The cost of running a caliphate

By Claude Salhani –

Running a country costs a lot of money. Running a country at war with all its neighbors and most of the civilized world costs even more.

There are enormous expenses incurred that range from paying fighters, to purchasing food to feed those fighters, to buying arms and munitions needed for the war, to providing health care for the casualties of that war, to paying the families of those fighters who were killed, to stashing “money away for a rainy day”. And this day may not be too far away for the supposed Islamic State, IS, a.k.a. ISIL or ISIS.

Running a caliphate costs money. So the people behind the current attempt to take control of Iraq’s oil, who collectively call themselves the Islamic State, decided they wound not mess around the way other terrorists have tended to do. Rather than going after the money in a petty manner or having to threaten and harass individual leaders for a few million dollars here, or a few million dollars there, and, since a few kidnappings, collectively worth a few million is considered chicken feed, They went directly to the mother lode: the oil wells.

In essence, what the leadership of IS are doing is very similar to what the Iraqi leadership under Saddam Hussein did in 1990 when they ran out of money after fighting Iran for eight long, bloody years: they raided the closest bank, the country of Kuwait, which Saddam simply declared was Iraq’s 19th province. He then helped himself to the oil, the monetary reserves, and all the cash and goods he and his goons could get their hands on. They literally ransacked the entire country of Kuwait. What they could not loot, they trashed, broke, burned or destroyed. That included setting fire to about 550 Kuwaiti oil wells.

Today the IS leadership is following in the footsteps of Saddam, by going after ‘the goose with the golden egg’: the oil fields of Syria and Iraq. And although IS is selling the oil at $18 per barrel, a price far below the going market rate of $93.45. Obviously IS did not incur any investment in developing the infrastructure, so any monies they may make from selling stolen oil is pure profit.

Refined crude, when available, will sell between $50 and $60 per barrel. This is a crucial part of how the terrorist group Islamic State fills its coffers.

U.S. intelligence officials stated last week that they believe the terror group calling themselves the Islamic State has become one of the wealthiest groups in history. As reported by American intelligence sources, the IS is said to be netting between $2 million and $ 3 million per day.

Most of the trade carried out by ISIS is through illegal trade of Syrian oil, from fields in eastern Syria, like Shahada and others, and more recently from fields captured since June in Iraq. The Islamist terror group is creating its own economy through a series of pragmatic trades, according to a report in Turkey’s Zaman newspaper.

The U.S., along with coalition of mostly Gulf Cooperation Council states and Jordan have started to target some of the Syrian field as the U.S. is trying to sever the group’s sources of revenue.

IS has been able to get the wells in areas it control to function at only 60 percent of full capacity.

Before the outbreak of violence, Syria produced between 385,000- 400,000 barrels per day. Still running at 60 percent has provided the IS with some 200,000 bpd from the Syrian wells alone. However, due to the fact that they are operated below par, some intelligence reports place the number of barrels being produced closer to 50,000 bpd.

Zaman quotes an unnamed Western oil executive who used to work in Syria as saying that “the Islamic State makes not less than $2 million daily,” off-loading this cargo.

In the meantime the IS has managed to deprive Damascus of some serious revenue stream. The Syrian government reports that its production fell to an average of 28,000 bpd in 2013 from 164,000 bpd in 2012. Oil sales made up nearly a quarter of state revenues before the war. The government says it has lost $3.8 billion in stolen oil revenue because of the conflict.

Syria’s pre-war production, estimated at around 380,000 bpd, a 2001 estimate, suffered heavily when Kurdish forces took control of some of the fields located in Hasaka province. The IS has taken fields in Shadad, al Omar, Tenak and Ward that were operated by international oil companies such as Royal Dutch Shell, Total, and Petro Canada.

A number of wells were shut down as foreign firms withdrew, equipment was looted by rebels, rendering exploitation of the wells all the more difficult, and few people with technical expertise remain in the so-called caliphate.

Meanwhile in Iraq the same script is being played out. IS has taken control of fields that produced around 80,000 bpd. Again production has been reduced dramatically. But even with joint efforts from the U.S., its allies and the Kurdish forces IS continues to rake in millions everyday.

Claude Salhani is a senior editor with Trend Agency.
You can follow Claude on Twitter @claudesalhani.

