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revenue stems from sales routed through middlemen and smugglers who trade and transport the
illicit petroleum and petroleum products for sale to end-users within the territory where ISIL
operates and to nearby areas, including to the Syrian regime as noted by several delegations. This
revenue stream may also include swapping ISIL crude oil for exported or imported petroleum
products to and from Iraq and Syria. Syria in particular has a long history of smuggling networks
operating in the country and along the border regions. These networks are largely autonomous, and
some of them, such as the Berri clan in Aleppo, are powerful local families known to have dealings in
arms and drug smuggling and historical ties to the Syrian regime.
21
These networks are profit-
motivated, and are excellently positioned to exploit the lack of state capacity and capitalize on ISIL’s
need for stable funding through newly acquired oil resources which they know they may not be able
to hold on to in the event of a serious military effort to regain territory. A sound estimate for the
amount of oil and petroleum products subject to smuggling by ISIL related or other networks in
Syria and Iraq is not known to exist and the nature of the relationship between ISIL and smuggling
networks active in Syria is not entirely clear. Further, it is not possible to determine the source of
the smuggled petroleum products that are seized. The assumption is that oil and oil product
smuggling activities have increased since 2011 targeting all jurisdictions which neighbour
territories where ISIL operates, but that the magnitude of such activities is impossible to assess. See
paragraph 68 for examples of measures taken to respond to this threat.
ISIL has reportedly sold oil near the wellhead for 20-35 USD per barrel (bbl) where middlemen can
then sell petroleum or petroleum products onwards at 60-100 USD/bbl in local and nearby markets,
creating significant arbitrage opportunities.
22
A representative truck carrying approximately 150
barrels of crude oil earns roughly 3 000 to 5 000 USD, depending on the degree of refinement of the
crude oil. According to press reports, ISIL is paid mostly in cash for the oil it sells, making the
transactions underlying its oil trade difficult to track and disrupt.
23
However, ISIL’s ability to
efficiently extract, refine, and sell petroleum and petroleum products from the territory in which it
operates has significantly diminished since the launch of international coalition airstrikes targeting
ISIL’s modular refineries and transport convoys.
24
ISIL's earnings from oil-related trade have
probably diminished in importance relative to other sources of revenue due to coalition airstrikes,
ISIL’s need for refined crude for its military operations, and declining oil prices.
While ISIL operates in vast areas in Iraq and Syria, the populations under its control do not receive
the full economic benefit from ISIL’s petroleum extraction, refining, and trade, meaning that ISIL is
robbing local populations of potentially millions of USD, on top of the explicit acts of theft and
extortion that occur on an ongoing basis. The withdrawal of national and private sector companies,
their equipment and expertise from ISIL-held territory prevents ISIL from fully utilizing the energy
assets under its control. As a result, ISIL tends to use primitive techniques for extracting and
refining oil. For example, Syria’s al-Omar field requires sophisticated water injection techniques to
21
Saleh, Yassin al Haj (2014).
22
We note that during the preparation of this report, there has been a substantial decline in global crude oil
prices (from approximately 80USD/bbl to 50USD/bbl), and so the price at which ISIL sells crude oil
(and the revenue generated from the sale of crude oil) has likely declined as well.
23
Hussein, M.; Toorn C.V.D.; Osgood, P., & Lando B. (2014); Giglio, M. (2014).
24
Philips, M. (2014).
FINANCING OF THE TERRORIST ORGANISATION ISLAMIC STATE IN IRAQ AND THE LEVANT (ISIL)
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maximize crude oil extraction.
25
Because ISIL doesn’t have the expertise or equipment, it is able to
withdraw only a fraction of the field’s potential output. This is also true in other fields as well,
leading to a best estimate of as much as 50 000 barrels per day of petroleum production in ISIL-held
territory.
26
Once ISIL extracts oil under its control, ISIL still faces the challenge of monetizing the
petroleum either by directly selling (or swapping) the crude oil itself or by refining the crude into
petroleum products that can be used locally as fuel for vehicles and cooking, or for sale to the local
population. Crude oil in itself, without a market and without refining, limits the use to the terrorist
group within its current capabilities.
ISIL has relied on a variety of petroleum refining techniques. In Iraq, the Qayyarah oil field, has its
own small refinery calibrated to refine the crude oil specifically from that field. More common are
modular refineries, which are built off-site, can be attached to trucks or to the wells, and are located
in both Iraq and Syria. These modular refineries are significantly smaller than, but can be as
sophisticated as, their larger counterparts. Modular refineries provide ISIL the capability to refine
crude oil and produce petroleum products for use in cars, trucks, and other energy-intensive
applications. By their nature, these refineries can be replaced and rebuilt by importing replacement
parts and machinery. As a result of coalition airstrikes, ISIL has been forced to rely upon even more
primitive refining techniques, including burning the crude in open pits that produce limited yields of
poor-quality product. With petroleum and petroleum product stores dwindling throughout the
territory where ISIL operates, the group’s resultant revenue stream is vulnerable to coalition
actions such as airstrikes and enhanced border security by Iraq and neighbouring states.
1.3 EXTORTING AGRICULTURE
Agriculture in Syria, and more recently in Iraq, has been identified as an opportunity to ISIL’s
extortion operations, providing the group another avenue to generate revenue.
27
Based on sources
in the rural al-Raqqa, ISIL’s Syrian stronghold, the organisation is said to extort money under the
name of “zakat” from farmers by taking portions of their wheat and barley crops.
28
Additionally,
ISIL has confiscated agricultural machinery from local farms, which it then rents back to
the farms
from which they were seized. Aside from these steep taxes and criminal rackets, ISIL is able to set
the crop prices by taking control of the fields and means of production, storing the wheat in silos,
and controlling its distribution.
The UN Food and Agriculture Organisation estimates that ISIL currently operates in part of Iraq that
account for over 40 percent of Iraq’s wheat cultivating land.
29
This allows the group to profit from
the wheat industry while strategically restricting supplies to minority Yazidi and Christians as well
as those who oppose ISIL's campaign. ISIL has also allegedly taken control of multiple government-
operated wheat silos in the most fertile areas in Iraq. In addition there are reports that ISIL is
integrating stolen harvests with existing regional agricultural businesses (an act which essentially
25
Marcel, V. (2014).
26
Lerman, D. (2014).
27
Fick, M. (2014).
28
Abu al-Khair, W. (2014).
29
UN Food and Agriculture Organization (2014); Fick, M. (2015)