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There Will Be Blood: ISIS Is Trying To Finance Its Caliphate With Oil

The ISIS offensive that provoked U.S. airstrikes may have been aimed at winning oil fields. The militant group is "among the wealthiest terrorist groups on the planet," says a U.S. intelligence official.

Posted on August 15, 2014, at 10:51 a.m. ET

Stringer/Iraq / Reuters

Kurdish peshmerga fighter takes position on the frontline in Khazer, August 14, 2014.

The offensive by Islamist militants that imperiled the Yazidi population and spurred the United States to launch airstrikes in Iraq was a strategic gambit by ISIS mainly aimed at winning access to oil fields and refineries, according to a former CIA official with deep experience in Iraq.

John Maguire ran CIA operations in Iraq in 2004. Currently a consultant on oil operations in northern Iraq, he helped the Kurds organize against Saddam Hussein in the 1990s, and worked on Iraq issues for the agency from 2001 through 2005. He said his sources have told him that when the Islamist army ISIS launched its offensive into Sinjar in northern Iraq, it was doing so in part to pressure Kurdish forces to abandon the oil-rich city of Kirkuk in northern Iraq. "They wanted to leverage that so they could take Kirkuk," he said. "So they could get access to the oil infrastructure. They are short on diesel and gasoline.

"There is a method to this madness."

That theory fits with what two U.S. intelligence officials said this week about the oil interests of ISIS, the militant Islamist army now in command of a vast swath of land in Syria and Iraq. Both officials spoke on condition of anonymity, in line with their agency's policies. Gaining control of energy resources is part of ISIS' "overall strategy," said one of the officials.

Kirkuk is an oil prize that both the Arabs and the Kurds have claimed over the years. The Kurds secured it in July as Iraqi armed forces collapsed in the face of the onslaught by ISIS, sometimes called ISIL or the "Islamic State."

Maguire said that to wrest Kirkuk from the Kurds, ISIS' strategy was to put pressure on the Kurdish forces on three fronts: the far north near Duhok, the south, and the west, near Sinjar. "They are pressing because they want Kirkuk," he said. The threatened ISIS Duhok offensive, he said, never took place because Kurdish resistance elsewhere was too stiff, and because the U.S. started bombing ISIS positions.

From a military point of view, ISIS's gambit was "a very smart strategy," said Lawrence Korb, a senior fellow of the Center for American Progress and a former assistant secretary of defense under President Ronald Reagan. ISIS, he said, is "pretty sophisticated." Still, he said he didn't think ISIS will take the coveted city: "The Kurds are going to fight like blazes for Kirkuk, for they've wanted that for a long time."

And in fact, ISIS's gambit now appears to be stalling, as U.S. warplanes bomb ISIS positions and the Kurdish militia, known as the peshmerga, fight back.

Reuters TV / Reuters

Abu Bakr al-Baghdadi, who is purported to be the reclusive leader of the militant group "Islamic State," speaking in Mosul.

While the two current U.S. intelligence officials didn't confirm Maguire's account, one official said that "it's certainly possible" that ISIS has its eyes on the city.

ISIS needs two kinds of energy resources, experts on the militant group say: First, gasoline and diesel fuel that's ready to be poured into armored vehicles and trucks, and that can be used to operate power plants and provide heat once the summer ends. But to raise cash, ISIS is targeting oil fields that can generate crude oil over the long term.

Currently, ISIS gets much of its revenue from extorting the populations it controls. It has also been reported that ISIS received large amounts of cash from robbing a bank in Mosul, but that account has been challenged.

One of the U.S. intelligence officials said that ISIS is selling crude oil. "They can sell it locally or they can sell it to smugglers."

The other official called ISIS "among the wealthiest terrorist groups on the planet."

Valerie Marcel, an associate fellow at Chatham House in London, said ISIS is attracting oil technicians "who have the ability to run these facilities." ISIS is "in production themselves now," she said

Marcel said ISIS is pumping oil at certain fields it has taken, bringing that oil to the black market, and selling it at steep discounts to international prices. "The big money is there," she said. She called ISIS an "oil cartel" that has "a lot of Turkish buyers and also Iraqi buyers."

But Maguire, the former CIA official, said that he doubts that ISIS can continue to sell crude over the long term, because the group lacks the sophisticated know-how. Right now, he said, the terrorist army is mainly in need of fuel for tanks and armored vehicles to maintain its assault. He quipped, "They need a gas station!"

The U.S. intelligence officials emphasized that, unlike other terrorist groups that have attracted attention in the past, ISIS doesn't have "significant outside support," as one of the officials put it. Many of the usual suspects in terror finance — wealthy Gulf donors who have contributed to Al Qaeda and other Islamist groups — appear to be sitting this one out. But in part because of oil, ISIS "is flush with money now," according to the one of the officials. "It has plenty of money and continues to have money."

He would not corroborate claims that ISIS stole hundreds of millions of dollars from a bank in Mosul when it took over the city. But in areas it controls, this official said, ISIS's governance is "brutal but effective."

He also said that ISIS is completely divorced now from al-Qaeda and is in a fierce competition with the group. Terrorists worldwide are weighing which one they would support, like baseball fans trying to choose a team in the World Series. "The global jidahi movement is picking out sides," the official said.

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