 

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Azerbaijan’s Geopolitical Importance Goes Beyond Oil and Gas

by Claude Salhani –

(This article was first published in OilPrice.com)

The Middle East is being consumed by some of the worst violence in its history, caused by Arabs themselves amidst unprecedented cruelty and destruction. At the rate the fighting is progressing, it is only a matter of time – and not much time – before we start to see tactics involving the bombing of oil and gas fields.

It would not require very much for the infrastructures of the states involved in the conflict to collapse and crumble. Without crucial revenues from oil and gas, what would be left behind would be fractured countries with little more than the memories of what could have been. Think Gaza on a larger scale.

The oil industries in Syria and Iraq, in particular, are in great danger as fierce fighting continues for control of areas held by the Islamic State. Western companies are finding it excessively dangerous to conduct business in Iraq. Syria, with far less oil, was already hurt by years of sanctions imposed by the United States and Western Europe for its support of terrorism.

With that in mind, the oil-rich, South Caucasus country of Azerbaijan could soon find itself playing a very important geopolitical role.

Related: Europe Needs A New Source of Oil and Gas, Fast

Stable Azerbaijan represents more than just a potential secure source of oil and natural gas to keep Europe warm during the cold winter. This former Soviet republic, which is majority Shia Muslim yet highly secular, is taking on more and more importance. It is friendly with the West, but understands the problems of the East.

With the exception of some oil- and gas-producing countries of the Arabian Gulf that seem to be weathering the storm so far, the rest of the Middle East is in dire straits. The sort of civil wars being fought today in Syria and Iraq — as well as in Yemen and Libya — are the kind of conflicts that take decades for countries to recover from.

This is where Azerbaijan, sitting on the fringes of the Arab world, can play a major role. It can help stabilize the region even while selling its oil and gas via some of the most sophisticated network of pipelines ever built. Indeed, Azerbaijan may well end up playing the role that was meant initially for Turkey a decade or two ago. But Turkey got distracted: first, by the near- obsession of former prime minister and now president, Recep Tayyip Erdogan, in joining the European Union. When that failed, he turned his attention to becoming a regional power player in the Middle East. And when that failed, he shifted his focus to Central Asia, where Turkey has cultural and linguistic roots.

Azerbaijan could help bridge East and West by bringing moderate Muslims into the fold of emerging democracies. It is the role that Turkey should have carried out but never did; instead, out of frustration, it moved eastwards, closer to the countries of the former Ottoman Empire and away from Europe.

Azerbaijan is one of the few Muslim countries to have not just relations with Israel, but cordial relations, and cooperation agreements in several fields, including the military. Azerbaijan has decent relations with its southern neighbor, Iran, though periodically the security services uncover a terrorist plot aimed at Israel and proceed to make numerous arrests. Inevitably, most, if not all the suspects are Iranians.

Baku maintains excellent relations with the United States and Americans are genuinely well received here. At the same time, Baku is able to walk the delicate tightrope required to remain on good terms with both Washington and Moscow. Not an easy feat by any stretch of the imagination.

Yet so far, President Ilham Aliyev has demonstrated incredible ability to find the middle ground and remain friendly with the Arab world, Turkey, Iran, Israel, the United States and Russia. He might soon find himself in high demand.

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ISIS’s Ultimate Goal: Saudi Arabia’s Oil Wells

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ISIS’s Ultimate Goal: Saudi Arabia’s Oil Wells

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Saudi Arabia has the richest reserves of oil on the planet
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Oil: A Blessing And A Curse For The Middle East

first published in Oilprice.com

By Claude Salhani  -

What exactly is at stake in the battle for control of the Middle East, other than the obvious — the region’s abundant oil and natural gas? And why is it coming to a head now?

There are two aspects to what is currently transpiring in the Middle East: the battle for the region’s natural resources and the battle for the region’s human resources.

The region’s natural resource wealth has long been both a blessing and a curse. It has helped countries like the United Arab Emirates and Oman achieve amazing progress in a relatively short time and make the leap from societies that not long ago were comparable to medieval times into the 21st century.

But as one learns in the study of conflict resolution, change – any change – brings with it a certain amount of conflict. And the changes that oil and gas money brought to the Middle East were phenomenal. In turn, they upset more conservative elements of society who were unhappy to see the “natural order” of things – i.e., the old ways – disrupted and replaced with modern ways.

At the same time, the region’s resources have been a curse because it gave dictators like Iraq’s Saddam Hussein and Syria’s Bashar al-Assad the ability to squander billions of dollars on arms and weapons systems, to wage wars on its neighbors, and to threaten regional security. Syria, for example, with far less revenue from oil than Iraq, invested its modest revenues on increasing internal oppression rather than investing in the country’s future — its people.

