Oil production and smuggling was the largest source of revenue for the finances of the Islamic State (IS or ISIS) in Syria and Iraq until the complete loss of its territory in 2019. Most oil extracted was distributed for use within the Islamic State, but some was also smuggled to surrounding states at below market price. Oil products, e.g. petrol and mazout, were the backbone of the economy of ISIL-controlled areas, with mazout being the preferred power source for small-scale electricity generators. Not all energy production was provided by oil, and some electric power supply was continued to Syrian government-held areas. Oil production in the Islamic State developed over time, reaching its peak in 2014. Due to military interventions, IS subsequently lost all of its territory in Syria and Iraq.
Revenue Estimates of the income ISIL derived from its oil operations vary. In 2014, Dubai-based energy analysts put the combined oil revenue from ISIL's Iraqi-Syrian production as high as US$3 million per day. An estimate from October 2015 indicated the production to be about 34,000–40,000 barrels per day, sold at US$20–45 at the wellhead and generating an income of US$1.5 million per day. Various other 2015 reports indicated that IS obtained 1.1 to 1.5 million dollars a day from selling of oil and its products. At the end of 2015, increased air strikes targeting oil production and distribution started to affect oil operations. Thus an estimate for March 2016 was a monthly income of about US$20 million.
Extent of control
In 2013, the Islamic State began to concentrate less on the north of Syria and more on its east, in recognition of the importance of control oil fields for its operations, in particular the fields in the Deir Ezzor region such as the al-Omar, the Deiro and the al-Tanak fields, and outside this region, the al-Jabsah fields and al Tabqa fields. The quality of the petroleum determined the price of each barrel sold at the wellhead, from 25 to 45 dollars. The Islamic State captured the Ajil and Allas oil fields in northern Iraq during the Mosul campaign in 2014, as well as the Qayyarah oil field, producing 8,000 barrels a day of heavy crude oil. Ajil in north of Tikrit and Himiran were important ISIS-controlled oil fields in Iraq. Oil production was centrally controlled by the top leadership. Until his death in May 2015, Abu Sayyaf had been the "emir" or top official for oil production controlling oil production from 200-plus wells. At the end of September 2016, the Islamic State no longer controlled any Iraqi oil, after Shargat and Qayyarah had been recaptured by the Iraqi army.
Local distribution IS made its money at the pump where it sold its products to usually independent traders from Syria and Iraq. In addition, IS taxed oil in the distribution system. Oil was brought to local refineries to produce petrol and mazout. Many "refineries" were just rudimentary furnaces spread along the roadsides. Most of these oil products were sold within IS-controlled areas in Syria and Iraq by traders. Rebel-held areas in northern Syria were also receiving oil from IS. IS had several markets in Iraqi and Syrian towns and provinces. Some of the largest IS oil market were Manbij, Al-Bab, and Al-Qa'im.
Oil smuggling Oil smuggling to areas outside of Syria was profitable bringing contraband to Turkey, Jordan, Iraq and Iran. A network to smuggle oil had been in place since at least the 1990s when Saddam Hussein evaded sanctions and smuggled oil out of Iraq. A report by The Guardian in 2014 suggested that corruption and bribery facilitated transport of oil from ISIL-controlled areas into surrounding areas. In November 2015 the Russian Prime Minister Dmitry Medvedev indicated to have information that some Turkish officials had a "direct financial interest" in the oil trade with ISIL, an assertion rejected by Turkish President Recep Tayyip Erdoğan. Vladimir Putin indicated that the extent of the oil smuggling had reached the point where vehicles "are going to Turkey day and night." Several independent analysts, on the other hand, argued that the allegations of Moscow did not carry any weight. Officials from the US responded that in their view only a small amount of oil is smuggled into Turkey and that this is economically insignificant. According to Adam Szubin, acting US Under Secretary of the Treasury for Terrorism and Financial Intelligence, most of the oil that leaves ISIL-controlled areas is going to places that are under control of the Syrian government. In January 2016 the Israeli Defence minister alleged that Turkey was buying oil from ISIS In response to the allegations, Serko Cevdet, the head of the Iraqi Kurdish Regional Government's (KRG) energy commission, told the Turkish media that the trucks in the footage actually belonged to the Kurds and there was no way that ISIL could have transported them through a Kurdish controlled territory due to the ongoing conflict between the Kurds and IS. Fawaz Gerges from the London School of Economics and Political Science argued that the claims about Turkey's involvement in ISIL oil trade were conspiracy theories. In a controversial move, Powertrans was given a monopoly on all the road and rail transportation of oil into Turkey from Iraqi Kurdistan. Turkish media reported in 2014 and 2015 that Powertrans has been accused of buying oil from the Islamic State of Iraq and the Levant. Commenting on the allegations, John R. Bass, the US Ambassador to Turkey, told the press that the claims about the Turkish government's involvement in ISIL oil trade were unfounded, citing the official apology issued by the CIA with regards to the allegations in 2014. Arab media accused Israel of being a major buyer of oil smuggled out of the IS-held Syrian and Iraqi territories. According to this accusation, oil was smuggled to Zakhu where Israeli and Turkish dealers would determine the price, the oil was then sent as Kurdish oil to Silopi, Turkey, and transported to Turkish ports (such as Ceyhan) and shipped to Israel.
Ways of smuggling
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