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

For Lebanon-based Refugees, Desperation Fuels Perilous Passage

In a war that has caused an estimated three million people to flee Syria, efforts to make perilous sea journey in search of asylum expected to increase More

South African Brewer Tackles Climate Change

Mega-brewer SAB Miller sent delegates to climate summit in Peru, says it is one of many private companies taking their own steps to fight climate change More

Indonesia Reports Increase in Citizens Joining Islamic State

Officials say more than 350 of its citizens are now in Syria or Iraq to fight with Islamic State - 50 more than last month 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.
Will Pakistan School Shooting Galvanize Pakistan Against Extremism?i
X
Ayesha Tanzeem
December 17, 2014 11:54 AM
The attack on a military school in Pakistan’s northwest city of Peshawar left 141 dead, including 132 children. Strong statements of condemnation poured in from across the world. The country announced three days of mourning, and the leadership, both political and military, promised retribution. VOA's Ayesha Tanzeem looks at how likely the Pakistani government is to clamp down on all extremist groups.
Video

Video Will Pakistan School Shooting Galvanize Pakistan Against Extremism?

The attack on a military school in Pakistan’s northwest city of Peshawar left 141 dead, including 132 children. Strong statements of condemnation poured in from across the world. The country announced three days of mourning, and the leadership, both political and military, promised retribution. VOA's Ayesha Tanzeem looks at how likely the Pakistani government is to clamp down on all extremist groups.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.
Video

Video Turkey's Authoritarianism Dismays Western Allies

The Turkish government has been defiant in the face of criticism at home and abroad for its raids targeting opposition media. The European Union on Monday expressed dismay after President Recep Tayyip Erdogan lashed out at Brussels for criticizing his government's action. Turkey's bid to be considered for EU membership has been on hold while critics accuse the NATO ally of increasingly authoritarian rule. Zlatica Hoke reports.
Video

Video US-China Year in Review: Hong Kong to Climate Change

The United States is pushing for a code of conduct to resolve territorial disputes in the South China Sea as it works to improve commercial ties with Beijing. VOA State Department correspondent Scott Stearns reports on a year of U.S. policy toward China from Hong Kong to climate change.
Video

Video Japanese Leader’s Election Win Raises Potential for Conflict with Neighbors

Japan’s Prime Minister Shinzo Abe and his allies easily won a two-thirds majority in parliament Sunday, even though the country has slipped into recession under his conservative policies. VOA’s Brian Padden reports from Seoul, that the prime minister’s victory will empower him to continue economic reforms but also pursue a nationalist agenda that will likely increase tensions with Japan’s neighbors.
Video

Video Nuba Mountain Families Hide in Caves to Escape Aerial Bombings

Despite ongoing peace talks between Sudan's government and the rebel Sudan People’s Liberation Movement-North, or SPLM-N, daily aerial attacks continue in South Kordofan province’s Nuba Mountains. Adam Bailes was there and reports for VOA that government forces are targeting civilian areas, rather than military positions, with their daily bombardments.

All About America

AppleAndroid