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Islamic State: The Money Behind the Monstrosity

In an Op-Ed article for the newspaper ‘Economic Times’, Dr Adil Rasheed (Senior Research Scholar of the USI) has written how the Islamic State or the ISIS has developed a “hybrid form of funding” that relies on a mafia-inspired business model that feeds on extortion, looting, kidnapping, smuggling and racketeering.

By Dr. Adil Rasheed
Dubbed the richest terrorist network in history, the Islamic State, or ISIS, has successfully run its dystopian version of a Caliphate as well as its global apocalyptic agenda thus far.
In September last, it was estimated that the terror proto-state made $3 million a day from oil revenues, kidnappings for ransom, sale of antiquities, human trafficking, extortion and had a total worth of over $2 billion. Recently, however, the so-called Islamic State is reported to have lost control of about 25% of its territories while its revenues are also said to have diminished substantially.
Ever since Abu Bakr Al-Baghdadi took the reins of the group in 2010, the ISIS has developed a “hybrid form of funding” that is both global and local. Details are provided in its annual military and economic reports called ‘Al-Naba’, which it publishes to attract potential donors. Still, Baghdadi has made it a point not to rely excessively on state sponsors and major donors in the region in order to enjoy freedom from external pressures and dependence. Thus, the group relies on a mafia-inspired business model that feeds on extortion, looting, kidnapping, smuggling and racketeering.
To evade international anti-finance measures, the ISIS employs “the three C’s” to conduct illicit trade: cash, crude oil and contraband. These help it to conduct transactions outside of the conventional banking channels and through a network of a large number of middlemen. The secret routes developed during the UN oil-for-food programme have come in handy as smuggled goods snake their way through Turkey’s southern corridor, Iraq’s northwestern corridor and Syria’s northeastern corridor. A principal source of revenue is the production and sale of petroleum through seized energy assets.
According to the Iraq Energy Institute, the ISIS oil empire consists of around 300 oil wells in Iraq alone. It has also seized energy assets in Sfaya, Qaiyara, Najma, Jawan, Qasab, Taza, West Tikrit and notably in Syria’s Deir Ezzor province. The group’s oil revenues fell significantly after the US-led coalition’s aerial bombardment in September 2014. Technical issues also reduced production to a fifth of its oilfields’ total capacity in Iraq and Syria. Extortion and taxes levied on captive population provide another source of income.
Following the proclamation of the Caliphate, the ISIS has even imposed an official taxation system. A bank in Raqqa, the administrative centre of the proto-state, is now functioning as the city’s tax authority, with its employees collecting money from business owners in exchange for electricity, water, and security. The group also imposes a tax on non-Muslims ranging from $250 to “large sums”. But perhaps the most grotesque form of making money is though kidnapping of foreigners and hostage taking. It is believed the ISIS has received over $20 million for the release of several European hostages. According to the London based think tank Integrity, kidnappings make up about 20% of ISIS’ revenues.
In this context, it is important to add the kidnapping of about 4,000 Yazidi girls and women and their reported sale as sex slaves. The UN is also looking into claims that the ISIS may be harvesting organs from slain civilians and trafficking the body parts. The other lucrative source of finance is the growing loot and sale of Iraqi and Syrian antiquities and the indiscriminate plunder of archaeological sites. Perhaps, the greatest loss has been the ISIS’ destruction of the ancient cities of Nimrud and Hatra. Statues, artworks, manuscripts, ancient figurines, shrines, seals and coins are reportedly fuelling a multimillion dollar trade in precious relics.
[The author is Senior Research Fellow(West Asia) at the United Service Institution of India]
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