Despite U.S.-led campaign, Islamic State rakes in oil earnings

BAGHDAD — The Islamic State rakes in up to $50 million a month from selling crude from oilfields under its control in Iraq and Syria, part of a well-run industry that U.S. diplomacy and airstrikes have so far failed to shut down, according to Iraqi intelligence and U.S. officials.

Oil sales — the extremists’ largest single source of continual income — are a key reason they have been able to maintain their rule over their self-declared “caliphate” stretching across large parts of Syria and Iraq. With the funds to rebuild infrastructure and provide the largesse that shore up its fighters’ loyalty, it has been able to withstand ground fighting against its opponents and more than a year of bombardment in the U.S.-led air campaign.

The group has even been able to bring in equipment and technical experts from abroad to keep the industry running, and the United States has recently stepped up efforts to close off this support.

Washington has been talking to regional governments, including Turkey, about its concerns over the importing of energy infrastructure into IS-run territory in Syria, including equipment for extraction, refinement, transport and energy production, according to a senior U.S. official with firsthand knowledge of the IS oil sector.

Speaking to The Associated Press in Washington, he said international actors in the region were intentionally or unintentionally aiding this effort and called IS’ management of its oil fields “increasingly sophisticated,” something that has helped the group slow down the degradation of its infrastructure from U.S. bombing raids. He spoke on condition of anonymity because he was not authorized to talk to the press.

IS sells the crude to smugglers for discounted prices, sometimes $35 per barrel but as low as $10 a barrel in some cases, compared to just under $50 a barrel on international markets, four Iraqi intelligence officials told the AP in separate interviews. The smugglers in turn sell to middlemen in Turkey, they said. The oil used to be smuggled in fleets of giant tankers but, fearing airstrikes by the U.S.-led coalition, smaller tankers are being used now. The Iraqi officials spoke on condition of anonymity because they were not authorized to brief the press.

The Islamic State group is believed to be extracting about 30,000 barrels per day from Syria, smuggled to middlemen in neighboring Turkey. In Iraq, they produce around 10,000-20,000 barrels per day, mostly from two oilfields outside Mosul, Ibrahim Bahr al-Oloum, a member of Iraq’s parliamentary energy committee and a former oil minister, told the AP. But he said much of the Iraqi production is not sold and instead sent to Syria to makeshift refineries the group has set up to produce fuel products.

In total, the group is believed to make $40-$50 million a month from sales, the Iraqi officials said. A report by the Islamic State’s Diwan al-Rakaaez — its version of a Finance Ministry — seen by the AP in Baghdad shows that revenues from oil sales from Syria alone last April totaled $46.7 million. The IS “finance ministry” report put at 253 the number of oil wells under IS control in Syria, saying 161 of them were operational. Running the wells were 275 engineers and 1,107 workers, it said.

Turkey’s prime minister’s office said in a statement to the AP that it has taken steps to tighten border security and “has effectively stopped oil smuggling” across the border. It said that as of the end of September it had prevented 3,319 acts of smuggling from Syria and that since 2011 it seized more than 5.5 million liters of oil in anti-smuggling operations. It did not comment on U.S. efforts to stop oil equipment and experts from entering Syria from Turkey.

Daniel Glaser, a U.S. Treasury official, estimated IS oil revenues at around $500 million a year, based on evidence they made around $40 million in one month in early 2015. The group is also believed to rake in hundreds of millions of dollars a year from “taxes” on commercial activities in the areas it rules, said Glaser, who is assistant Treasury secretary for Terrorist Financing in the Office of Terrorism and Financial Intelligence.

That income is on top of the money that the militants first looted from the Iraqi central bank branch in the city of Mosul when they seized it in the summer of 2014 and other bank branches, which “at the time was thought to be anywhere between $500 million dollars to up to $1 billion,” Glaser told the AP.

The Iraqi officials said some oil was also smuggled into Iraq’s self-ruled Kurdish region. But Ali Hama Salih, a member of the Iraqi Kurdish parliament who follows trade out of IS-run areas, denied the group was smuggling oil into Iraqi Kurdish areas, saying “there are no documents to prove Daesh is selling oil through here,” using an Arabic acronym for the group. It is easier, he said, for IS to move the smaller amounts it produces in Iraq into Syria.

Still, there is other trade into Kurdish regions. Salih said authorities in the regional government in Iraqi Kurdistan have recently arrested 15 people, including military officials and businessmen, on suspicion of doing business with IS.

So far, the campaign of Russian airstrikes in Syria that began last month has not hit IS oil infrastructure, though the nearly year-old U.S.-led air campaign has on occasion. In Iraq, airstrikes and ground offensives have had a greater effect in grinding down the oil industry.

In March, the militants were driven out of a major oilfield outside the northern Iraqi city of Kirkuk. Fear of airstrikes is preventing IS administrators from exploiting another large oilfield near Sinjar in northern Iraq, though production teams are sent there occasionally to quickly pump out oil and leave, the Iraqi intelligence officials said.

Still, little has hurt the sophisticated industry that the IS group has built up around oil production.

The Islamic State runs a network of small, rudimentary refineries set up in trailers whose output partially satisfies domestic needs. Turkish and Kurdish maintenance crews travel overland into IS-held territory under heavy security to work on the wells and the refineries, according to the Iraqi officials. Also, senior officials from Iraq’s state-owned, northern-based oil companies have been employed by IS, the officials said.

Hashem al-Hashemi, a prominent Iraqi expert on the Islamic State, said Iraqi oil engineers are given a daily rate of $300, rising to nearly $1,000 when they deal with technical problems.

Two of the Iraqi intelligence officials said a senior IS member they identified as Haji Diaa was in charge of the group’s oil operations and is the point man in dealing with Turkish and Kurdish engineers. The officials refused to provide further information about him.

Those buying the oil often wire the payments to female IS members in Istanbul and Ankara — on the presumption that women will draw less attention — and the money is later hand-carried into Iraq or Syria, said one of the officials, the head of one of Iraq’s top counterterrorism agencies.