Western intelligence officials say they can track the ISIS oil shipments as they move across Iraq and into Turkey’s southern border regions. Despite extensive discussions inside the Pentagon, American forces have so far not attacked the tanker trucks , though a senior administration official said Friday “that remains an option.”
“Turkey in many ways is a wild card in this coalition equation,” said Juan Zarate, a senior adviser at the Center for Strategic and International Studies and author of “Treasury’s War: The Unleashing of a New Era of Financial Warfare.” “It’s a great disappointment: There is a real danger that the effort to degrade and destroy ISIS is at risk. You have a major NATO ally, and it is not clear they are willing and able to cut off flows of funds, fighters and support to ISIS.”
Turkey declined to sign a communiqué on Thursday in Saudi Arabia that committed Persian Gulf states in the region to counter ISIS, even limited to the extent each nation considered “appropriate.” Turkish officials told their American counterparts that with 49 Turkish diplomats being held as hostages in Iraq, they could not risk taking a public stance against the terror group.
Still, administration officials say they believe Turkey could substantially disrupt the cash flow to ISIS if it tried.
“Like any sort of black market smuggling operation, if you devote the resources and the effort to attack it, you are unlikely to eradicate it, but you are likely to put a very significant dent in it,” a senior administration official said on Saturday.
A second senior official said that Mr. Obama’s national security team had spoken several times with Mr. Erdogan and other top Turkish officials in the past two weeks about what they can do to help counter ISIS, and that ISIS’ financing was part of those discussions. “Stopping the flow of foreign fighters, border security and dismantling ISIL funding networks are also key aspects of our strategy, and we will continue to work closely with Turkey and our other partners in the region on these efforts in the days ahead,” the official said, using a different acronym to describe the militant organization.
At the core of the talks are the dozen or so oil fields and refineries in Iraq and Syria on territory the group has controlled. The output has provided a steady stream of financing, which experts place at $1 million to $2 million a day — a pittance in terms of the global oil market, but a huge windfall for a terror group.
“Oil is a huge part of the financing equation” that empowers ISIS, said James Phillips, the senior fellow for Middle Eastern Affairs at the Heritage Foundation, a Washington-based research center.
The territory ISIS controls in Iraq alone is currently producing anywhere from 25,000 to 40,000 barrels of oil a day, which can fetch a minimum of $1.2 million on the black market, according to Luay al-Khatteeb, a visiting foreign policy fellow at the Brookings Doha Center, who also directs the Iraq Energy Institute. Some estimates have placed the daily income ISIS derives from oil sales at $2 million, though American officials are skeptical it is that high.
“The key gateway through that black market is the southern corridor of Turkey,” Mr. Khatteeb said. “ Turkey is becoming part of this black economy ” that funds ISIS.
But targeting the smuggling network has proved a major challenge, and so far the Turkish authorities have been unwilling to cooperate.
“ They’ve been turning a blind eye to it, because they benefit from the lower price of smuggled black-market oil ,” Mr. Phillips said, “and I’m sure there are substantial numbers of Turks that are also profiting from this, maybe even government officials.”.
The supply chain of routes, individuals, families and organizations that allow the oil to flow are well-established, some dating back decades, to when President Saddam Hussein of Iraq smuggled oil during the United Nations’ oil-for-food program. “Those borders have never been sealed, and they never will be sealed,” Mr. Phillips said.
For the Obama administration, getting at ISIS’ oil revenue is far more complex than, say, its crackdown on Iran. That has been the administration’s most successful use of sanctions, and officials credit the effects on Iran’s economy, along with American sabotage of its nuclear facilities, for Iran’s reluctant decision to negotiate on the future of its nuclear enrichment program.
But Iran used fairly conventional means of reaching oil markets, and not one of its techniques applies to ISIS’ black-market sales, which take place mostly through networks of smugglers.
The long-term American plan appears focused on persuading Turkey to crack down on the smuggling networks — some of which, one Western diplomat noted, “ benefit a powerful Turkish elite ” — and aiming at the refiners who would ultimately have to turn the crude oil into petrochemical products. But gathering the intelligence is a slow process, analysts say.
“It’s hard to use any of the suite of tools that are available to the U.S. Treasury Department to sanction people in this case,” said Patrick B. Johnston, a RAND Corporation researcher who is working on a top-to-bottom study of ISIS’ financing and organization. “Getting a grip on who the right financial targets would be at the Treasury Department would be difficult.”
That is equally true of the other major source of ISIS money — its extortion activities in the areas it controls, said Mr. Johnston, who is examining declassified documents that detail the group’s funding streams. ISIS demands anywhere from 10 percent to 20 percent of revenue from businesses in its territories and operates other “mafia-style” rackets that yield as much as $1 million a day.