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Islamic State selling Iraqi oil to finance caliphate

Jul 25, 2014 9:41 am By Robert Spencer

Mideast IraqThe Islamic State is doing everything it can to ensure that it remains on the scene, as that will be its best claim to legitimacy: if it still exists in a year, or five years, or ten years, many of the Muslims who have contemptuously dismissed its claim to constitute a new caliphate will reconsider their position. Might, in the case of the historical caliphates as well as this one, makes right.

“Islamic State Selling Iraqi Oil To Finance ‘Caliphate,'” by Ahmed Rasheed, Reuters, July 23, 2014:

BAGHDAD, July 23 (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.

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.”

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 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.

FROM TAXES TO NYMEX?

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.

TIKRIT OILFIELDS

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.

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….

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Filed Under: Islamic State (aka ISIS, ISIL, Daesh) Tagged With: featured


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Comments

  1. Jay Boo says

    Jul 25, 2014 at 9:56 am

    Midnight Meditation beneath the Black Flag
    Late at night when it is oh so very quiet, you will hear them but only you listen.
    When the world is so sound asleep, you can even hear the dust fall, listen to their menacing whispers.
    If you wait in the silence with a determined patience and if you stay perfectly still, Islam’s demons will soon emerge from their dark secret hiding places.
    Do not alert them of your presence.
    They will not harm you, as long as, you are well prepared to ambush their evil plans.
    Think only of calm pleasant thoughts as they approach and take slow deep breaths.
    Be confident. Do not be afraid.
    When they are so close you can smell the decay in their fetid breath, grab the Black Flag with a death grip and stop the Islamic infestation. Wave the Black Flag all around. Wave it (left and right), then wave it (high and low) and follow them wherever they scatter and go. Spray them all, wherever they crawl – on the ceiling and even inside the walls.

    • Jerry says

      Jul 26, 2014 at 12:30 pm

      Shame on you!

      Sounds like you planted your microphones in the whitewash house!

      • Jay Boo says

        Jul 26, 2014 at 1:14 pm

        Thanks Jerry
        I see I was not clear enough on the black flag metaphor
        I should have ended my comment with a clearer reference to the jihadi cockroaches

  2. John C. Barile says

    Jul 25, 2014 at 10:04 am

    IS is a rapidly metastasizing malignancy growing in proportion to its malice. When–not if–they capture the Baiji refinery, they will then gain an added advantage over their weakened opponents in Baghdad and Damascus, and IS will certainly field more powerful forces on the battlefields.

    • John C. Barile says

      Jul 25, 2014 at 10:08 am

      Let me refine that cancer metaphor–IS is a rapidly growing malignancy that may soon metastasize, first regionally, then globally.

  3. Richie says

    Jul 25, 2014 at 12:02 pm

    There is NO reason the US should depend on any oil from the Middle East- We get most of our oil from Canada, we should be able to get the rest from the Gulf of Mexico. Want to crush the Islamic fascist states? Cut off their only source of income; oil.

    • David says

      Jul 25, 2014 at 8:44 pm

      Independence from Middle Eastern oil would be good in itself. As to its crushing the Islamo-fascist states, I doubt it. Global energy demand is growing and will continue to grow enormously during this century. Others would pick up the slack and buy those countries’ oil. Nevertheless, the US should still stop buying Islamo-fascist oil and determine to become energy independent.

  4. Daniel Triplett says

    Jul 26, 2014 at 2:32 pm

    They’ll have plenty of customers other than the US lined up to buy their oil. The plan was to use all that oil to pay for the Operation Iraqi Freedom. Didn’t seem to work out.

    A mistake on so many levels for the US to pull out. But now that we’re out, going back in would be a big mistake too. Incremental random Strategic Area Bombing Worldwide to force Muslim governments to outlaw Islam is the only feasible strategy we have left. We don’t have enough gold or military to invade and occupy every Muslim sovereignty on Earth.

    We can never eliminate every Muslim, but we can make Islam a crime in every civilization across the globe, forcing Muslims to live in caves like animals if they insist on worshipping Satan’s religion. Islam is a Conspiracy to Murder innocent men (Genocide of non-Muslims). That makes it a crime already. Outlawing it is fully justified. No reason the rest of us must tolerate it. We are the victims in this whole affair.

    WWIII will light-off by the end of the year. Although Obama is impotent, Netanyahu is not, and won’t allow Iran to get nukes. We may as well all join hands and end Islam once and for all, as long as we’re eliminating the Iranian threat.

    I am NOT talking about killing every Muslim. I’m talking about strategically killing their ideology.

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