CATF Reports Dec. 28, 2015, 1:28pm


Situated at the southeastern border of Syria, the province of Deirezzor has not received the attention it deserves by international analysts focusing on the Syrian theater. A recent report published by Ayin Al Madina Magazine titled “The Oil of Deirezzor: From the Revolution to ISIS”, which mostly went unnoticed, sheds new light on the nature of the complex political and financial interactions currently shaping the Syrian conflict. The evidence offered by its authors forces us to confront uncomfortable pieces of truth. The first is that, at least at a local level, ISIS is not the dysfunctional product of an immature proto-state entity such as the one we observe struggling for global outreach through its powerful propaganda machine. It is, instead, a non-state organization effectively providing services, organizing local labor, and coordinating chaotic power struggles in a portion of the Syrian territory not anymore controlled by the central government. The second is that in Syria ISIS has proven to be an extraordinarily resilient political actor, guided by a business oriented strategic vision and capable of building a solid administrative apparatus based on reliable political partnerships. ISIS’ cooperation with the Assad regime, a claim which this report reinforces with solid pieces of evidence, has been crucial in this sense. Even more so, this study compels a rereading of the political alliances at work in Syria and reinforces the necessity of a closer scrutiny of the funding flowing to support local actors.

For about two decades, Deirezzor’s gas and oil fields were a major source of wealth in Syria. Based on the total yields of oil companies operating in the province, the authors of the report estimate that in 2010 the Deirezzor oil and gas fields generated profits for more than 130 thousand barrels per day and 6.5 million cubic meters of gas per day, approximately equivalent to more than a third of the Syrian oil general production and to a quarter of the gas national production. No matter how abundant this reservoir’s resources, the Syrian Ministry of Petroleum’s poor management - once administered through al Furat Petroleum Company (AFCP) and Deirezzor Petroleum Company (DEZPC) in partnership with Shell and Total, and by the national Syrian Petroleum Company (SPC) - cost the Syrian government the loss of its control of the oil facilities in June 2012 to more effective political actors after the outbreak of the upraising against Bashar al-Assad’s regime.

A systemic tension between the agenda and ideology of local families, tribes and other powerful political actors struggling for power on the oil and gas fields in Deirezzor determined the course of the limited business productivity over the past two years. In March 2013 Jabhat Al-Nusra offered a center of direction of local labor and coordination of the investors through the establishment of a “Central Sharia’a Commission.” Nonetheless, the unresolved contrasts soon escalated into a consuming war between Al-Nusra and the allied forces of the Free Syrian Army against ISIS, which ultimately prevailed in June 2014. ISIS took control of both the gas and oil wells and fields, but prioritized oil as its major financial source. Overall - and especially over the past year - ISIS has achieved impressive accomplishments from a technical and an administrative point of view, proceeding from the structural reorganization of the local labor to the consolidation of solid strategic political partnerships, especially with the Assad regime. More in general, ISIS proved the most successful administrator of the Deirezzor province oil and gas fields over the last two decades. Not only did it systematize local and foreign investments by establishing independent administrative sections differentiated by function; ISIS more effectively reorganized the administrative staff, including a problematic mix of muhajereen, foreign managers with little technical experience but exerting high responsibilities and authority, and local employees mostly hired by private companies, by the Syrian government or by the Ministry of Petroleum.

According to the report, the nature of the relationship between the Assad regime and ISIS remains partially unclear as little information is currently available beyond the research collected by the authors, that took months of crossing official and unofficial data and of testimonies of highly reticent workers and contractors still employed on the gas and oil fields under ISIS control. However, the picture emerging from the study leaves no doubt about the existence of a consolidated, mutually beneficial axis between Assad and ISIS governed by their bilateral interest in opportunity access to resources and profit from gas and oil extraction and trade.

