Islamic State oil is going to Assad, some to Turkey, U.S. official says

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The War Against ISIS

LONDON, Dec 10 (Reuters) - Islamic State militants have made more than $500 million trading oil with significant volumes sold to the government of Syrian President Bashar al-Assad and some finding its way to Turkey, a senior U.S. Treasury official said on Thursday.

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The United States, France, Britain and Russia have vowed to defeat Islamic State, which uses an extreme interpretation of Islam to justify attacks and brutality in large parts of Syria and Iraq that it controls.

A U.S.-led coalition is bombing the hardline Sunni group, as is Assad's only big-power supporter Russia, in an attempt to kill its leaders and cripple the oil wells which the group uses to finance its rule and attacks abroad.

See what life is like under Islamic State rule:

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What life looks like under ISIS rule
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Islamic State oil is going to Assad, some to Turkey, U.S. official says
A civilian woman carries her child during a battle with Islamic State militants, east of Mosul, Iraq, January 10, 2017. REUTERS/Azad Lashkari
Civilians walk past Iraqi Special Operations Forces (ISOF) during a battle with Islamic State militants, east of Mosul, Iraq, January 10, 2017. REUTERS/Azad Lashkari
A displaced man, who fled the Islamic State stronghold of Mosul, carries a woman in the Mithaq district of eastern Mosul, Iraq, January 3, 2017. REUTERS/Thaier Al-Sudani TPX IMAGES OF THE DAY
Smoke rises from clashes during a battle with Islamic State militants in the Mithaq district of eastern Mosul, Iraq, January 3, 2017. REUTERS/Thaier Al-Sudani
An Iraqi soldier is seen during a battle with Islamic State militants, north of Mosul, Iraq, December 30, 2016. REUTERS/Khalid al Mousily
Iraqi people flee the Islamic State stronghold in the town of Bartella, east of Mosul, December 28, 2016. REUTERS/Ammar Awad TPX IMAGES OF THE DAY
Iraqi people flee the Islamic State stronghold in the town of Bartella, east of Mosul, December 28, 2016. REUTERS/Ammar Awad
Iraqi rapid response forces cook food in their headquarters during the war against the Islamic state militants east of Mosul, Iraq, December 21, 2016. REUTERS/Khalid al Mousily
Mohammad Hassan, whose hand was chopped off by Islamic State militants, sits outside a house at Nimrud village, south of Mosul, Iraq, December 13, 2016. Picture taken December 13, 2016. REUTERS/Mohammed Salem
Displaced Iraqi boys, who fled the Islamic State stronghold of Mosul, warm themselves by a fire in Khazer camp, Iraq,December 15, 2016.REUTERS/Ammar Awad
Displaced Iraqi woman, who fled the Islamic State stronghold of Mosul, bids her relatives farewell as she leave Khazer camp to go home, Iraq December 10, 2016.REUTERS/Ammar Awad
Iraqi Christians come to visit the heavily damaged Church of the Immaculate Conception after Iraqi forces recaptured it from Islamic State in Qaraqosh, near Mosul, Iraq, December 9, 2016. REUTERS/Ammar Awad
An Iraqi father (L) mourns the death of his son, who was killed during clashes in the Islamic State stronghold of Mosul, in al-Samah neighborhood, Iraq December 1, 2016. REUTERS/Mohammed Salem
An Iraqi girl, who was wounded during clashes in the Islamic State stronghold of Mosul, lies on a bed at a field hospital in al-Samah neighborhood, Iraq December 1, 2016. REUTERS/Mohammed Salem
Displaced people who fled the clashes transfer to camps during a battle with Islamic State militants in Mosul, Iraq, November 30, 2016 REUTERS/Alaa Al-Marjani
A member of the Iraqi Special Operations Forces (ISOF) gestures in military vehicle during a battle with Islamic State militants in Mosul, Iraq, November 30, 2016 REUTERS/Alaa Al-Marjani TPX IMAGES OF THE DAY
A man gestures as other men sit on the ground as an Iraqi Special forces intelligence team check their ID cards as they search for Islamic State fighters in Mosul, Iraq November 27, 2016. REUTERS/Goran Tomasevic
Two men hold hands as an Iraqi Special forces intelligence team searches for Islamic State fighters in Mosul, Iraq November 27, 2016. REUTERS/Goran Tomasevic
Oilfields burned by Islamic State fighters are seen in Qayyara, south of Mosul, Iraq November 23, 2016. REUTERS/Goran Tomasevic TPX IMAGES OF THE DAY
Boys stand in front of oilfields burned by Islamic State fighters in Qayyara, south of Mosul, Iraq November 23, 2016. REUTERS/Goran Tomasevic
Civilians flee fighting between Iraqi forces and Islamic State fighters in Mosul, Iraq, November 20, 2016. REUTERS/Goran Tomasevic TPX IMAGES OF THE DAY
Smoke rises from clashes during a battle with Islamic State militants at the airport of Tal Afar west of Mosul, Iraq November 18, 2016. REUTERS/Thaier Al-Sudani
A member of Shi'ite fighters carries a weapon during a battle with Islamic State militants at the airport of Tal Afar west of Mosul, Iraq November 18, 2016. REUTERS/Thaier Al-Sudani
A displaced woman from the outskirts of Mosul covers herself in a blanket in the town of Bashiqa, after it was recaptured from the Islamic State, east of Mosul, Iraq, November 18, 2016. REUTERS/Khalid al Mousily
A girl attends classes after the city was recaptured from the Islamic State militants in Qayyara, Iraq, November 17, 2016. REUTERS/Ari Jalal
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In one of the most detailed public explanations of Islamic State's oil trade, U.S. Treasury Department official Adam Szubin said militants were selling as much as $40 million a month of oil at the installations which was then spirited on trucks across the battlelines of the Syrian civil war and sometimes further.

