Monday, September 22, 2014

Happy Rosh Hashana from the IDF

Dreamers of the Day

All men dream: but not equally. Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act their dreams with open eyes, to make it possible. This I did.
- T.E. Lawrence

Saturday, September 20, 2014

“For death remembered should be like a mirror,
Who tells us life’s but breath, to trust it error.”

William Shakespeare, Pericles

Wednesday, September 17, 2014

A method of systematically degrading ISIL's forces

ISIL has already adapted to air attacks by dispersing and going to ground.
"... Facing US air strikes in Iraq, Islamic State fighters abandoned heavy weaponry that made them easy targets and tried to blend into civilian areas. In anticipation of similar raids in Syria, the group may already be doing the same.In Raqqa, the group has evacuated buildings it was using as offices, redeployed its heavy weaponry, and moved fighters' families out of the city."They are trying to keep on the move," said one Raqqa resident, communicating via the internet and speaking on condition of anonymity because of safety fears. "They have sleeper cells everywhere," he added.
"They only meet in very limited gatherings."...

http://www.news24.com/World/News/ISIS-goes-underground-in-Syrian-stronghold-20140916

This would present some opportunities as ISIL will be unable to concentrate forces to repel attacks without exposing themselves to air assault. 

Thus stationary targets will be vulnerable to recapture such as refineries, oil fields, damns, power substations. 

The key would be to take the initiative to force the concentration on our terms.  If ISIL is not pressed then they will continue to be able to concentrate their own forces quickly in light vehicles and overwhelm defenders. 

Equally if Iraqi, Kurd or Syrian government forces can coordinate their movements then it would be possible to spread ISIL out very thinly and geographically. One might see a scenario whereby targets were selected that required ISIL tactical vehicles to race over open roads place to place exposing them to air attack on open ground.

As noted 35,000 ISIL fighters is stretched over a very long geographic border.
 

Tuesday, September 16, 2014

Quick Observations on Oil Prices, Russian Budgets and US Fracking Breakevens


Russian Budget and Oil Prices

"... He said Russia's 2015 budget deficit was expected to be 0.5 percent of gross domestic product (GDP) - higher than a previously expected 0.4 percent - while budget deficits for 2016 and 2017 are expected to reach around 0.6 percent of GDP.
He said previous expectations were based on an expected oil barrel price of $96.
"(The oil price) has been clarified and because of that the deficit has risen. It was 0.4 percent of GDP and is now 0.5 percent," he said, speaking to journalists.
Russia's Economy Ministry also raised its expectations for 2015 growth to 1.2 percent from a previous 1 percent forecast, Interfax reported.
Oil prices have fallen recently on demand worries and Russia's Urals URL-E has fallen to $94.50 per barrel.
Economy Minister Alexei Ulyukayev said Russia may divert funds from its separate National Wealth Fund or from pensions.
Russia relies on oil and gas for around two-thirds of exports and half of federal budget revenues. Over the course of a year, each $1 fall in the oil price wipes around $1.4 billion off federal tax revenues.
http://www.reuters.com/article/2014/09/14/russia-budget-deficit-idUSL6N0RF0K120140914

US Fracking Breakeven Points

" ...LEVI: On the flipside, no one expects Vladimir Putin to cut his own oil exports in order to inflict harm because he can't sustain his spending - his state - his budget without the revenues from oil cells.

YDSTIE: Fadel Gheit, managing partner and head of oil and gas research at Oppenheimer and Company, says oil prices will spike higher when severe disruptions occur. But he thinks global supply will continue to grow and keep prices in check. He says that will happen as fracking technology improves, reducing the costs of production.
FADEL GHEIT: The break-even point continues to decline. I mean, yes, we needed $80 oil for the North Dakota bargain oil development to continue. Now it's about 65. Five years from now, it could be 50 or even 40.:  http://wmuk.org/post/turmoil-roiling-abroad-why-arent-oil-prices-bubbling

-bth: if this is correct then global economic weakness in demand, surging production from almost all sources in the ME and US will keep prices low.  As it happens breakeven for the Russian budget is in the $80s and US fracking breakevens are falling below those levels.  One might expect oil prices to stay surpressed for some time.




Aggregated recent news on ISIL cash sources





ISIS Oil Maphttp://www.ibtimes.com/isis-grip-iraqi-oil-infrastructure-could-be-slipping-amid-us-air-strikes-kurdish-attacks-1686238

ISIL Oil Fields

"... Perkins said it is difficult to tell how much oil the ISIS-controlled wells are actually producing, or how much of the oil the militants are smuggling throughout the region. The illicit oil operations are thought to earn the group more than $1 million a day, according to Platts estimates, and ISIS is showing no signs of relenting its campaign of terror across Iraq.
ISIS now fully controls about 18 cities and surrounding areas in northern Iraq, according to a recent New York Times map. The region holds about 17 percent of Iraq’s oil reserves, part of which is simultaneously being taken over by the separatist Kurdistan Regional Government in the north...." http://www.ibtimes.com/isis-grip-iraqi-oil-infrastructure-could-be-slipping-amid-us-air-strikes-kurdish-attacks-1686238

bth: these stationary targets would lend themselves to systematic reduction from the air.  Plus oil must be refined to useful end products or sold for cash and should be made far more difficult.  Also if ISIL is squeezing out the middlemen then one might believe this offers a fertile field for recruitment of intelligence assets by the Iraqi, Syrian and Kurdish governments.

"... ISIS militants pushed past Baiji toward Tikrit, where they captured at least four oil fields, including Ajeel, one of the area’s most productive. In early August, the extremists captured two more oil fields -- Ain Zalah and West Batma -- in the predominately Kurdish region of northern Iraq.
As of Aug. 15, ISIS still controlled the Quyarrah, Ajeel, Ain Zalah, West Batma, Sufiyah and Himrin wells in the Nineveh and Salahuddin provinces, according to Platts.
Recent reports indicate that ISIS has since lost its grip on the Ajeel oil field after a Kurdish-led advance in Nineveh in late August."  http://www.ibtimes.com/isis-grip-iraqi-oil-infrastructure-could-be-slipping-amid-us-air-strikes-kurdish-attacks-1686238
ISIL Oil to Turkey

"...“The key gateway through that black market is the southern corridor of Turkey,” Mr. Khatteeb said. “Turkey is becoming part of this black economy” that funds ISIS.
But targeting the smuggling network has proved a major challenge, and so far the Turkish authorities have been unwilling to cooperate.
“They’ve been turning a blind eye to it, because they benefit from the lower price of smuggled black-market oil,” Mr. Phillips said, “and I’m sure there are substantial numbers of Turks that are also profiting from this, maybe even government officials.”.
The supply chain of routes, individuals, families and organizations that allow the oil to flow are well-established, some dating back decades, to when President Saddam Hussein of Iraq smuggled oil during the United Nations’ oil-for-food program. “Those borders have never been sealed, and they never will be sealed,” Mr. Phillips said...." http://www.nytimes.com/2014/09/14/world/middleeast/struggling-to-starve-isis-of-oil-revenue-us-seeks-assistance-from-turkey.html?hp&action=click&pgtype=Homepage&version=HpSum&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

What NYT is dancing around is that key Turkish government officials are involved in tremendous scams regarding oil and natural gas.  This was most tellingly reported about a year ago with regard to Iranian sanctioned energy buys.  But when this was reported there were enormous crackdowns on journalists and anti-corruption police.  Low grade gasoline and diesel fuels can be found easily enough and it doesn't require the US Treasury to dig too deep to ferret these sources out.  Local bus drivers, taxi operators and local merchants will know where to get bootleg low grade refined products.  The key problem is that these intermediaries are likely well connected. The capture of Turkish diplomats, truck drivers and then their gasoline truck fleet all factored into the funding cycle for ISIL.  Probably the only way to reverse this trend is to make the cost of buying petrochemical products from ISIL cost prohibitive.  To do this will require destruction of Iraq and Syrian roads used by tankers, destruction of bootleg oil pipelines, and infliction of pain on middlemen of all nationalities.  This might be offset by increases in Kurdish oil flows to Turkey and the reduction of sanctions against Iran as it relates to Turkey which has extremely high gasoline prices.

ISIL Refineries

"... ISIS first began capturing oil infrastructure in Syria. In June, extremists made their first major Iraqi oil grab near the north-central city of Mosul, an area flush with oil fields and the small Qayyarah (also known as Qaiarah) refinery. Iraq Army fighter jets reportedly shelled the refinery in mid-July, though the facility appear to remain in the militant’s control.
The extremists continued south to Baiji, where they targeted Iraq’s biggest oil refinery. Witnesses reported that Sunni extremists seized the 310,000-barrel a day facility in June, but Iraqi Army officials have disputed those claims. In any case, workers were evacuated and operations stopped in July. The Iraqi government now purportedly controls the facility, though pockets of militants continue to sporadically attack Baiji. It could take more than a year to repair the refinery when fighting subsides...." http://www.ibtimes.com/isis-grip-iraqi-oil-infrastructure-could-be-slipping-amid-us-air-strikes-kurdish-attacks-1686238

"... Islamic State militants set fire to an oil storage tank at Iraq’s largest refinery as the US prepares to escalate the campaign against the extremist group.Militants fired mortar rounds at the Baiji refinery, 130 miles north of Baghdad, causing a crude storage tank to catch fire and emit a plume of smoke visible from miles away, the police said in a statement read over the phone by an officer. “The fire could go on for two or three days as there is no civil defense to put it out,” police said in the statement, without indicating how much oil the tank contained. “The situation in the refinery’s perimeter is quiet now.”  http://www.hydrocarbonprocessing.com/Article/3379965/Latest-News/Islamic-State-bombs-Baiji-oil-refinery-in-Iraq.html


bth: refined gasoline is a critical weak spot for ISIL worthy of exploitation. Better to take the refineries like Baiji out of commission than let ISIL benefit from the refinery itself or the extortion racket built up around protection money and similar ISIL activities.  Without a doubt there will be shortages of gasoline in the region for the foreseeable future. What strikes me as intersting is that if ISIL did in fact mortar the Baiji refinery which would be a great cash cow for them, it must be because they do not feel they can secure it for themselves.

Extortion

"...That is equally true of the other major source of ISIS money — its extortion activities in the areas it controls, said Mr. Johnston, who is examining declassified documents that detail the group’s funding streams. ISIS demands anywhere from 10 percent to 20 percent of revenue from businesses in its territories and operates other “mafia-style” rackets that yield as much as $1 million a day...." http://www.nytimes.com/2014/09/14/world/middleeast/struggling-to-starve-isis-of-oil-revenue-us-seeks-assistance-from-turkey.html?hp&action=click&pgtype=Homepage&version=HpSum&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

Cash Squeeze?

Adding it all up one has to wonder if ISIL is going to be cash starved once their bank robbery loot is used up.  And we know that ISIL seized farmer harvests and government granaries and that without money from the Iraqi government, many farmers in the Sunni areas did not set aside funds for 2015 plantings. One has to believe that basic food stables will cost more in 2015.