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Background Briefing on Interagency Efforts to Target ISIL's Energy Assets

Redacted in accordance with ground rules

STAFF: Finally, I did want to welcome [senior U.S. official]. As most of you know, our military operations to degrade and defeat ISIL are not done in a vacuum; that they're in fact the product of work that takes place across our government and draws upon not only military intelligence and analysis of military hardware and capabilities, but also our analysis of ISIL finances and in particular energy sector information. And that's been particularly apparent with the recent Tidal Wave II operation which sought to deny ISIL the profits from the illicit trade of oil.

Our intent today is to help all of you understand some of the analytical work that went into that and other operations. Again, this event today is on background and you may use this as a senior U.S. official. Our goal, again, is to help provide you with context. That said, if there are particular things you hear that you want on the record, I am told that [redacted] over here, from [redacted] public affairs, will be happy to work to get you something on the record if you hear something you like on background and you would like it on the record. She may be able to help arrange that for you.

You may record, of course, but not for broadcast. And without any further ado, sir, over to you.

SENIOR U.S. OFFICIAL: Thank you. It's good to be here. Thanks for the hospitality.

So, I'm [senior U.S. official title], which means we look at the nexus of energy, foreign policy, energy and national security. We started working with our colleagues in the Department of Defense at the beginning of the conflict, looking at specifically in Iraq and Syria, at the energy assets. And as the conflict began, where energy was being prioritized in the -- in the battle over specific territory.

So if you look at some from the early days of the conflict to where we are today, there was a clear prioritization by ISIL and other groups, as well as the regime, to control specific energy assets. That means whether it's natural resources, oil and gas fields, the wells, but also some of the other installations, facilities, infrastructure, from pipelines to grid lines to GOSPs (gas-oil separation plant), to the oil separating, to gas transmission lines, et cetera.

So what we have been able to do is -- over the last year is to take a look at how do we degrade their capability of using energy as a resource. And they use that energy as a resource in two different ways. One is the actual profits generated forward for cash, and the other is control of territory.

When you are trying to be a state, you need to govern, and part of governance is providing for natural resources for power, electricity, fuel, et cetera. So it's both a symbol of a state as well as revenue generation.

The idea has been from the beginning was for us to take a look at how do you take the value of the barrel because you can't simply take away their ability to profit from energy unless they lose the territory in which that facility installation or natural resource is in. So you can't -- oil will be produced, the gas will be produced, and therefore, how do you under -- how do you operate so that absent taking away the physical territory where that asset is, how you degrade its value, how do you sell it for less or make the delta on the revenue smaller and make it more complicated and slow it down.

To do that, there's been a lot of suggestions by experts on the outside of simply bomb it. The problem is it doesn't -- it's not that easy. It doesn't work that way. You can't simply bomb a well. It doesn't do very much, and several of the things that you can take out, if you don't take them out in the right way at the right timing in the right place or the right facility, it can be rebuilt, replaced or created a workaround where the cost effectiveness of taking it out is not there. It'll probably cost more to take that facility out than it'll be for them to rebuild it.

So therefore, we looked at the full value chain from the time of production of the oil, the producing the oil, meaning taking it out of the ground, all the way to the sale point of where ISIL makes the money on it. And to do that, we began about a year ago October, working between our office and the folks in the field at the -- in the military at looking at the refineries.

As ISIL took control of territory, they had control of the old Iraqi and Syrian refineries, and beyond that, they began to import and build modular refineries which are remarkably -- I learned this through this process about a year ago -- you can go on a whole number of websites and actually order a refinery. So for those of you looking to build a refinery in your backyard, you could literally get a modular refinery sent to your home in pieces.

They started building several of those, and we began to target refineries and able to take out the vast majority of them. Again, that wasn't going to affect the production, but what that was able to do was to reduce the value. So the quality of the product that you get from a refinery versus the products that you take when you distill oil in more rudimentary or primitive ways.

So we took out most of the refining capacity, started targeting the well heads as well. The well heads are -- it's effective to take them out, it reduces the production, but only temporarily. They were able to figure out how to rebuild them, replace them and figure out how to utilize the wells without the well heads.

Once the Abu Sayyaf raid occurred, we were -- and we got our hands on or access to the enormous amount of data that -- Abu Sayyaf was the oil emir that you all know was taken out. And with that raid, we got this enormous amount of information that was very detailed as to how they operated their energy sector and allowed us to learn more and -- about the operation and how to attack it or address it.

