How the Islamic State of Iraq and Syria Gets Funding

As the Islamic State (IS) continues to try and establish a Caliphate within Syria and Iraq, one must ask how IS has been able to afford fighting against Kurdish, Iraqi, Syrian, and American forces all the while maintaining a territory that spans approximately 81,000 square miles between the two countries. IS is now considered by many to be the richest terrorist organization in the world. It has accomplished this by obtaining large sums of money through oil revenue, extortion and criminal networks, the ransom of hostages, and donations.

One of the biggest streams of revenue for IS is the illegal sale of oil obtained from the oilfields that the organization controls in both Syria and Iraq. While it is difficult to determine how much money IS actually makes through the sale of oil, experts estimate that the group is bringing in about two million dollars a day. This profit is small in terms of global oil sales, but massive for a terrorist organization. But how can terrorists even sell contraband oil?

Most of IS’s oil production is sold through middlemen in Syria who then bring it to refineries in Turkey, Iran, or Kurdish areas. The purchase of this oil has obviously been condemned by the international community, with the United Nations warning that the purchase of oil from IS violates international sanctions against the group.

Another financial source for the terrorist group has been the establishment of criminal and extortion networks throughout Syria and Iraq. According to Deputy Assistant Secretary of State Brett McGurk, IS was already making 12 million dollars a month through smuggling and extortion rackets in Mosul before the city was captured. The group has also gained money through the control of wheat and energy production; IS currently controls territory that accounts for approximately 40% of wheat production in Iraq and the group temporarily captured the Mosul and Haditha dams, major sources of electricity for Iraq, before they were repulsed by airstrikes and ground forces. And of course, one cannot forget the fact that members of the group reportedly stole 425 million dollars from Mosul’s central bank during the takeover of the city in June.

The group, like other terrorist organizations around the world, has also received significant revenue through the ransoming of hostages, although the low release rate of captives tends to indicate that this is not a very reliable funding source for IS. The group reportedly demanded a 123 million dollar ransom for journalist James Foley prior to executing him and they continue to demand ransoms for other Western hostages. The freeing of 49 Turkish hostages by IS this week has prompted speculation that the Turkish government may have paid a ransom for their release.

Finally, the group still continues to receive private donations as a revenue source through individuals and groups, although given IS’s recent economic gains, donations are now considered to be “bonus payments” according to Douglas Ollivant, a former Iraq director at the US National Security Council and fellow with the New America Foundation.

As the US continues to increase its involvement in countering the terrorist group’s advance, its strategy must not merely halt IS’s physical advance through airstrikes, but also attack its financial sustainability. The US and its allies were fairly effective in freezing the financial assets of terrorist organizations following the attacks of September 11th 2001 and it needs to do the same when dealing with IS. Enforceability of UN resolutions prohibiting the sale of IS-affiliated oil is a must, and greater effort needs to be made to push out the group from economic and agricultural hubs that enable them to gain millions of dollars daily. Failure to do so will merely result in a longer and more drawn out US involvement in the region, which is already costing the United States 7.5 million dollars a day.

Photo by U.S. Army Corps of Engineers – Northwest Division (public domain)











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