Islamic State Smuggles Oil Into Turkey—With Hostages as Insurance

The militants sell cheap oil to the country—and keep 49 hostages
Civil servants stage a protest outside the Foreign Ministry in Ankara, Turkey, on July 17, demanding the release of 49 officials seized by Islamic militants in June at the Turkish consulate in Mosul, Iraq Photograph by Adem Altan/AFP via Getty Images

Turks pay about 5 liras ($2.30) per liter at the pump, a higher price than in most European countries and more than double the average in the U.S.—the equivalent of almost $9 a gallon. That makes cheap oil and gasoline smuggled across the border from Syria and Iraq attractive. The fuel makes its way into Turkey by truck, hauled inside canisters, or is pumped through plastic pipelines. Middlemen purchase the fuel for 1 lira to 1.5 liras per liter, says Mehmet Ali Ediboglu, a Turkish legislator. By the time it arrives in the city of Gaziantep, a booming export hub in southeastern Turkey, it sells on the black market for about 3 liras, locals say.

The trouble is, much of that gas comes from Islamic State, the murderous proto-government that rules a swath of territory straddling Syria and Iraq. The Sunni militants control about 60 percent of Syria’s crude oil production assets and several oil wells in Iraq, says Luay al-Khatteeb, a visiting fellow at the Brookings Doha Center. While some of the fuel is sold or distributed in Syria and Iraq, the rest is smuggled to southern Turkey. “It’s the only export market that Islamic State has,” he says.

Smuggling has always played a role in the border economy, but it’s grown out of control since the start of Syria’s civil war in 2011. The amount of fuel seized at the border by authorities has tripled since then, say two government sources speaking on condition of anonymity because they aren’t authorized to speak to the press. Over the past few months, Turkey’s armed forces have started taking a tougher line, stopping trucks at the border and destroying pipelines, often little more than hoses. “We try to make sure that those smugglers know that if they smuggle now, it will be related to terrorism,” says one of the officials.

As the shadow economy thrives, the traditional one is feeling the hurt. Already cut off from markets in Jordan, Lebanon, and the Persian Gulf by the fighting in Syria, merchants and Turkish exporters in Gaziantep province are reeling from the effects of Islamic State’s offensive in Iraq. A month after the militants overran Mosul and other cities, the province’s exports to the country fell 48 percent from the previous year, according to the Gaziantep chamber of commerce. Islamic State “has blocked the trade routes from the northern part [of Iraq] to the center,” says one agricultural commodity trader, who asked not to be named because of his company’s policy. “We had 15,000 metric tons going to Iraq every month. … Over the last two months that has basically stopped.” Turkey’s overall trade with Iraq has dropped 32 percent since June. According to Turkish news reports, the militants have set their sights on a number of towns near the border, presumably to open supply routes for weapons, fighters, and smuggled oil.

Islamic State has also begun recruiting fighters inside Turkey, possibly with the help of Islamist organizations and charities. Estimates of the number of Turks who have joined the militants range from several hundred to more than a thousand. At least 114 Turkish nationals have died fighting in Syria, according to a Turkish official who declined to be named.

One of the main reasons for Turkey’s muted response to Islamic State: In June, when the militants overran Mosul, Iraq’s second-largest city, they took over the Turkish consulate there, capturing 49 people, including the consul general. They are still being held hostage. “It is very difficult now for Turkey to manage the situation,” says Yasar Yakis, a former Turkish foreign minister. “Its hands are tied.” After the execution of the U.S. journalists James Foley and Steven Sotloff, “it has become all the more difficult to do something which Islamic State might perceive as a wrong move.”

Of all the countries involved in NATO’s newly formed “core coalition” against the terrorists, Turkey is the most exposed to potential blowback. “Once they consolidate their gains in Iraq and Syria, some of Islamic State’s leadership may try to export their brand of jihadism to Turkey,” says Sinan Ulgen, a former Turkish diplomat and visiting scholar at the Carnegie Endowment for International Peace. “The biggest threat is their potential to stage suicide attacks on Turkish soil,” he says. Can Kasapoglu, a research fellow at the Center for Economics and Foreign Policy Studies, a Turkish think tank, wrote in a recent report that the Islamic State leadership “could opt to keep the hostages indefinitely in order to impede Turkish and allied options.”

Asked to comment on the effect the hostage situation is having, the second government source is circumspect. “We’re careful,” she says. “Our options are limited,” Defense Minister Ismet Yilmaz said in August. “Those who say otherwise want us not to attach any importance to those 49 people. That’s not a reasonable demand.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE