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Blowing Up the Islamic State’s Oil Company

Blowing Up the Islamic State’s Oil Company

Just a year ago, the Islamic State was riding high on a wave of crude oil and hard cash. The jihadi group was increasing oil production and recovering quickly from U.S.-led coalition strikes designed to “disable” — not destroy — its infrastructure. According to its own records, the Islamic State was producing more than 50,000 barrels a day after the first wave of airstrikes. It earned $40 million to $50 million a month in early 2015.

But today the Islamic State’s oil business is fighting for its life. A year of relentless airstrikes against targets that were once off-limits, combined with territorial losses in Iraq and Syria, has badly undercut the group’s fortunes. In June, the United States flattened the Islamic State’s oil ministry headquarters in Mosul. In August, Kurdish forces took credit for killing the Islamic State’s oil minister, Sami al-Jabouri, in a joint raid with U.S. forces near the Iraqi-Syrian border.

The so-called caliphate’s national oil company is still in business, but volumes and revenues are down significantly. By exactly how much, we don’t know. We do know, however, that fuel prices have spiked wildly across Islamic State territory over the last year, suggesting that oil is in short supply. We also know that the Islamic State adopted austerity measures this year after revenues plummeted. Even well-paid oil professionals are calling it quits as the group cuts pay and provisions.

All these setbacks are the result of Operation Tidal Wave II, which ushered in a far more aggressive and expansive campaign against the Islamic State’s oil network when it began on Oct. 21, 2015. The operation, which was the culmination of a fierce debate inside the U.S. government about the effectiveness of the first year of strikes against the group’s oil production efforts, was made possible by a huge trove of Islamic State documents captured by U.S. commandos last year when they slipped into Syria to raid the group’s most lucrative oil field.

The Omar oil field doubled as the headquarters for Abu Sayyaf, the man then responsible for the Islamic State’s day-to-day oil operations. Abu Sayyaf and two of his deputies were killed in the May 2015 raid — but American troops walked away with the single largest intelligence haul in special operations forces history. The information seized consisted of seven terabytes of spreadsheets, personnel files, receipts, and communications that fleshed out the network like never before.

Throughout the summer of 2015, intelligence agencies translated these documents and combed through them for clues. What they found forced the coalition to go back to the drawing board.

The intelligence trove left no doubt about the resilience of the Islamic State’s oil business. The group’s repair teams were out in the oil fields fixing equipment just a few days or weeks after a U.S. strike. It also demolished old assumptions about the group’s oil economy, which had prompted the United States to be overly cautious. U.S. officials had previously assumed that the oil facilities were staffed by desperate locals rather than Islamic State members. But Abu Sayyaf’s records revealed that the Islamic State had a small army of highly professional and ideologically committed workers and managers, all of whom were vetted. Local or foreign, many if not most of these professionals had pledged allegiance to the Islamic State’s leader, Abu Bakr al-Baghdadi.

Amos Hochstein knows the Abu Sayyaf intelligence was a game-changer. As the special envoy and coordinator for international energy affairs at the State Department, he’s been at the center of U.S. efforts to dismantle the Islamic State’s oil business. “It answered a lot of questions about how they recruit people and who’s working in the fields,” he told me in his office last month. “But it also gave us a much clearer understanding of the monetization. Where do they make the money, and how do they make the money?”

By late summer 2015, the United States was looking at the Islamic State’s oil network with new eyes — Abu Sayyaf’s. Washington slowly began to recognize that the network’s resilience was undeniable: The “surgical” strikes on control rooms and other infrastructure had little or no effect; many of the “civilians” running the group’s oil operations were in fact combatants; and too much equipment was being left intact.

The facts overrode old arguments for restraint. Going back to 2014, U.S. officials had warned that an aggressive campaign was too risky because it might cause grave environmental damage. No more. “If you don’t take [the oil infrastructure] out, they will make more money next year than they’re making this year…. This is what’s fueling the ISIL global machine,” Hochstein said, using the U.S. government’s preferred acronym for the jihadi group.

Initially, U.S. officials also held out hope that the Syrian civil war would be resolved sooner rather than later. The United States pulled its punches as a result, assuming that the oil sector would be essential to Syria’s postwar recovery. By late 2015, however, peace was no closer, and the Islamic State was still thriving. Washington sobered up. A strategy shift was underway.

Operation Tidal Wave II launched a year ago this month. Armed with a better understanding of the network, U.S. warplanes began targeting production sites in October 2015, destroying wellheads, pump jacks, and drilling rigs in bunches, along with cranes and other heavy equipment, seemingly on a daily basis.

