ISIL has added a lucrative new business line in Iraq: oil smuggling

July 10, 2014
Obsession
Energy Shocks
July 10, 2014

ISIL, the business-minded Islamic army threatening Baghdad, has established a new flow of revenue since seizing a large swath of Iraq—an estimated $1 million-a-day oil smuggling business.

According to an investigation by Iraq Oil Report (paywall), ISIL rapidly captured one and possibly two oilfields south of Kirkuk soon after storming Iraq a month ago. The fields, in the Hamrin mountains, produce relatively small volumes—just 16,000-20,000 barrels a day. But that earns a tidy income even at the knock-down local black market rate of about $55 a barrel, according to the report.

The description of ISIL’s smuggling route into Kurdistan continues the narrative of a ruthlessly managed, financially savvy rebel group that has emerged over the last year first in Syria and now Iraq. That includes control over Syria’s oilfields—on July 3, ISIL captured al-Omar, the country’s largest oilfield—plus some $420 million in Iraqi dinars snatched up in the June capture of Mosul. In all, ISIL may have a cache of some $1.3 billion.

If you look at the capture of Iraqi territory as a business expansion, the prudent thing for ISIL to do is to establish new lines of revenue to support its added expenses. This is what the Hamrin mountain oil-smuggling network looks like.

From the area controlled by ISIL, the oil is taken by smugglers in 160-barrel tanker trucks to Kurdistan, where it is refined in plants in Sulaimaniya and sold on from there. Kurdish authorities have begun to arrest drivers carrying the smuggled oil but, with global prices at about $108 a barrel, there is an ample selling margin to incentivize people all along the route to go along.

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