Terrorism and Energy Security

Updated: Jul 21

Terrorist groups such as ISIS have shocked the world by how technologically advanced and organized they are. Behind the scenes, most of the funding for groups such as ISIS comes, and relies on a well known ressource: oil.


Introduction

It is commonly acknowledged that oil has been a key factor in the emergence and the financing of ISIS. However, whereas many analyses have been made to discuss ISIS’ organization in terms of energy from a geopolitical perspective, less have been written from an energy security point of view. The question I will attempt to answer throughout this article is the following: to what extent is oil security crucial for the survival of ISIS? ISIS’s dependence on oil revenue, as well as continuous Middle Eastern instability, represents a grave threat to ISIS’ durability. Oil is undoubtedly a source of wealth and power for ISIS, but regardless of this fact, ISIS cannot be considered “oil secure” for a multitude of reasons discussed in this article.

Oil as a source of wealth and a symbol of power for ISIS

To begin with, let’s analyze to what extent oil has been a source of wealth and symbol of power of ISIS. In 2015, several studies have shown that ISIS possessed assets with a total value of around 1 800 billion euros, and revenues of 2,7 billion per year. ISIS has a diversified financing system. It is based on agricultural revenues; extortion of populations and taxation of economic activities; looting of financial reserves of administration and banks; traffic of cultural goods; abductions for ransom and human trafficking and donations made by foreign donors, most of it by Saudi Arabia. Nonetheless, since its creation, the main source of revenue for ISIS has been oil. Indeed, the Islamic State has been controlling eight oil fields in Syria and Iraq, and they sold most of those fields’ oil production on the black market, through parallel networks along the Turkish border. This production represented around 44 000 barrels per day in Syria and 4 000 in Iraq. Yet it is very difficult to estimate what oil sales represented since ISIS usually provides oil at very low prices, far under the price of the global markets, which themselves fell consequently recently. Nevertheless, in 2014, when the price of crude oil was close to $80 per barrel, the United Nations estimated that ISIS could earn $1,6 million per day in oil revenue. ISIS’ substantial oil revenue allowed it to finance its military and terrorist attacks, and to attract new recruits from all over the world. Oil has remained the main source of revenue for ISIS, and the Caliphate has professionalized their methods of distributing their black gold. According to Bloomberg, it became “a well-greased logistical machine that keeps thousands of barrels moving from unknown pumps to refineries, and ultimately to smugglers who operated out of Turkey and other countries”.Thus, oil has indeed been a genuine, solid weapon of war for ISIS. First, because its well organized and clandestine system proved difficult to disrupt. Secondly, because this system took part in the destabilization of the Middle East, essential to ISIS’s success. The whole ISIS oil system is murky, non-transparent, and difficult to assess. As explained by Pierre Conesa (Former high official at the French minister of foreign affairs), in countries like Saudi Arabia, there is no distinction between public and private money. It is therefore difficult to trace such financing sources as they pass by non-official ways such as supposed charities. Underground funding of terrorism through oil resources has thus remained in place, as it is argued by Floch Prigent (former president of Elf, an oil company). According to him, oil coming from ISIS was bought by actors that also wish to keep these transactions secret and officially non-existent. Furthermore, an inquiry from the Financial Times has shown how ISIS could maintain a production chain despite the political instability and the old infrastructures. In fact, refiners came to get their provisions from an oil field controlled by ISIS, sometimes in lines of trucks six kilometers in length. The oil was then directly sold in Turkey. As explained by Bloomberg : “Militants increasingly sell raw crude oil to truckers and middlemen, rather than refining it themselves”. Commercials responsible for the transportation and oil sales came to the extraction sites with a large number of trucks (sometimes up to 30). They made their economic transactions with ISIS directly from there, encouraged by the low prices and easy paying methods. Thus, in a context where the number of buyers was still increasing, it was difficult for the international coalition to bomb ISIS’ oil fields as the risk to kill civilians was very high. From Michael Knights’ perspective (Iraq expert at the Washington Institute for Near East Policy), ISIS had “quite an organized supply chain running fuel into Iraq and [throughout] the ‘caliphate” and the difficulty to weaken this chain could explain why it could be considered as a genuine weapon for ISIS.

Moreover, oil extractions have led to ISIS’s increase in power due to its destabilizing in the Middle East. The countries where ISIS gained territories, such as Iraq or Syria, have important oil resources. These states can be seen as victims of the “resource curse”, because they tend to follow its main criterias, outlined by UCLA Professor Michael Ross. Indeed, oil “tends to make authoritarian regimes more durable, increase certain types of corruption, and to help trigger violent conflict”. Thus, attacking these countries’ resources through terrorist means tended to increase this “resource curse” even more. It could be argued that, ISIS’ attacks against petrostates, destabilized the political context, making those countries more vulnerable to ISIS’s invasion.

II- Yet ISIS cannot be considered as energy secure

The symbol of power and wealth oil provided to ISIS made the organization heavily dependent on it. However, ISIS cannot be considered as oil secure. The four main criteria of energy security are: availability, accessibility, affordability, and acceptability. Despite a clear availability of oil resources in the Middle East, ISIS’ accessibility to them needs to be questioned. It is commonly known that the Middle East represents a significant share of the global oil reserves - about a third to be exact. The Middle East also offers the possibility to actually extract that oil. Supposedly then, the availability of oil resources for ISIS in Middle eastern countries is quite high. However, it does not necessarily mean that these resources are easily accessible, as the criteria of “accessibility” depends on geopolitical elements. In fact, ISIS’ access to oil in this region is not as expansive as it seems, since natural resources are generally exploited by the official, internationally recognized government of the said state. Although, ISIS functions like a state, with a calif, a capital, tribunals, a police force, an army, and a territory division in seven provinces, it has always been a proto-state. It does not possess any international recognition, any proper Constitution, nor any delimited territory by official borders. Thus, regarding international law, the Islamic State has no legal personality and cannot legally claim the resources which are on the territory of another, internationally recognized state. Therefore, ISIS does not have easy nor reliable accessibility to oil resources. It does not possess any right to exploit those resources, and is thus at the mercy of any other terrorist entity, or even local government trying to reclaim those much valued oil fields.

Another criterion used in the definition of energy security is the affordability of the resource in question, and the economic system it. Once again, it is questionable whether ISIS genuinely fulfils this criterion or not. Indeed, even though it has been demonstrated that oil turned out to be the main source of revenue for ISIS, their system still possesses several flaws from an economic perspective. Since it is impossible for the terrorists to sell their oil on the regular markets, they sell it at a very cheap price (usually half of the market price) to intermediaries, which usually become their allies, According to an inquiry made by France 24, at one point, instead of the official price of 85 dollars, crude oil was sold by the Islamic State at an average price of 40 dollars. However, despite the fact that ISIS’ oil is economically very attractive for the consumers, it is subject to the variation of the global oil price. To maintain their comparative advantage, ISIS had to adapt their prices to whatever the global market price is. This leads to an extremely high volatility of prices, thus fragilizing the economic system behind ISIS’s development of oil.

There is also some evidence showing that ISIS oil production is not economically efficient. This is explained by the fact that the ISIS members taking over those fields do not necessarily have the technical capabilities to operate them. They mainly rely on the cooperation, probably not always voluntary of locals who ran the field beforehand. However, ISIS still suffers from not exploiting the full potential of the oil fields they take over. As explained by Eline Gordts from the Huffington Post, “ISIS is in control of 60 percent of Syria’s oil production capacity. Pre-conflict, Syria’s production capacity stood at 385,000 to 400,000 barrels a day, so 60 percent would be more than 200,000 barrels. But from what is being reported out of Syria, ISIS appears to only be producing around 50,000 barrels”. The same thing happened in Iraq, where the Islamic militants could only produce between a quarter and a half (20 000- 40 000 barrels a day) of their field capacity (of 80 000 barrels a day). Considering the economic flaws of ISIS’ oil system, we can argue that the third criterion of affordability is not completely fulfilled, due to both the weakness of their economic system caused by high volatility of prices, as well as their under-exploitation of their oil fields’ capacities.

Finally, significant criticisms can rise concerning the fourth and last criterion about acceptability. Acceptability touches upon the environmental and societal elements. From an ethical point of view, this oil production cannot be considered as acceptable as ISIS has no legitimacy to exploit resources that are part of a sovereign territory. Then, from an environmental perspective, ISIS’ oil production cannot be seen as sustainable as it only relies on fossil fuels, which are non-renewable energy. We wouldn’t expect ISIS to care about the environment, but using non-renewable instead of renewable energy does cause a problem in ISIS’s growth model. Non-renewable energies, as indicated in their name, are finite resources, and there will come a time when ISIS will run out of their main source of revenue if they don’t change their ways.

III- Direct threats to ISIS’S longevity

Thus, because ISIS does not genuinely fulfill the four criteria of energy security, we can argue that the organization has not been oil secure until now. In our last part, we will now analyze how this constitutes a direct threat to the Islamic State’s survival. ISIS does not have any legitimacy to exploit their oil resources. For this reason, it cannot benefit from any protection against the use of force from other actors on these territories, turning these regions into privileged targets for allied air strikes. In fact, since Mosul, the second biggest city of Iraq, was taken by ISIS in June 2014, the international coalition (composed of the United States, France, the United Kingdom, Canada and Australia) targeted the rich oil network of ISIS, in order to impoverish the organization. Attacking the money-making sources of ISIS such as its oil fields has become Washington and its allies main strategy in order to weaken ISIS’s economic strength, and thus also diminish their overall cohesion. Characterized by bombings on refineries, storage sites, oil pipelines and transport trucks, these air strikes have significantly affected ISIS’s revenues. Daniel Glaser, Former Assistant Secretary of Terrorism Financing at the US Treasury argued that these strikes have been highly effective because the destruction caused by them has limtied ISIS’s capacity to produce and sell crude oil with high benefits. They were even more effective during the period these strikes were taking place, the international oil market collapsed, leading to a decrease in the price of ISIS’ crude oil and consequently their revenues. In addition, air strikes have also damaged reserves of cash of around a hundred million dollars.

As a result, despite the fact that natural resources represented about half of the annual budget of ISIS and two billion euros in 2015, it seems that they only represented a third according to the latest estimations from terrorism experts. Thus, not being oil secure could be seen as a direct threat for ISIS’s survival, due to the obvious weakness ISIS’s oil selling business showed after the coalition’s strikes on oil fields. In other words, it shows that even though oil production is crucial for ISIS, the fact that it does rely on a legal framework makes it subject to destabilization from external factors such as these air strikes and international oil price fluctuation.

In order to compensate for this decrease in oil revenues, ISIS has developed a strategy of diversification of its financial resources. Organ, human and drug trafficking; thefts of antiquities; ransoms and donations; and taxes and extortions imposed on inhabitants and businesses in the territories they control, now account for about 40% of the organization’s total income. However, without the predominance of oil revenues, it can be argued that this new strategy has not been enough.

Conclusion

To conclude, there is no doubt that oil is a crucial source of revenue and power for ISIS. However, by analyzing its system of production and sales, it can be argued that a proto-state like ISIS cannot be oil secure because it does not genuinely fulfill the different criteria related to energy security. This underlies several weaknesses about this system that are and can be used as strategic targets for the international coalition in order to fight ISIS. Relying on oil revenues while not being oil secure and having a heavily flawed economic model of oil distribution is thus very likely to lead to ISIS’s caliphates demise in the near future.




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By Martin Gilbert and Vincent Leroy


Martin Gilbert

Born in Paris where I spent most of my life, I am a French student at the Paris Institute of Political Sciences. Currently studying abroad for the academic year at the University of California, Santa Barbara, I am trying to seize every opportunity to expand my knowledge in Geopolitics, Arabic, and Farsi, to pave the way for a career in international security. My dream is simple: work and live in a Middle Eastern country as soon as possible. I am also passionate about sports, and frequently run marathons, such as the LA marathon that I finished in 3:14h

Contact:

martingilbert@sciencepo.fr

https://www.linkedin.com/in/martinglbt/

Vincent Leroy

I am a student in Political Science at Sciences Po and currently studying at the University of Toronto for the academic year. Born in France where I have lived most of my life, I also studied two years abroad, one in the United States and the other in Canada, and I have a special interest for geopolitics, more specifically in the Middle East. I wish to satisfy my curiosity for this region as well as to practice Arabic by pursuing a career in international security.

Contact:

vincent.leroy1@sciencespo.fr

https://www.linkedin.com/in/vincent-leroy-19487a126/





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