How Terrorist Groups Benefit from Low Oil Prices

Article By: Julianne Geiger

Terrorists have struck in the heart of Indonesia; the uber violent Boko Haram is rampaging across Nigeria; & ISIS is…everywhere. While the knee-jerk reaction is to ask how geopolitical chaos affects oil prices, we might ask how low oil prices cause instability that feeds terrorism.

ISIS may be earning less revenue than it could bc oil prices are so low, but overall, the slump is good for terrorism the world over bc it creates economic & political instability.

Last week, a terrorist attack in the center of the Indonesian capital, Jakarta, killed 8 people — 4 of which were attackers believed to be linked to the Islamic State.

In Nigeria, Boko Haram is reaping the benefits of a weakened state. Petroleum exports account for 90% of Nigeria’s total overseas revenue & the country is awaiting a doubled budget deficit next year. Consumption is at an all-time low, employment at a high & salaries at risk of going unpaid. It’s an economic meltdown of which Boko Haram will take full advantage.

It was, after all, the original chaos of Nigeria & its massive corruption & income disparity between the predominately Muslim north & the oil-rich Christian south that fostered the rise of Boko Haram, 1 of the most violent terrorist groups in the world. Now, the state’s growing inability to fund the fight against this pervasive terrorism is being hindered by low oil prices. Indeed, the country’s new government is now accusing the former president of having siphoned over $2 billion in oil funds that were originally intended to fight Boko Haram & redirecting it to his failed election campaign.

Enter ISIS, which has fully adapted to the geopolitical realities of oil. The chaos of Syria gave them a convenient base & the falling price of oil gave them the regional instability to spread across many borders. Most recently, it’s moved into Libya, where chaos reigns in the form of 2 rival governments.

Saudi Arabia, which refuses to cut oil production in the name of stabilizing the market, is in financial trouble. Here’s the cliffhanger: If the low oil prices weaken the Saudi monarchy too much, ISIS will be able to run amok even more than it is now. While oil money from the wealthy Gulf States — most notoriously, Saudi Arabia — has been the main funding source for Sunni radical groups, ISIS has broken the mold. It’s organized its own continual source of funding through the sale of oil out of Syria & is now clearly eyeing Libya.

At the same time, sanctions against Iran have been lifted & it’s preparing to unleash another 500,000 bpd into the already glutted market. Iran already has significant control over Shi’ite radicals & its new oil money will make this even easier. OPEC-leader Saudi Arabia was hoping that by maintaining production levels, it would retain market share & hit back at the U.S. shale boom that threatens their position in the market. Unfortunately for the Saudi’s, this increase in production has failed to box out U.S. shale producers. But it has succeeded in creating dangerous economic & political instability.

To stay afloat, Saudi Arabia has had to issue a bond package — its 1st since 2007 — & it is expected to report an $82-billion drop in revenues for 2015. The IMF predicts a deficit equivalent to 20% of GDP for 2015 & the risk of deficit as far ahead as the next decade. This is the door to chaos that ISIS is looking for & the Saudis need to help close it.

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