Stolen oil profits fuel militants, U.S. says

BAIJI, Iraq — The Baiji refinery may be the most important industrial site in the Sunni Arab-dominated regions of Iraq. On a good day, 500 tanker trucks will leave the refinery filled with fuel with a street value of $10 million.

The sea of oil under Iraq is supposed to rebuild the nation and make it prosper. But at least one-third, and possibly much more, of the fuel from Iraq's largest refinery in Baiji is diverted to the black market, according to U.S. military officials. Tankers are hijacked, drivers are bribed, papers are forged and meters are manipulated; some of the earnings go to insurgents who are killing more than 100 Iraqis a week.

"It's the money pit of the insurgency," said Capt. Joe Da Silva, who commands several platoons stationed at the refinery, 125 miles north of Baghdad.

Five years after the war in Iraq began, the insurgency remains a lethal force. The steady flow of cash is one reason, even as the U.S. troop buildup and the recruitment of former insurgents to U.S.-backed militias have helped push the number of attacks down to 2005 levels.

Money, far more than jihadist ideology, is a crucial motivation for most Sunni insurgents, according to U.S. officers in some Sunni provinces and other military officials in Iraq who have reviewed detainee surveys and other intelligence on the insurgency.

Although many U.S. military officials and politicians — and even the Iraqi public — use the term al-Qaida as a synonym for the insurgency, some U.S. and Iraqi experts said the number of committed religious ideologues remains small. They said insurgent groups raise and spend money autonomously for the most part, with little centralized coordination or direction.

Money, not ideology

Money from swindles in Iraq and from foreign patrons in places such as Saudi Arabia allows a disparate, decentralized collection of insurgent cells to hire recruits and pay for large-scale attacks.

But the focus on money is the insurgency's weakness and its strength, and one reason loyalties can be traded. For now, at least 91,000 Iraqis, many of them former enemies of the U.S. forces, receive a regular American-paid salary for serving in neighborhood militias.

"It has a great deal more to do with the economy than with ideology," said one senior U.S. military official, who added that studies of detainees in U.S. custody found that about three-quarters were not committed to the jihadist ideology.

A military official familiar with studies on the insurgency estimated half of the insurgency's money comes from outside Iraq, mainly from people in Saudi Arabia, a flow that does not appear to have decreased in recent years.

Before the invasion of Iraq, eight gasoline stations dotted the region around Sharqat, north of the refinery at the northern edge of Saddam Hussein's home province, Salahuddin. Now there are more than 50.

Economic growth? Not exactly. It is among the schemes that feed money to the black marketeers. Most tanker trucks intended for Sharqat never make it there. "It's all a bluff," said Taha Mahmoud Ahmed, the official who oversees fuel distribution in Salahuddin. "The fuel is not going to the stations. It's going to the black market."

Gas stations are often built just to gain the rights to fuel shipments, at subsidized government rates, that can be resold onto the black market at higher prices. New stations cost more than $100,000 to build, but black-market profits from six or seven trucks can often cover that cost, and everything after that is profit, said officials who have studied the scheme.

The plan also requires bribing officials, said Col. Mohsen Awad Habib, who is from Sharqat and is police chief in Siniya, near Baiji. He said owners of bogus gas stations told him they paid $20,000 bribes to an oil-ministry official in Baghdad to get their paperwork approved. Local and provincial officials then extort their own cut. "In each station, you'll find high Iraqi officials who have shares," he said.

In Baiji, dozens of insurgent groups feed off corruption from the refinery, said Lt. Ali Shakir, commander of the paramilitary Iraqi police unit. Shakir said the more hard-core insurgent groups had a lot of money to pay other fighters. He said part of the reason they thrived is that obvious thievery is never prosecuted.

Large pool of money

U.S. and Iraqi officials struggled to estimate how much the insurgency reaps from its domestic financing activities. In the past, Iraqi officials estimated insurgents receive up to half of all profits attributable to oil smuggling. Before the troop buildup began a year ago, a U.S. report estimated insurgents generated up to $200 million a year.

The skimming is not limited to the insurgency; illicit earnings from the Baiji refinery also flow to criminal gangs, tribes, the Iraqi police, local council members and provincial officials who also smuggle fuel, Iraqi officials said.

Barham Salih, the Iraqi deputy prime minister, said the pool of money available to insurgents across Iraq had fallen in the past year, but he declined to provide an estimate. He said Iraqi security analysts estimated al-Qaida in Iraq received $50,000 to $100,000 a day from swindles related to the Baiji refinery.

The insurgents appear to understand how valuable the Baiji refinery is to their operations. "They have not attacked the oil refinery, because they don't want to damage their cash cow," said 1st Lt. Trent Teague, who commands the 3rd Platoon in Da Silva's unit, the headquarters company of the 1st Battalion, 327th Infantry.

Instead, when the insurgents want to send an angry message to someone at the refinery, they attack neighborhoods where oil workers live. Two suicide bombings in such Baiji neighborhoods in December killed at least 30 people and wounded more than 100. "It was the refinery being hit, without it being hit," Teague said.

Some U.S. officials and politicians said Sunni insurgents have deep ties with al-Qaida networks loyal to Osama bin Laden in other countries. Al-Qaida in Iraq, whose members are mainly Iraqi but whose leadership has been described by U.S. commanders as largely foreign, remains a well-financed and virulent force that carries out large-scale attacks.