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Is everything we know about ISIS's oil money wrong?

A Kurdish fighter near the oil-rich city of Kirkuk, in Iraq.
A Kurdish fighter near the oil-rich city of Kirkuk, in Iraq.
Spencer Platt/Getty Images

You have probably heard that ISIS makes a lot of money from oil. The group's ironclad control over northern and eastern Syria includes most of Syria's oil extraction operations. Syria's oil deposits are small by Middle Eastern standards, but estimates of ISIS's oil money can range from roughly $1 million to $3 million a day. That's a lot of cash for a terrorist group to be raking in.

But according to a new estimate by German intelligence agencies, a lot of this speculation is "hugely overblown." ISIS makes way less money from oil than we think, and its oil revenues are one of its most vulnerable revenue streams. ISIS's oil riches aren't so rich, and what they do have is fairly insecure.

According to German English-language publication The Local, the BND (German equivalent of the CIA) estimate was obtained by several German news agencies. The BND estimate suggests that ISIS may make less than $100 million this year from oil — under $274,000 per day. Obviously, that's still a lot, but it's way lower than what most public estimates suggest. And keep in mind that ISIS isn't putting every cent of that into its military and terrorist operations; it also has to run a territory the size of Belgium. That's expensive.

There are two big reasons the BND thinks most estimates are inflated. The first is coalition airstrikes: the United States and its allies have pounded the oil extraction rigs, which are after all right out in the open, and hit ISIS smuggling lines. As such, the BND believes that ISIS has gone from producing its highest oil production of 172,000 barrels per day to 28,000 in October.

The US Treasury, a source of the early estimate that ISIS makes $1 million dollars per day in oil money, also thinks airstrikes are taking a major toll. David Cohen, under secretary for Terrorism and Financial Intelligence, has acknowledged that the $1 million figure was "pre-airstrikes" and that they haven't updated it after ISIS sales have been "impaired." So the BND's not totally alone here.

The second reason the BND believes ISIS oil revenues are inflated has to do with ISIS governance itself. According to German intelligence, ISIS lacks the specialist technicians necessary to keep the oil pumping at optimum levels. Moreover, what oil ISIS does manage to produce can't all be sold: the group needs to keep the lights on and cars running in the territory it controls. Indeed, one report from Mosul, the largest Iraqi city held by ISIS, describes major blackouts and rising prices for oil.

kurdish oil

An employee works at the Tawke oil field near the town of Zacho on May 31, 2009 in Dohuk province about 250 miles north of Baghdad, Iraq. (Muhannad Fala'ah/Getty Images)

ISIS's domestic need for oil has been "completely neglected in most evaluations" of ISIS profits, according to the BND. They believe that most of the 28,000 barrels ISIS produced in October went to consumption within ISIS territory; only about 10,000, according to the BND, were exported for profit.

So there's a strong case that ISIS makes much less money from oil than you think. ISIS also makes a lot of money from extortion schemes and de-facto taxation systems, but without actual economic activity to tax and extort, experts believe ISIS can't keep up those funding streams indefinitely. The BND report, then, points to another ISIS weakness — economics — in what's starting to be a pretty long list.

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