"ISIL is selling a great deal of oil to the Assad regime," Szubin, acting under secretary for Terrorism and Financial Intelligence with the Treasury, told an audience at Chatham House in London.

"The two are trying to slaughter each other and they are still engaged in millions and millions of dollars of trade," Szubin said of Assad's government and Islamic State, also known as ISIS or ISIL.

The "far greater amount" of Islamic State oil ends up under Assad's control while some is consumed internally in Islamic State-controlled areas. Some ends up in Kurdish regions and some in Turkey, he said.

"Some is coming across the border into Turkey," Szubin said when asked for details on the money trail.

"Our sense is that ISIL is taking its profits basically at the wellhead and so while you do have ISIL oil ending up in a variety of different places that's not really the pressure we want when it comes to stemming the flow of funding - it really comes down to taking down their infrastructure," he said.

Szubin said it was unclear whether the $40 million a month estimate could be multiplied over a year. But in remarks prepared for delivery, he said Islamic State had made more than $500 million from the oil trade, but did not give a more specific time period.

'SECURE THE TURKISH BORDER'

After Turkey downed a Russian fighter jet last month, Russian President Vladimir Putin said he had intelligence that large amounts of oil and petroleum products were moving across the border from Islamic State territories to Turkey.

The son of Turkish President Tayyip Erdogan has denied Russian allegations that he and his family were profiting from the illegal smuggling of oil from Islamic State-held territory.

"There is no question that better security, closing the Turkish border to flows is a key component right now and we are looking to the Turks to do more in that respect," Szubin said.

"It's not just a financial issue - it is about foreign terrorist flows, it's about weapons and it's about financing. I think securing that border would pay major dividends in terms of intensifying the pressure and also reducing the threat."

In an attempt to cut militants' links to the global financial system, Szubin said the United States had worked with Iraq to close down dozens of bank branches in Islamic State-held territories. Szubin said militants had looted up to $1 billion from bank vaults in Syria and Iraq, but he said Islamic State's oil trade was the main target.

Islamic State militants claimed responsibility for a Nov. 13 attack on Paris that killed 130 people and the Oct. 31 downing of a Russian passenger aircraft over Egypt's Sinai region that killed 224.

They promise more attacks on the West and Russia and have claimed that U.S.-born Syed Rizwan Farook and his Pakistani wife Tashfeen Malik who killed 14 people in a mass shooting in Southern California last week were its followers.

See satellite photos of what Russia says are oil trucks in Turkey:

