Oil Jihad: A Strategic Weapon Against Low Prices? – Analysis


For terrorist outfits like Al Qaeda and ISIS, low oil prices are counter-productive. These organizations, much like Venezuela, depend mostly on oil for their revenues that ultimately fund their weapons. There is, therefore, a need for them to attack oil infrastructure to freeze production and engineer a price rise.

By Ashay Abbhi*

Oil prices fell through the roof. Unrelenting oil glut. Exporters in shambles. Rejoicing end consumers. But there is more to oil price volatility than meets the eye. Let’s call it Oil Jihad.

The physical security of the world’s source of energy security has been undermined since the Arab Spring and exacerbated since the birth of ISIS, leaving 80% of the world’s crude vulnerable. Groups like ISIS, Al Qaeda and Niger Delta Avengers are fighting for control of oil rich territories in Iraq and Syria to fund terror through back-end trading. In attacking oil infrastructure, there is a grander scheme of choking production and national revenues until such time as prices sky rocket and a black market is established.

But, is there more to what motivates these extremist outfits? Could energy terrorism have deeper roots? Are their motives restricted to only destabilization of government revenues and/or taking control of the oil reserves? Or are the distraught oil-economies looking at it as a desperate measure to engineer an eventual price rise?

Recent attacks and the motivation

2016 has, so far, witnessed major attacks on the North Africa and Middle East facilities of large corporations like Chevron and Shell that have, for the last many decades, influenced major economies. In March, Al Qaeda in the Islamic Maghreb (AQIM) has claimed responsibility for the rocket attack on the Salah Gas Plant run by British Petroleum, Statoil and the Algerian National Oil Company, Sonarach in Algeria. Niger Delta Avengers (NDA) attacked Chevron’s Okan offshore platform in the Niger Delta in May. The organization has carried out several other attacks on the Nigerian oil and gas assets as a means to disrupt the oil-export based economy. Chevron suffered another blow on the same facility just a week later, despite having shut down due to the previous attack. This time they targeted the wellhead. These attacks have cut Chevron’s production from the region by 600,000 to 1.4 million Barrels per Day (bpd). The attack was followed by another in July when NDA destroyed the Nembe 1, 2, 3 and Tebedaba pipelines in Nigeria. These attacks have, as predicted, severely affected the country’s export commitments.

Shell Petroleum Development Company of Nigeria Limited declared force majeure following an attack on its 250,000bpd Forcados Export Terminal claimed by the Niger Delta Avengers.

July witnessed another attack by NDA. This time it was ExxonMobil subsidiary Qua Iboe. Its largest export pipeline in Nigeria that transported nearly 50,000 barrels daily was attacked and forced to close as the company declared force majeure. ExxonMobil and the government initially denied the attack. NDA has also issued a warning for more attacks and has asked all oil workers and foreigners to leave the facilities.

Taking a step beyond Al Qaeda and NDA, ISIS has created a simultaneous reign of terror by not only blowing up the oil and gas assets, but also controlling those that it didn’t blow up. Iraq has been a target of pipeline attacks for more than a decade. From its seized assets, ISIS produces nearly 50,000 bpd in Iraq and Syria, selling oil domestically and internationally to unidentified buyers through a trade route that enters from Turkey at a highly discounted price of anything from $10 to $35 per barrel. While the US has attacked ISIS-owned oil facilities, it has not damaged them enough for the organization to stop bringing in the oil money that runs into the range of $500 million annually.

For terrorist outfits like Al Qaeda and ISIS, low oil prices are counter-productive. These organizations, much like Venezuela, depend mostly on oil for their revenues that ultimately fund their weapons. There is, therefore, a need for them to attack oil infrastructure to freeze production and engineer a price rise. Also, with production losses and export delays, ISIS expects to create more customers and a larger market share that would translate into more revenues.

Hitting where it hurts

Lack of infrastructural security has often been criticized as it significantly hampers production, transportation, exports and revenues. Pipelines are more vulnerable since they run for longer distances through remote unmanned areas. This dearth of safety and security is considerably exploited by terrorists to create a dent in the national income. On the one hand, attacking infrastructure certainly stuns the governments and corporations into freezing production, thereby threatening the export contracts and weakening the country economically. Nigeria has lost nearly 1 million bpd of oil due to the terrorist attacks, containing its total output to only 1.1 million bpd, severely restricting exports and revenue. Attacks in the Delta have crippled the Nigerian economy and provided legs to Boko Haram by weakening Abuja’s resources to fight the terror group. On the other hand, frozen production means restricted supply and consequently, increasing prices.

