As repeatedly happens in Middle East conflict, oil infrastructure was a military target last week. On Wednesday, UAE and Saudi warplanes supported US forces in destroying refineries in eastern Syria. This was not a rerun of Saddam Hussein’s scorched earth policy in Kuwait, but rather an attempt to cut off funds to ISIL.
The role of oil revenues for ISIL has come under intense scrutiny since its seizure of Mosul in June. Some estimates have suggested it earns US$2 million to $3m daily from oil sales, making it the world’s wealthiest terrorist group. But these figures are likely to have overestimated both volume and value of the oil, and the number has probably fallen significantly since then.
Shortly after the fall of Mosul, ISIL held seven oilfields in northern Iraq and several small refineries, and was besieging Iraq’s largest refinery at Baiji.
At this point, it might have controlled about 70,000 barrels per day of production capacity in Iraq. But Baiji is still holding out, and Kurdish and central government forces have retaken several fields, leaving just Hamrin and the heavy oil of Najmah and Qaiyarah – more useful for boot polish than as fuel for mobile warfare.
The Kurds have tried to block smuggling into their region. If anything, as the Iraq Oil Report points out, fuel may be moving the other way, to sustain the ISIL war machine.
In the same month it took Mosul, ISIL also extended its control over a number of oilfields in eastern Syria around Deir Al Zor, which had been run by Jabhat Al Nusra and other groups. The fields produced about 125,000 bpd in 2010, the last year of normal operations.
Lebanon’s Al Safir newspaper, reporting on the division of the spoils between ISIL and various local tribes, suggested that by June this year, Omar, Syria’s largest light oilfield, was yielding about 32,000 bpd, the Tanak field 19,000 bpd, and the badly damaged Al Kharrata, Thayyem and Al Ward fields just 300 bpd between them.
These fields were already mature and geologically complex, reliant on large amounts of water injection to sustain production. With rudimentary operations and no new drilling, it is surprising that output is even as much as 50,000 bpd. Much of this is refined locally in primitive facilities, the type hit in the recent raids.
ISIL and other groups maintain a shadowy relationship with the regime of Bashar Al Assad, continuing to supply power and gas to regime-held areas. This trade can fray, as in July’s bloody attack by ISIL on the important Al Shaer gasfield near Palmyra, which feeds Homs and Damascus.
Some other oil is smuggled to Turkey, which has come under strong pressure recently to clamp down on the illegal trade. But exports from ISIL territory either in Iraq or Syria must be greatly constrained by the difficulty of driving large amounts of oil in lorries through mountainous and dangerous territory, vulnerable now to air attack, and across borders that – in principle at least – are sealed.
Between patronage to fickle allies, military needs and basic local consumption, there may not be much oil left to sell. Even legitimate oil from the Kurdish region fetches only $60 per barrel, which means ISIL must be earning far less.
At their peak, ISIL revenues from oil and other sources were probably well short of $1 billion a year, and the refinery raids and other actions should have cut that substantially. In comparison, even a basic budget for military and civilian needs in its area would be $4bn or more annually. This is a parasite, a state of plunder, not a “self-sustaining economy”, as some have claimed.
So, is ISIL a very wealthy terrorist organisation, or a very poor state?
Robin Mills is head of consulting at Manaar Energy, and author of The Myth of the Oil Crisis
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