Oil Smuggling in the Islamic State

Project Proposal: Mike Airosus, Emily Cole, Travis Wheeler (we will be taking the second module)

This project will use social network analysis to understand the structure and evolution of Iraqi and Syrian oil smuggling networks, beginning with Saddam Hussein’s efforts to evade a UN-sanctioned embargo in the 1990s. Since Saddam’s removal from power, criminal and insurgent networks have come to dominate oil smuggling. Today, oil is a central feature of the illicit wartime economies of both Iraq and Syria. Indeed, the Islamic State’s stunning territorial gains in the summer months of 2014 were made possible by its previous capture of revenue-generating oil fields. The Islamic State’s goal is to establish a functioning caliphate. In addition to capturing new territory, it must also hold its current territory and govern it. Statebuilding and governance are capital-intensive endeavors. Thus far, they have self-financed through a variety of criminal enterprises, including robbing banks and extortion. Since capturing key Iraqi and Syrian oil fields, even at highly-discounted rates, oil revenues are a key source of finance for the Islamic State and appear to be their primary source going forward. I. Background In response to Saddam Hussein’s invasion of Kuwait in August 1990, the UN Security Council passed a number of resolutions to expel Iraqi forces from Kuwait and restore peace and security to the region. After U.S.-led Operation Desert Storm (ODS) achieved the first goal, the Security Council imposed an oil embargo on Iraq to prevent the regime from reconstituting its Weapons of Mass Destruction (WMD) program and once again menacing its neighbors (Katzman, et al.). These harsh UN sanctions had a drastic impact on the Iraqi economy – per capita income went from $2,304 in 1989 to $507 or lower over the next several years – and fed Saddam’s fears of social unrest (Wing). The Baathist regime relied on illicit oil sales – via trade protocols with neighbors, oil smuggling, and other illegal mechanisms – to enrich Sunni tribes, criminal gangs, and other potential agitators and maintain its grip on power (Duelfer and Wing). In addition to enhancing the regime’s internal security, its reliance on transnational smuggling routes gave it the opportunity to improve its relations with regional actors. In 2000 alone, the Iranian Islamic Revolutionary Guard Corps (IRGC) earned $50 per metric ton for protecting Iraqi oil transiting the Persian Gulf (Wahab). According to the U.S. Central Intelligence Agency (CIA), these funds – totaling $11.2 billion – also allowed Iraq to rebuild its conventional military forces and WMD program (Duelfer) until the United States launched Operation Iraqi Freedom (OIF) in 2003. In the aftermath of the U.S. invasion, insurgent networks exploited the insecurity to become major players in the oil smuggling business, earning an estimated $200 million a year from these activities alone. Oil was so important to the insurgency’s financial health that groups refrained from bombing refineries, opting instead to stage attacks in the neighborhoods where oil workers lived in order to intimidate them into cooperation (Oppel). Over time, an insurgent-political nexus emerged around the smuggling activities. In one infamous case, Mish’an al-Juburi, a tribal leader and a former parliamentarian, helped insurgents infiltrate Iraqi security forces protecting an oil pipeline in addition to sharing intelligence with former members of Saddam’s Baathist regime (Wahab). The Islamic State generates at least $1 million in daily revenue, leading some to call it the “richest terrorist group on the planet” (Johnston, et al.). Like previous insurgents in the region, much of this wealth comes from oil smuggling. In 2013, the Islamic State gained control of Syrian oil fields near Raqqa, selling the crude oil to the regime of Bashar al-Assad and processing the rest into petroleum products for its fighters (Nordland, et al.). In Iraq, the Islamic State’s oil fields produce between 25,000 and 40,000 barrels per day, a haul worth more than $1 million on the black market (Aisch, et al.). Al Qaeda in Iraq (AQI), the Islamic State’s predecessor funded its operations through oil smuggling and aggressive extortion schemes (Amos), just as Abu Bakr al-Baghdadi’s group does in Iraq and Syria today. Yet, the illicit funds generated by oil smuggling are even more important to the Islamic State than they were to AQI. To begin with, the Islamic State rejects funding from foreign sources (Johnston), believing that such assistance would corrupt its independence and integrity. Moreover, in contrast to most terrorist organizations, the Islamic State must invest heavily in state-building activities for its caliphate claim to remain credible. Iraq and Syria are home to some of the most productive oil fields in the world and have been a source of finance for both countries and non-state armed groups over the past century. Iraq has 141 billion barrels of proven oil reserves, making its oil reserves the fifth largest in the world (EIA, Iraq). Reserves are concentrated in the Shiite south and the Kurdish north. Syria has 2.5 billion barrels in proven oil reserves (EIA, Syria). Syrian economic losses in the oil sector alone during the war amount to $12 billion (EIA, Syria).

Key oil fields in Iraq and Syria have now fallen under ISIL/ISIS/Islamic State control. The excellent graphic from the New York Times below shows oil fields in purple and oil fields controlled by the Islamic State in red.

II. Objectives

The following objectives will guide our work on this project.