And using, again, the time that we had to translate it and analyze it, collate it from the different sources that we had and put together the picture, we were able to, starting this past summer, trying to look more strategically at which assets in Syria are more -- are a better value target, meaning harder to replace, harder to take out and, therefore, harder for them to rebuild not only because it's difficult to find the resources to do it, they are more expensive on the market, but they're also more difficult to get into the territory where they're -- where they're operating.

Part of that, as you -- as was mentioned before in Title Wave II, we started also addressing the trucks which are, in my view, the veins of the operation. It's how the oil gets around Syria. And again, the ability to do that with minimal casualties and -- but we're starting to see now just a few weeks into this, into Title Wave II, seeing the effects of what it did to take out several hundred trucks.

It has slowed the operation down considerably, it has meant that trucks no longer line up in these massive lines of thousands of trucks, but they are grouping further away from the wells, further away from the collection points in smaller groups. It slows -- takes longer to get to the collection point to pick up your oil. It means it's a different decision-making process at home to decide whether I want to get in this business of being a truck driver for ISIL on this; it is no longer safe.

If I'm going to do it, truck drivers are charging more, so the cost of that barrel now has increased for ISIL to be able to sell it. And the entire operation is less effective. And again, if you look at it from not trying to take the ability to produce oil or the ability to sell it, but rather degrade the value of that barrel, it was enormously successful.

We also started targeting other kinds of infrastructure in the Dawr az Azar area where we were able to take out some higher value infrastructure, which is harder to rebuild. And we're still in the process of analyzing what they're going to do next and how they're going to try to recover or rebuild, but so far, we're starting to see the signs of a degrading and decreasing of the value of the oil and, therefore, the value of their profits.

Let me just end with -- there was one -- there's been some -- a lot of discussion about where's the oil going. Is it being sold to Turkey, is it being smuggled across the border, et cetera. I have said before publicly on the record that we do not believe that there is significant smuggling of oil into Turkey. There was in the early days some, but there is very little of it today.

Part of that is because of the joint efforts between the United States and Turkey both on the military side but diplomatically to slow that process down, but also because it also just simply doesn't make the economics sense to move the oil around. This is -- for ISIL, this is a lot of oil they're producing, but in the grand scheme of things, this is not a lot -- there are not a lot of barrels being produced in Syria by ISIL. And moving that oil across great distances when there is a local market in Syria simply doesn't make all that much sense.

So I'll repeat that. We do not believe that there is much smuggling going on from ISIL territory into Turkey. If there is, it's very small amounts that are happening on the border, just as they have probably for several hundred years, but they are not significant from a volume metric perspective, neither for revenue nor volume of quantity of oil.

So, we believe that, as the president said yesterday, we have made significant process. We have ability -- already affected their ability to generate the revenues, and they're starting to see the trouble of the ability to govern by having shortages of the fuel types that they require.

So I'll leave it there, knowing that there may be a couple of questions -- (inaudible).

Q: Sure. Bob Burns with AP.

Could you put some numbers on that, some dollars figures on that? You say you're beginning to affect their revenues. How much, you know, how much per month? We see various numbers, but how much do you estimate that it – that they make per month on oil in either Syria or Iraq or combined? And how much has it been reduced so far?

SENIOR U.S. OFFICIAL: So, first let me say that in Iraq, they no longer control oil fields in Iraq. And the ones that are contested oil areas are not producing. So they used to have access to Ajeel field. They don't anymore. And if they do, parts of it that they do are contested and they don't -- they're not producing anymore. The Beiji refinery, as you know, is not operational, to say the least. So no real revenues coming out of Iraq.

In Syria, I know you've seen the number -- about 40 to 50 -- 40 to 48 million dollars a month In the $1.5 million a day range, that were some of our estimates. But I don't believe that that number is accurate anymore. I believe it's -- it's lower than that. How much lower, you're going to have to ask me again in a couple of weeks, two or three weeks. We need some time to figure out the -- to assess the -- we're still in Tidal Wave II, and see how that -- how they regroup and what exactly effects that has had.