Just how rewarding is it for Assad to look at his country today, utterly destroyed, more than 190,000 killed according to the United Nations, many more maimed both physically and psychologically, the infrastructure totally devastated? Yet he remains at the reins. He is now president of parcels of territory eroded by war.

Oil wealth has also allowed tiny counties, like Qatar, to assume an outsized role in the region and meddle in its neighbor’s politics, certain that its money can buy it anything, including influence. But what money cannot buy is critical thinking, which is what appears to be lacking most in the region.

The second aspect of why the Middle East is going bonkers today is that the existing borders are based on Western colonial thinking. In many places, one country ends and another begins at a line in the sand drawn by a Frenchman and a Brit who divided up the spoils of the Ottoman Empire at the close of World War I.

This is why, for example, the Islamic State (IS) became so powerful in Syria and in Iraq — for them and the fighters who join them, there are no borders, no demarcation lines and no frontiers.

Why is IS so powerful, yet so little is known about who they are? From the little we know about them is that that the core of the officers corps comes from the remnants of Saddam Hussein’s army that went underground when the U.S. invaded in 2003.

Professor Amazia Baram, chair of Arab studies at Haifa University and an expert on Iraq under Hussein, explains that when the late dictator was still a lower echelon thug working for his cousin — who took power in a military coup – the family was overthrown but managed a comeback.

Once back in power, Saddam was given the task of setting up an underground system of operations from which the regime could recover in the event of a future coup. Saddam, according to Baram, excelled in securing back-up plans and in the process got rid of the top man and placed himself at the head of the state and party. Saddam never forgot the importance of maintaining the emergency fallback protocol and although he is now gone, his former generals have, by all appearances, taken over the network and placed it at the disposal of IS.

As the United States and its Western allies again get drawn into a Middle East war, this time it might be more constructive if they went in with something more than shock and awe.

Eliminating the IS threat militarily alone will not suffice. What is needed here is a viable “Marshall Plan” adapted for the Middle East where reforms are made in the education sector, where democratic principles are gradually introduced, and where the people are given voice in participating in the affairs of state and invited to join in governance, rather than being locked out of any decision making process.

As the map of the Middle East is being redrawn, so too must change be introduced into the very core of the region’s socio-political system.

You can follow Claude on Twitter @Claudesalhani

 

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Has WWIII already started?

By Claude Salhani

As the war against Islamist terror begins to gather momentum, forging new alliances and accentuating older ones while questioning others, now that the Obama administration appears to have a policy of sorts, some pundits are beginning to ask if this conflict qualifies as a world war?

Indeed, when does a war rank as a “world war”?

Merriam-Webster’s Dictionary defines a world war as “a war involving many nations of the world.”

Judging by the scope of the current conflict one could well argue the point that this war falls into the category of a world war. If nothing else due to the number of countries involved and the theatre of operations covered should be enough to justify calling this a world war.

The countries involved includes all 28 members of the North Atlantic Treaty Organization and several others, who may not be NATO members, but are assisting the war effort in one way or another. These include former Soviet republics such as Kazakhstan and Azerbaijan. In sum, this conflict concerns nearly every country on the planet.

Pope Francis said on Sept. 12 the spate of conflicts around the globe today were effectively a “piecemeal” Third World War. The pope condemned the arms trade and “plotters of terrorism” sowing death and destruction.

“Humanity needs to weep and this is the time to weep,” Pope Francis said in the homily of a Mass during a visit to Italy’s largest war memorial, a large monument dating back to the fascist era where more than 100,000 soldiers who died in World War One are buried.

“War is madness,” the pope said in his homily before the massive, sloping granite memorial.

“Even today, after the second failure of another world war, perhaps one can speak of a third war, one fought piecemeal, with crimes, massacres, destruction,” he said according to a Reuter’s dispatch.

In the past few months, Pope Francis has made repeated appeals for an end to conflicts in Ukraine, Iraq, Syria, Gaza and parts of Africa.

“War is irrational; its only plan is to bring destruction: it seeks to grow by destroying,” he said. “Greed, intolerance, the lust for power. These motives underlie the decision to go to war and they are too often justified by an ideology … ,” the pontiff said.

Last month the pope, who has often condemned the concept of war in God’s name, said it would be legitimate for the international community to use force to stop “unjust aggression” by Islamic State militants who have killed or displaced thousands of people in Iraq and Syria, many of them Christians.