1. Identify and Describe Saddam Hussein’s Oil Smuggling Network

While under embargo, Iraq smuggled significant quantities of oil out of Iraq and onto the world market. Understanding this network and how it was tied to ancient smuggling routes and the ways that it does and does not resemble current smuggling routes will be critical to our analysis. If a similar or even identical route is now being used, are the actors also similar?

2. Identify and Describe the Current Oil Smuggling Network

Finding reliable data and creating a data set on the current oil smuggling network will likely be the most challenging part of this endeavor. Different scholars and journalists have reported on this network, but it is a current and adaptive system. Over the course of our research, it is likely to change possibly at an observable level. If these change or adaptation occurs, we will need to choose a point in time for our analysis.

3. Analyze Current Oil Smuggling Actors

Drawing on Carolyn Nordstrom’s typology of war economies, we will analyze the individual actors and groups of actors who make up this network. We will look at how these actors fit into this network and what they risk to participate in this network, what they gain, and how they connect other actors to one another. We know from other conflicts and from theory that networks set up to smuggle one commodity, generally end up carrying other goods as well. We hope to illustrate if there are other goods moving through this network what they are and how they are moving. We will also compare the current network with Saddam Hussein's earlier network.

III. Methodology and Data

For the current oil smuggling network we will use a combination of sources, including news articles, non-government and international organization reports, official government statements, and interviews with Fletcher alumni and other preeminent researchers in this field, including scholars at: The Combating Terrorism Center at West Point; the Carnegie Endowment for International Peace; and the European Council on Foreign Relations.

Therefore, given our restriction to open-source, and remote research methods, as well as time constraints, we will be using qualitative judgement to determine where connections exist, what types of connections exist, and the attributes of each actor. In order to create a dataset, we will code these judgements into connections and attributes.

For the first objective, we hope to find data from pre-existing scholarly work, declassified government documents (e.g. the 2004 Duelfer Report, West Point’s Harmony Database, et al.), and other sources on Saddam Hussein and insurgents’ oil smuggling networks. If there is no available data, we will use the method described above.

For this project we would like to look at connections in general as well as types of connections between nodes. For instance, we would like to see which actors are connected with oil sales, vs. transportation, vs. financing, etc. In addition, we are concerned with who the central players are within the network and which actors are key to maintaining the network, especially across geography. Therefore our one-mode dataset will be coded as follows:

0 = no connection in any way

1 = oil has been purchased by this group

2 = transportation connection

3 = communication connection

4 = financial connection (bank used, money transferred or held)

5 = direct control

Note: all of these connections must be in relation to the oil trade/oil smuggling, as connections may exist for other purposes.

We also want to create an attribute dataset that includes information on the type of actor/node, its geographic location and its classification.

The attribute dataset will be coded as follows

Classification:

1 = State government

2 = Non-state armed group

3 = private company

4 = charitable organization

5 = oil field

6 = city/town

Non-state armed groups:

1 = Militia

2 = Terrorist organization

3 = Criminal organization

4 = Insurgent group

Location - Country:

0 = Unknown/unclear

1 = Syria

2 = Iraq

3 = Turkey

3, 4, 5, 6, etc. = other countries added as needed

Location - District

1,2,3,4,5, etc. = districts and governorates within Syria and Iraq.*

(*if data is available)

Additional attributes may include

• Nationality
• Tribal affiliations
• Linked to Baathists/Saddam Hussein’s network
• Role (Sellers, buyers, brokers, transportation, protectors: those protecting transportation routes and/or oil infrastructure)

In addition, we will consider centrality measures to identify key connectors within the network.

IV. Research Questions

The following guiding research questions will inform our work. We do not anticipate that available data will be sufficient to answer all of these questions fully or even partially. We hope to use theory and conflict analysis as a complement to social network analysis to answer these questions as best we can with incomplete information.

How is this network able to survive in war? 

• Could this network survive outside of war and instability?
• Why are the people in the network? 
• What skills, connections or capabilities make them valuable and/or necessary to the network’s operation?
• What do people gain from participating in oil smuggling?
• How does oil smuggling allow these actors to support their other activities?

How is oil smuggling a part of different and overlapping economies?

• the war economy
• the informal/grey economy
• the survival economy

How does soil smuggling overlap or not overlap with smuggling of other goods?

• human trafficking
• foreign fighters
• domestic fighters
• weapons
• food
• medicine
• illegal drugs and other contraband

V. Conclusion

We anticipate shifting our focus based on data availability. Our work will be an expression of “looking where the light is” instead of looking where the most can be learned. We are prepared to adapt our methodology and research questions to meet the data constraints.

Works Cited

Amos, Deborah. “How The Islamic State Smuggles Oil To Fund Its Campaign.” NPR.org. Accessed October 23, 2014. http://www.npr.org/blogs/parallels/2014/09/09/346844240/how-the-islamic-state-smuggles-oil-to-fund-its-campaign.

Duelfer, Charles. Comprehensive Report of the Special Advisor to the DCI on Iraq’s WMD. Central Intelligence Agency, April 25, 2005. http://www.gpo.gov/fdsys/pkg/GPO-DUELFERREPORT/pdf/GPO-DUELFERREPORT-1.pdf.

