News / Middle East

Iraq: Islamic State Financing Caliphate by Smuggling Oil

FILE - A fighter from the Islamic State, formerly known as the Islamic State of Iraq and the Levant (ISIL), mans an anti-aircraft gun mounted on the rear of a vehicle in Mosul, Iraq, July 16, 2014.
FILE - A fighter from the Islamic State, formerly known as the Islamic State of Iraq and the Levant (ISIL), mans an anti-aircraft gun mounted on the rear of a vehicle in Mosul, Iraq, July 16, 2014.
Reuters

Islamic State militants seized four small oilfields when they swept through north Iraq last month and are now selling crude oil and gasoline from them to finance their newly declared “caliphate.”

Near the northern city of Mosul, the Islamic State has taken over the Najma and Qayara fields, while further south near Tikrit it overran the Himreen and Ajil fields during its two-day sweep through northern Iraq in mid-June.

The oilfields in Islamic State hands are modest compared to Iraq's giant fields near Kirkuk and Basra, which are under Kurdish and central government control. Most of the Islamic State-held oil wells - estimated by a Kurdish official to number around 80 - are sealed and not pumping.

But the monopoly over fuel in the territory it has captured gives the Islamic State leverage over other armed Sunni factions who could threaten its dominance in northern Iraq.

Iraqi officials say that in recent weeks the group has transported oil from Qayara to be processed by mobile refineries in Syria into low quality gasoil and gasoline, then brought back for sale in Mosul, a city of 2 million people.

Turkish traders

Larger shipments of crude, some of them from Najma, are also sold via smugglers to Turkish traders at vastly discounted prices of around $25 per barrel, they said.

“We have confirmed reports showing that the Islamic State is shipping crude from Najma oilfield in Mosul into Syria to smuggle it to one of Syria's neighbors,” said Husham al-Brefkani, head of Mosul provincial council's energy committee.

“The Islamic State is making multi-million dollar profits from this illegal trade," Brefkani said.

Petrol stations in Mosul are now selling fuel supplied by traders working with the Islamic State, which charges either $1.0 or $1.5 a liter depending on quality - a huge increase on previous prices, one petrol station owner in the city said.

“The fuel is brought from Syria. ... It's triple the price before, but drivers have to buy it because subsidized government fuel was halted,” Brefkani said.

Brefkani said the Islamic State was the sole sponsor of the imports from Syria, where the group also controls oilfields in the Syrian province of Deir al-Zor. “They use part of it for their vehicles and sell the rest to their traders in Mosul.”

Najma and Qayara had been operated by Angola's state-owned firm Sonangol, but it pulled out last year declaring force majeure amid rising development costs and security concerns over Sunni militants in the area, even before last month's assault.

Qayara, which has estimated reserves of 800 million barrels, had been producing 7,000 barrels per day of heavy crude before the Islamic State took over the field and a nearby 16,000 bpd refinery.

Qayara refinery and a second, smaller plant at Kasak, northwest of Mosul, stopped operating when staff fled.

But Qayara oilfield itself has kept pumping after the militants asked Iraqi employees to stay at their posts, promising to protect them - as they have done at most oil facilities in order to maintain production.

Baiji refinery battle

Iraqi official gave the example of the battle to seize Baiji refinery in the north, Iraq's largest, where the Islamic States and other insurgents have been trying since mid-June to control the site without damaging its facilities.

“(The Islamic State) were keen to keep energy installations inside Qayara intact. We did not realize why they did not destroy facilities, but a week later they started to fill the trucks with Qayara crude. They were planning from the beginning to profiteer the field,” said an engineer who works at Qayara, speaking on condition of anonymity for fear of reprisals.

Iraqi government sources said it was hard to assess how much money the group makes from selling crude or the fuel refined in Syria as the number of trucks fluctuates daily.

One source said that a separate - and now terminated - smuggling operation into the Kurdish enclave and into Iran generated nearly $1 million a day earlier this month.

One dealer and shipping company owner in Mosul said he buys 250-barrel truckloads of crude from the militants for $6,000.

