The Islamic State (IS), which controls swathes of territories across the Iraq-Syria border, is one of the best-financed terrorist outfits in the world. Several Arab armies and an international coalition, led by the US, have been at war with the IS for months now. Still, the Sunni organisation not only manages to retain control over its territories (the size of Britain), but also continues to attract a steady stream of jihadis from across the world. These fighters are well-paid (around $400 a month, according to The Economist), and the group possesses advanced weapons, including tanks and surface-to-air missiles.
Where do they get the money to keep this well-oiled terror engine running?
Doing the math
Most other international terrorist organisations survive on donations. The IS gets donations as well, mostly from Gulf financiers, but those are insignificant in comparison with the group’s total revenues. Analysts believe the control over large areas comprising some 6-8 million people and natural resources lets the IS raise funds locally. An offshoot of the Al-Qaeda, the group’s, rise to notoriety can be traced back to the time when it captured the Syrian city of Raqqa in June 2013.
Syria was already in the midst of a civil war, where the government forces of President Bashar al Assad were fighting a number of rebel groups, including the ISIS, Jabhat al Nusra (the Syrian al Qaeda) and the Free Syrian Army (backed by the West). From Raqqa, the IS expanded its reach to Iraq, and captured Iraq’s second largest city, Mosul, in June 2014. The capture of Mosul was a bonanza for the militants, who looted banks in the city and captured advanced weapons given to the Iraqi army by the US.
The IS has also amassed a fortune from kidnappings. It made at least $20 million last year from ransoms paid for hostages, including several European journalists. Besides this, it is taxing people in the areas it controls. According to one report, the group charges retail stores about $2 a month in taxes.
Liquid gold
But the main source of income for the IS is oil. The group controls six of Syria’s 10 oilfields, including the big Omar facility, and at least four small fields in Iraq, including those at Ajeel and Hamreen, according to Maplecroft, a risk management firm. They are estimated to be making anywhere between $1 million and $5 million a day from oil sales in the black market.
The geopolitical crises in West Asia had led to the emergence of a thriving black market for oil, which the IS is using to its advantage. This network has been especially strong in Iraq which, in Saddam Hussein’s last days, banked on the black market to raise money as the country faced international sanctions to sell oil. Analysts say IS is selling the oil it pumps in Turkey and Jordan, and some of the illegal crude being refined in the Kurdish region of Iraq.
Choke its finances
For any anti-IS strategy to succeed, strangling the source of its revenue is vital. But since most of the income is raised locally and the group almost exclusively uses cash, it is difficult to choke its finances. “Given that the Islamic State has sought to minimise its reliance on the international banking system, the group is comparatively less prone to asset seizures or international financial sanctions,” says the Maplecroft report.
Unless members of the anti-IS coalition find a way to destroy IS’ revenue network, they will find it difficult to defeat the terror outfit.