BEIRUT

Middle East

ISIS grabs oil and gas fields in Syria and Iraq, but challenges remain

A member of the Islamist rebel group Al-Nusra Front pulls a cart filled with sands as the group alledgely digs a tunnel under a military site of the Syrian government forces in the northern Syrian city of Aleppo on July 17, 2014. AFP PHOTO / AHMED DEEB

BEIRUT: As militants from ISIS establish themselves as the dominant force in the fight for oil and gas resources among rebel factions within Syria and Iraq, they are reaping windfall profits – and confronting a series of constraints on their newly gained wealth, experts say.

ISIS has consolidated control over several oil fields throughout Syria and Iraq, most notably the Al-Omar oil field in eastern Syria’s Deir al-Zor, seized from its rival the Nusra Front earlier this month.

Meanwhile in Iraq, reports indicate that ISIS has begun selling oil extracted from several small fields at a considerable profit. Officials from the Iraqi oil industry have mentioned profits of $1 million a day for ISIS from the group’s Iraq operations – outside of their control are much larger fields under the control of the central government in the south, and the Kurdish authorities in the north.

If this figure is added to estimates of Syria’s jihadist-controlled production, the group could be nearing the mark of $100 million a month.

ISIS militants also seized a natural gas field from government troops in central Syria this month, but according to David Butter, a Chatham House Middle East and North Africa analyst, the “prize” represented a psychological blow against the regime, rather than another financial boost.

Asked about ISIS’ potential to make money off natural gas resources, Butter said “the short answer is no.”

“The only feasible customer is Syrian government’s electricity utility, and producing non-associated gas is technically difficult; some reports say ISIS caused too much damage to the facility [during the battle] to allow it to operate,” he told The Daily Star.

This leaves oil production as a key source of wealth for ISIS, but the group is far from harnessing a flourishing resource.

Hassan Hassan, a UAE-based Syria commentator who hails from Deir al-Zor, cited an estimate by defected Syrian Prime Minister, Riad Hijab, that the rebels are only able to extract 10 percent of the oil that the regime had previously been able to extract from the same fields.

Shwan Zulal, an energy and risk analyst who specializes in the Kurdistan Region and Iraq, told The Daily Star that ISIS relies on junior engineers whom they’ve recruited, or persuaded to remain on the job.

“The refineries are run by their own people who know what they’re doing – to an extent. They’re usually junior engineers who don’t have a lot of experience. But they’re good enough to operate the existing equipment,” Zulal said.

Meanwhile, there are also questions over how sustainable the oil fields are.

Butter said that the oil fields require extensive water injection, but due to the chaotic state of water infrastructure in Deir al-Zor, it will be difficult to maintain the fields.

Once the oil is extracted, it is sold on the black market – reports vary on the cost, but usually for no more than $30 per barrel - to various customers, who can transport the crude oil to small, make-shift refineries.

In Iraq, the oil is often taken to Syria or smuggled into Turkey and Iran. Zulal said that some black market business has sprung up in Jordan.

While in Syria, Butter says that crude oil and locally refined products are transported by truck or tanker to the city of Manbij, east of Aleppo, which has become a trading hub. From Manbij, crude oil is often taken to small refineries set up on the border with Turkey.

The Syrian Observatory for Human Rights, an anti-regime group, reported recently that oil from Deir al-Zor is also being marketed in the other direction, to Iraqi businessmen.

After purchasing the crude, businessmen must transport the commodity through conflict areas. To aid with this some local militias, usually those that have pledged allegiance to ISIS, have begun offering their services.

“Businessmen don’t have the capacity or the resources to protect the trucks or the tankers that transfer these resources so they usually hire escorts,” Hassan said. “There are now certain militias that operate mostly like that and they protect people and it’s a business now.”

The Iraqi authorities, meanwhile, have now begun actively targeting the trucks used to transport ISIS’ oil, which could put a serious dent in the group’s revenue.

And for local communities, the jihadist-controlled industry has both positive and negative repercussions.

The environmental ramifications are widely seen as negative, according to experts.

For instance, the oil being sold from Iraq is of low quality. Since it is not being properly refined, it often contains relatively high levels of lead, which can have a lethal long term impact on residents inhaling the gases emitted when the oil is burned.

Another pressing concern is water contamination.

Recently, a rusty pipeline that ran from the Kirkuk oilfields to the Baiji refinery leaked a substantial amount of oil into the Tigris River.

The crisis was magnified when the oil was set ablaze, sparking a minor health incident as ambulances evacuated residents who had difficulty breathing.

The spill also impacted farmers and residents who relied on the river for drinking water and irrigation.

Northern Iraq’s oil infrastructure was already in decay prior to the insurgent gains spearheaded by ISIS last month.

While insurgents can manage to maintain the various oil facilities, they likely lack the capacity to deal with damage when refineries and pipelines come under attack, potentially leading to more accidents, piling up the health and other problems.

When oil fields in Syria were under the control of the rebel Free Syrian Army, it released a video warning locals of the effects of setting up ad-hoc refining operations. Likewise, the Asala wa al-Tanmia Front, an independent Islamist militia active in eastern Syria, issued a fatwa banning people from setting up their own oil-burning operations due to the hazardous repercussions.

Hassan described the environmental consequences as “catastrophic,” relating how locals often describe the sight of birds turning black because of the smoke.

And during its relatively short period of control over territory in Deir al-Zor province, ISIS has on more than one occasion taken steps to endear itself to the population, by cutting down on its profits.

The Observatory reports that ISIS has begun selling barrels of oil to locals for as low as $12, and this week a series of photographs circulated via social media, purportedly showing ISIS fighters distributing free gasoline in Deir al-Zor.

The windfall profits from oil in Iraq and Syria are certainly a bonus for ISIS, but they come with two big question-marks: Will the sector continue to deteriorate, and how much of the money must be redistributed, so that locals have access to affordable supplies?

 
A version of this article appeared in the print edition of The Daily Star on July 26, 2014, on page 11.

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Summary

ISIS has consolidated control over several oil fields throughout Syria and Iraq, most notably the Al-Omar oil field in eastern Syria's Deir al-Zor, seized from its rival the Nusra Front earlier this month.

Meanwhile in Iraq, reports indicate that ISIS has begun selling oil extracted from several small fields at a considerable profit. Officials from the Iraqi oil industry have mentioned profits of $1 million a day for ISIS from the group's Iraq operations – outside of their control are much larger fields under the control of the central government in the south, and the Kurdish authorities in the north.

There are also questions over how sustainable the oil fields are.

In Iraq, the oil is often taken to Syria or smuggled into Turkey and Iran.

The Iraqi authorities, meanwhile, have now begun actively targeting the trucks used to transport ISIS' oil, which could put a serious dent in the group's revenue.

Northern Iraq's oil infrastructure was already in decay prior to the insurgent gains spearheaded by ISIS last month.


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