We've -- we know from our sources and what we can see is that the costs of the -- the costs of the operation has gone up and the -- and the ability to move it around has gone down. And that -- that is where that really hits you in your -- in your generation of revenue. So I've got to go back and still -- I still need a couple of weeks to figure that piece out.

Q: The $1.5 million per day was an accurate figure?

SENIOR U.S. OFFICIAL: I think that -- there is no real -- this is not Exxon, right? I mean, it's not -- it's not -- the bookkeeping doesn't tell you "here's what I'm doing, and today if $1.5 million; tomorrow is $900,000, or the next day is $1.8 million."

So, I think it was very fluid. On days where there were strikes or there was activity, that revenue could have gone down significantly. But I think it was fair to say that based on how many barrels they were producing and how they were understanding the process, I felt that that was in the range. People were giving very specific numbers all along. I'm extremely uncomfortable with specific numbers. This is at the end of the day, this is a terrorist organization, not an international oil company.

So I don't believe that there are hard numbers on revenue, but it's in the neighborhood.

Q: Speaking of a terrorist organization, are there any indications that ISIS is making efforts and/or is in fact recovering some of that lost revenue through other endeavors? Kidnapping, extortion, theft -- have those activities risen to make up for the loss of revenue?

SENIOR U.S. OFFICIAL: So the – [redacted]. So I'll address the energy, but I'll say that we -- they clearly are -- will need to replace some of that revenue. We've seen some of the efforts in that -- in that regard. But the energy piece was such an important and -- and significant part of their revenue generation, it would be very difficult to replace those dollars dollar for dollar.

Q: Just a few follow-ups, you said before that there was -- the truck drivers were charging more. How much more? How much were they charging before? You said that not a significant amount of oil was going to Turkey. What quantity of oil do you think is doing to Turkey? And the rest of it, we've been told by Treasury it's going to the Syrian government and others? Where else is the energy going to that's being sold?

SENIOR U.S. OFFICIAL: I don't -- I'm not going to be able to give you hard dollars, numbers on how much they're charging. I think it's -- it's -- they're not the same in different -- they're charging different numbers in different places. And it depends what the purpose is for, et cetera.

So, this is -- these -- it's a market. It's a real market. And we believe that ISIL is making most of its money from sales to these trucks and then later on by taxation. It's not -- it's a relatively simple operation. It's not a very sophisticated one.

So, the price, based on what's -- what the truck driver is able to sell it later on, and how fast it can get to the market, is going to depend on how much he's going to have to buy it for. So there is a little bit of a market here, and therefore there isn't a hard number. So we could look at increase in the dollars.

The other things that happens is that the overall price of oil in the market has gone down quite significantly, so it has a knock-on affect further down even on black market oil. And I would consider this to be one big black market oil.

As far as the numbers of oil going to Turkey, I don't know. I think it's -- the reason I can tell you that it's not significant is because in order to have real volume, you would need trucks crossing the border on a regular basis. If you think that a truck is somewhere between 200 and 250 barrels per truck, you start looking at -- if you want 20,000 barrels a day, which is a low end of any real volume, that's over 1,000 trucks a day going.

You start getting to the point where that's impossible without having a highway of trucks that is dedicated to crossing the border – of Turkey . We have nothing of the kind. There are very few trucks. Oil trucks are limited in the terrain that they can pass. They -- the mountainous areas, it's very -- you don't see trucks loaded with 200 barrels of oil making -- on dirt roads and sandy areas and mountainous areas.

So, there is -- you start limiting where they can cross, how they cross, if you don't -- (inaudible) -- significant volume. If you're talking about a bunch of mules with -- with sacks of oil on them; if you're talking about garden hoses that use water -- for water, that were created for water, but you put some oil in them, you're talking about trickles -- a few barrels here and there that are crossing the border, used domestically, locally in that area, in that village to do -- to do something fairly rudimentary, or going to a small refinery that is doing something.

These are very, very small numbers. The way we understand ISIL's operation, they don't make any more money going into Turkey than they do delivering it 10 miles, 20 miles away; so, within the vicinity. And therefore, it doesn't really make sense for them to -- it's a huge effort and a huge lift to get into Turkey for no return on that -- on that investment.

I've used this analogy before. You know, living in New York in the past, taxi drivers didn't like taking you to Jersey because they have to come back empty. If you're a truck driver and you took 250 barrels of oil, you're driving four days to Turkey, you off-load it there or anywhere that's very, very far, you're now coming back that whole way. You're not getting paid for that way back. You have just as much a market nearby. It doesn't -- it doesn't make a lot of sense.

