The Islamic State of Iraq and Levant (Isil), which controls a huge swathe of territory between Syria and Iraq, is selling crude from captured oilfields on the black market at less than half the global international prices, experts in the Middle East said.
The oil being sold by Isil ranges between $25 (Dh91.75) per barrel to $60 per barrel compared to the current market prices, which on Friday traded for about $102 for Brent crude. Brent is a benchmark for European, African and Middle Eastern oil. However, the illegal sale of oil by Isil will not have any impact on the global oil prices as the quantity traded is too small, they said.
Luay Al Khatteeb, a visiting fellow at the Brookings Doha Centre said that Isil is believed to be smuggling over 30,000 barrels of oil a day. By comparison, Saudi Arabia produces about 9 million barrels every day.
“Though the quantity is small, it is alarming and significant. It is able to generate $2 million per day through the sale of oil and finance its operations.”
He said that the militant outfit could fetch them more than $700 million per year through the sale of oil in the black market.
“The region between Iraq and Syria has emerged as the ideal black market to sell the oil as the territory is under their control,” he said.
According to Khatteeb, Isil controls smuggling routes and the crude being transported by tankers to Jordan via Anbar province, to Iran via Kurdistan, to Turkey via Mosul, to Syria’s local market and to the Kurdistan region of Iraq, where most of it gets refined locally.
“Around 60 per cent of oil fields located in the eastern provinces of Syria and seven oil fields and two refineries in Iraq are under the control of Isil. The bulk of the oil is being smuggled to southern Turkey.”
Al Khatteeb said cross border oil tanker owners, cartels and gangs are involved in smuggling.
“Northern part of Iraq, southern Turkey and eastern Syria is known for smuggling historically,” he said. “Earlier these gangs used to smuggle goods nowthey have evolved into oil trading.”
“Countries like Turkey have turned a blind eye to the practise and international pressure should be mounted to close down black markets in its southern region.”
Another expert working in Dubai-based Institute for Near East and Gulf Military Analysis (INEGMA) said that the oil is also being smuggled to far off places in Eastern Europe like Bulgaria and Ukraine through Turkey and Cyprus.
“There is a need to crack down on the brokers doing the illegal trade. The UnitedNations should investigate the matter and find out who these brokers are and how they are operating,” said Dr Theodore Karasik, director of research and consultancy at INEGMA.
Karasik said that the militant outfit is able to refine oil on its own to some extent but is mostly depending on brokers in Kurdistan.
“The oil is being taken in trucks along with other vehicles carrying essential items like food and cooking. It has been hard to control this.”
The demand for black market oil is expected to peak in Eastern Europe during winter and Isil is likely to pump in more oil in the coming weeks, he said.
French Foreign Minister Laurent Fabius in June said that the militant outfit has sold oil from captured areas to the regime of Syrian President Bashar Al Assad.
When asked whether the group is selling oil to the Al Assad regime to finance its operations, Dr Karasik said there is no evidence.
Robin Mills, head of consulting at Manaar Energy in Dubai said that individuals dealing in the illegal sale of oil could be charged by Iraq, European Union and the US, under legislation against terrorist financing but it’s very hard to track, particularly these small volumes and mostly being used within Iraq and Syria.
Al Khatteeb said regional countries need to comply with UN Security Council Resolution 2170, which aims to put an end to money laundering stemming from oil smuggling and other funding that contributes to Isil operations and international terrorism, he said.
The UN Resolution passed on August 15 condemned gross, widespread abuse of human rights by Isil and Al Nusra Front and placed sanctions on individuals associated with those organisations.
As per the resolution, the UN Security Council called on all United Nations member states to act to suppress the flow of foreign fighters, financing and other support to Islamist extremist groups in Iraq and Syria.
Mills also said that world prices will not be affected by the smuggled oil. “The amounts are too small to have an effect on world oil prices.” According to him, Isil controls some small refineries in northern Iraq, and part of the large Baiji refinery.
“In Syria most oil is refined in very small, simple facilities set up by individuals or small groups.”
Manaar provides strategic and commercial advice on exploration and production oil service and infrastructure projects and has offices in Dubai and Iraq.
Reuters said that Brent crude futures steadied near 14-month lows above $101 a barrel on Wednesday, with ample supplies putting prices at risk of further losses as worries over geopolitical tensions ease.
The oil benchmark has fallen more than 12 per cent from this year’s peak of $115.71 reached in June due to the turmoil in Iraq.