Oil smuggling finances Islamic State's new caliphate

 Oil smuggling finances Islamic State's new caliphate
A member of the Kurdish security forces takes up position with his weapon as he guards a section of an oil refinery, which is being brought on a truck to Kalak refinery in the outskirts of Arbil, in Iraq's Kurdistan region, July 14, 2014.

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.

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 neighbours," 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."

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," he 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."

MILITANTS KEPT OILFIELD INTACT

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 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.

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 realise 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.

More about

smuggling
Purchase this article for republication.

BRANDINSIDER

SPONSORED

Most Read

Your daily good stuff - AsiaOne stories delivered straight to your inbox
By signing up, you agree to our Privacy policy and Terms and Conditions.