A Bank Of Blood Money
Soldiers of fortune they’re not, but ISIS has effectively monetised their loot
Where is the money coming from?
Oil: The largest component. Opinion on earnings from oil smuggled to the global markets (via Turkey) ranges from $500 million to $2 billion. Some say most of the oil is used within the region.
Extortion: Taxes on local residents, all goods, roads and transport, protection money from non-Muslims (jazia); refugee smuggling; smuggling; ransom; sale of rare artifacts, looting of banks
What is the money being spent on?
Cost of armament and logistics
Payments to members and family
Recruitment
Legal cost for detainees
Administrative costs
What are the caveats?
Most of the budget is speculative as ISIS leaders hold financials within top ranks only
Oil smuggling by Iraq jehadists has existed for a decade; but value shot up after Western offensive launched
High value attached to self-financing by ISIS helps maintain support for anti-ISIS coalition
Sufficient external funding for ISIS means rich West Asian states avoid anti-ISIS conflict
The money that lubricates the levers of the Islamic State (ISIS) remains a mystery soaked in oil and extortion. More than extreme violence, the vast funds ISIS controls perpetuates its power. Money increases its seductive call to arms and gives its recruitment strategy a fillip. Talk of a well-stocked caliphate helps its eschatological claims. It also prompts ISIS’s enemies to pump in more money in order to vanquish the evil machine.
Yet, nobody has a clear grasp of exactly how much money ISIS controls, and how it makes that money. Estimates vary. For instance, a 2014 Thomson Reuters report claimed that ISIS controls assets worth over $2 trillion and generates at least $2.9 billion income each year. Moreover, speculation continues that there is substantial external funding that has continued to flow in despite all the carnage. There are other estimates as well (see graphic) but all punctuate it with caveats.
The popular view is that ISIS is making millions of dollars that finance weapons, fighters, recruitments and terrorist attacks. It reportedly controls several oilfields in Syria—the source of the bulk of their oil money. Ground reports suggest that they have been selling oil at literally throwaway prices—as low as $25 a barrel, while the current global crude price is $40 a barrel. Western countries have claimed that ISIS is churning out up to $5 million in profits each day from oil sales, indicating a total annual income of $1.5 billion from oil alone.
Speaking to Outlook, journalist and West Asia expert David Butter disagrees with estimates that he feels overplay ISIS’s assets. Prior to the conflict, the Assad government generated about 4,00,000 barrels of crude oil a day. “ISIS controls oilfields that accounted for about 30 per cent of Syria’s pre-conflict daily production of 3,85,000 barrels. And it has negligible oil production assets in Iraq,” says Butter. According to him, the core of ISIS’s oil production comes from fields previously operated by Al-Furat (Shell) and DZPC (Total) in Deir ez-Zor province. It has smaller fields in South Hasakeh and near Albukamal. It controls the Conoco associated gas plant, which processes gas from Al-Furat and DZPC fields and some non-associated gas fields north and east of Palmyra.
“I would estimate oil capacity to be a maximum 30,000 barrels per day, and that the average revenue earned by ISIS around $10-$15/barrel,” says Butter, while acknowledging other, varying estimates. “Firm evidence is hard to come by, but a budget statement obtained by the Jihadology blog said that oilfield revenue for Wilayat al-Khair (which includes Deir ez-Zor province) was $2m in the month corresponding to mid-December 2014-mid-January 2015, in other words $66,000 per day, which would indicate fairly low levels of production and low prices,” Butter says.
The Thomson Reuters report also claims that ISIS-controlled natural gas-fields annually generate half-a-billion dollars from natural gas sales. But most of the gas goes to thermal power stations in Syria. Butter points out that ISIS supplies the gas from treatment plants in its own zones to power stations located in areas the Assad regime controls. “My understanding is that oil is sold to traders who sell to makeshift refiners who sell to other traders who sell to consumers mainly inside Syria, in the ISIS zone, the rebel (non-ISIS) zone and to a limited extent in the (Assad) regime zone.”
Like conflict diamonds, ISIS oil is travelling to the global market. Its likely route is from northwest Iraq and northeast Syria to southeast Turkey.
However, there is sufficient reason to state that just like conflict diamonds, the oil is definitely travelling to the global market. A journalist working close to the ISIS conflict zone responded very briefly to Outlook to say that “the crude (oil) smuggling routes and existing networks remain, but some of the players have changed as per preference of the ISIS commerce structure”. The oil seems to travel from northwest Iraq and northeast Syria to southeast Turkey.
A recent investigative data report by two London-based scholars, George Kiourktsoglou and Alec Courtroubis, exposes how the crude oil travels through Ceyhan port in Turkey and then to the world. Between July 2014 and February 2015, there were three spikes in containers moving from Ceyhan, corresponding to exactly the time when ISIS was taking over oilfields in Syria.
Between July 10 and July 21, 2014, there was a spike in crude transport matching the fall of Syria’s largest oilfield in Al-Omar to ISIS. The second was during October-November 2014, while ISIS took over the Jhar and Mhar gas fields and the Hayyan gas company. The third was from the end of January 2015 to February 10, 2015, while the US bombarded ISIS oil wells in Kirkuk. To add credence, there is data to show that when ISIS launched its oil business in mid-2014, there was a surge in tanker charter routes from Turkey. The sharp increase in smuggled crude oil sale could mean that ISIS was raising funds by supplying the global market through Turkey.
Grabbing Mosul in June 2014 gave ISIS its first taste of financial independence, say Jessia Stern and J.M. Berger in their book ISIS: The State of Terror. At the time, both ISIS supporters and others mentioned the large booty captured from Mosul’s banks in the social media. ISIS started consolidating its revenue generation from looting, local taxes, sale of antiquities and oil-smuggling. The group was reportedly generating between $1-3 million a day. Financial documents seized from ISIS fighters reportedly show that only five per cent of the group’s funding is from external contributions.
Irrespective of the large or moderate nature of ISIS’s oil revenues, the West has been feeling the pinch of ISIS control in Syria and Iraq, especially so after last week’s attack on Paris. A bit of history helps to unravel its financial methods.
The official name, ISIS, was given after the Mujahideen Shura Council (MSC)—an umbrella Sunni organisation—disbanded after the death of Abu Musab Al-Zarqawi in 2006. Between 2004 and 2006, Zarqawi, leader of Al Qaeda in Iraq, funded global jehad. With speculated average revenues of $120 million a year, even Osama bin Laden and the Qaeda network relied on Zarqawi. There are rumours that Zarqawi was pressurised into making his old group, Jamaat al-Tawhid wal-Jihad, the Iraqi affiliate of the Qaeda, because the latter sorely needed the cash. Zarqawi’s control over the umbrella outfit had ensured that the interests of Al Qaeda’s funders were protected. The oil extracted from the few wells were smuggled out using routes established during Saddam Hussein’s rule. They would be carried to Turkey and other neighbouring countries, where middlemen would sell the oil to international buyers. The modus operandi of ISIS’s revenue generation follows and expands on the prototype set by its forebears.
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