November 20 2015
Here's How ISIS Keeps Selling So Much Oil Even While Being Bombed And Banned By The West
Suleiman Al-Khalidi, Reuters
Oct. 25, 2014, 2:03 PM
AMMAN (Reuters) - Islamic State is still extracting and selling oil in Syria and has adapted its trading techniques despite a month of strikes by U.S.-led forces aimed at cutting off this major source of income for the group, residents, oil executives and traders say.
While the raids by U.S. and Arab forces have targeted some small makeshift oil refineries run by locals in eastern areas controlled by Islamic State, they have avoided the wells the group controls.
This has limited the effectiveness of the campaign and means the militants are able to profit from crude sales of up to $2 million a day, according to oil workers in Syria, former oil executives and energy experts.
"They are in fact still selling the oil and even stepping up exploitation of new wells by tribal allies and taking advantage of the inability of the enemy to hit the oil fields," said Abdullah al-Jadaan, a tribal elder in Shuhail, a town in Syria's oil-producing Deir al-Zor province.
U.S.-led forces want to avoid hitting the oil installations hard because it could hurt civilians more than the militants and could radicalize the local population, analysts say.
On Thursday the United States threatened to impose sanctions on anyone buying oil from Islamic State militants in an effort to disrupt what it said was a $1-million-a-day funding source.
Most of the oil is bought by local traders and covers the domestic needs of rebel-held areas in northern Syria. But some low-quality crude has been smuggled to Turkey where prices of over $350 a barrel, three times the local rate, have nurtured a lucrative cross-border trade.
"Our options are limited unless you hit the wells - but it does not just hit Islamic State, it hits the entire population and that is not something that the U.S. can do very easily," said Andrew Tabler, a senior fellow at the U.S.-based Washington Institute, who focuses on Syria.
"It's a good example of the constraints of trying to bomb your way out of it."
Any bombing of Syria's major oil wells could evoke memories of the 1990-1991 Gulf War when the forces of Iraq's Saddam Hussein invaded Kuwait and burnt oil wells as they were repelled by U.S.-led forces, causing severe damage to the infrastructure.
Washington wants to preserve parts of Syria's oil infrastructure with the hope that they can be used after the war if Islamic State and the forces of President Bashar al-Assad are defeated, a U.S. official said near the start of the bombing campaign.
One U.S.-led raid destroyed parts of a mobile refinery in eastern Syria but left a tower at the installation intact.
"It wasn't about obliterating the refineries off the face of the map. It was about degrading (Islamic State's) ability to use these refineries," Pentagon press secretary Rear Admiral John Kirby told a briefing on Sept. 25.
"We'd like to preserve the flexibility for those refineries to still contribute to a stable economy in what we hope will be a stable country when the Assad regime is not in control anymore."
Over the summer Islamic State was pumping anything between 40,000 to 80,000 bpd of crude oil from the wells it controls in the Deir al-Zor and Hasaka provinces, according to estimates from oil experts, traders and local sources contacted by Reuters.
The International Energy Agency said in a report this month that output in Islamic State-controlled areas had fallen to less than 10,000 bpd as a result of the air strikes.
Local prices of petroleum products however suggest that the strikes have not had a large impact on the supply of illicit oil. A barrel of Islamic State oil sells for around $20, whereas early in 2014 it was selling for $35.
Traders say this is because there were ample stockpiles built up before the strikes and because Islamic State ramped up its production in recent weeks.
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http://www.businessinsider.com/r-islamic-state-keeps-up-syrian-oil-flow-despite-us-led-strikes-2014-10