Third, I'll end where I -- where I started on the last question. Oil prices today are -- Brent crude was at $36 yesterday. Why would you -- the urgency for black market oil is usually when you have high prices and you can create the arbitrage for lower-priced oil. It was created during the Assad Senior -- Hafez al-Assad regime, where gasoline and diesel products in Syria were, let's say, at 50 cents and in Turkey were $2. So, you got -- created a black market automatically.

I'm talking about very, very small volumes.

Q: (inaudible) -- can you give us a percentage?

SENIOR U.S. OFFICIAL: I can't. I -- I think these are volumes that don't register. And the -- oh, you asked where the oil -- the oil is -- I -- there's not much trade with the regime on oil at the moment. There is more trade on gas than there is on oil. But I'll go back to what I said earlier. This is a relatively small market. We're talking about ISIL, and therefore every dollar is important. We're trying to degrade their dollars.

But if you look at the total barrels being produced from a -- Syria at the best of days didn't have a lot of oil that it was producing. And now it's a fraction of that. So, this is not a lot of oil. And if you look at even an in-conflict region such as this one, there is -- they -- they still have enough consumption in their areas, in Syria, to be able to consume it. That's why there's not as much trade with the regime. That's why there's not trade -- that's why there's not smuggling into Syria.

Q: So just to clarify, the $48 million is down because of the low oil prices? And it wasn't -- and that's -- that's the baseline -- that baseline amount is probably the same?

SENIOR U.S. OFFICIAL: No, no. I -- no, I said that --


Q: -- the volume of oil being sold has not changed really? It's just the prices are going down and the --

SENIOR U.S. OFFICIAL: So, what we're looking at is degrade the ability to move oil around. So you lower the volume -- that's what I said. It's two volumes. One is the volume of actual -- how many -- how much oil; and how much money you make on each barrel.

So the volume is -- of oil distributed around the country is down, because we've taken out a lot of their infrastructure. We've taken out -- the trucks are no longer as prevalent as -- prevalent. And therefore, you're lowering the amount of oil that's in the system.

Second, the cost is going down -- is going up, and therefore they're selling less -- the ability to sell oil is reduced, and the amount of money they make on each barrel is reduced as well. So you're catching it from both ends.

Q: But you don't have a percentage of the volume -- (inaudible). You don't know -- (inaudible).

SENIOR U.S. OFFICIAL: I -- I'm not ready yet. That's why I said if you give me a few more weeks to see what Tidal Wave II has done.


Q: So, I guess if it's not the regime that's really buying a majority of this, and it's not going into Turkey. So this is just the average Syrian people that are buying the majority of this oil?

SENIOR U.S. OFFICIAL: Well, first of all, it goes to fuel the ISIS operation and governing as well -- as well as just the economy, the Syrian economy that is still -- I mean, people are still -- still have cars. They still have generators. It's still creating electricity. So it's still in the region itself. So, both ISIL governing, as well as people.

Q: So it's hurting ISIL, but is there any -- do you see any statistics on whether it's just hurting the average Syrian people who are living there, who -- (inaudible)? I mean, is there any humanitarian costs, I guess, to doing this, to taking it out?

Especially when -- I mean, it's interesting that you said -- you said that there are not a lot of barrels being produced by oil. So if it's not -- it's not -- they're not actually producing that much, is this actually hurting the Syrian people who are -- have had such a rough five years?

SENIOR U.S. OFFICIAL: No, no. It's definitely hurting ISIL, but let's be clear. This is their primary source of revenue, and for quite some time. And we believe that that's -- that -- that is going down by the day. So, it is extremely important to take away the source of revenue, and we will continue to do that.

As far as the Syrian people, there's no doubt that they have suffered more than any of us can imagine over the last several years. And what we're trying to do is be strategic about it so that we hurt ISIL more than we hurt -- more than we hurt people. The oil is still going to be produced. What we are essentially doing is taking them from a 20th, 21st century operation that they had -- that they inherited when they took over the territory, back to a 17th century mode of operation.

And that is going to reduce their ability to profit from it. So the oil is still -- is still coming out of the ground. That's what I said before. As long as ISIL -- whoever controls the territory where that oil field is, this is not complex oil. This is not hard oil to produce. It's still bubbling out of the ground.