“The next step depends on our cunning in dealing with the Turkish traders,” he said.

Vehicle taxes

As another revenue earner, the Islamic militant group levies taxes on all vehicles and trucks bringing goods into Mosul.

A large truck must pay $400, while small trucks are charged $100 and cars $50 if they are also carrying goods.

Ahmed Younis, a Baghdad expert on armed groups, said the Islamists were in effect establishing an economic state based on the increasing resources and infrastructure under their command.

Considering its spread across the Syria-Iraq border, its grip over oilfields there and its growing economic activity, the Islamic State will “transform into an economic giant with assets of billions of dollars,” he said.

“In future, will they buy shares in NYMEX? Everything is possible,” Younis said.

Further south Islamic State fighters control another two oilfields east of Tikrit, home town of Saddam Hussein.

One of them, Ajil, produced 25,000 bpd of crude that were shipped to the Kirkuk refinery and 150 million cubic feet of gas per day piped to the government-controlled Kirkuk power station.

The gas is still pumped - albeit at lower volume of about 100 million cubic feet daily - because, according to energy experts, Kirkuk power station supplies many towns in the region and the militants want to avoid energy shortages.

The militants are moving only small amounts of oil from Ajil because of fears that their primitive extraction techniques could ignite the gas, according to an engineer at the site.

The other small oilfield captured by the Islamic State is Himreen, with a capacity of 5,000-6,000 barrels per day from five operating oil wells.

“The militants brought technicians from outside Tikrit to deal with crude from Himreen and they started to dig up craters and siphon crude out of the wells using small water irrigation pumps,” said an oil ministry employee working at the field.

Iraqi Kurdistan

An Iraqi security official said trucks used to smuggle crude from Ajil and Himreen into Iraqi Kurdistan and Iran. Kurdish peshmerga forces used to turn a blind eye.

But Iraqi national security forces as well as the peshmerga began to halt the trade on July 12, he said. The army used helicopters to bomb trucks heading east from Tikrit, while Kurdish security forces seized trucks with smuggled crude crossing into territories under their control.

“We have managed to destroy more than 50 trucks as of July 12,” Iraqi counter-terrorism spokesman Sabah Nouri said. “Our helicopter strikes hit the smuggling process hard and cut a vital source of finance to the terrorists.”

An oil ministry adviser estimated that in the first two weeks of July, before the operation was halted, the Islamic State made around $10 million - nearly $1 million a day.

The mayor of Tuz Khuramto, a town on the route between Tikrit, the Kurdish enclave and Iran, said the smuggling route had been shut down 10 days ago.

“Before that, between 30 to 60 trucks moved into the Kurdish region, but now we can say number is zero,” Shallal Abdul said. 

You May Like

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants More

This forum has been closed.
Comment Sorting
Comments
     
by: ali baba from: new york
July 23, 2014 6:53 AM
After ISIL Occupied oil refinery ,they took oil and sell it to generate income. How they finance where they are in Syria? who give them the weapons? who pay for traveling fee? It obvious there are other source for them. the money flow to them from Arab countries and their supporters in USA and Europe. This vicious organization has to stop. Sunni .they hate Shia and they have money and use to initiate violence .the conflict has caused people to be killed especially the Christian in Musol .

ISIL had put three options such as, taxes convert to Islam, or killed. they destroyed churches and they continue the massacre . so giving money is not acceptable . the Arab to stand clean which it is impossible . the dirty politics in middle East has caused many tragedy. since Washington is Sunni lover , no body want get the bottom of money supplying

by: Xaaji Dhagax from: Somalia
July 23, 2014 4:37 AM
There should not be any doubt that the buyers of these dirty oil are Americans. The reason is very obvious: Americans are extremely addicted to OIL!
In Response

by: ali baba from: new york
July 23, 2014 7:01 AM
For your information , America Has natural gas that USA will be self sufficiency in Energy in the coming years. . So Arab oil will be send to Somalia. you need to read to understand kids

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs