A significantly oil exporter before the civil war, Syria has found itself extremely oil-poor, with almost all the oil producing regions of the country now under ISIS control. This has been a windfall for ISIS, which has allowed local communities to keep running the oil and has been raking in heavy tax dollars from it.
That’s made oil production in ISIS territory a major focus, with both the US and Russia pounding what is basically civilian infrastructure, on the theory that they are dramatically cutting ISIS’ income by virtue of lowering their exports. They’re not halting them though, and the income loss may be overstated.
ISIS doesn’t sell oil on the traditional international market, of course. They sell the oil and refined products, at a discount, to smugglers who take it elsewhere, including large amounts that ends up in other parts of Syria that aren’t under ISIS control. As that excess oil availability falls, so does the discount, and those parts of Syria are seeing a major price increase, parts of which are going right into ISIS’ pockets.
This is compounded by Syria not importing a lot of oil from overseas, except for enough to keep their military running, meaning private industry is going to these smugglers, and may ultimately be willing to pay above-market prices for ISIS oil, since the war is making supply so scarce.
I believe there are few problems with this information. First, US coalition has been targeting Syrian civilian infrastructure for over one year, but not making major impact on Daesh trade. There has been a lots of idle talk about all of the oil going to Turkey, where bad boy Erdogan and even his family is profiting from oil. Aside from "cui bono" of such media attacks, it has proven to be largely inaccurate. In the absence of refineries, that oil is of no great value to buyers. Actually, even though it can be easily seen from the air — as Russian data provided to G-20 shows, the endless columns of oil tankers are like a ribbon across hundreds of miles, transporting oil to Iraq. More specifically, Iraqi refineries. As for selling gas, that is a more diverse operation, and some of it is purchased in Syria, some by Kurds in Turkey, or elsewhere, and majority of it finds its way to the rest of Iraq. Until Russia started pounding the columns of tanker trucks, US coalition did not bomb them — NOT ONCE. After Russia destroyed hundreds of vehicles, US attacked the column for the FIRST TIME.
Unfortunately, most of the gas ends up on the international market via very uncontrolled Iraqi territory. Once the oil is refined, its origin does not matter. Refineries are not reporting on the origin of oil they process, they sell actual gas to traders, and it ends up being spent in Iraq or exported to the region and overseas. INADVERTENT information on CNN business news recently pretty much said so, without realizing what they divulged Namely, the article talked of the sharp increase of import of GAS from Iraq, as opposed to OIL. The article then proceeds explaining why it is better and cheaper for US to let Iraqi or other Middle East refineries do the job, and we should import gas.
So, it is much to EARLY to draw conclusions on the impact of blocking transit of oil into Iraq. Sure, there will be some gas being sold into Syria and some into Turkey. But this will not be enough, and price increase will just wipe out any incentive for smugglers and buyers to get into risky trade. They may as well go buy legally. Syria gets oil from Russia, and only population that is living under Daesh control cannot get it. There is no factual report of the lack of gas in Syria under government control. Let us see what will happen once the refineries dispose of the low cost oil products, and no more new supplies are coming. Since until Russia started bombing the oil highway — nobody, not once, tried to stop them. Pictures given by Russia to G-20 leaders, both from satellite and from low flying aircraft, tells the whole dirty story.
Yet another blogger scared silly of the idea that Putin isn't winning the war!
Bianca,
Your assessment is more astute then Jason's
In other words, all Putin's huffing and puffing isn't blowing ISIS's house down! Indeed, it seems to be making things worse, thereby bogging him down even further.