Assad buys oil from ISIS

Matthew M. Reed writes: Russia’s claim that ISIS smuggles 200,000 barrels a day assumes of course that the group produces that much. In reality, ISIS has never been credited with pumping so much oil. The group’s own internal assessment, retrieved by U.S. commandos during the May raid that killed ISIS oil emir Abu Sayyaf, pegged production at 55,000 barrels a day earlier this year. More recent estimates point to daily output of 40,000 barrels at most. That’s still a lot for a cult that fancies itself a state. But supply is only half the story. More than 5 million people are trapped in ISIS territory, and they could easily consume that amount every day. ISIS is also at war. If it retains any refining capacity for itself, or takes a cut from local refiners, that’s one more customer at home who gets priority.

We know ISIS has a discreet arrangement with a neighbor, but it’s not Turkey. The Syrian regime has done business with ISIS from day one, just as it did with al Qaeda’s Nusra Front and other rebels who took over energy assets early in the war. President Bashar al-Assad’s point man for ISIS deals, George Haswani, was first designated by the European Union in March. The U.S. Treasury went a step further with its designation on Nov. 25. In addition to the oil deals, Treasury fingered Haswani’s engineering and construction company (HESCO) for servicing active ISIS fields. Leading up to the most recent wave of airstrikes against ISIS oil targets, U.S. officials admitted the network was more resilient and resourceful than expected. Another Treasury designation in late September hinted that ISIS actually increased oil production this year. They may have had some help from Assad’s man.

We don’t know how much oil ISIS has delivered to Assad, but there’s no doubt he needs it. For the first half of 2015, the regime’s oil output was less than 10,000 barrels a day. That was before pro-Assad forces retreated from even more oil-rich territory. All those eyes in the sky over Syria can’t tell how much ISIS oil passes through pipelines to regime-held refineries in the west. There are, however, curious gaps in official data. In April, for instance, Syria’s oil ministry said it refined 106,000 barrels a day, yet trade press could only explain where 85,000 barrels of that oil came from. Data has been increasingly hard to come by since.

Besides oil, ISIS delivers natural gas to the regime. These deals are durable because ISIS can’t use it or sell it to anyone else: It must be captured at the source and moved by pipeline. The only users connected to the gas fields are power plants, refineries, and industries, which are concentrated in Assad’s strongholds. In exchange for gas, the regime provides utilities like electricity, which ISIS taxes accordingly. At natural gas fields like those around Palmyra, which produce lighter liquid hydrocarbons in addition to gas, ISIS takes whatever it can turn into fuel. The gas goes west to Assad. [Continue reading…]

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