How ISIS uses captured oilfields to finance its campaign

An essential component of ISIS oil sales is going to so-called "middlemen" who own tanker trucks and have connections to smugglers or local refineries in places like Syria, Iraq, Kurdistan and Turkey.

'They're relying on very small transactions, and a lot of them,' to finance their operations

ISIS is said to control a few smaller fields in northern Iraq with significantly more oil under control in eastern Syria, where they have undisputed control of the eastern territory. Most estimates place production in Iraq and Syria at around 80,000 barrels a day (Reuters)

To finance its militant campaign in Iraq and Syria, ISIS has relied heavily on the revenue it generates from captured oilfields, some of which are now being targeted by U.S.-led airstrikes.

ISIS oil production has been estimated at tens of thousands of barrels a day, and generates between $1 million and $3 million a day of revenue, analysts say. But the challenge for the militant group, which is said to control at least 11 oilfields, is finding buyers for its product.

"No big traders, no serious companies are going to fool around with that oil," says Matthew M. Reed, vice-president of Foreign Reports, a Washington-based consulting firm that analyzes oil and politics in the Middle East. "That oil is essentially radioactive at this point. No one wants to touch it."

What that means is that the vast bulk of ISIS's oil sales is going to so-called "middlemen," who own their own tanker trucks and who have connections to established smuggling networks in northern Syria and southern Turkey, or to local refineries in places like Syria, Iraq, Kurdistan and Turkey.

"They're relying on very small transactions and a lot of them in order to move the oil because they're selling it by tanker truck more often than not. And a tanker truck can't hold that much oil," Reed said.

Robin Mills, a Dubai-based energy consultant and the author of two books on the politics of oil, said that these rogue tankers will fill up at the fields and cross the border at smuggling points.

"This is a long, established smuggling trade that's gone on for many years," Mills told CBC's The Current.

Refined oil being used in places fighting ISIS

ISIS is also refining some of this oil itself and selling the product in the local market. As well, the group is using some of it to supply its own war effort, Reed said.

"There's good reason to believe that the refined product coming from ISIS oil is actually being used in places that are fighting ISIS," he added. 

And that includes the sworn enemy of the groups, the regime of Syrian President Bashar al-Assad, which is probably getting oil either directly or indirectly from ISIS-controlled fields or territories.

"The regime in Damascus has pulled its punches with ISIS from the beginning in order to promote the idea that all of Assad's enemies are terrorists," Reed said. "So if you allow ISIS to flourish and then ISIS in return also gives you breathing space — let's say it allows oil to pass through its territory, allows refineries they could cut off to keep operating under regime control —  it benefits both sides."

ISIS is said to control a few smaller fields in northern Iraq but most of its oil comes from eastern Syria, where it has undisputed control of most of that territory.


However, international companies that were operating those fields have since fled the region, Mills said, and while ISIS has had some success attracting oil engineers, "production is far below what it used to be."

Working on skeleton staff

Most estimates place oil production in the ISIS-controlled parts of Iraq and Syria at around 80,000 barrels a day, but that is a sharp decline from pre-conflict days. In Iraq for example, those same assets would have produced around 220,000 barrels a day, Luay al-Khatteeb, founder and director of the Iraq Energy Institute, told CNN.

"In a lot of these places it sounds like they're working on skeleton staffs of engineers and others who are able to run the refineries," Reed said.  "Some of those people are just doing it to keep their jobs, others certainly are under threat. They have been told they have to show up."

The oil is also being sold at a steep discount, in some cases as low as $25 a barrel. But that is still a price that allows ISIS to generate up to $3 million dollars a day, some analysts say.

Carjackings, bank robberies, extortion, kidnappings for ransom are also used to fund its organization. But Reed said there seems to be a general agreement that oil is the number one revenue stream for them.

"It's the only thing they have to sell, really, and you can only steal so much from the people."

He said it's too early to tell what impact the recent U.S.-led airstrike on at least four oil installations and three oilfields controlled by ISIS will have on their operations or revenue.

But al-Khatteeb told CNN that the impact of these strikes is "going to be immense and grave."

"If they are hitting the facilities and the oil convoys on the smuggling roads they will significantly disrupt supply and regular production. If the bombardments continue it will impact the energy supply and deny ISIS much-needed fuel for their mobility and the servicing of the communities under their rule."

With files from The Associated Press


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