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Page added on November 30, 2015

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ISIS: Oil as a Strategic Weapon

ISIS: Oil as a Strategic Weapon thumbnail

 

I have to admit that I am a news junkie. So my TV was glued to CNN on the day of the Paris terrorist attack. During its coverage, one of the CNN commentators mentioned that ISIS makes about $2 million a day in oil revenue. That piqued my curiosity and decided to find out more about ISIS oil operation.

Oil as a Strategic Weapon

According to FT, ISIS oil strategy has been long in the making since the group emerged in Syria in 2013. The group saw oil as a funding source for their vision of an Islamic state, and identified it as fundamental to finance their ambition to create a caliphate. ISIS controls most of Syria’s oil fields where it created a foothold in 2013. Crude is the militant group’s biggest single source of revenue.

Read: Obama Put Taiwan on ISIS Radar

ISIS has derived its financial strength from being the monopoly oil producer in a huge captive market in Syria and Iraq. Despite a US-led international coalition to fight ISIS, FT describes a “minutely managed” sprawling ISIS operation akin to a national oil company in just two years with an estimated crude production of 34,000-40,000 barrels per day (bpd).

 

$1.5 million a Day to Fund The Terrorist Group 

The group sells most of its crude directly to independent traders at the wellhead for $20-$45 a barrel earning the group an average of $1.5 million a day. Without being able to export, ISIS brought hundreds of trucks and started to extract the oil and transport it. According to an FT interview of a local sheikh, an average of 150 trucks is filled daily with about $10,000 worth of oil per truck. Most traders can expect to make a profit of at least $10 per barrel.

 

Son of Turkey’s President Is In on ISIS Oil?

The arbitrage had the potential to go a lot more than $10 a barrel when oil prices were high. Russia has accused Turkey of buying ISIS oil (allegedly the son of Turkey’s President is involved, and also allegedly the U.S. is aware of it), reselling it to Japan and Israel for huge profits. Smugglers have been using boats, pumps, carrying on foot, by donkey or horse. Some see the oil production from ISIS as a contributing factor to the global oil glut pushing down oil prices.

Read: Using the Wave Principle to Trade

ISIS Adapts to Low Oil Prices

However, the biggest threat to ISIS oil production has been the depletion of Syria’s aging oilfields despite the group’s efforts to recruit skilled oil workers. ISIS does not have the technology of major foreign oil companies to counter the production decline.

ISIS has tried adapting to the new lower oil price environment by turning to oil midstream and downstream. FT and Aljazeera both reported that ISIS has recently expanded into refining and petrol stations. In ISIS-controlled territory, there’s no shortage of demand.

 

Russia & China Eyeing Middle East While Obama ‘Pivots’ to Asia

It is widely acknowledged that one of the reasons the international coalition against ISIS has not been effective is the reluctance of the coalition to target ISIS oil infrastructure (trucks, oilfields, pipelines) where there’s a large civilian presence, and for the potential environmental impact. Russia jumped in to aggressively target specifically ISIS oil operation and infrastructure aiming to cut off its funding source after ISIS took out a Russian plane. In essence, Russia is trying to push the U.S. aside and take a leadership role in dealing with the ISIS and Middle East chaos.

Russia’s timing is impeccable just as the U.S. is ‘pivoting’ to Asia, while China is only too eager to help Russia with an eye on the Middle East energy assets for its future energy security. The alliance of China and Russia may have been weakened on a now fragile economic ground due to the slowing economy in China and low oil prices negatively impacting Russia.  However, the U.S. could be in serious trouble if the world starts trading oil in Reminibi instead of the U.S. dollar now that IMF has approved Chinese yuan as a main world currency.

 

Read: Federal Reserve and Interest Rate Hike

Coalition In-fighting

Judging from the allegation that Turkey is buying ISIS oil, and that Turkey shot down a Russian Jet within a narrow 17-second window (some say the actual window is only 5 seconds), there is some serious in-fighting within the coalition against ISIS (perhaps that’s why Obama is desperate enough to drag Taiwan into the ‘Coalition’). One thing seems to always ring true in international politics: When it is about money or self-interests, countries seem more than willing to go that extra mile despite potential dire implications.

This could mean ISIS will keep its funding source with its oil making its way to all the intended and ‘unintended’ recipients like Japan, a significant U.S. ally. ISIS has so far demonstrated its ample capabilities in adapting and organizing its operation, this suggest there’s a long way to go in the fight against ISIS terrorists.

zerohedge



15 Comments on "ISIS: Oil as a Strategic Weapon"

  1. makati1 on Mon, 30th Nov 2015 8:08 pm 

    “Glued to CNN”? That brings into question anything he says as fact. But, he does go one to reference other sites that are less questionable.

    As for the BS about the West not bombing the ISIS oil caravan because of possible ‘civilian’ casualties and pollution, that is an obvious lie. The Empire is getting desperate as Russia and China move into position to block all of it’s plans of conquest.

    I think that, if Russia keeps up the pressure, ISIS’ days are numbered and that means the US loses it’s only active weapon in the ME.