They're putting it into pits, into stills. They just selling it slowly, more slowly than they would like. They're selling it for less money than they would like. And the quality of it is not that great. So people still have access to it. It's just that those selling it are making a lot less money on it.

Yes, sir?

Q: Thank you. Joe Tabet with Al Hurra.

I understand from you that the oil has become unimportant -- not important to finance ISIL activities. Is that accurate?

SENIOR U.S. OFFICIAL: No, I don't know how you would get that. I -- I think that, on the contrary, it is extremely important. It is their -- if you took -- it's not their only source of revenue. And several others were mentioned before by one of the questions.

But it is the single largest revenue generator. So, selling oil is extremely important. What we're trying to do is to make sure that they make a lot less of it, and to complicate that operation.

Q: When the oil revenue was around $30 million or $20 million a month, who was buying that oil then?

SENIOR U.S. OFFICIAL: The operation was the same. So, there was -- the oil was still -- from the quantity of oil that they're producing, the Syrian territory still can support that amount of oil and much more if we were in a post-conflict situation.

So they were still selling it there. What was happening was they were able to generate far more revenue from it because their operation was better. The quality of the oil was better, so you can charge more for it. When you take out the ability to process the fields better, you're -- you're getting all the -- all the devaluation of the barrel is happening.

And that's -- that's what I started with. We're trying to reduce their ability to generate the revenue from it. So it was -- they were making more money out of a similar operation because they had more access to infrastructure, more access to equipment. They were refining it in a better and more professional and more modern way.

So for all those reasons, they were making more money. The consumer is -- is roughly the same. The consumer base is the same because nothing has changed on that end. It's just slower. There are going to be more fuel lines; are going to be more fuel shortages. There are going -- ISIL is going to have to prioritize in its own operations where it wants to use fuel, where it has to, where it can.

And that's the idea. This is -- we talked about the people, but ISIL itself needs a lot of fuel to continue its operation; to use for power generation for its own use; for fueling its own vehicle fleet, et cetera.

Q: (inaudible) -- clarify. So, the people who live in these areas or ISIS, they still have access to oil that comes from other -- they import oil. I mean, not them technically, but they have access to oil that comes from other places.

SENIOR U.S. OFFICIAL: When you say other -- you mean, outside of Syria?

Q: Yes.


Q: Or in other areas in Syria. I mean, there must be other sources of petroleum.

SENIOR U.S. OFFICIAL: There is -- ISIL does not control 100 percent of the Syrian -- the Syrian territory or oil and gas fields, but they control a lot of it. We're -- I would -- I don't want to give an exact number, but we're -- 80 percent of it or so.

Yes, sir?

Q: Do you have a clearer picture of what the sort of retail and wholesale marketplace looks like? In other words, are there middlemen buying these tankers, and then selling them on a retail basis?

And also, are you able to -- I know that quantifying a lot of this difficult -- but are you able to quantify the price of -- you know, and what they're charging per barrel now as opposed to what they were charging per barrel to these middlemen?

SENIOR U.S. OFFICIAL: Because I believe that a significant portion of the sales for ISIL was happening with the -- at the point of -- that first point of sale, wherever it is, there is a lot of trade that happens along the way. And that's not unlike other conflict situations in other parts of the world.

This oil could get sold and purchased several times before the end consumer gets it, either because of territorial gains or because of just making that black market arbitrage. I'm not comfortable in discussing how much it's being bought and sold for because there are fees along the way. So there's going to be higher value to go to places that are more remote and -- but as you cross areas of control, you're also paying the fees of the new group that owns that territory. So if you're going to -- if you're going to cross two areas of control, that's going to cost you -- that's going to cost you a bunch. So the oil has to be sold for a lot more money at that area.

So there's -- there is so much difference -- that differentiates what the end consumer is going to pay, but that doesn't affect where -- how much ISIL is going to make. Yeah?

Q: Just to follow up on that business model. So ISIS is gaining revenue on that first sale to the guy with the truck, and we're hitting the trucks. Aren't we hurting the Syrians that are driving those trucks instead of ISIS if they've already been paid in that first transaction?

