How the Islamic State makes its money
Since 9/11, the United States, other countries, and international organizations such as the International Monetary Fund and the United Nations have set up initiatives to detect and stop the flow of funds to terrorists
Ana Swanson
Weapons, vehicles, employee salaries, propaganda videos, international travel all of these things cost money. The recent terrorism attacks in Paris, which the Islamic State has claimed as its own work, suggest the terrorist organization hasnt been hurting for funding. David Cohen, the Treasury Departments Undersecretary for Terrorism and Financial Intelligence, described the Islamic State last October as probably the best-funded terrorist organization we have confronted deep pockets that have allowed the group to carry out deadly campaigns in Iraq, Syria and other countries.
But where does the Islamic State get all this money? It turns out that the groups methods of financing are very different from other prominent terrorist organizations, and much more difficult for the United States and other countries to shut down. Unlike many terrorist groups, which finance themselves mainly through wealthy donors, the Islamic State has used its control over a territory that is roughly the size of the U.K. and home to millions of people to develop diversified revenue channels that make it more resilient to U.S. offensives.
Normally, U.S. efforts to cut off funding for terrorists focus on tracking and stopping the flow of funds through the international system. Since 9/11, the United States, other countries, and international organizations such as the International Monetary Fund and the United Nations have set up initiatives to detect and stop the flow of funds to terrorists. Leaders of the Group of 20 issued a statement on Sunday calling for better coordination to cut off funding channels to terrorist organizations, including exchanging information and freezing terrorist assets.
While the Treasury Department says these efforts have disrupted terrorist networks and saved lives, the Islamic State is a different animal. The Islamic State often avoids international finance, instead generating and spending funds within its own territory or immediately along its porous borders. As for disrupting the revenue that ISIL generates from extortion and other local criminal activities, we recognize that Treasurys tools are not particularly well-suited to the task, Cohen said in October, using another name for the Islamic State.
Estimates of the precise amount that the Islamic State earns from these activities tend to vary a lot and fluctuate over time, but what is certain is that the group is heavily diversified meaning that if one funding source is shut down, the group can turn to others to generate revenue. Its main methods of generating money appear to be the sale of oil and antiquities, as well as taxation and extortion. And the groups financial resources have grown quickly as it has captured more territory and resources: According to estimates by the Rand Corporation, the Islamic States total revenue rose from a little less than $1 million per month in late 2008 and early 2009 to perhaps $1 million to $3 million per day in 2014.
The Islamic State has other expenses, besides the cost of carrying out terrorist attacks and waging war. The terrorist group runs schools, a religious police force, food kitchens, an Islamic court system and even a Consumer Protection authority. It reportedly pays fighters roughly $400 a month, which is more than the Iraqi government offers some staff. The Islamic State sets and approves annual budgets, and it uses a chief financial officer-like figure to manage its accounts. Its also fastidious about documenting a return on investment for its funders. The Islamic State has established a central bank and even planned to mint its own currency although in practice the group generally uses local currency, such as the Iraqi dinar and the Turkish lira.
Its control of an expansive territory obviously gives the Islamic State a valuable source of funding and flexibility. However, some U.S. officials have argued that having territory might also be seen as a weakness for the group. Maintaining a state of 8 million to 10 million people, waging war around its borders, and financing and carrying out international attacks are costly and difficult tasks. Without adequate funds to provide services to the local population, people in Islamic State territory might turn against the group, provoking a backlash that might end its grip on power, the thinking goes. In addition, reports from territory held by the group paint a picture of a brutal, two-tiered society, in which terrorists and their families live well and most others suffer. Under this pressure, the economy struggles to function, leaving the Islamic State with less and less to tax and to sell.
As other writers have pointed out, considered as a state ISIS looks quite poor, with a budget roughly on par with Afghanistan or the Democratic Republic of Congo. But considered as a terrorist organization, it looks wealthy and diversified. Below are 12 ways the Islamic State earns its revenue:
Oil: The oil fields that it has captured in Syria and Iraq have been a major source of funding for the terrorist group. Although its relatively easy for the United States and other countries to prevent large-scale exports of oil from Islamic State territory, its much harder to control the black market oil trade that reportedly flourishes along the porous borders of territory controlled by the Islamic State and surrounding countries.- The Washington Post
The location of oil fields are shown in green, and oil refineries and pipelines are in purple. (Congressional Research Service)
The terrorist group mostly refines oil in small, mobile refineries, then ships it by truck to the Turkish border, where oil brokers and traders buy or barter for it. Because the trade is illegal, the oil is sold at a steep discount that can fluctuate wildly. Smugglers reportedly use mobile messaging services like Whatsapp to coordinate exchanges of products. Some traders may even have been selling oil from the Islamic State back to the regime of Bashar al-Assad, which the Islamic State is fighting in Syria, according to the Boston Globe.
Oil sales initially provided much of the Islamic States revenue, but that has declined since the U.S. and others launched an extensive campaign of airstrikes on the groups oil and gas facilities, according to a report by the Congressional Research Service in April. By October 2014, the U.S. had reportedly destroyed about half of the groups refining capacity. The United States has also tried to identify and target oil brokers and encourage Turkey to clamp down on smuggling on its border.
The Islamic States oil and gas revenue has also suffered because the engineers and other technical experts necessary to make these products have either fled the area or been killed. The terrorist group has been trying hard to recruit skilled people, as a recording by Islamic State leader Abu Bakr al Baghdadi calling for scientists, engineers, doctors and people with administrative expertise in July 2014 shows. The Washington Post
