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Iraq Losing Billions In Oil Revenues To IS

The Iraqi Army reported a critical victory against IS militants in Baiji, home to the country’s largest oil refinery (above). The fate of the refinery remains unclear, however.

Iraq’s Oil Ministry has said that the country is losing as much as $1.2 billion a month in oil revenues as a result of Islamic State militants seizing oil refineries and pipelines in the areas it controls. As a result of Islamic State, Iraq has lost the export of 400,000 barrels per day of oil, the ministry estimated.

Assem Jihad, a spokesman for the Oil Ministry, told RFE/RL's Radio Free Iraq on November 11 that these losses are having an adverse affect on the overall state budget.

Islamic State militants had also inflicted heavy damage on oil installations in areas under their control, the spokesman said.

Islamic State militants in Iraq have replicated the strategy they have used to disrupt and appropriate Syrian oil production. Patrick Osgood of IraqOilReport told the Vocativ news agency in September that IS was “lifting oil from stricken pipelines, smaller oil fields…and then they sell it through the very established Iraqi oil smuggling industry.”

Islamic State militants are handling around 25,000 barrels a day of oil in the north and midwest, according to a report by CNN. This is only a small fraction of the country’s overall oil production, however. (In June 2014, Iraq produced 3.17 million barrels per day.)

Still, experts have warned that any severe disruption caused to Iraqi oil production by Islamic State could have significant consequences.

In an attempt to mitigate these losses, Iraq’s Oil Ministry is seeking to increase oil production from its middle and southern oil fields. The ministry said that it hoped the exports from the West Qurna-2 field would rise to over 400,000 barrels per day by early 2015.

At a closer glance, however, this figure is no higher than that already set for West Qurna-2 back in March.

One of Iraq’s largest oil fields, West Qurna-2 is located in southern Iraq, 65 kilometers northwest of the port city of Basrah. Previously closed to Western firms due to sanctions, West Qurna-2 began production March, when Russia’s LUKoil -- which owns a 75 percent stake in the oil field -- began producing crude at a rate of 120,000 barrels per day. LUKoil Operations Manager Gennady Budarin said that the Russian oil company expected West Qurna-2 to produce at a rate of 400,000 barrels per day by the end of 2014, the same rate specified by Iraq’s Oil Ministry spokesman.

Meanwhile, the Iraqi Army on November 11 reported a critical victory against IS militants in Baiji, north of Baghdad. The town is home to the country’s largest oil refinery. The fate of the refinery remains unclear, however.

-- Joanna Paraszczuk

About This Blog

"Under The Black Flag" provides news, opinion, and analysis about the impact of the Islamic State (IS) extremist group in Syria, Iraq, and beyond. It focuses not only on the fight against terrorist groups in the Middle East, but also on the implications for the region and the world.


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