SENIOR U.S. OFFICIAL: First, the trucks that were hit were not post-filling up, they were pre. So we were -- what you're doing is you're moving the trucks from being -- we're complicating the operation, we're slowing it down, we're making it less efficient, less effective and we're increasing the cost. So that's what we're doing.

So no, it doesn't -- I don't believe so. I believe that we're hitting exactly where that target is, and we've been able to do that without hitting the -- hurting the truck drivers themselves.

Q: And then I just want to follow (off-mic). Do you have a sense of who's operating these refineries and wells? Are these Syrians with petroleum engineering backgrounds who have been kind of forced by ISIS or are these ISIS members who have the expertise to run, you know, a fairly complex oil operation?

SENIOR U.S. OFFICIAL: I think you cross the gamut. There are some foreign, there are some local, there are some who are there by choice, some who are not. I think it's -- but I also don't want -- I'm not the COO (chief operating officer) of ISIS Oil Inc. and -- or nor their CFO (chief financial officer), so some of this is -- we're -- they're -- we have information that we got, but we're also -- they're -- they are -- they adapt and they change their operations.

So we've seen that over the last year-plus, a ability to adapt to what we do and the -- but we've adapted, sometimes not as quickly but just as effectively.

Q: (Inaudible) -- question. You said earlier that ISIS controls 80 percent of oil in Syria. What percentage of Syria depends on ISIS-generated oil? And secondly, you --

SENIOR U.S. OFFICIAL: What percentage of --

Q: Syria depends on ISIS-generated oil? They may control 80 percent of sort of the supply, but how much of the demand hinges on ISIS-supplied oil?

And then secondly, you mentioned Abu Sayyaf raid and that yielded information. And I was wondering if you could help me understand something. If possession is sort of the most important thing, how much additional information was Abu Sayyaf able to give? And also, was his wife able to provide any information on the oil production and how ISIS uses that revenue or keeps -- or makes adjustments that you were speaking about earlier?

SENIOR U.S. OFFICIAL: So I'll start from the end because that's a short answer. I can't answer that question, which I think you expected. But --

Q: (off-mic) safe raid itself?

SENIOR U.S. OFFICIAL: The raid itself was extremely helpful in understanding where revenue is generated, how, who, what the -- who the people -- some of the people were that were important to this. So it enabled us to be more strategic in our counter effort, and that has yielded the results that we -- that we wanted, which is why I'm comfortable telling you you should ask me again in a few weeks about what the -- some of the numbers are, and I'm happy to share those in a few weeks when I have it.

So there have -- there has been -- that raid was a critical point for us to be able to understand this better. We made a lot of assumptions before, I have to say much of it was accurate, but some of it was not.

Q: And -- I'm sorry, the percentage of total --

SENIOR U.S. OFFICIAL: Yeah. I would have to get back to you. I don't have that off the top of my head. And again, when I said 80 percent, I think that's the rough -- roughly. I don't have -- these are not exact. It's in the -- it's in that neighborhood.

Q: (off-mic) or less of that. How much --


Q: (off-mic) what I’m trying to understand in terms of ratio, how many Syrians are depending on ISIS oil versus --

SENIOR U.S. OFFICIAL: Versus the regime?

Q: Yes.

SENIOR U.S. OFFICIAL: There -- the regime still imports some of its products from other places. So -- but that doesn't get to ISIL-controlled territories in our assessment. Yeah.

Q: You mentioned in your opening comments that simply bombing the fields doesn't have much of an effect, that as much as that's occasionally discussed in the political realm. Can you talk about what is the disadvantage of simply bombing, you know, a well? Why is it that that is not advantageous or cost effective to do, and what's the difference -- when you talk about the well caps you're dealing with, what's the difference there as far as the cost that's exacted?

SENIOR U.S. OFFICIAL: So you can bomb the fields and -- if you want to carpet bomb the entire operation, that would have a certain value. It would also have a lot of costs associated with it. And some questions that were asked before started going after that.

But you can achieve the end goal by being strategic, and I think that's where -- that's what we're better at is we look, we understand, we study, we figure it out and then we target it strategically and we're able to achieve the same result with a better use of our -- when we have to look at a whole bunch of other things that we need to do in the area. We're not there just looking at oil. It's a -- it's a revenue generator, and we want to stop it as a revenue -- or slow it down as a revenue generator.

And I think to do that, think understanding the operation and targeting it at the strategic critical nodes of it is the -- is a better way to go. Yes, ma'am?