Gregor Aisch, Joe Burgess, C.J. Chivers, Alicia Parlapiano, Sergio Pecanha, Arche Tse, Derek Watkins, and Karen Yourish. “How ISIS Works.” The New York Times, September 16, 2014. http://www.nytimes.com/interactive/2014/09/16/world/middleeast/how-isis-works.html.

Johnston, Patrick B., and Benjamin Bahney. “Hitting ISIS Where It Hurts: Disrupt ISIS’s Cash Flow in Iraq | RAND.” Accessed October 22, 2014. http://www.rand.org/blog/2014/08/hitting-isis-where-it-hurts-disrupt-isiss-cash-flow.html.

Jr, Richard A. Oppel. “Iraq’s Insurgency Runs on Stolen Oil Profits.” The New York Times, March 16, 2008, sec. International / Middle East. http://www.nytimes.com/2008/03/16/world/middleeast/16insurgent.html.

Katzman, Kenneth, and Christopher Blanchard. Iraq: Oil-For-Food Program, Illicit Trade, and Investigations. Congressional Research Service, June 14, 2005. http://fas.org/sgp/crs/mideast/RL30472.pdf.

Nordland, Rod, and Alissa J. Rubin. “Iraq Insurgents Reaping Wealth as They Advance.” The New York Times, June 20, 2014. http://www.nytimes.com/2014/06/21/world/middleeast/isis-iraq-insurgents-reaping-wealth-as-they-advance.html.

Wahab, Bilal A. “How Iraqi Oil Smuggling Greases Violence.” Middle East Quarterly, September 1, 2006. http://www.meforum.org/1020/how-iraqi-oil-smuggling-greases-violence.

Wing, Joel. “A History Of Oil Smuggling In Iraq.” Musings on Iraq, August 17, 2010. http://musingsoniraq.blogspot.com/2010/08/history-of-oil-smuggling-in-iraq.html.

Wing, Joel . “The Growth Of Organized Crime And Gangs In Iraq.” Musings on Iraq, August 1, 2010. http://musingsoniraq.blogspot.com/2010/08/growth-of-organized-crime-and-gangs-in.html.

Amos, Deborah. “How The Islamic State Smuggles Oil To Fund Its Campaign.” NPR.org. Accessed October 23, 2014. http://www.npr.org/blogs/parallels/2014/09/09/346844240/how-the-islamic-state-smuggles-oil-to-fund-its-campaign.

Duelfer, Charles. Comprehensive Report of the Special Advisor to the DCI on Iraq’s WMD. Central Intelligence Agency, April 25, 2005. http://www.gpo.gov/fdsys/pkg/GPO-DUELFERREPORT/pdf/GPO-DUELFERREPORT-1.pdf.

Syria. Washington, DC: U.S. Energy Information Administration, February 18, 2014. http://www.eia.gov/countries/analysisbriefs/Syria/syria.pdf.

Iraq. Washington, DC: U.S. Energy Information Administration, April 2, 2013. http://www.eia.gov/countries/analysisbriefs/Iraq/iraq.pdf.

Gregor Aisch, Joe Burgess, C.J. Chivers, Alicia Parlapiano, Sergio Pecanha, Arche Tse, Derek Watkins, and Karen Yourish. “How ISIS Works.” The New York Times, September 16, 2014. http://www.nytimes.com/interactive/2014/09/16/world/middleeast/how-isis-works.html.

Johnston, Patrick B., and Benjamin Bahney. “Hitting ISIS Where It Hurts: Disrupt ISIS’s Cash Flow in Iraq | RAND.” Accessed October 22, 2014. http://www.rand.org/blog/2014/08/hitting-isis-where-it-hurts-disrupt-isiss-cash-flow.html.

Jr, Richard A. Oppel. “Iraq’s Insurgency Runs on Stolen Oil Profits.” The New York Times, March 16, 2008, sec. International / Middle East. http://www.nytimes.com/2008/03/16/world/middleeast/16insurgent.html.

Katzman, Kenneth, and Christopher Blanchard. Iraq: Oil-For-Food Program, Illicit Trade, and Investigations. Congressional Research Service, June 14, 2005. http://fas.org/sgp/crs/mideast/RL30472.pdf.

Nordland, Rod, and Alissa J. Rubin. “Iraq Insurgents Reaping Wealth as They Advance.” The New York Times, June 20, 2014. http://www.nytimes.com/2014/06/21/world/middleeast/isis-iraq-insurgents-reaping-wealth-as-they-advance.html.

Wahab, Bilal A. “How Iraqi Oil Smuggling Greases Violence.” Middle East Quarterly, September 1, 2006. http://www.meforum.org/1020/how-iraqi-oil-smuggling-greases-violence.

Wing, Joel. “A History Of Oil Smuggling In Iraq.” Musings on Iraq, August 17, 2010. http://musingsoniraq.blogspot.com/2010/08/history-of-oil-smuggling-in-iraq.html.

Wing, Joel . “The Growth Of Organized Crime And Gangs In Iraq.” Musings on Iraq, August 1, 2010. http://musingsoniraq.blogspot.com/2010/08/growth-of-organized-crime-and-gangs-in.html.