In early 2015, the United States’ campaign against the Islamic State’s oil resources proved to be ineffective, with the terrorist group recovering quickly from strikes meant to disable its oil production capabilities.
Now, as the fight for Mosul rages, and even ISIS turns towards destroying local oil resources before the group is terminated, the future of one of Iraq’s major cities lies in the hands of those who will stick around to rebuild its economy – notably Russia and Europe.
Black smoke covers Mosul as the retreating forces of Islamic State burn oil wells, aiming to delay the reconstruction of post-ISIS Iraq for as long as possible.
The arson serves two purposes: it obscures the view of bomber jets providing air support to Kurdish Peshmerga forces, and extends the economic woes of the Iraqi people, fueling recruitment for terrorist groups that may spring up after ISIS.
The toxic fires – which could each take up to a month to put out – cost billions of dollars for Iraq’s national oil companies and cause widespread environmental and medical damage to local residents.
Mosul, the second-largest city in all of Iraq, is the capital of the Nineveh province, which produced 200,000 barrels of crude per day and refined an additional 310,000 bpd before ISIS took it over in June 2014. In the simplest terms, it’s an oil city.
And not just any ordinary oil city either: its location between Erbil and Kirkuk, and its highway access to Sulaymaniyah make it essential to the logistical realities of oil transport within the Fertile Crescent.
Turkey and Russia have specific stakes in Nineveh’s international oil production and transport game after ISIS’ demise. Related: Houston Oil and Gas: Cuts and Rehires Indefinitely Frozen
One potential pipeline would cut through Turkey to supply oil to the European Union, which has been on the lookout for new sources of energy to reduce Russia’s political leverage.
Over the past couple of years, Russia and the EU have been at odds with each other over the annexation of Crimea and the Syrian Civil War. President Vladimir Putin’s support of Syrian President-turned-dictator Bashar Al Assad has led the European states to search for oil import opportunities from new regions.
Last year, the European Council on Foreign Relations released a report outlining new energy sources for Europe. The document called Russia an “unreliable partner” and suggested several Central European and Middle Eastern countries – including Iran and Iraq – as possible suppliers in the near future, albeit with logistical caveats due to international sanctions and the presence of ISIS.
Russia, on the other hand, would support a pipeline going through Iran to Russia, China and other eastern partners during post-ISIS negotiations. This line would also allow the distribution of natural gas within the Kurdistan Regional Government, if it happens to gain regional autonomy, or even independence.
It is unlikely that Iraq will be able to rebuild its economy with loans solely from the International Monetary Fund or aid from the United States or the European Union.
Though Peshmerga forces have made it a priority to protect oil and gas facilities in Kirkuk, reclaimed areas around Mosul, and other oil and gas centers, the impact of ISIS’ attacks on the sector’s infrastructure has yet to be calculated, and the footage circulating international media does not look good.
Private contributions from multinational oil companies that had been active in Iraq will be essential to return the Organization of Petroleum Exporting Countries’ second-largest producer to its previous glory under the internationally recognized government in Baghdad.
As long as the focus rests on expelling ISIS from its de facto Iraqi capital in Mosul, international powers are bound to stay focused on expelling the caliphate’s presence. The war’s end will bring in Russia, Turkey, the United States and other international partners with stakes in the conflicts to discuss the future of Iraq.
By Zainab Calcuttawala for Oilprice.com
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