Illicit Iraqi oil smuggling to Syria continues amid US crackdown

London — Smuggling of Iraq's oil into Syria has been slowed but not entirely eliminated by a combination of US-led coalition airstrikes and citizen surveillance, despite the fractured Baghdad government continuing to turn a blind eye to the illicit trade, sources have told S&P Global Platts.

In late December, Platts first reported that Iraqi militias linked to Iran were involved in sneaking trucks filled with crude oil from western Iraq to Syria, continuing a lucrative business left behind by the Islamic State.

The volume of oil involved was as high as 10,000 b/d, and the revenue generated by the sales was funneled back to the Iranian Revolutionary Guard Corps, according to people with knowledge of the matter.

Since then, US air strikes have killed Qassem Soleimani, the head of the IRGC, as well as Abu al-Muhandis, a powerful Iraqi militia leader whom sources said had directed the oil smuggling operation in Anbar province.

Sources on the ground say the trade has continued under new leaders.

"There is no method to date that has succeeded in stopping the smuggling operation, but air strikes against the tankers and surveillance have had an impact," one witness to the trade told Platts, under condition of anonymity.

Locals say the militias are profiting by taking Iraq's sovereign oil resources, sending some to Syria's Banias refinery and crudely refining the rest, for sale to Syrians as marked-up prices.

Iraq's oil ministry did not respond to a request for comment.

US pressure on Iraq

Oil minister Thamir al-Ghadhban is leading a caretaker government in Baghdad, as the country struggles to name a prime minister and form a cabinet amid months of discord.

Scott Modell, a geopolitical analyst with energy consultancy Rapidan Energy and a former CIA officer who advises the US military, said authorities in Baghdad have little sway over the region.

"Iraqi militias have little incentive to end cross-border oil shipments into Syria which the Sunnis in western Iraq also profit from and have little incentive to stop," Modell said.

US officials say they are aware of the smuggling and are engaged in discussions with Iraq on how to reduce its political and economic reliance on Iran. Much of US pressure on Baghdad has centered on sanctions waivers the US has granted to Iraq for the purchase of Iranian gas and electricity to keep the country powered.

The Trump administration in April imposed sanctions on the IRGC and designated it a terrorist group, one of a series of sweeping measures the US has implemented to cut off funding to Iran's government.

"The cases you mention, I am sure we are looking into those and will take appropriate action," US Assistant Secretary of State Francis Fannon told Platts when asked about the smuggling.

"What we are focused on is the revenue. What are the big ticket items that are contributing illicit revenue. We have a methodical, thoughtful, stepped approach to cutting off this revenue stream."

Avoiding detection

The US maintains a military base with the Iraqi Armed Forces in Anbar's Ayn al-Asad Airbase, about 100 miles (160 km) west of Baghdad, and Iraqi officials in late 2018 revealed two other US bases near the Syrian border in northern Rumana and Al-Rutbah.

Local sources in Anbar province say air strikes launched by US-led coalition forces have disrupted some of the oil smuggling routes.

To evade detection, the tanker trucks travel by night through wide trenches dug by the militias, turning off their lights, according to witnesses.

Local activists, who have for months posted video footage on social media that they say shows the illicit trade, say they have given up on seeking help from Iraqi authorities.

"The Iraqi government is ignoring the oil smuggling issue and pretending that it does not know because it would be powerless to stop Iran from smuggling oil even if it was known to be aware of it," one said.