Q: Carla Babb, Voice of America. President Obama mentioned Libya when he was talking about ISIS. And I know that they form this kind of -- second nucleus insert. How are they getting their revenue and energy there?

SENIOR U.S. OFFICIAL: So it's a very good question. We are -- we look at -- we've been following Libya for a long time, and a little bit of whiplash looking at the Libyan oil and who controls what from the beginning of the conflict with understanding what Gadhafi controlled versus the rebels. And then as that oil production went off-line during the conflict beginning at 1.5 million barrels a day, came back almost to 1.5, now still at about half a million or so.

We are -- while we're doing what we've been talking about today in Syria, we are taking a very good, very hard look at who controls and what's going on at every well, every field, every part of the pipeline system, trucking routes, whether it's in Libya, Sinai and other areas that I believe are vulnerable.

The reduction in oil prices actually is -- adds another element of insecurity because companies have less money to spend on a variety of things. There are more employee -- oil and gas employees that are looking for -- who are out of work, looking -- so they're easier targets to recruit around the world.

And that's not only about Syria. There are a lot of people who won't go to Syria, but they will go other places. So, I think energy is a vulnerable spot as it creates -- it's an easy cash flow -- taking over a tanker; taking over a field.

So, that's something that we are looking at -- my team is looking at very closely, following that -- and that's probably the most that I can say about -- about Libya. They are -- there's no doubt that they would like to -- that I believe that they would like to take a look at -- that they are looking at the oil assets in -- in Libya and elsewhere. We'll be -- we'll be prepared.

Q: So when you said you're looking at every oil well and everything. Are you kind of hinting to us that there could be a Tidal Wave II extension into Libya?

SENIOR U.S. OFFICIAL: No, I'm saying my team. I'm not at the Pentagon. I said the State Department. We're a bunch of diplomats, you know. (Laughter.)


Q: You said you would be -- (inaudible).

SENIOR U.S. OFFICIAL: We're -- (inaudible) -- as far as, I'm talking about the analysis and understanding, and understanding what -- what the terrain looks like. So, I give a very different kind of briefings.

Q: Has the reduction in oil production and revenue had any discernible effect on ISIS's ability to function and/or conduct any kind of military operations?


Q: (inaudible) -- less power generated? Or are they unable to fill up their cars? I mean, what's the effect -- the military, tactical effect?

SENIOR U.S. OFFICIAL: So, I can look at that second piece better than I can answer the first piece. We are seeing some anecdotal evidence of fuel shortages and more difficult to get product. That's affecting -- that will affect both ISIL and everyone else. There will be prioritization, I suspect.

As far as the first part of the question, you're probably better to ask the Pentagon folks on that question. But it's also a little bit early. We -- Tidal Wave II has disrupted an operation that was significant, and to see how they adapt to it or what the causes is going to take a little bit more time, especially when you get down to the end result of how much power.

There's already such -- so little power generated in Syria today. So you have to differentiate between grid power, so what they get when they flip the switch, versus their generators. Generators rely on -- on the diesel, which means that really low-quality fuel oil that they're getting from -- from ISIL facilities, because of the degrading of their -- of their installations and infrastructure, which has a knock-on effect that not only do you still have access to it, but it's lower quality, which means your generator doesn't work as well.

So there is all these knock-on effects that happen. So, and it doesn't all happen overnight. It's not a -- it's less like -- it's less about a flipping a switch and all of a sudden everything is dark and nobody has any fuel. It's about -- it gets more difficult. You have to make more priorities.

Yes, sir?

Q: On the meeting on Thursday at the United Nations Security Council -- the cut of the -- the -- (inaudible) -- of the oil revenue -- (inaudible), what do you expect if they are not selling the oil to the regime, either it's not -- (inaudible) -- significant amount to Syria, I mean, to Turkey? What do you expect from this resolution? What can the neighboring countries can do to stop this?

The second thing you mentioned on the oil modularrefineries. How do they get these refineries? I mean, is it simple to order online and to get -- I mean, what -- they have to cross borders at some point -- (inaudible).

(inaudible) -- Abu Sayyaf information was enormous use. You designated recently one guy who was doing oil business with Syrian regime. Was it related to Abu Sayyaf? And did you designate another guysfor example, who are facilitating this -- this oil from the Abu Sayyaf information, especially middlemen in Turkey?