Indeed, quite a few voices are echoing that of the Bishop of Rome, calling for a “justifiable war”.

It is perhaps a difficult concept to visualize that we might be on the verge of a world war, or yet still, well within one. There can, however, be no doubt that the perils represented by a culture of hate – irrespective of its name, uniforms, fancy banners, remains very real and that we are well on the road to WWIII.

The march to forge this new Islamic caliphate is not geographically limited to any single country, region, or state. The ultimate goal of such a group is to conquer, subjugate and dominate.

Many people were quite probably thinking along the same lines before WWII was officially recognized as such. Yes, regretfully, this is WWIII.

Claude Salhani is a senior editor with Trend Agency. You can contact him via Twitter @claudesalhani.

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Claude Salhani in Time Magazine

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Europe Needs A New Source of Oil and Gas, Fast

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Islamic State’s Ultimate Goal: Saudi Arabia’s Oil Wells

 

by Claude Salhani

For the terrorist group known as the Islamic State, Syria and Iraq were a good place to start their campaign, but in order to survive and prosper it knew from the outset that it had no choice but to set its sights on the ultimate prize: the oil fields of Saudi Arabia.

It is in that direction that the battle for control of the world’s largest oil fields is currently heading.

Islamic State — which has its origins in al-Qaeda – knows fully well that in order to sustain itself as a viable and lasting religious, political, economic and military entity in the region, it has to follow the same objectives established by al-Qaeda when Osama bin Laden broke off his relations with the Saudi monarchy and vowed to bring down the House of Saud.

Bin Laden’s ire at the Saudi monarchy stemmed from the fact that Saudi King Fahd bin Abdulaziz Al Saud invited the American military to use Saudi Arabia as a staging area to build up forces to take on the then Iraqi leader Saddam Hussein after Iraqi troops occupied Kuwait in August of 1990. Bin Laden objected to the presence of “infidels” in the land of the two holy mosques, and asked the king to allow his outfit to tackle Saddam Hussein’s troops.

Similarly, IS knows that it will only feel secure once Saudi Arabia is part of the Caliphate, and its oil fields are under IS control — which is why the group has two logical next steps.

First, to capture and secure the most important country in the Muslim world: Saudi Arabia.

If the battle for Syria and Iraq attracted tens of hundreds, (some say tens of thousands) of young Muslims, the battle for control of Islam’s two holiest sites, Mecca and Medina, are very likely to attract many more fighters into the ranks of the Islamic State.

And second, to take on the United States — the one remaining superpower that could stop its march on the oilfields of Saudi Arabia, and ultimately the rest of the Gulf.

After much hesitation, it now appears that the Obama administration has come around to realizing the true danger posed by IS. Washington, along with some of its NATO allies, is now formulating a plan to defeat IS.

However, it may be wise to point out that Washington’s track record in dealing with Middle East problems has not been something to crow about. As a point of reference, one need only mention Iraq and Afghanistan — both prime examples of how not to do things.

Even if the U.S. can defeat IS militarily, any victory would only be temporary since eventually, U.S. troops will pull out and the remnants of IS would emerge from their respective hiding places, as they did after Saddam Hussein’s capture and death. Indeed, a U.S. intervention — through its massive air campaign — will foment even greater animosity toward the West in general, and the United States, in particular. It’s all déjà vu.

The one power that can effectively move against IS in a manner that would appear legitimate to other Muslims is Saudi Arabia, as Nawaf Obaid, a fellow at Harvard University’s Belfer Center for Science and International Affairs, and Saud al-Sarhan, research director at the King Faisal Center for Research and Islamic Studies pointed out in a joint opinion piece published Sept. 9 in the New York Times.

The authors dispute the widely believed notion that Saudi Arabia created IS and is funding it. “Saudi Arabia is not the source of ISIS — it’s the group’s primary target,” they write.

As Obaid and al-Sarhan put it, “The Saudi leadership has a unique form of religious credibility and legitimacy, which will make it far more effective than other governments at delegitimizing ISIS’s monstrous terrorist ideology.”

What makes IS powerful today is the fact that they laid out their military strategy based on where oil fields are located. The fact that they went after northeast Syria and northern Iraq is not coincidental by any means. Islamic State may be ruthless and brutal, but it is first and foremost a terrorist organization with an astute business plan.

The capture of oil wells in Syria and Iraq has made the group financially self-sufficient. Now it’s all or nothing.

 

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