Once famous for being the richest terrorist group in the world, the so-called Islamic State, also known as ISIS or Daesh, now faces considerable money problems. Coalition airstrikes, economic downturns in both Iraq and Syria and historically low global oil prices have combined to hit the group where it hurts the most — the bottom line.
Coalition successes in countering ISIS financing owe primarily to two main efforts. The first is an air campaign against the group’s oil revenue named Operation Tidal Wave II. The campaign, which began last October, has starved ISIS of tens of millions of oil dollars it was making by controlling the majority of Syria’s oilfields.
While Operation Tidal Wave II was not the first coalition effort to target ISIS oil, from which the group was making an estimated $50 million per month prior to the operation, the campaign has reduced ISIS oil revenue by an estimated 30% according to coalition estimates.
The second effort has targeted ISIS’s cash directly, going after the banks where the group stores its cash in Iraq. Airstrikes have destroyed much of the money in ISIS’s Bayt al-Mal, or “general treasury,” the locations where ISIS holds its money.
After conducting two airstrikes on ISIS-controlled banks in Mosul in January that destroyed between “tens of millions” and “a billion” dollars of bulk “Daesh cash,” according to coalition spokesman Col. Steve Warren, the coalition struck again. Airstrikes decimated four more major ISIS cash storage and distribution facilities on Feb. 14, including the Iraqi Central Bank branch in Mosul — the same bank from which ISIS reportedly stole an estimated $400 million dollars after the group seized the city in June 2014.
These airstrikes on ISIS’s Bayt al-Mal in Iraq complement coalition actions against ISIS oil assets in Syria since the group controls only a small share of the country’s oil revenue in Iraq.
There, the group relies instead on extortion, taxation and other financial schemes to generate the revenue needed to finance attacks and to impose strict laws over civilians across large swaths of territory. In addition to these two coalition initiatives to erode ISIS’s major financial pillars, the struggling economies of Iraq and Syria have also hindered ISIS’s ability to generate revenues.
Citing economic hardship, the Iraqi government has discontinued salaries to thousands of government employees located in ISIS-controlled territory, whom ISIS tax at high rates. Moreover, historically low oil prices have reduced the profitability of ISIS’s oil operations. The difficulty of producing and smuggling cheap oil across borders has led ISIS to sell most of its oil locally in Iraq and Syria at steeply discounted prices.
Taken together, coalition actions have deprived ISIS of hundreds of millions of dollars it planned to use to conduct military operations and to enforce strict law. In practical terms, this means ISIS must now find ways to continue funding itself within its self-proclaimed caliphate. Despite the success of the counter-terrorist finance measures adopted by the United States and other coalition partner nations, it is too early to dismiss ISIS financially. Where will ISIS turn for money? The answer is, “It’s the economy, stupid.” In the absence of Iraqi and Syrian security and opposition forces capable of reclaiming ISIS territory, the group continues to control important economic and financial resources in Iraq and Syria’s agricultural, manufacturing and financial sectors.
The question is whether ISIS will be able to translate these economic resources into a functioning, sustainable economy in its self-proclaimed caliphate from which it can extract sufficient tax revenue to finance its military and governance operations.
No other militant group has faced as much pressure to conduct effective large-scale economic governance. Unlike other terrorist groups, such as al-Qaeda, the ISIS has historically eschewed reliance on deep-pocketed donors for funding. Instead, it has developed a robust taxation and extortion infrastructure in ISIS-held territories.
There are already indications of price increases on goods sold in those areas, tax hikes and more aggressive collection of fines and other fees by the ISIS al-Hisbah, or “morality police.” The ISIS is also implementing austerity measures to slash the group’s costs — the most dramatic being an across-the-board 50% decrease of salaries paid to ISIS members.
— Courtesy: USA Today