November 19, 2014
Inside Islamic State’s oil empire: how captured oilfields fuel Isis insurgency
Islamic State has consolidated its grip on oil supplies in Iraq and now presides over a sophisticated smuggling empire with illegal exports going to Turkey, Jordan and Iran, according to smugglers and Iraqi officials.
Six months after it grabbed vast swaths of territory, the radical militant group is earning millions of dollars a week from its Iraqi oil operations, the US says.Coalition air strikes against tankers and refineries controlled by Isis have merely dented – rather than halted – these exports, it adds.
The militants control around half a dozen oil-producing oilfields. They were quickly able to make them operational and then tapped into established trading networks across northern Iraq, where smuggling has been a fact of life for years. From early July until late October, most of this oil went to Iraqi Kurdistan. The self-proclaimed Islamic caliphate sold oil to Kurdish traders at a major discount. From Kurdistan, the oil was resold to Turkish and Iranian traders. These profits helped Isis pay its burgeoning wages bill: $500 (£320) a month for a fighter, and about $1,200 for a military commander.
The US has pressured Iraqi Kurdistan’s leaders to clamp down on smuggling, with limited success. But oil is still finding its way to Turkey via Syria, with Islamic State deftly switching from one market to another, smugglers say, with cheap crude channelled to Jordan instead. On Monday, a UN panel urged countries neighbouring Iraq and Syria to seize oil trucks that continue to flow out from jihadist-occupied territory.
“We buy an oil tanker carrying around 26 to 28 tonnes [of oil] for $4,200. We sell it in Jordan for $15,000. Each smuggler takes around eight tankers a week,” Sami Khalaf, an oil smuggler and former Iraqi intelligence officer under Saddam Hussein, told the Guardian. Khalaf, who lives in Jordan’s capital, Amman, said smugglers typically paid corrupt border officials $650 to pass through each checkpoint.
Iraqi intelligence officials confirm that Isis uses Anbar province, which shares a border with Jordan, as a major smuggling hub. Isis controls three major oilfields in Iraq – Ajeel, north of Tikrit, Qayara, and Himrin.
One official, based in Kurdish-controlled Kirkuk, said 435 tonnes of crude oil from the Ajeel oilfield in Salahuddin province was recently transported to Anbar. From there it went to Amman. Iraq’s oil ministry spokesman, Asim Jihad, said he was not aware of oil being smuggled to Jordan, but conceded that Isis was still managing to export crude to Turkey via Syria. “We are pressing Turkey to stop this trade because it strengthens Isis,” Jihad said.
In June, US reconnaissance drones flying above northern Iraq spotted large numbers of oil tankers crossing unhindered from Isis areas into the Kurdistan region. At the time, Kurdish peshmerga fighters were facing off against Isis on a new and fragile frontline. American commanders presented Kurdish officials with satellite imagery and pressured them to crack down. US planes destroyed seven tankers, with Iraqi aircraft hitting similar targets last month.
Militants outside an oil refinery in Baiji, north of Baghdad. Isis was quick to make the oilfields it captured operational. Photograph: Uncredited/AP
“The middlemen, traders, refiners, transport companies, and anyone else that handles [Isis’s] oil should know that we are hard at work identifying them, and that we have tools at hand to stop them,” David Cohen, the undersecretary for terrorism and financial intelligence at the US treasury, warned. Last week, Cohen estimated the militants were still earning “several million dollars per week from the sale of stolen and smuggled energy resources” – down on what they pulled in before the coalition air strikes, but still a substantial amount.
Before Isis captured them, the oil fields might produce 400,000 to 500,000 barrels of oil a day, according to an official in Iraq’s state-run North Oil Company, which oversaw all the fields in the area before the militants took control. One trader said that at its height, 3,000 tonnes of crude oil (25,350 barrels) a day were going to Kurdistan. From there the oil vanished into Turkey and Iran.
International scrutiny has restricted these volumes. But one Kurdish parliamentarian admitted it hadn’t been shut down altogether. “I would say the illegal trade has decreased by 50%. We have detained several people who were involved in buying oil from Da’esh [Isis]. The same people provided Isis with petrol and over 250 pick-up trucks,” Mahmoud Haji Omar said. He added that even Shia militia fighting the extremists had profited from the trade by taxing oil tankers passing through territory they control.
Karim Hassan, a 47-year-old Sunni Arab truck driver identified an Isis commander, Saud Zarqawi, as responsible for much of the trade. Zarqawi had made a deal to smuggle the oil with Sunni tribal leaders and other prominent individuals in the Mosul area, Hassan said. The leaders reactivated existing networks with Kurdish traders who took the oil to the autonomous region.
Oil refinery in Beiji. Corrupt peshmerga commanders have facilitated the oil-smuggling from Isis territory. Photograph: AP
Hassan, who has transported oil for the past 13 years, said he was astonished how quickly Isis had made these oilfields operational. When he asked his contacts in the oil sector in Mosul, he was told that Isis had brought in two oil engineers from Syria who managed to get the fields under its control up and running.
“Kurdish traders agreed to buy the oil for half of its international price and paid $1,500 for each tanker to pass through the peshmerga checkpoints in Kirkuk, Makhmour, Daquq and Tuz Khormato areas,” said Hassan, who used to get $120 to $150 for transporting crude oil but was paid as much as $300 for a round trip by people affiliated with Isis. The oil was then resold to Turkish and Iranian traders.
While the overwhelming majority of Kurdish peshmerga are battling Isis on a long frontline in northern Iraq, some corrupt commanders within the force have facilitated the oil-smuggling from Isis territory.
Nihad Ghafar, who has been transporting crude for the past seven years, said he had loaded oil from the Isis-controlled area of Hemrin and taken it to Qoshtapa – a district about 30km south of the Kurdish capital, Erbil, where much of the smuggled oil appears to have been taken for refining.
Before Isis captured them, the oil fields might produce 400,000 to 500,000 barrels of oil a day. Photograph: Karim Sahib/AFP/Getty Images
“We did not stop at the Kurdish checkpoints because there was an arrangement between the Kurdish traders and the head of the checkpoints,” Ghafar said.
Kurdish regional government officials claim they have detained several individuals who dealt in the oil coming from Isis and are working with American officials to put a stop to the trade. Ahmad Askari, a member of the security committee of the Kirkuk provincial council, said those who had bought oil from Isis would be charged under the anti-terror law, punishable by death.
A security official in south of Kirkuk who requested anonymity said as far as he knew his superiors had not taken any action against Kurds involved in the trade initially because they didn’t want to tarnish the image of the peshmerga.
Ghafar said that for the past month the route he used to buy and transport Isis oil had been closed because of the US bombing. Checkpoints had also applied tighter controls, he said. The air strikes in Iraq and Syria on oil refineries and crackdown on crude oil smuggling has led to price rises for fuel and petrol in Mosul, which poses serious challenges for the Islamic militant group to rule its biggest urban centre. “There are trucks and oil tankers parked by the side of every road in Mosul selling all kinds of gasoline: black, red, white and yellow gasoline with very low quality,” said a resident of Mosul.
When asked if many within the smuggling network have been arrested, the Kurdish oil trader replied: “Small fish always get caught. But the big fish always escape.”
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