STEVE INSKEEP, HOST:
As we've discussed elsewhere in the program, President Obama tomorrow is expected to outline a military strategy to confront the Sunni militant group called the Islamic State or ISIS. There are also calls for a strategy to target the group's financial resources, especially oil. The militants are pretty savvy at smuggling and marketing oil as NPR's Deborah Amos reports.
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DEBORAH AMOS, BYLINE: This is ISIS on June 10, rolling into Mosul, a city of 2 million people in northern Iraq. But it's now clear the big prize was oil - a bold grab for lucrative refineries and oil fields across Northern and central Iraq. The group uses violence to hold onto the area and now reaps huge oil profits. The business model is becoming clearer - smuggling networks, attractive low prices and forged papers - first, the takeover. ISIS swept into at least four fields, including Arjeel, one of Iraq's most productive, says Ben Van Heuvelen, managing editor of Iraq Oil Report.
BEN VAN HEUVELEN: ISIS was stealing oil out of pipelines, out of storage tanks, loading it into trucks and selling it to drivers for very cheap.
AMOS: Cut-rate prices - $25 a barrel - and at that price, there are plenty of buyers.
VAN HEUVELEN: The drivers were then selling to middlemen, and then middlemen would find a way to launder the oil, so to speak, and then sell it on.
AMOS: His calculation, based on interviews with drivers and reports of trucks crossing local borders...
VAN HEUVELEN: Our estimate was it was about a million dollars a day going across.
AMOS: ISIS was driven out of Arjeel at the end of August by the Iraqi military, but that hasn't slowed smuggling from other fields or dimmed the aim for bigger takings. The oil-rich province of Kirkuk is under threat. The effort to curb the smuggling there begins with Kurdish fighters known as the Peshmerga. They're the first line of defense, says Kirkuk's Governor Najmiddin Karim. The Peshmerga are doing more than just protecting.
GOVERNOR NAJMIDDIN KARIM: When we see oil tankers coming from areas controlled by ISIS, we confiscate those.
AMOS: So they have actually tried to set up trade by sending oil across the line?
KARIM: Oh, yeah. We have confiscated many oil tankers.
AMOS: But they keep trying to do it?
KARIM: They try to find other ways.
AMOS: Oftentimes they succeed, he admits, bribing drivers and officials to get papers forged.
KARIM: You know, wartime people do anything to make money. That's why they are called warlords.
AMOS: ISIS started their smuggling operation in Syria after capturing oil wells in Syria's Eastern Province, says Rafik Mark Latta with the Energy Intelligence Group. They now control an extensive operation, supporting a large network of refineries built by Syrian businessmen.
RAFIK MARK LATTA: I call these teakettle refineries, all very small, most are under 100 barrels a day.
AMOS: The network for exporting stolen crude is also well-developed, he says, moving through Turkey and Iran reaching markets as far away as Afghanistan and Armenia.
MARK LATTA: The number that gets quoted is anywhere between 1 and 3 million barrels a day. I suspect at times it's been more, you know. It's a tiny amount for a state, but it's quite a lot for a terrorist group.
AMOS: And it depends on local corruption, says Van Heuvelen. Unraveling those illicit networks won't be easy.
VAN HEUVELEN: If you can pay off even a low-level official to give you the piece of paper that he took from somebody else, then you can get your oil out.
AMOS: By the time he gets to Turkey or Iran, it looks like it's official oil?
VAN HEUVELEN: That's correct.
AMOS: It's a system that's made ISIS the richest militant organization in the world. Deborah Amos, NPR News, Istanbul.
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