May 28, 2015 | Quote

ISIS’s Wealth: Stronger Than Ever Or In Decline?

The recent takeover of Ramadi by the Islamic State of Iraq and Syria (ISIS), and the consequent criticism of Iraqi forces’ inability to counter the group, has not fared well for arguments that ISIS is weakening.

A report published last week by the New York Times (NYT), and based on information from the RAND Corporation, claims that ISIS’s finances are strong and have brought in around $875 million since the fall of Mosul in June 2014. While experts widely agree that ISIS is wealthy, they do not all agree that the terror group is financially stable.

The statistics from RAND show that ISIS has a diverse revenue stream. Though its financial strength was initially dependent on oil, the report shows that oil now only makes up a fraction of its revenue. In 2014, ISIS’s major revenue came from extortion and taxation in Iraq (around $600 million), money stolen from state-owned banks in Iraq (around $500 million), oil (around $100 million) and ransom from kidnappings (around $20 million).

By keeping its operating costs low and diversifying its income sources, its largest chunk of spending is going toward salaries, the NYT reported. ISIS spends between $3 million and $10 million every month on salaries. Many experts agree that ISIS is extraordinarily wealthy, but the report argues that it continues to gain financial momentum despite continued U.S.-led airstrikes.

Revenue diversification

Most experts agree that oil is no longer the money-maker it once was for ISIS. The fluctuations of the global oil market, and airstrikes against ISIS-controlled refineries, have caused the group to shift further away from oil-dependency and more on looting, extortion and theft. While the diversity of financial sources may be good in the short term for ISIS, in the long term it makes it vulnerable to losing its ability to capitalize on lawlessness if stability and law-enforcement in Iraq increases.

A very clear indicator of the potential financial weaknesses of ISIS can be seen in the breakdown of Mosul, said Dr Daveed Gartenstein-Ross, a fellow at the Foundation for Defense of Democracies in Washington, DC.

Months after ISIS’s takeover of Mosul in 2014, the city fell into despair – a sign that the group is unable to sustain the large swathes of land it controls and the people who inhabit it. There have been documented instances of water-poisoning due to lack of filtration, widespread power outages, and inconsistent civil services in Mosul under ISIS.

Experts that say ISIS is not financially sustainable agree that the way to roll back its financial strength is to continue military strikes, increase political stability and security in Iraq, and target the middlemen that facilitate ISIS’s financial transactions and sales.

The key to its financial success came from not only gaining access to financial resources, but also knowing how to navigate international markets – a perk of having members of the former regime of Saddam Hussein, among others, as part of the group.

Middlemen

ISIS members who are bolstering the looting and theft are the “criminally inclined middlemen who had been doing this for many, many years,” as far back as the Oil for Food Program under Saddam, said Levitt. “They’ll work with anybody.” Levitt added that because ISIS’s leadership is made up of some former Baathists, it is likely that some of these middlemen have already worked with leaders under Saddam’s regime.

Since extortion, looting and theft are ISIS’s current financial backbone, the key to disabling the cash flow is to take down the middlemen that are working to facilitate the transactions. “Middlemen are replaceable,” said Gartenstein-Ross. The key is not to remove them, because they can always find others, but to make being a middleman for ISIS not worth the cost, he added.

If arrests, jailings or sanctions against middlemen become frequent, the number of people willing to fill those roles will likely become scarce, Gartenstein-Ross said. ISIS’s financial trajectory is further weakened because “a lot of their diversified income is not sustainable,” he added. The antiquities and resources that the terror group are pillaging and selling are not limitless.

…  

Read the full article here

Issues:

Syria