombed or otherwise put out of commission, the disruption to civilians in the region would be enormous. This likely accounts for the fact that of the more than 10,000 air strikes against ISIS by the U.S.-led coalition, fewer than 200 have targeted its oil infrastructure.

The story comes from the Financial Times. Only part is below, but it's all fascinating:

Isis Inc: how oil fuels the jihadi terrorists

Erika Solomon in Beirut, Guy Chazan and Sam Jones in London

Jihadis’ oil operation forces even their enemies to trade with them

On the outskirts of al-Omar oilfield in eastern Syria, with warplanes flying overhead, a line of trucks stretches for 6km. Some drivers wait for a month to fill up with crude.

Falafel stalls and tea shops have sprung up to cater to the drivers, such is the demand for oil. Traders sometimes leave their trucks unguarded for weeks, waiting for their turn.

This is the land of Isis, the jihadi organisation in control of swaths of Syrian and Iraqi territory. The trade in oil has been declared a prime target by the international military coalition fighting the group. And yet it goes on, undisturbed.

Oil is the black gold that funds Isis’ black flag — it fuels its war machine, provides electricity and gives the fanatical jihadis critical leverage against their neighbours.

But more than a year after US President Barack Obama launched an international coalition to fight Isis, the bustling trade at al-Omar and at least eight other fields has come to symbolise the dilemma the campaign faces: how to bring down the “caliphate” without destabilising the life of the estimated 10m civilians in areas under Isis control, and punishing the west’s allies?

The resilience of Isis, and the weakness of the US-led campaign, have given Russia a pretext to launch its own, bold intervention in Syria.

Despite all these efforts, dozens of interviews with Syrian traders and oil engineers as well as western intelligence officials and oil experts reveal a sprawling operation almost akin to a state oil company that has grown in size and expertise despite international attempts to destroy it. ...

Estimates by local traders and engineers put crude production in Isis-held territory at about 34,000-40,000 bpd. The oil is sold at the wellhead for between $20 and $45 a barrel, earning the militants an average of $1.5m a day.

About selling to their enemies in Syria:

“It’s a situation that makes you laugh and cry,” said one Syrian rebel commander in Aleppo, who buys diesel from Isis areas even as his forces fight the group on the front lines. “But we have no other choice, and we are a poor man’s revolution. Is anyone else offering to give us fuel?”

It's both a complicated situation and a lucrative one (my emphasis):

When [ISIS] pushed through northern Iraq and took over Mosul, Isis also seized the Ajil and Allas fields in north-eastern Iraq’s Kirkuk province. The very day of its takeover, locals say, militants secured the fields and engineers were sent in to begin operations and ship the oil to market.

“They were ready, they had people there in charge of the financial side, they had technicians that adjusted the filling and storage process,” said a local sheikh from the town of Hawija, near Kirkuk. “They brought hundreds of trucks in from Kirkuk and Mosul and they started to extract the oil and export it.” An average of 150 trucks, he added, were filled daily, with each containing about $10,000-worth of oil. Isis lost the fields to the Iraqi army in April but made an estimated $450m from them in the 10 months it controlled the area.

While al-Qaeda, the global terrorist network, depended on donations from wealthy foreign sponsors, Isis has derived its financial strength from its status as monopoly producer of an essential commodity consumed in vast quantities throughout the area it controls. Even without being able to export, it can thrive because it has a huge captive market in Syria and Iraq.

Indeed, diesel and petrol produced in Isis areas are not only consumed in territory the group controls but in areas that are technically at war with it, such as Syria’s rebel-held north: the region is dependent on the jihadis’ fuel for its survival. Hospitals, shops, tractors and machinery used to pull victims out of rubble run on generators that are powered by Isis oil.

“At any moment, the diesel can be cut. No diesel — Isis knows our life is completely dead,” says one oil trader who comes from rebel-held Aleppo each week to buy fuel and spoke to the Financial Times by telephone.

The article details well the way the oil industry is managed. ISIS, unlike a number of other jihadist groups, has a professional core and it shows. ISIS, after all, is led by a ex-Iraqi army officers, the people L. Paul Bremer fired almost as soon as he took office as Bush's "proconsul" in Iraq:

As the top civilian administrator of the former Coalition Provisional Authority, Bremer was permitted to rule by decree. Among his first and most notable decrees were Coalition Provisional Authority Order Number 1, which banned the Ba'ath party in all forms[14] and Coalition Provisional Authority Order Number 2 dismantled the Iraqi Army.[15]

In a very real sense, ISIS is Bush's and Bremer's direct creation.

How will this end? The authors aren't sure:

Isis’ luck with oil may not last. Coalition bombs, the Russian intervention and low oil prices could put pressure on revenues. The biggest threat to Isis’ production so far, however, has been the depletion of Syria’s ageing oilfields. It does not have the technology of major foreign companies to counteract what locals describe as a slow drop in production. Isis’ need for fuel for its military operations means there is also less oil to sell in the market.

For now, though, in Isis-controlled territory, the jihadis control the supply and there is no shortage of demand. “Everyone here needs diesel: for water, for farming, for hospitals, for offices. If diesel is cut off, there is no life here,” says a businessman who works near Aleppo. “Isis knows this [oil] is a winning card.”

The situation in Iraq and Syria isn't stable, but it isn't unstable either. Dismantling ISIS is going to be a tough nut to crack. Radicalizing a great many more of the region's residents is a distinct possibility if Western and Russian attacks increase.

A Nation Free of Oil

One final thought. Have you ever wondered what the nation and our foreign policy would be like today if Jimmy Carter had won in 1980, the solar panels had stayed on the roof of the White House, renewable energy production had thrived, and the nation, by determined effort, were freed of all dependence on fossil fuel?

That world, with the possibility of leisurely conversion from carbon, is gone. But for a time in the 1970s the door was wide open. If a certain Presidential candidate hadn't cut a deal with a certain hostage-holding government, we might even have walked through it. How much better would our lives be today, if we were a nation free of oil?

GP