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Subsidies may curb Islamic State oil financing

Revenue stream curbed for terror group, but still large source of finances.

By Daniel J. Graeber

WASHINGTON, Feb. 3 (UPI) -- Western supporters fighting the group calling itself the Islamic State should consider subsidizing regional fuels to curb terror financing, a U.S. scholar said.

The Islamic State is said to generate anywhere between several hundred thousand dollars to as much as $2 billion in illicit oil trade. Liz Rosenburg, director of the energy and security program at the Center for a New American Security, told delegates at the Washington Institute of Near East Policy that, while it was difficult to pinpoint exact financing, the group's ability to generate funding through oil is diminished.

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"It is unlikely to be anywhere near the top of that spectrum now, given coalition efforts to degrade ISIL financing last year and the drop in the price of oil, but it is without a doubt extraordinarily substantial for a terrorist organization," she admitted.

The terrorist group, which once controlled large parts of Iraq and Syria, generates revenue by selling oil on the black market at a deep discount. The related smuggling network, Rosenburg added, is one of the most sophisticated in the world, suggesting conventional economic and military means may be ineffective.

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Rosenburg said regional allies may want to consider flooding the market with cheap subsidized oil products as a way to curb terror financing.

"It will not be possible to stop shadowy oil trading from occurring in Islamic State border regions as long as there is any commercial incentive to do so," she said. "However, flooding the local market will make the group compete harder to sell its oil, forcing it to take an even lower price and earn less money."

David S. Cohen, undersecretary for terrorism and financial intelligence at the Department of the Treasury, testified last year financial pressure could diminish the Islamic State's revenue stream. Rosenburg suggested that effort may have a limited impact, however.

Despite concerns of secondary impact of military action, airstrikes continue to hit Islamic State oil targets. Kurdish military forces, for their part, thwarted an Islamic State attack on the oil-rich Iraqi city of Kirkuk earlier this week.

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