8 PHOTOS
Russia says Turkey involved in Islamic State oil trade
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Islamic State oil is going to Assad, some to Turkey, U.S. official says
Russia's top military officials hold a press conference on the fight against terrorism in Syria at the National Defence Control Centre of the Russian Federation in Moscow on December 2, 2015. Russia's defence ministry on December 2 accused Turkish President Recep Tayyip Erdogan and his family of involvement in illegal oil trade with Islamic State jihadists, as a dispute rages over Ankara's downing of one of Moscow's warplanes. AFP PHOTO / VASILY MAXIMOV / AFP / VASILY MAXIMOV (Photo credit should read VASILY MAXIMOV/AFP/Getty Images)
Russia's top military officials hold a press conference on the fight against terrorism in Syria at the National Defence Control Centre of the Russian Federation in Moscow on December 2, 2015. Russia's defence ministry on December 2 accused Turkish President Recep Tayyip Erdogan and his family of involvement in illegal oil trade with Islamic State jihadists, as a dispute rages over Ankara's downing of one of Moscow's warplanes. AFP PHOTO / VASILY MAXIMOV / AFP / VASILY MAXIMOV (Photo credit should read VASILY MAXIMOV/AFP/Getty Images)
Russia's top military officials hold a press conference on the fight against terrorism in Syria at the National Defence Control Centre of the Russian Federation in Moscow on December 2, 2015. Russia's defence ministry on December 2 accused Turkish President Recep Tayyip Erdogan and his family of involvement in illegal oil trade with Islamic State jihadists, as a dispute rages over Ankara's downing of one of Moscow's warplanes. AFP PHOTO / VASILY MAXIMOV / AFP / VASILY MAXIMOV (Photo credit should read VASILY MAXIMOV/AFP/Getty Images)
In this photo made from video taken from Russian Defense Ministry official web site on Thursday, Oct. 1, 2015, an aerial image of what they purport shows lines of oil trucks 14 km (8.8 miles) east of Dayr-az-Zawr, Syria. The Russian Defense Ministry invited dozens of foreign military attaches and hundreds of journalists to produce what they said were satellite and aerial images of thousands of oil trucks travelling from the IS-controlled deposits in Syria and Iraq into Turkish sea ports and refineries. Signs placed on photo at source, sign on top reads: Accumulation of vehicles 14 km east of Dayr-az-Zawr on Oct. 18, 2015. The sign at right reads: 550 oil trucks. (AP Photo/ Russian Defense Ministry Press Service)
In this photo made from the footage taken from Russian Defense Ministry official web site on Thursday, Oct. 1, 2015, an aerial image which they say shows heavy trucks crossing the Syrian-Turkish border near Turkish check point Reyhanli. The Russian Defense Ministry invited dozens of foreign military attaches and hundreds of journalists to reveal what they said were satellite and aerial images of thousands of oil trucks streaming from the IS-controlled deposits in Syria and Iraq into Turkish sea ports and refineries. (AP Photo/ Russian Defense Ministry Press Service)
Russian top military officials speak to the media in front of an aerial images they say are oil trucks near Turkeyâs border with Syria displayed by the Russian Defense Ministry at a briefing in Moscow, Russia, Wednesday, Dec. 2, 2015. The Russian Defense Ministry invited dozens of foreign military attaches and hundreds of journalists to reveal what they said were satellite and aerial images of thousands of oil trucks streaming from the IS-controlled deposits in Syria and Iraq into Turkish sea ports and refineries. Russian Deputy Defense Minister Anatoly Antonov accused Turkish President Recep Tayyip Erdogan and his family of personally profiting from the oil trade with the IS. (AP Photo/Vladimir Kondrashov)
Russian top military officials speak to the media in front of an aerial images of what they say are oil trucks near Turkeyâs border with Syria is displayed by the Russian Defense Ministry at a briefing in Moscow, Russia, Wednesday, Dec. 2, 2015. The Russian Defense Ministry invited dozens of foreign military attaches and hundreds of journalists to reveal what they said were satellite and aerial images of thousands of oil trucks streaming from the IS-controlled deposits in Syria and Iraq into Turkish sea ports and refineries. Russian Deputy Defense Minister Anatoly Antonov accused Turkish President Recep Tayyip Erdogan and his family of personally profiting from the oil trade with the IS. (Vadim Savitsky/ Russian Defense Ministry Press Service pool photo via AP)
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IRAN BANKING

Szubin sought to soothe concerns about U.S. reaction to what is expected to be a boom in trade with Iran when Western sanctions are lifted as part of a nuclear deal between Tehran and six world powers reached earlier this year.

Many Western companies, including European ones, remain concerned about initiating trade with Iran fearing they could still fall foul of the complex layers of sanctions and potentially face fines or be cut off from the U.S. financial system.

Szubin acknowledged there would be a great deal of "caution and hesitancy" by international banks initially.

In 2014, the United States imposed a record fine on French bank BNP Paribas, which agreed to pay almost $9 billion to resolve accusations it violated U.S. sanctions against Sudan, Cuba and Iran.

Without naming any banks, Szubin said there had been some "very bad conduct" going on in the Western banking system in the mid-2000s and before.

"That conduct by and large stopped in 2007, 2008... we haven't seen reputable European banks doing this for close to a decade now," he said.

"If banks are being honest and accurate in describing what they are doing and there's an accidental payment that goes through the U.S. payment system that shouldn't, we are not going to look at the penalty cases, these massive enforcement cases."

He said once global sanctions were lifted, all non-U.S. companies would be able to invest in Iran and trade oil with Iran, though accompanying U.S. sanctions on Iran for supporting terrorism would remain.

(Editing by Toby Chopra and Grant McCool)

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