Oil and Terror: A Critical Review of Terrorism in Oil and Gas Sector in Iraq

Abstract

This paper reviews the presence of terrorism in Iraq oil and gas sector. The paper gives in-depth scholarly definition of the term terrorism as defined by various academicians. It establishes the origin of terrorism in Iraq and provides a link between terrorism and Iraqi oil and gas sector. The paper identifies specific terror organization in Iraq that is involved in capturing oil fields. This paper identifies the effect of terror groups to the global oil market as well as Iraqi economy. Evidence based table have been developed to show connection between civil terror conflicts to the oil industry.

Keywords: Terrorism, civil terror conflicts, terror groups, ISIS terror organization, global oil market

Introduction

            The word terrorism is coined from the word terror that means instilling dread and fear. Various scholars have established different definitions to the term terrorism. The term terrorism denotes the mass killing of civilians and destruction of property by non-government groupings for political reasons. Terrorism arguably began in the 18th century and was propagated by the French government to its citizens. Currently, the situation is different since terrorism is propagated by illegal non-government groupings. Terrorism has been a major crisis in the modern world and threatens peace and security of many independent nations. Many governments across the world have been reluctant in providing a clear definition of term in fear of seemingly legitimizing terrorists. Terrorists are described as people who lack compassion of the humans and are involved in perpetrating evil (Basuchoudhary and Shughart, 2010).

Various scholars and scholarly institutions have consistently tried to define the word terrorism. This has not however successfully arrived at an acceptable definition. Clutterbuck (2006) defines terrorism as use or threats to cause mayhem and violence with little regard to humanitarian rights. The idea is usually to instill fear among the victims. The threats are widely publicized in order to reach many people. Neumayer and Plümper (2009) indicates that terrorism is basically for political motives and involves threatening or using violence aimed at creating a much wider psychological effects beyond the primary target. It is carried out by a particular informal group with identifiable command chain organized in cells. Kis-Katos, Liebert and Schulze (2011) defines terrorism as an act of barbarism by an organized illegal group through use of violence on random targets among the civilians with a general aim of creating fear amongst a wider population for political gains. Islamic states are the most affected by terror groups’ activities. Iraq particularly has been a soft spot target for terrorists who aim to benefit from the luxurious and highly profitable oil business. This paper aims at reviewing the impacts of terror organizations in Iraq’s oil sector with a keen interest on ISIS terror group that controls most of Iraq’s oil fields.

Origin of Terrorism in Iraq

            Terrorism is not new in Iraq since the country has served as a hub for terrorist groups for decades now. Previous Iraq’s governments have used terror campaigns as one of its foreign policies since 1980s. The reliance in terrorism activities is meant for securing particular objectives outside the country. The country’s past leaders have harbored and collaborated with terror groups. Iraq have historically given refuge to terror organizations and facilitated terror activities (Le Billon, 2005). For example, in May 1985, Iraq arguably gave refuge to Palestine Liberation Front (PLF), a terror gang that was later involved in hijacking a cruise ship and killing a member of the crew. The Iraqi government also facilitated the formation of Abu Nidal Organization (ANO) and used it to eliminate political opponents from Syria and Palestinian. Iraq is known of giving logistical aid to the terrorist groups such as training grounds, food and equipment supplies as well as training forums (Byman, 2013).  However, more profound and most recent terror gangs arose towards the end and after the reign of Saddam Hussein. These include Sunni and Shia militias as well as the ISIS insurgency group. These terror groups have got a local political objective as opposed to the earlier groups. While the Sunni and Shia uprisings target political power and political leadership in the country, the ISIS looks for financial benefit from the country’s rich oil industry (Le Billon and El Khatib, 2004).

Link between Terrorism and Iraq Oil Industry

            Iraq is among the countries with the largest amount oil reserves in the world. It is the fifth largest natural oil reservoir after Iran and Saudi Arabia. Iraq’s daily oil production stands at 3.4 million barrels per day. 93% of Iraq’s government revenues are derived from the oil industry while the same contributes more than 40% of the country’s GDP. Sectarian politics in the country are the major cause of terror groups’ involvement in the oil sector. The Iraqi government arguably mismanages and embezzles most of the finances realized from the oil industry for personal gains (Al-Istrabadi, 2014).  For example, the oil revenue realized from the country in years 2010 to 2013 doubled the normal rate to a high of USD $100 billion in a month. This would have necessitated for a reward of USD $50 per month to all households in the country. However, the government has constantly failed to equitably support the country’s households necessitating involvement of terror organizations to fight for their rights. Terrorist organizations feel that the government is marginalizing some communities in the country hence forcefully demands direct involvement in the oil business (Kollias, Kyrtsou, and Papadamou, 2013).

Islamic State in Iraq and Syria (ISIS) is the major terror organization in the country and controls some of Iraq’ oil fields in the northern region. Political divide led to the interest of the insurgency group in oil industry. This was after Nouri al –Maliki a former Iraq prime minister stepped down in early 2014. The prime minister happened to be a Shiite and most Sunni Muslims from the north felt politically beaten. Their dissatisfaction arose from evident inequitable distribution of oil revenues (Gause, 2014). Le Billon (2005) indicates that Iraq has had corrupt government regimes especially during the era of the late former militant president Saddam Hussein. The form of governance experience in the country has been coupled by marginalization of communities that are not represented in the government. This hence led to gaps in the governance system and prompted rise in strong terror organizations. The ISIS militias argue that the government has constantly failed to support its citizens with oil revenue and have actively stepped in for the people.

