In February 2015 the Financial Action Task Force (FATF)
released a report on the Islamic State’s (IS) funding. This was the culmination
of a project that began in October 2014 to help states counter IS’s financial
networks. FATF found that the Islamic State is different from other terrorist
organizations such as Al Qaeda and Al Nusra Front. Unlike those other groups IS
does not rely upon external donations. Rather it earns most of its money based
upon the conquered territory it controls in Iraq and Syria. It exploits the
population and resources in those areas much like an organized crime group does
with protection and extortion rackets. Some of these assets have been targeted
by the U.S. led Coalition such as oil refineries, but much of it remains
untouchable. Taking ground from IS will obviously cut into its money flows, but
even then, since it operates like a criminal organization it will always be
very hard to completely eliminate its sources of revenue.
The FATF identified several sources of money for the Islamic
state, but the largest and most important was its criminal activities. It
loots, extorts, smuggles, robs and taxes across all of the territory that is
under its control much like a mafia. This bring in the vast majority of its
revenues, although it is inconsistent and vulnerable. For example, it has taxes
on fuel sales and vehicle traffic along with fees on children attending school.
It also extorts money from businesses, which it calls religious dues or
donations, but is really protection money to stave off attacks or the closing
of their shop. IS has a long history of these types of activities. Years before
the fall of Mosul for example, the Islamic State was acting as a mafia
there. It would charge money on things like imports into the city, food,
construction, and electric generators. In early 2014 one Iraqi paper estimated
that these activities brought in around $8 million a month. The group had
become so embedded into the city and state apparatus that it was even stealing up
to half of the salaries of Interior Ministry forces in Ninewa by threatening
officials and policemen. Finally, the Iraqi government has continued to pay
civil servants in IS territory and taxes them up to 50% in some areas. In
Mosul, Baghdad is paying around $130
million a month to civil servants. The group could be earning hundreds of
millions of dollars from these public workers. These are the hardest schemes to
disrupt since they take place in secret. It would take real police work and
investigating to discover and overturn all of these techniques that IS employs,
something that Iraq is not especially good at. Having a security force that is
made up of locals and respected would go a long way to collecting intelligence,
and in places like Mosul that rarely if ever existed. In fact in that city the Iraqi
forces were more under siege than being the law. That will take quite a while
to restore after these areas are cleared of the insurgents.
Another long term source of money has been kidnapping. While
the group has taken many Iraqis and Syrians, the real money comes from seizing
foreigners such as aid workers. Although IS has recently been executing some of
the latter group as part of its propaganda campaign, many more were sold off
for money. One study estimated that IS earned $20-$45 million from ransoms in
recent years. This is a tactic that many insurgent groups in Iraq have employed
since 2003.
IS also has access to several banks and their funds. It has
seized control of state run banks and allowed private banks to continue to
operate, but with fees imposed on withdrawals. The U.S. believes that IS has
access to $500 million in cash in Iraq alone from banks it took in Ninewa,
Anbar, Salahaddin and Kirkuk. There are more than 20 banks operating in Syrian
controlled territory as well. The group has also carried out bank robberies in
Fallujah, Ramadi, Raqqa, Aleppo and Deir al-Zor. Most of this money is in Iraqi
dinars and Syrian pounds and needs to be exchanged into foreign currency to be
used outside of those two countries. Iraq and international banks have tried to
limit these exchanges, but there is no way to tell whether this has been
effective or not.
IS has taken over large swaths of farm land in Iraq and
Syria. In Iraq it controls nearly 40% of the country’s wheat fields. In Syria,
it levies taxes on farm production. It has confiscated machinery from farmers
and rents it back to them. It also controls silos, the distribution of seeds,
and crop prices. It has mixed in its harvests with others in a type of
laundering to hide its origins.
Another source of illicit funds is selling antiquities. IS
could have earned tens of millions from stolen artifacts from Syria alone. The
Wall Street Journal had an article
in February on how IS uses social media and cell phones to sell ancient relics
it has taken from Syria. An Iraqi intelligence officer said that the Islamic
State might have taken $36 million from just one historical site in Syria in
2014. More recently, on March 8 the group destroyed an ancient site in Bashiqa,
Ninewa, but not before taking away valuable relics, probably to market later. There
is no telling how much IS has earned from these antiquities as much of it is
done on the black market.
The largest new source of funding for the organization is
captured oil fields, the related infrastructure, and trade in refined products.
It produces and refines oil from several fields in Iraq and Syria. It does not
have the resources and technical capabilities to fully run them however. The
Omar field in Syria for example needs water injection to run efficiently, which
IS cannot operate. Even so it does produce and refine oil at low levels, and
smuggles some of it to international markets. It works with a major smuggling
gang in Syria for example. Coalition air strikes have focused upon this infrastructure
and illegal trade, and restricted some of it, and forced IS into more ad hoc
and less efficient refining processes. The Islamists have also been hit by the
decline in oil prices. A recent Financial
Times article said that IS’s funds from oil could have dropped from around
$1-$2 million a month to just $300,000. FAFTA found that the group actually
made more money from selling fuel and other refined products to locals, and
taxing the sale of those products as well than from its smuggling operations.
The last source of money has been donations and fund
raising. Unlike other insurgent groups this is estimated as only a small
portion of IS’s revenues. That doesn’t mean that it does not get money from
supporters internationally. Some of this is disguised as giving to
non-government organizations. IS also runs social media campaigns to raise funds.
Foreign fighters often bring a small amount of money with them as well. FATF
estimated that if these sources were cut off IS would still earn plenty from
the areas under its control.
The Islamic State is in need of large sums of money because
it has such major obligations. It considers itself a real state with all of the
costs that come with it. It has to pay for services to people under its control
and to run infrastructure like its refineries. It has salaries for its
fighters, and pensions for its dead. Its membership could cost around $10
million a month alone according to some reports. All of these impose huge
burdens upon the Islamic State. Declining petroleum prices and Coalition air
strikes have severely limited its oil assets. There are some reports that this
is imposing varying degrees of austerity measures, but there is no way to
confirm that. What is more problematic is that in the long run, if the group looses
territory it will still be able to find funds. Not being able to hold land will
be a massive setback for IS’s goal of maintaining its caliphate and reduce its
appeal to foreign fighters, but that will not mean that the group will turn
over and die. That’s because it acts like a criminal organization. It has a
long history of mafia like tactics, which it can turn to finance its
operations.
SOURCES
Alsumaria, “Source: Daash swept away the ancient city of
Bashiqa in northern Mosul and steals effects,” 3/8/15
Brannen, Kate, “Pentagon: Oil No Longer the Islamic State’s
Main Source of Revenue,” Foreign Policy, 2/3/15
Financial Action Task Force, “Financing of the Terrorist
Organisation Islamic State in Iraq and the Levant (ISIL),” February 2015
Parkinson, Joe, Albayrak, Ayla and Mavin, Duncan, “Culture
Brigade,” Wall Street Journal, 2/10/15
Peritz, Aki, “How Iraq Subsidizes Islamic State,” New York
Times, 2/4/15
Solomon, Erika, “Fines, sell-offs and subsidy cuts: life
under cash-squeezed Isis,” Financial Times, 2/27/15
No comments:
Post a Comment