The Cable

Pentagon: Oil No Longer the Islamic State’s Main Source of Revenue

Airstrikes and falling oil prices have put a major dent on the Islamic State's oil smuggling business.

A picture taken on July 1, 2014 shows a North Oil Company gas field located near a checkpoint held by militants of the Islamic State (IS), some 30 kilometres southwest of the disputed Iraqi city of Kirkuk. Iraqi security forces and loyalists are battling militants led by the Islamic State (IS), which on June 30 declared a "caliphate," an Islamic form of government last seen under the Ottoman Empire, and ordered Muslims worldwide to pledge allegiance to their chief. AFP PHOTO / MARWAN IBRAHIM (Photo credit should read MARWAN IBRAHIM/AFP/Getty Images)

Money from illicit oil sales is no longer the main source of revenue for the Islamic State, Pentagon Press Secretary Rear Adm. John Kirby told reporters at the Pentagon Tuesday.

Oil smuggling had become a crucial source of revenue for the group, which holds a handful of oil fields in Iraq and Syria. Oil profits set the extremist organization apart from other terrorist groups that are more reliant on outside donations. But oil production is also a vulnerability for the group, as it provided the U.S.-led coalition with relatively easy targets to hit with airstrikes.

Over the summer, before U.S. airstrikes began, the Islamic State was believed to be producing more than 80,000 barrels a day. Because it was selling the oil on the black market, the group took a major discount compared to global market prices, but experts still estimated it was collecting between an estimated $1 million to $3 million a day.

Kirby said he did not know how long it had been since oil was no longer the top revenue source, but cited donations and other black-market sales as other valuable streams of money.

U.S. and coalition aircraft have hit targets associated with oil production — mostly oil refineries — in Iraq and Syria over the last several months. In October, the International Energy Agency estimated that the airstrikes had reduced Islamic State production to about 20,000 barrels daily.

Falling oil prices, which are taking a toll on Iraq’s budget, also would reduce black-market prices. Iraqi politicians have warned that lower oil revenues could hurt the military’s ability to mount an offensive against the Islamic State later this year.

In recent days, the Islamic State has tried to launch a series of attacks on the oil-rich city of Kirkuk in northern Iraq. U.S. Central Command said Tuesday that the U.S.-led coalition had conducted 32 airstrikes from Saturday through Monday to support Kurdish security forces fighting the Islamic State in Kirkuk. The Kurdish forces have been successful at repelling the Islamic State’s attacks, Centcom said in its release.


Kate Brannen is deputy managing editor at Just Security and a contributor to Foreign Policy, where she previously worked as a senior reporter. @K8brannen
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