ISIS Control over Iraqi Oil Fields

ISIS terror insurgents control the oil fields located in the northern Iraq territory. These oil and gas fields can finance the groups’ terror activities. The insurgency group is self sufficient from revenue collected from the sale of oil. Reports indicate that ISIS makes a net worth of $1 daily annually from Iraq’s oil reserves in the north. Although these are minor oil fields in the country, the terror group has stripped the country a large amount of oil revenue with its domination of the oil fields (Sullivan, 2014). According to Al-Khatteeb (2014) the terrorists are currently enjoying close to $2 million per day from oil sales. This can possibly fetch the group more than $730 million annually which is enough to sustain their operations within and outside the country. The production capacity of ISIS controlled regions amounts to 80,000 barrels per day. Cooper and Gordon (2014) indicate that the insurgents remunerate their workers well, even better than the government does to the people working in the refineries

The Iraq’s southern oil fields are not yet under ISIS control. However, the Baiji refinery is under siege of ISIS militants but they have not yet got full control of the plant. The southern refineries are the major oil reservoirs for the country. Although it would be difficult for the insurgents to capture the southern oil fields due to domination of the region by Shia militants, the government armies have beefed up security in the region. The oil produced and refined in ISIS controlled regions is sold in black market and revenue realized is not accounted for by the Iraq’s federal government. Most of the oil is exported to the Turkish black market (Wahab, 2006). Phillips (2014) indicates that there is a high risk that the oil is mixed with additional oil quantities smuggled from other countries such as Syria. The Sunni militias who are part of the ISIS are heavily armed with latest technology weapons and cannot be deterred from the country’s northern refineries. Speculations are high that the ISIS is likely to attack the southern refineries to distort global oil market. Crippling southern Iraq oil refineries would probably cause an increase in oil prices and consequently benefit the ISIS.

Implications of Terrorism on Iraq and Global Oil Industry

The short term effect of the terrorists’ control of Iraq’s oil fields is at the minimum at the moment. This is because the largest and most dependable oil fields in the country are controlled by the federal authorities. However, the insurgents strip the Iraq government close to $1 billion annually. The amount may be dispelled as little compared to $100 billion earned by the government annually from southern refineries. The amount produced and sold by the illegal militia group is marked as lost revenue and has negative impact in the country’s GDP and overall economy (Srikant, 2015). The terrorist groups are distorting the global oil prices due to distribution of cheap oil and gas in the black market. Terrorists have little regard for national and global oil policies and tend to market the product at their discretion. Distribution of cheap oil in the global market causes confusion among the vendors on the real price of the good (Holtmann, 2014).

The rise of the oil terror groups in Iraq has forced the government spend a lot of finances in empowering its armies to counter possible attacks on free government oil fields by the insurgency groups. Currently, domination of terror groups in the northern region of Iraq have interfered with investment projects in the region leading to loss of revenue for the country (Pippard, 2010).  Business with northern Iraq neighbors has also been hampered since the ISIS and Sunni militias have taken control of the region rendering the trade routes impassable. For instance, Iraq has reduced its border trade with Turkey. Trade trucks are forced to use a long route through Iran to South Iraq. Jordan and Lebanon have also experienced indirect impact from the presence of terror gangs in Iraq. The countries have been forced to absorb many refugees from Northern Iraq. Jordan exports to Iraq which amounts to 20% of the country’s total exports have reduced drastically due to Iraq’s internal conflicts (Dorsey, 2014).

Terror Threats: Mapping the Terrorism Trend Connected to Oil and Gas Sector

Iraq holds the second biggest oil reserves in the world. The enormous oil reserves in the country have been cited as the major cause of constant wars and rise of terrorist groups in the region. Other than the rise and control of northern oil reserves by the ISIS militants, Iraq has had numerous oil related wars in the modern history. Although the wars were not directly related to oil, critics draw a close relationship of these conflicts to the oil industry (Al-Tamimi, 2014). The table below shows oil related conflicts in modern Iraq.

Source: James (2003).

From the above table, it is evident that oil and gas industry in Iraq have attracted a lot of interest from independent parties leading to conflicts. This is because of the high profitability levels and has prompted terror groups to seek control of the sector in order to enrich themselves (Watkin, 2014).

Conclusion

            This paper has successfully reviewed aspects terrorism in Iraqi oil and gas sector. The paper has critically reviewed the case of ISIS terror organization and how the group controls some of Iraq’s oil reserves. From the analysis, it is evident that Iraq’s oil industry has been faced by constant threat of terrorism. As the demand for oil rises, Iraq oil and gas sector continues to face the risk of terrorism from insurgents who seek to take charge of the highly profitable venture. Iraq is likely to spend most of its oil and gas revenue in strengthening its army to counter the terrorists. Iraq should find a way to weaken the terrorists in the region (Romano, 2014).