Islamic State battles for Syria’s oil wealth

Beirut, Lebanon - Syrian government troops reportedly retook the Shaar gas fields in Homs province on July 26, a week after the facility was captured by Islamic State fighters, in what many view as an alarming increase in hostility between the group and the Syrian regime.

Footage distributed by Syrian state media showed victorious government troops celebrating atop tanks in what an official Syrian army statement described as a "precise operation in which dozens of terrorists were killed".

Islamic State sources later claimed that its fighters only pulled out after destroying the gas field's equipment and plundering at least 15 tanks and dozens of rockets used to guard the facility. 

The incident is the latest in an escalation of tensions between Islamic State and the Syrian regime. The opposition-aligned Syrian Observatory for Human Rights said that fighting between the two has left over 1,100 soldiers and pro-government fighters dead in the last month. 

Critics, including the FSA, claim the two groups have largely avoided direct confrontation in Syria's civil war, but clashes have become more frequent as the Islamic State group's military and financial strength increases.

"[The Islamic State group] is now looking to centralise and and stabilise its position. They are looking for financial sustainability and oil and gas can provide this. Their methods are quite sophisticated, almost professional," said Sami Nader, a professor of economics and international relations at Beirut's Saint Joseph University.

"In some cases during assaults [the Islamic State group] has been careful to avoid damaging the infrastructure of refineries. In the fields they are said to have tried to assure some workers of their jobs and safety."

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Since the beginning of June, Islamic State has emerged from its base in eastern Syria, seizing Iraq's second largest city, Mosul, and advancing down the Euphrates to the gates of Baghdad. The group's total assets are purported to total $2bn. 

The seizure of American military equipment including trucks, Humvees, rockets, artillery pieces, and Stinger missiles from the Iraqi army has provided a fortuitous windfall.

The ranks of the group have also been bolstered by converts to the cause: A number of al-Nusra Front groups in Deir Ezzor and elsewhere are now said to pledge allegiance to Islamic State leader Ibrahim al-Baghdadi, in addition to several factions affiliated with the Free Syrian Army (FSA). These include the Daoud Brigade, based near Idlib, which pledged allegiance to Islamic State in January.

But accrued oil and gas assets represent an even bigger prize. While Syria's official oil production has dropped by 96 percent since the outbreak of war in March 2011, rebel groups have cashed in. Islamic State is currently said to control around 35 percent of Syria's territory, including nearly all of the country's oil and gas fields, which are predominantly in the east of the country.

Rebel-produced crude has largely been channeled through Manjib, north of Aleppo, onto Turkey, Iraq, Iran, and Jordan and sold for between $20-40 per barrel, compared to global market prices of $100. The revenues are said to net the Islamic State in the region $100m per month.  

Further advances have been made towards the Baiji oil refinery, Iraq's largest, south of Mosul. Earlier in July, before the assault on Shaar, the Islamic State took control of the Omar gas fields in Raqqa from the al-Nusra Front.

Omar Abu Leila, a spokesman for the FSA's operations in eastern Syria, said that the Islamic State attack on Shaar was an unusual confrontation between the group and the Assad regime.

"Even when the regime claimed that they had shelled an Islamic State checkpoint, it has merely been media propaganda to obtain legitimacy from the international community," said Abu Leila, adding that any substantial FSA campaign against Islamic State and Raqqa in Deir Ezzor is impossible due to a lack of firepower.

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The attack on Shaar represents an anomaly for another reason: Islamic State has made most of its profits through the sale of crude oil, while Shaar is a natural gas plant. Exploiting its resources for financial gain would have posed considerable problems for the organisation since the facility is connected through pipelines to regime-controlled territory.

"There is no easy way of sending the gas [from Shaar] anywhere else … you can't put it in a tanker. If you wanted to send it somewhere else you'd have to build a whole new pipeline and that is not feasible," said David Butters, an energy expert and associate fellow at Chatham House.

Western intelligence sources have previously alleged that the regime of Bashar al-Assad had bought oil from both Islamic State and the al-Nusra Front in Deir Ezzor. However, given recent events, the regime's reaction at Shaar appears to illustrate an unwillingness to allow Islamic State to take control of further territory and resources, Butters explained.

"There have been some local agreements between the regime and rebel groups concerning exchanging fuel and electricity, but nothing on a large scale," he told Al Jazeera. "Shaar looks like it could be a turning point because any effective understanding between the two is going to come under strain."

Prior to 2011, government income from oil constituted around 20 percent of the Syrian state's total budget revenue. This source of income has been almost totally eliminated by sanctions barring exports to Europe, and the loss of refineries to rebel groups, particularly in the east of the country.

But the government has been able to rely on the Banias refinery in northwest Syria in addition to considerable foreign support to meet its energy needs; both from Russia, and from Iran, who in 2013 reached an agreement with the state-owned Bank of Syria to provide $3bn worth of credit to cover oil supplies, as part of an overall lifeline of up to $7bn.

Seventeen million barrels of crude were shipped to Banias between February and October 2013, on credit from Iran, via the Sumed pipeline that runs through Egypt, according to one Reuters report. 

Still, the growth of the Islamic State has undoubtedly raised alarm bells in Damascus. "New borders are being established, there has been a real change taking place in the last couple of weeks," said Sami Nader of Beirut's Saint Joseph University.

"If one follows the theory that the regime gave birth to Islamic State to further their own political agenda then the genie is well and truly out of the bottle."