Strike reports from the U.S. Defense Department show a huge shift in the variety of targets and the volume of strikes over this period. In the 12 months starting September 2014, the United States focused almost exclusively on Islamic State refineries and oil storage sites. It rarely hit those places where oil reached the surface. But in the 12 months since Tidal Wave II started, the vast majority of strikes have hit oil-producing sites, including plants that separate oil from natural gas, thus complicating the extraction process.

A declassified selection of Abu Sayyaf’s personal records shows that he controlled a total of 253 oil wells in Iraq and Syria shortly before his death. By my count, the coalition has destroyed at least 224 of them over the last year, though some may have been rebuilt or replaced and hit again later. Prior to Tidal Wave II, the Pentagon reportedly hit just four oil wells during the first year of strikes.

Besides production sites, the United States also started targeting the middlemen who make the Islamic State’s oil trade possible. These middlemen buy from the Islamic State and sell to a variety of groups, including locals who run very simple refineries, Syrian rebel groups, and even some customers outside of Syria and Iraq. On Nov. 16, 2015, three days after Islamic State gunmen and suicide bombers murdered 130 people in Paris, the coalition for the first time hit tanker trucks waiting to load the group’s oil. Because the drivers are considered civilians, they were warned with leaflets, text messages, and targeted radio transmissions — but they were given only minutes to abandon their trucks. U.S. forces watched from above as drivers fled the scene on foot.

The result? One hundred and sixteen oil trucks were destroyed that day alone, and the total number destroyed is now well over 1,000 trucks. “The risk premium [for a driver] just went up significantly,” Hochstein said. “And what changed was, first, no truck driver wanted more than three trucks next to him.”

That meant the Islamic State was forced to carefully manage and schedule each loading. It also had to lower the price of oil it charged at the wellhead to attract middlemen who might otherwise be scared away. Even then, the drivers started keeping their distance from the source, Hochstein confirmed. “They moved further and further away from the wells so they had to be called to come in and get it. You just slowed down the operation,” he said.

These days, the Islamic State is adapting rather than rebuilding. The distinction matters. It’s trying to avoid huge losses by spreading out its network and trying to conceal it. Truckers aren’t lining up like they used to, and the group is burying pipelines and storage tanks in the hopes that the United States will have less luck finding them.

Until last year, Abu Sayyaf ran a profitable oil company, providing a huge influx of funds for the terrorist state. This year, his successor is running an industrial triage unit, cutting losses and concentrating on the most productive assets. He’s salvaging what he can — even hauling away tens of miles of pipe from the old Iraq-Turkey pipeline, which linked fields in Kirkuk to the Mediterranean Sea before it was closed two years ago.

Fortunately for the Islamic State, the group still has customers inside and outside its borders. Some daring middlemen still load oil, even if there’s less of it available. It’s a safe bet that Syrian President Bashar al-Assad’s regime is still buying, too. As in years past, we’ve seen curious, unexplained gaps in official Syrian Oil Ministry data: Imports from Iran continue, averaging roughly 50,000 barrels a day, while the regime is producing less than 10,000 barrels a day. For their part, the Russians supply refined fuels rather than crude oil. But we’re left guessing where the regime gets another 30,000 barrels of crude it says it refines every day. This might be trivial, if we didn’t already know that Syria’s natural gas industry is essentially run as a joint venture between Assad and Baghdadi.

In spite of the damage done by the coalition, natural underground pressure pushes oil to the surface no matter what. If it’s not captured at the wellhead where it can be controlled, then the Islamic State collects all the oil it can in “flow pits” aboveground. The United States is hitting these oil pits, too, but the scheme could hardly be more basic. “You gotta throw away all the manuals,” Hochstein assured me. “They can operate things that based on every manual is inoperable.”

The effect is that the Islamic State’s oil is being moved in smaller and smaller batches. Again, this increases costs and consumes time, making oil less profitable. But it’s still being produced. And even though the caliphate’s borders keep shrinking, the Islamic State hasn’t loosened its grip on the eastern Syrian province of Deir Ezzor, where more than half of its oil wells are located. By contrast, territorial losses in Iraq haven’t cost the Islamic State much, because its assets there were few and the quality was poor.

Today, a year after Tidal Wave II started, the question facing the coalition — and the next occupant of the White House — is whether or not to double down. To finish the job, the mission may have to take an even more aggressive turn.

That decision may be easier to make now that the Islamic State has established its modus operandi wherever it retreats from oil-rich territory. In Qayyarah, Iraq, the group torched several wells that it was forced to abandon. “[The] one thing we’ve now learned for certain is that whenever we take over territory [and the Islamic State retreats], they don’t leave much behind — especially not energy infrastructure…. They blow up everything,” Hochstein said. What the Islamic State doesn’t destroy, it cannibalizes for operations elsewhere.

If scorched earth is the order of the day, there’s no reason to hold back now.

YASIN AKGUL/AFP/Getty Images