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How ISIS Sells Its Oil

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How ISIS Sells Its Oil

Most people have seen the news reports of how the terrorist army known variously as ISIS, ISIL, or Islamic State funds its reign of terror by selling oil from captured oil wells and refineries. What isn't well known is exactly how ISIS sells its oil.

In its ongoing investigative journalism series "ISIS, Inc.", the Financial Times details the path this "blood oil" takes from the well head to consumers.

Map of ISIS-controlled areas and Syrian oil fields. Red = ISIS, Green = Kurds, Blue = Government

Decentralized Network Proves Difficult to Disrupt

Contrary to common belief, there is no formal conspiracy between the terrorists and the renegades in the Turkish government. Instead, the oil passes through several middlemen, with most of it sold and consumed inside Syria itself. Independent smugglers use mountain passes and back roads to get some of the petroleum into Turkey.

A scratch-built refinery similar to those being used to process ISIS oil A makeshift refinery similar to those used to process ISIS oil

A system of jury-rigged private refineries and independent truckers make for a decentralized system that proves hard to disrupt without permanently destroying the oil wells. ISIS is content to get most of its money up-front by selling crude directly from the well head, but has also used its wealth to outright purchase existing oil refineries. They keep the original owner as a front man and split the profits. ISIS-owned tankers are used to deliver crude oil from their wells to the refineries. This arrangement allows the terrorists to get their oil into the general market undetected.

Both these systems free up ISIS fighters to expand their territory, instead of being involved in the long supply chain from oil field to end user. The group is content with letting others take the risks for a profit, as they are selling the crude as fast as they can pump it.

Bombs Not Always The Best Answer

With the distribution network so difficult to disrupt, the idea of cutting the supply off at the source seems a natural one. After all, the locations of the oil fields are common knowledge, and the infrastructure impossible to hide. However, the consequences of such actions have prevented the U.S,-led coalition from doing this.

Oil well fires rage outside Kuwait City in the aftermath of Operation Desert Storm. Oil well fires rage outside Kuwait City in the aftermath of Operation Desert Storm.

One big factor is the environmental damage that would be caused. In the first Gulf War, Kuwaiti oilfields were destroyed by the retreating Iraqi army, and the resulting toxic plumes of burning crude could be easily seen from space. Specialized equipment and expertise are needed to extinguish oil well fires. Similar fires in Syria could burn for months or even years, devastating the region and severely impacting the local population.

Another factor is the number of civilian casualties that would occur during a bombing campaign against ISIS oil wells. Almost all of the workers in the oil fields and ISIS-controlled refineries are there against their will.

A third factor is the long-term damage to Syria's infrastructure that would result. It took years to rebuild Kuwait's oil infrastructure, and that was in a modern, peaceful area.

As the war on drugs has proven, targeting the traffickers of illicit goods does not appreciably reduce the money being made by the suppliers. Thus, ISIS will continue to successfully sell its oil and use the proceeds to strengthen their position for the foreseeable future.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

About the Author

Everett Millman

Steven Cochran

Precious Metals Market Analyst
BS University of South Florida (2002)

A published writer, Steven's coverage of precious metals goes beyond the daily news to explain how ancillary factors affect the market.

Steven specializes in market analysis with an emphasis on stocks, corporate bonds, and government debt. He writes a monthly review of the precious metals markets for SurvivalBlog.com.

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