  2. theedrich on Tue, 1st Dec 2015 3:55 am 

    Ø’s bizarre statement that global unity on climate change will now defeat ISIL leaves one speechless.  What’s next?  An executive order forcing all American women to wear Mohammedan-style black potato sacks?  The son of American Negro poet and pornographer Frank Marshall Davis, who inseminated Ø’s mother when she was 16, is indeed creative in his irrelevancies.  Given the escapism so characteristic of the American electorate, it is no wonder he was crowned POTUS

  3. Boat on Tue, 1st Dec 2015 7:45 am 

    theedman,
    Given the escapism so characteristic of the American electorate, it is no wonder he was crowned POTUS

    He was elected to dump the Republicans who had just crashed the worlds economy along with promoting an unpopular war in Iraq. Obama wasn’t elected as nuch as McCain was rejected.

  4. GregT on Tue, 1st Dec 2015 10:37 am 

    Obama wasn’t elected Boat. He was installed. The same way that Hillary will be installed. McCaine and Palin were a media sideshow. Nothing more. The only candidate worthy of real change was Ron Paul. He was shot down by the corporate media. You no longer live in a democracy Boat. You live in a corporate fascist state, by the oligarchs, for the oligarchs.

  5. Boat on Tue, 1st Dec 2015 11:12 am 

    GW was a media side show and got elected. And your wrong. Many of the Republican candidates would run the country just like McCain.To think the American complainers on this site dislike what happens around the world. Just wait and see if a Republican wins. They will attack Putin at every turn. They feel the need to control diplomacy and they will.

  6. apneaman on Tue, 1st Dec 2015 12:13 pm 

    Boat, plenty of free grammar refresher courses available on line. Google it. You can learn to correct YOUR grammar and spelling if YOU’RE willing.

  7. GregT on Tue, 1st Dec 2015 12:35 pm 

    GW won due to a 5-4 decision by the US Supreme Court not to recount the Florida vote. He did not win by popular vote, and was not elected as POTUS. The fact that you have fallen for the Democrat vs Republican muse, exposes your complete lack of understanding of how the political system works in your own country Boat. You are a perfect example of a fleeced sheeple. BAAH

  8. Anonymous on Wed, 2nd Dec 2015 1:44 pm 

    We can also wield oil as a strategic weapon.

    Most notably to effectively bankrupt Russia and Iran to prevent military buildups, along with forcing them to extract their oil resources at full throttle to maintain some degree of revenue.

    This will ultimately result in oil scarcity arriving much sooner rather than later, which will then make military activity over long distances almost impossible, defanging the dangerous Russian and Chinese military from affecting our friends, and ourselves.

    Then this will simply close off the West to conquest due to isolation by sea (Japan), Ocean (United States), or overwhelming local manpower (Europe).

    Its genius really.

  9. JuanP on Wed, 2nd Dec 2015 2:08 pm 

    Russia’s Air Force needs to assist the Syrian Army in sealing the border with Turkey. If ISIS can’t trade with Turkey and can’t get guns and ammo there, they will be significantly weakened.

    This war is a global long game. The USA wants to split Russia and Turkey. Erdogan, who is completely deranged, IMHO, will oblige.

    I think that all countries should be focused on achieving self sufficiency and resilience. I think that Russia would benefit in the medium and long term from becoming increasingly isolationist. The same goes for all other countries.

    All these wars are weakening and bankrupting us, here in the USA, and strengthening others, and make no sense from an American citizens’ interests perspective. The USA being involved in places like Syria and Ukraine goes against our national security interests and is against the USA interests in general.

  10. Boat on Wed, 2nd Dec 2015 3:57 pm 

    JuanP
    You forgot the oil. By creating enough stability to produce oil is in the worlds best interest.
    When the Middle East runs out of oil there will be little interest of what goes on there.

  11. makati1 on Wed, 2nd Dec 2015 7:45 pm 

    Anon, did you forget that China can destroy the US economy overnight and just might. Russia has bombs, but China makes all of the things you need and they hold enough USTs to bankrupt the US anytime they want.

    Just restricting the export of Rare Earths threw the Us into a panic because it does not produce them in the huge quantities needed for electric car batteries, and other electronic junk.

    If you disagree, look at the labels on the things you buy and see where they really come from. For instance, my toothpaste, with a Colgate label, is made in Guangzhou, China. My Croft & Barrow PJs that I bought in the US, are made in … China. Most things you own and use come from Asia or Central America. Especially the components of electronics. Try buying stuff only labeled “American Made” and see what is available.

  12. Davy on Wed, 2nd Dec 2015 8:03 pm 

    China could restrict trade which consists of cheap plastic consumer items and that might ruin Christmas but China will begin to go hungry without the Americans. What would you rather have a barbie doll or food?

  13. JuanP on Wed, 2nd Dec 2015 8:53 pm 

    Davy “… China will begin to go hungry without the Americans.”

    While I think Davy’s claim is an exaggeration, he does raise what could have been a valid point if he had stuck with the truth.

    China is the number one agricultural products importer in the world and would need to adjust its diet significantly if food imports became unavailable somehow. This is a Chinese weakness and a consequence of China’s excessive population level and long increasing material consumption. The Chinese are as foolish as all the rest of us in that sense.

  14. Davy on Wed, 2nd Dec 2015 8:59 pm 

    Of course it an exaggeration Juan. My exaggeration is in response to Mak’s normal daily routine exaggerations.

    China is in no position to mess with the status quo any more than the US. Is that closer to the truth for you?

  15. JuanP on Wed, 2nd Dec 2015 9:08 pm 

    Davy, I can give you more. The truth is that, to the best of my knowledge, China is in a worse position than the USA to mess with BAU. The status quo, though, is a moving target and is constantly changing.

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