Since the Arab Spring the threat of rebellion has unsettled the all-comfortable monarchs, even nudging the mammoth of the Middle East, Saudi Arabia. So far, while the Kingdom has seen some recent low-intensity attack, its oil assets have remained impregnable. Riyadh has refused to cut production to preserve its market share, but rapid depletion of strategic reserves may eventually weaken the spirits. Slowing down the tap could mean losing the cap, its ability to single handedly influence market price, lose market share and eventually threaten the money, muscle and existence of the Royal Family. The fall of the House of Saud would also mean less oil-money to fund Sunni terror outfits to fight interests of Shia Iran that is only growing stronger. With sanctions and trade barriers lifted post US-Iran deal, Tehran has begun pumping serious oil into the market, adding 3.6 million bpd to the glut. A Shi’ite state, the newfound oil money in Iran will find itself in the coffers of the Shia extremists, all in the name of fighting the holy war against the “infidels”. There are concerns that this new money in Iran could help it fund Shia extremists, that could further destroy oil assets in Sunni majority countries and bring the oil-terror saga full circle.

Remember those attacks on large oil companies? Revenue generated in 2015 by US oil and gas companies was down to nearly $860 million from $1,337 million in 2014; a steep drop of over 35.6% year on year. The only way to recover these losses and post a stronger 2016 and onwards is by increasing the oil prices. These attacks on oil and gas infrastructure intend to do just that. More attacks, lower supply, higher price. But only if demand remains the same or increases. This ‘only’ is the answer to why we haven’t seen this theory work out as well for the terroconomists (economists studying terror or economics studied terrorists, that link barrel of oil to barrel of the gun).

Falling oil demand due to the slowing Chinese economy and the world going green has held prices back. It may not be a stretch to say that the increasingly greening of economies and climate change efforts could be doing more damage to the oil-paid terror surge than US air strikes in Iraq. The IEA estimates that renewable energy will grow from a 22% share of global power generation in 2013 to 26% in 2020, with nearly 700 gigawatts of new installed capacity being added. This will offset power generation from oil and gas plants, eventually releasing the demand pressure that would force the market to keep the price levels low. The only way to counter this is to manufacture a supply deficiency and a demand surplus to increase the prices, a feat that oil terrorism has the potential to master.

Oil Jihad has given a new angle to the great geopolitical game of energy, as it moves from being a war for assets to include a war on assets as well. Attacks on infrastructural assets of commodities as sensitive as oil and gas, have long-term destabilising effects than short term gains. It has become another strategic weapon by funding terror organizations to carry on these attacks in the hope that prices will rise to sustainable levels once again. With the motive in place, conjecture points its oily fingers at countries that have been economically ravaged by the low oil prices.

A new can of worms?

The nature of this form of terrorism is that it is very likely stemming from the countries that are expected to fight against such outfits. Russia, despite being on the brink of recession, has waged a war against ISIS to support Assad. The US – still fighting a war against Al Qaeda – has sought to destroy the oil and gas assets of ISIS, the effectiveness of which is still debatable. These measures have weakened the outfits but not enough to deter them from either stopping production or from attacking infrastructure in other countries. Nigeria is yet to tackle NDA or Boko Haram and hasn’t been successful at either, much to the chagrin of companies like Chevron and Exxon Mobil that operate there. It remains to be seen how these anti-terror forces that are themselves reeling with the ill-effects of low oil prices, the attacks by which is expected to increase the prices and generate larger revenues for them. Is renewable energy the anti-dote to Oil Jihad and other resource conflicts? Would keeping the oil prices low deter the terrorists from sabotaging oil assets and output? How will the catch-22 situation in front of countries such as the US and Russia play out in the great game of geopolitics of energy besides making it more interesting?

*Ashay Abbhi is based out of India. An analyst in the field of contemporary energy issues, Ashay’s interests also lie in nuanced issues of war and conflict. With his specialisation in tow, Ashay has explored different angles of energy sector, one of which includes the comprehension of the geopolitics of energy.

The views expressed in this article do not necessarily reflect the views of TransConflict.


TransConflict was established in response to the challenges facing intra- and inter-ethnic relations in the Western Balkans. It is TransConflict’s assertion that the successful transformation of conflict requires a multi-dimensional approach that engages with and aims at transforming the very interests, relationships, discourses and structures that underpin and fuel outbreaks of low- and high-intensity violence.

One thought on “Oil Jihad: A Strategic Weapon Against Low Prices? – Analysis

  • September 30, 2016 at 12:03 pm

    The author of this article has some wrong elements. First, terrorists receive weapons and medical treatment from the USA and Israel. Even the Western and American media show Daesh and AL-Qaeda driving Japanese vehicles and carrying American and Israel weapons. Second, financing terrorism comes from some Arab states who are paying the bills. Selling oil brings to Daesh some money which can be used in many other ways, and all this oil goes to Israel without any effect on the world price of oil. Terrorists are also selling historical treasures to Israel, Turkey, and other countries. Third, US imperialism is defending AL-Qaeda in Western Syria (Aleppo) and negotiating for their safety and for assistance with modern weapons to fight the Syrian army. US imperialism is moving Daesh out of Iraq to Syria according to Clinton’s debate. US imperialism and Israel are also helping AL-Qaeda in Southern Syria. US imperialism also bombed the Syrian Army in the South-East of Syria. Finally, US imperialism is threatening Russia and may go to third world war for defending the terrorists.


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