Putting the Islamic State Over a Barrel

The Islamic State, which has conquered a host of oil fields in Syria and Iraq, has often been touted as the world’s richest terrorist group.

But months into the international community’s fight against the militants, key questions remain about the biggest single source of the Islamic State’s money: the group’s oil wealth. It’s unclear how much the Islamic State is actually making from oil these days, how much the U.S.-led military campaign has hurt its funding, or how much money the group spends on operations, which include paying both its fighters and the civilians running schools, hospitals, and local governments in the areas it controls. The only thing clear is that American and allied diplomats and troops, as well as the United Nations, are focusing their diplomatic muscle and military might on cutting — and hopefully eliminating — the group’s ability to fund attacks and maintain the territories it controls through oil sales.

"At some point, the oil does have to enter the legal economy. And by working backwards, we’ve been able to map where most of it comes from and to develop ideas about how to stop it," U.S. Secretary of State John Kerry said in a speech on Monday, Nov. 17, at an event organized by Foreign Policy. "And we will also continue to bomb and destroy ISIL’s oil infrastructure," he added, using one of the acronyms by which the Islamic State is also known.

The military action, more than sanctions or a greater crackdown on smuggling in the region, seems to have hurt the Islamic State the most.

"We believe that in a relatively short period of time, we’ve been able to create a serious change in their ability to profit from oil and petroleum products," said Amos Hochstein, the acting director of the State Department’s Bureau of Energy Resources, the sharp end of U.S. energy diplomacy, in a briefing Tuesday. "Our efforts have been successful, but the job is not done," he said.

Despite all the attention paid in recent months to the Islamic State’s oil-smuggling activities, the people trying to strangle the group’s ability to wreak mayhem still don’t have a clear idea of exactly what they’re dealing with.

In a report on Nov. 14 to the U.N. Security Council, the United Nations group tasked with cutting off the Islamic State’s money flows, the Analytical Support and Sanctions Monitoring Team, pithily summarized the challenge of figuring out how much oil the group is pumping, refining, and selling in international black markets.

"Evidence-based analytics remain challenging given continuing information gaps," the group confessed. And if the Islamic State’s income remains unclear, its outlays are just are murky. "A significant unknown is how much money ISIL is expending on a daily basis," the group conceded.

So how much oil does the Islamic State have, and how much money does it make selling crude and refined products like diesel? This summer, at the height of the group’s advances through the oil patches in eastern Syria and northern Iraq, estimates of the Islamic State’s oil production ranged as high as 80,000 barrels a day. Analysts figure the group probably made at most half the market price of oil at the time, or roughly $50 a barrel. Estimates of the Islamic State’s oil earnings then ranged as high as $2 million a day; few think it is that high anymore.

The group’s oil operations seem to have shrunk in recent weeks, after coalition airstrikes and ground offensives by the Iraqi and Kurdish militaries have pushed the group out of some oil-rich areas and have given skilled personnel a chance to escape the group’s clutches. Most recently, Iraqi forces finally managed to push the Islamic State out of Iraq’s biggest oil refinery, near Baiji, though the facility could take months to bring back online.

In October, the International Energy Agency estimated that the Islamic State was pumping about 20,000 barrels a day. The U.N. team, based on member-state assessments, figures maybe 47,000 barrels a day. Hochstein says the Islamic State’s total oil output is "in the range of 50,000 barrels a day." That alone would nearly halve the oil income the Islamic State enjoyed this summer.

One reason the group’s output may have fallen is because military strikes, while avoiding oil fields themselves for fear of creating environmental damage, have targeted storage tanks, pumps, and other infrastructure needed for oil production and loading, Hochstein said.

As a result, Hochstein estimates the group makes somewhere around $1 million a day. David Cohen, the Treasury Department official responsible for sanctions, told Congress last week the group now makes "several million dollars a week" from stolen oil. The U.N. tosses out estimates that range from as low as $250,000 a day to as high as $1.6 million a day.

One thing that seems to have sharply cut into the Islamic State’s oil income is the U.S.-led airstrikes on mobile refineries, which have walloped the group’s ability to turn crude into easily transportable products that can be smuggled to nearby Turkey, Iraqi Kurdistan, and even Bashar al-Assad’s regime in Syria. Hochstein figures that the U.S.-led attacks have taken out the "majority of the group’s refining capacity." At least 22 mobile refineries have been destroyed, which means about 11,000 barrels of refining capacity have been taken offline, he said.

At the same time, there is increasing interest in further cracking down on the tenuous link between captured oil fields and the people who buy the stolen oil: the fleet of 200-odd tanker trucks that has become the Islamic State’s main way to move and smuggle crude into neighboring countries.

The U.N. team recommended that the Security Council order member states bordering the terrorist-held regions to seize any of those tankers headed into or out of Islamic State territory. And Hochstein said he has already held talks with Turkey and with officials in the semiautonomous region of Iraqi Kurdistan to interdict the trucking routes, which has helped slow the tempo of smuggling operations.

"As we take out truck routes, it makes it more difficult to find buyers and to move it," he said.