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What can ISIS do with oil wells it captures?

Scott Tong Aug 28, 2014
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By some estimates, the extremist group ISIS controls 60 percent of oil production in Syria, as well as six oil wells in Iraq.

Much of this oil ends up in the black market, and given that, the “purchase” and sale of this oil is far from typical.

In addition to its holdings, the group is also assumed to pilfer from pipelines and storage facilities, said Valerie Marcel, oil and Middle East analyst at the Chatham House think tank in London.

Marcel says ISIS, also known as ISIL or the Islamic State, takes some of its crude and refines it. “They have an open pit, they burn the oil very crudely,” Marcel says. “And then they have some gasoline which they can provide to local residents, and to their own Humvees.”

The rest of the oil goes to market, largely in Turkey, through a murky set of intermediaries.

“Some of them are Iraqi middlemen, and they take the crude to the border,” Marcel says. “Others are Turkish middlemen. And they’re able to actually sometimes get the oil sold directly to a refinery in Turkey. So that involves a quite well-informed organization.”

Middlemen take a big cut of the money on the way to the black market. So instead of earning the world market price of $100 a barrel, ISIS pockets half or a quarter of that.

Still, assuming intelligence estimates that the group sells 40,000 to 60,000 barrels each day, daily revenue comes out to $1 million to $3 million.

This is enough oil that intelligence may be able to spot its movement.

“We are talking about at least 200 trucks,” says Luay al-Khateeb, an advisor to the Iraqi parliament and head of the Iraq Energy Institute. “And these fleets should be legitimate targets of U.S. and Iraqi air forces.”

Convoys may be a key point of interception. Once the crude gets to market, it can be untraceable.

“Once oil is integrated, it’s very hard to know, literally impossible to know, if a drop comes from here or from there,” says Matthew Levitt, a former Treasury Department intelligence official now with the Washington Institute for Near East Policy. “What we are going to need is intelligence identifying those middlemen, and then deciding how to target their ability to continue functioning in that manner.”

As important as oil revenue is to ISIS, Levitt thinks it’s a small piece of the group’s overall finances.

The extremist group is also assumed to raid banks, and tax farmers and commerce in the territory it controls.

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