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Islamic State an oil power

Steals to support its growing budget

– The Islamic State, like many shady and not-so-shady groups before it, is apparently getting into the oil business. It seems to suit the militants, who reportedly are making millions of dollars a day off of it.

The group, which has conquered broad swaths of Iraq and Syria, is turning to good old-fashioned crime – oil smuggling, in this case – to underwrite its main line of work.

The money it can earn from illicit oil sales further bolsters the group’s status as one of the richest self-funded terrorist outfits in the world, dependent not on foreign governments for financial support but on the money it has reaped from kidnappings and bank robberies.

But even the millions of dollars a day that the Islamic State seems to be raking in by trucking stolen oil across porous borders is not enough to meet the hefty obligations created by the group’s own headlong expansion. Taking over big chunks of territory, as in eastern Syria and in northern Iraq, could also leave it forced to take on the sorts of expensive obligations – such as paying salaries, collecting the trash and keeping the lights on – that are usually reserved for governments.

As with much of what the Islamic State purportedly does, the group’s actual role in trading illicit Syrian and Iraqi oil is hard to pin down. The Islamic State seemingly controls the majority of Syria’s oil fields, especially in the country’s east; human rights observers say 60 percent of Syrian oil fields are in the hands of militants or tribes.

The Islamic State also seems to have control of several small oil fields in Iraq, though reports differ on whether the Islamists are producing and shipping serious volumes of stolen Iraqi oil across the border, or most of those wells are capped.

In all, energy experts estimate that illicit production in Iraq and Syria – largely by the Islamic State – is greater than 80,000 barrels a day. That’s a tiny amount compared with stable oil-producing countries’ output, but it is a lot of potentially valuable oil in the hands of a group that even al-Qaida considers beyond the pale.

If that oil fetched global market prices, it would be worth a small fortune: $8 million a day. But as the Sunni militant group’s new neighbors in Iraqi Kurdistan have discovered, it’s not easy to get top dollar for what many consider black-market oil.

The Islamic State allegedly sells much of its production to middlemen in Syria, who then bring it to refineries in Turkey, Iran or Kurdistan. It likely fetches only about $10 to $22 a barrel, said Valérie Marcel, an oil expert at Chatham House in London. By contrast, crude trades just above $100 a barrel in New York and London.

But in Iraq, the Islamic State apparently cut out middlemen and uses its own fleet of tankers, which means it can reap between $50 and $60 a barrel, Marcel said.

The United Nations is taking notice. This week it warned countries against buying oil from militants in Iraq or Syria, saying that such purchases would violate U.N. sanctions on the terrorist group.

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