Editor’s Note: Luay al-Khatteeb is visiting fellow at the Brookings Doha Center, focusing on the geopolitics and political economy of the GCC and Iraq. He is the founder and director of the Iraq Energy Institute and serves as senior adviser to the federal parliament of Iraq for energy policy and economic reform. Follow him on Twitter.
Terrorist group ISIS controls some oil fields in North Iraq, which helps fund its activities
The group is using smuggling routes to get crude into nearby countries, and refine it
The refined oil is then sold locally and used to fund ISIS' warfare and raise money
The impact on global markets has so far been limited as ISIS is not in southern Iraq
Luay al-Khatteeb spoke to CNN about the impact of ISIS’ march through northern Iraq, and the militant group’s control of some oil fields. He explained how they used the oil fields to raise funds, and how it could impact global prices. This is an edited version of the conversation.
How much of Iraq’s oil market do ISIS control?
A month ago, the ISIS–controlled oil market in Iraq was reported to be worth $1 million a day. Now, with expansion, further control of oil fields and smuggling routes, the market is believed to be raising at least $2 million a day.
This could fetch them more than $730 million a year, enough to sustain the operation beyond Iraq.
ISIS have been battling over Baiji and the refinery is still under siege. However, if ISIS succeed in capturing it, the refinery would be very difficult to operate without capable and technical staff.
One important factor for the stability of global markets: ISIS is not yet in the south of Iraq, where the country’s true oil bounty lies. Capturing the southern assets of the country would be mission impossible for the group.
The territory is far from fault lines, and is dominated by Shia, which makes dominating the region difficult for the Sunni militant group.