Islamic State’s Oil Revenue Targeted as U.S. Adjusts Tactics

The U.S. is adapting its money-tracking tactics to choke off Islamic State’s lucrative oil-smuggling routes and restrict its use of Iraqi and Syrian banks, the Treasury Department’s top anti-terrorism official said.

“To disrupt the market in oil derived from ISIL-controlled fields, we will target for financial sanctions anyone who trades in ISIL’s stolen oil,” David Cohen, the Treasury’s undersecretary for terrorism and financial intelligence, said today in a speech in Washington. “The trade in this oil fundamentally funds this terrorist organization.”

Cohen, outlining how the Obama administration intends to combat Islamic State’s financing methods, said the group poses a different challenge because it has gained wealth “at an unprecedented pace” from funding sources unlike those of other terror organizations.

In addition to oil smuggling, Islamic State raises money from local criminal activities such as extortion, theft and looting, Cohen said. Unlike al-Qaeda, it doesn’t get much money from rich donors and therefore doesn’t depend on moving funds between countries.

Cohen said the terrorist group raises tens of millions of dollars a month, including $1 million a day in oil sales, “up to several million” a month through an extortion racket and has pocketed at least $20 million in kidnapping ransoms this year. He also said “it seems” the regime of Syrian President Bashar al-Assad, in a further show of its “depravity,” has made an agreement to purchase oil from Islamic State.

Diverse Revenue

“ISIL’s revenue streams are, to be sure, diverse and deep,” he said. “With the important exception of some state-sponsored terrorist organizations, ISIL is probably the best-funded terrorist organization we have confronted.”

He described Islamic State’s oil operations as exploiting a “deeply rooted” black market. The group sells to smugglers who move the oil outside of Islamic State’s strongholds using a variety of methods, from big tanker trucks to small containers.

As of last month, Islamic State was selling oil “at substantially discounted prices to a variety of middlemen, including some from Turkey” who then transport the oil to be resold, Cohen said. Some of the oil that comes from Islamic State territory has been sold to Kurds in Iraq and then resold to Turkey, he said.

No Overlooking

The illicit oil trade, with routes that have existed for a long time, won’t be tolerated any longer, Cohen said.

“What may have been a willingness to look the other way in the past is something that I think cannot continue going forward,” he said in response to questions from the audience. “We will try to emphasize that message both rhetorically and through actions as we identify the people who are involved in those networks.”

Among the targets in the smuggling chain are banks, which have grown reluctant to deal with financiers of terrorism, Cohen said.

“At some point, that oil is acquired by someone who operates in the legitimate economy and who makes use of the financial system,” Cohen said. “He has a bank account. His business may be financed, his trucks may be insured, his facilities may be licensed. All that makes ISIL oil facilitators vulnerable.”

Although the group is well-funded, Cohen said its ambitions to hold territory are a financial burden.

Governing Costs

“‘Attempting to govern the cities, towns and sprawling territory in Iraq and Syria where it currently operates, much less delivering some modicum of services to the millions of people it seeks to subjugate, is expensive,’’ he said. ‘‘ISIL cannot possibly meet the most basic needs of the people it seeks to rule.’’

Speaking at the Carnegie Endowment for International Peace, Cohen said that by refusing to pay ransom to kidnappers, the U.S. reduces the chances of having Americans taken hostage. He urged other countries to adopt the U.S. policy of not paying ransom.

‘‘We are redoubling our efforts to translate the emerging international consensus against the payment of ransoms to terrorist groups into a more widely adopted practice,’’ he said.

Islamic State has killed aid workers and journalists, and enslaved women and girls, Cohen said in a speech that also highlighted the diplomatic challenges the U.S. and its allies in the region face.

Turkey’s Complaints

Turkish President Recep Tayyip Erdogan today accused the U.S. of ignoring his country’s concerns by airdropping weapons to Kurds defending a Syrian town against Islamic State.

U.S. support for Kurdish forces fighting in Kobani, a Syrian community on the Turkish border, has opened a new rift between the NATO allies, with Turkey concerned that arming Kurds with separatist aims could imperil its own security.

‘‘The U.S. is delivering the aid in spite of Turkey,” Erdogan said in televised remarks during a visit to Latvia, questioning why Kobani “is of strategic importance” to the U.S. “There are no civilians left in Kobani,” and some of the airdropped weapons were seized by Islamic State, he said.

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