SENIOR U.S. OFFICIAL: So, on the modular refineries, we don't believe that there are modular refineries being shipped into - into ISIL territory today. That was something that was happening very early in the conflict, post- -- post-Mosul. So that -- that was much earlier in the process. That's not something that we assess as necessarily happening today.

But to -- to your question, what I said before was yes. It is very easy to order a modular refinery. Anybody can do it. All you need is a -- is a laptop and a credit card and a shipping address.

So it was coming across different borders, but that's not a concern that we are necessarily -- we're tracking, but it's not a concern that we have today.

As far as Abu Sayyaf, I would -- on the designations -- I would refer you on the designations to the Department of Treasury. And as far as where that information came from, obviously, I can't -- I can't really respond -- respond to that.

As far as the oil -- I think you asked the first question was about the oil and what the Security Council -- again, I would talk to the folks at the Treasury Department where Secretary Lew is going to be going to the Security Council on this. But I think what we want to make sure is that we're tightening up flows of cash, so some of it -- and flows of money in general.

But oil is one. I wouldn't say mainly oil. I would say oil is one. But what our -- in -- we work as -- when I was introduced, we were talking about the fact that we all work together, and the integration of our teams, between my team and the folks at the Pentagon and in the field, is very close. The same goes with -- with Treasury. They look at where the money is going. I look at how the money is generated when it comes to oil.

So, you want to tighten up the flow. So they're still buying -- in order to fix all the things that we are making go boom, they have to buy new parts, equipment and so on. And it's a constant -- what I tried to hint at before, it's a constant battle of they have to adapt, regroup, recoup, rebuild to what we do. And we have to react to that as well.

So, some of that means equipment. They can't do it with only the equipment they have inside the country. They've got to bring some of it, if they want to repair this. It's getting harder and harder. Early days, they could repair it with -- by cannibalizing fields, cannibalizing equipment.

So, I have -- I -- when I took over the territory, I had two pieces of equipment that were doing the same thing. I -- I have -- one is damaged. Now, I've got to prioritize, so I'm going to take all the -- I'm going to use one for spare parts. I can go into other territories and get stuff.

That's starting to get difficult. They don't have enough. They've got to go across the border -- any border -- and try to get these pieces of equipment in. Some of it is able to go in a car or truck. Some of it is larger than that. It gets complicated. You've got to buy it. You've got to spend money.

So what we do is we're looking with our team on the specific equipment they would need, where they would source it from, how they would get it, and try to stop it at those areas. The Department of Treasury looks at the finance part of it, of to buy that equipment, you need to pay for it. How do you pay for it? How do you move the money around?

Part of this is what we're going to do on Thursday, but a lot of this is the day-to-day, people looking at all these different -- that's what I mean by talking about a full spectrum of denying them the ability to do this.

Let's take one more question.

Q: Is any of the money moving through the banking system -- any of the energy trade credit cards, banks -- (inaudible)?

SENIOR U.S. OFFICIAL: That's a Treasury Department question, but I can tell you my -- my -- I'm not Treasury Department, but I would say that a lot of it is cash.

Last one?

Q: How much of a balance are you trying to strike between preserving infrastructure for potential use down the road? How much more efficient could you be if you didn't have to concern -- be concerned about that?

SENIOR U.S. OFFICIAL: I think you have to be -- you have to be concerned about a lot of things. You have to look at what does this do to the population, what does this do from a humanitarian perspective, from an environmental perspective, from a cost of reconstruction -- post-conflict reconstruction costs.

I think all those are considerations on one side of the ledger. The other side of the ledger is denying ISIL the ability to generate the kind of revenues that they need in order to function and expand both internally and externally. That's -- for everything that we do, we have to look at both sides of that ledger.

I think that we have been able to be careful, cautious and still extremely productive. What the Abu Sayyaf raid did for us was enable us to give us a little bit of an advantage on doing it in a more strategic way so we can take out the kind of infrastructure that would have the biggest bang for your buck while paying attention and being concerned about the humanitarian needs, the cost of reconstruction, favoring certain strikes over others in order to be as efficient as we can.

So I don't see that by being concerned about cost of reconstruction or humanitarian or any of the other ones that I just mentioned that we're losing a step in this process at all.

Thank you, guys. Appreciate it.