The authors of the study argue that ISIS is currently exporting gas to sites administered by the Assad government on a regular basis, benefiting from the “gas for electricity” deals inherited from previous administrations and still in place after ISIS took over. The forces that once controlled the gas plant “Al-Tabiya” - commonly known as Conoco, from the name of the American company that founded that plant - finalized an agreement with the Syrian Ministry of Petroleum that aimed at ensuring continuation of “pumping an average of 90 million cubic feet per day of clean gas through the gas transmission line feeding the network of power plants (Jandar in Homs, and Mhardeh in Hama, and Tishreen and Deir Ali in Damascus), in return that the Regime allow the electric current to pass to Deirezzor with a 130MW power.” The “gas for electricity” deal was violated many times, especially before June 2014, in the form of attacks on gas transmission pipelines perpetrated by families and tribal groups. Those attacks often times triggered the reaction of the Assad regime, which would cut power from the entire province until “the attackers allowed the maintenance and repair of damaged pipes and resuming pumping gas.” The fact that ISIS has not retaliated for the reduced capacity of the current passing through Deirezzor network imposed by the Syrian government over the past six months, however, suggests that margins of cooperation between the terrorist organization and the Assad regime extend beyond the “gas for electricity” agreement.

“Gas is the only benefit left for the Assad regime in terms of fossil fuels in Deirezzor,” especially given that ISIS has invested most of its resources, energy and strategic efforts to preserve and increase its oil profits. Towards this goal, ISIS established cooperation with the Assad regime and allegedly negotiated that “any contract or project maintenance work for oil or gas is a free service provided by the Regime to ISIS.” More specifically, the report emphasizes that Assad cooperates with the oil business in and from the Deirezzor province through ENESCO, a contracted private oil company owned by George Haswani, a businessman and close friend of Bashar al-Assad who purportedly manages most of Assad’s business dealings.

Once contracted by the government establishments working with foreign companies, ENESCO cut its contracts with the Syrian regime to commit exclusively to ISIS. According to the report, ENESCO entered in a partnership with ISIS in early 2015 in the Iraqi territory through a project related to the maintenance and operation of four gas wells in the Ukaz field almost 40 km south of the city of Qaim, close to the Iraqi border, and was commissioned to extend gas pipelines from the field to a power plant in the vicinity of the city. The data collected by the researchers who authored the study highlight that over 60 ENESCO employees are currently working in the Deirezzor province. ENESCO’s expertise and equipment were reportedly applied to several projects on ISIS-controlled territory, with valuable results. The company restarted dozen of closed wells, applied specialized technology to increase the reservoir layers of oil pressure and raise the productivity of wells invested, and supported ISIS’s application of “gas injections device technology in special gas-injection wells in some wells of the Omar field.”

Overall, the authors calculated that the daily revenue related to the extraction, sell and trade of oil from the Deirezzor province is $2,031 million, in addition to the gas revenue corresponding to an average of $10,000 per day. Such extraordinary figures, supported by disaggregated date provided by the report, testify to ISIS’ remarkable resilience in neutralizing potential threats to its financial stability through an articulated administrative infrastructure and solid political alliances.

Reflecting on ISIS’ most impressive accomplishments, the authors stress the terrorist organization’s ability to minimize the impact of the coalition’s airstrikes to the oil sector of Deirezzor. By alienating the “sales site almost 5 km away from the main oil facilities” and “by connecting them to buried pipelines in the ground” branching out to smaller offshoots, ISIS has implemented a system that allegedly reduces the effect of any airstrike to suspended sales for a short period of time, “during which the fire department would succeed in extinguishing the fire caused by the airstrike, then the maintenance workshops would follow to prepare the site for functioning again in record time.” Moreover, the study points out that ISIS has strategically chosen to rely on the local population to refine oil through small burners distributed in vast areas of Deirezzor especially after the coalition airstrikes destroyed bigger refineries administered by ISIS’ predecessors.

The scenario unfolding before our eyes is far more alarming than the one drawn by programmatic speeches resonating through the media. It is one dominated by pragmatism and driven by profit, in which ISIS emerges as a smart political actor exploiting power gaps and economic opportunities to reinforce its political and administrative infrastructure. The hypothesis of ISIS evolving into a stable state actor relying on a functional administrative machine, and therefore capable of providing services and potential political and economic stability, is certainly more disconcerting than any of its terrorist endeavors. The Deirezzor case unfortunately confirms what we feared, namely that the coalition airstrikes will prove at best marginally effective. It is time for both the coalition and for all the forces opposed to Assad and ISIS to rethink their entire counter strategy along with alternative scenarios taking into account financial interests and potential business opportunities more than ideological and cultural affiliations.

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