A town worth fighting for.

Photographer: Mohammed Sawaf/AFP/Getty Images

Oil Is Islamic State's Lifeblood

Noah Feldman is a Bloomberg View columnist. He is a professor of constitutional and international law at Harvard University and was a clerk to U.S. Supreme Court Justice David Souter. His books include “Cool War: The Future of Global Competition” and “Divided by God: America’s Church-State Problem -- and What We Should Do About It.”
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The battle for Baiji, site of one of Iraq’s major oil refineries, is heating up again. Since May, Islamic State fighters have been chipping away at the Iraqi government’s control. Now it seems possible that the empty city and the shuttered refinery could fall.

Iraqi Prime Minister Haidar al-Abadi visited the battlefield this week and emphasized the site’s strategic importance to retaking Mosul. What he didn’t say was that Islamic State’s offensive on Baiji is part of its grand strategy to develop domestic sources of revenue that would help make it a functioning state, instead of a would-be state attempting to achieve legitimacy by beheadings and religious fervor.

QuickTake Iraq's Oil

Oil is crucial to Islamic State’s future success. Even in the Middle East, religion and fear alone aren’t enough to achieve legitimate statehood. The Sunni militant group will have to deliver a baseline of governance and services to persist over time, as its utopian dream fades into boring reality.

Consider Saudi Arabia, whose early origins provide perhaps the closest analogy to the rise of Islamic State. The modern state’s founder, Abdulaziz Ibn Saud (he put the “Saudi” in Saudi Arabia), swept across the Arabian Peninsula in successive waves, greatly assisted by the Ikhwan, or Brethren, a kind of religiously inspired militia. His rule was legitimated by religious scholars, especially from the “family of the Sheikh,” descendants of Muhammad Ibn Abd al-Wahhab, the father of Wahhabism.

Yet Ibn Saud didn’t rely on force and religion alone. To consolidate his rule, he carefully maintained a dense network of tribal allegiances, many of which persist today. After oil was found, he and his successors layered petro-patronage over the tribal structures. Today, Saudi Arabia’s rather stable monarchy rests on religion, tribalism and oil money -- not to mention a century of tradition.

Islamic State’s leaders know how valuable it is to have a “pure” form of Islam on your side when you conquer the territory of weak or failing states and unify Sunni Arabs under a common banner. After all, their ideal model is the Prophet Muhammad himself, who unified disparate and warring Arabian tribes through a combination of religious inspiration, politics and force.

What’s more, the utopian spirit of the militants’ “back to true Islam” state-building has inspired copycat franchises as well as thousands of foreign volunteers.

But eventually, Islamic State, like any government, will have to satisfy some basic form of the social contract. What that contract entails is always a matter of negotiation.

The most basic public good is order. Islamic State has taken tremendous advantage of power vacuums in the areas it dominates. Sunni Syria was an order-free zone after Bashar al-Assad’s forces withdrew and continued to bomb civilians. Western Iraq had a government, but Baghdad’s influence was trivial and resented among Sunnis there, creating a situation of near-vacuum.

Where there’s no order at all, an oppressive order can still be an improvement for members of the favored group -- Sunni Arabs, in the case of Islamic State. The Taliban achieved something similar when they came to Afghanistan in the mid-1990s, after the Soviet withdrawal and the long Afghan civil war. Beheadings can be perceived as a positive development so long as the right people’s heads are chopped off and order ensues. So it would be an error to underestimate the legitimacy Islamic State can glean from establishing an order, even one based on terror.

At the same time, its leaders knows they need to establish some simulacrum of ordinary governance. That’s why its fighters issue parking tickets and open health clinics.

Yet governance costs money. Islamic State stole hundreds of millions from banks in Iraqi cities. But cash eventually runs out. The group sells some antiquities on the black market. But backlash will make the items harder to sell, and greater vigilance by experts will make them easier to spot and, one hopes, less salable.

That leaves the basic revenue sources relied on by Arab states: taxes and oil. Islamic State can collect taxes from merchants and ordinary citizens haphazardly. But systematic tax collection requires an organized state apparatus. And you can’t get blood from a stone. The ordinary economy of Islamic State-controlled areas is highly depressed, for obvious reasons. It’s unlikely it could sustain a state’s regular requirements on tax revenue alone.

Oil is the answer. Already Islamic State has sold oil from the fields it controls on the black market to willing buyers in Kurdish areas and in Turkey. Efforts to crack down on these sales will continue. But the product is fungible and almost untraceable.

A refinery is less important than fields -- but a reopened Baiji would help Islamic State’s efforts if and when it establishes itself with regularized borders. Whatever oil fields it manages to hold will be a source of cash. And refined oil sells for more than unrefined oil. A refinery would also be useful if Islamic State wanted to become energy independent, a plausible goal if it is cut off from neighbors.

For now, Islamic State wants to keep Baiji away from the Iraqi government, which needs the refinery for its own purposes of state legitimacy. But Baiji stands for the militants’ goal of self-funded statehood.

The policy lessons are obvious: Keep Islamic State from getting oil fields. Starve it of revenue. Block it from the sea, which is accessible from Syria and Lebanon alike. Islamic State can’t become a state easily -- unless the world lets it.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Noah Feldman at nfeldman7@bloomberg.net

To contact the editor on this story:
Stacey Shick at sshick@bloomberg.net