Introduction
The global militancy connected with the modern jihadist ideology and the ensuing instability in the Middle East pose a great threat. Not only the surrounding regions but also the United States, Europe, and the whole world are exposed to danger. The dramatic rise of the Islamic State (IS) is heavily based on the turmoil in Iraq and Syria that created a specific context in which jihadist ideas flourished and continue to do so. When considering combating IS, coordinated actions are needed. They should include extensive measures, such as regional and international diplomacy, political engagement, military operations, and intelligence cooperation.
The latter should become the central component, as it deals with the core of the Islamic State; in other words, it is impossible to defeat IS without knowing its background and peculiarities. One of the most important issues is the financial support (Kan, 2014). This paper will examine the funding of the Islamic State and demonstrate the necessity to take action against this militant group, in the first place, financially. A brief history of IS, its money sources, their usage, and the current state of affairs are explored. It is argued that, in order to stop the Islamic State from further expansion and liquidate the threat, the United States and other nations need to cut off its military funding.
Historical Background
Analyzing the fall of Muslim empires, Muslim scholars and philosophers came to a conclusion that their civilizations’ collapse is linked to heretical interpretations in the teachings of the Koran. For this reason, they suggest Muslims return to “pure Islam” (Neriah, 2016, para. 3). The concept of jihad, “holy war”, becomes the cornerstone of the ideology. The world consists of the house of Islam and the house of war. The struggle against unbelievers will not stop until all territory is conquered for Allah, and a global Islamic State, the Caliphate, is built (Sekulow, 2014). This idea took root and became important for many terror organizations.
The history of IS began in 1999 when the Jordanian extremist Abu Musab al-Zarqawi founded the terrorist group. The invasion of Iraq in 2003 resulted in the sectarian tensions. With the Iraqi army being disbanded, dozens of Sunni officers were deprived of their livelihood and became implacable enemies of America. In these conditions, the group flourished. In 2004, it pledged loyalty to Al-Qaeda and was publicly known under the name of Al-Qaeda in Iraq (AQI) (Humud, Pirog, & Rosen, 2015).
In 2006, AQI started merging with Sunni groups. The process continued after al-Zarqawi was killed; the new organization was renamed to the Islamic State of Iraq, ISI. With expansion into Syria in 2013, the group acquired the names ISIS (“the Islamic State of Iraq and al-Sham” or “the Islamic State of Iraq and Syria”) and ISIL (“the Islamic State of Iraq and the Levant”) (Humud et al., 2015). At the moment, IS, ISIL, and ISIS are used interchangeably. Changing the name to the Islamic State proclaims that the organization’s goals are connected not only with the Fertile Crescent. The ultimate objective is the Islamic Caliphate, reinstating the historical splendor of Islam (Neriah, 2016).
The Islamic State is headquartered in Raqqah, an eastern Syrian city, and operates in northeastern Syria and northwestern Iraq (Humud et al., 2015). Some 10 million people of diverse nationalities live in that territory (Neriah, 2016). It is worth mentioning that the relevant statistical evidence and exact figures are almost impossible to obtain. The estimates given in scholarly literature and mass media publications are approximations and may vary in different sources.
Main Sources of Income
ISIS has recently become one of the richest organizations across the globe. A few captured battlefield documents and official reports have given an opportunity to measure its funding; for instance, Sinjar records revealed the way criminal and smuggling networks worked (Humud et al. 2015). The organization’s financial success is phenomenal. From August 2008 to January 2009, ISI was able to generate about $1 million per month. In April 2016, the same amount of money was reportedly being received per day (Johnston et al., 2016).
The organization’s income originates from both legal and illegal funds, with the latter being predominant. While the source of legal funds is usually limited to wealthy donors, illegal financing involves various forms of crime: kidnapping, extortion, smuggling, and many more. The Islamic State’s preferred fundraising methods are donations, oil sales, and crimes connected with violence. In total, they provided approximately $3 million a day in 2014 (Gordts, 2014).
External Sources
Similar to other radical militant organizations, the initial financing of the Islamic State significantly depended on wealthy sympathizers. Since the majority of them supported Sunni fighters, IS was regularly provided with cash gifts; the group is known to be opposing Shiites and presenting itself as the supporter of Sunnis. Although the Islamic State’s donors are basically unaffiliated with jihadist groups per se, they participate in what they consider a holy war (Al-Shishani, 2014).
The most money comes from the Gulf states, especially Qatar and Kuwait. These countries’ banking systems are loosely regulated so no official documents are necessary. IS groups in Syria acquired more than $200 million from the Gulf region (Al-Shishani, 2014). Nevertheless, donations are not the primary source of ISIS income and account for a small percentage of the funding.
Internal Sources
What provides IS with the most dramatic income is oil. Because the group has taken control of many oil fields in Syria and Iraq, it sells oil and fuel on the black market for almost half of the global price. They are of poor quality and cause health and environmental problems, but ensure a vast amount of income for IS. Since ISIS has no control of an up-to-date operating oil refinery, they refine oil “in crude, small, mobile refineries with capacities of about 300 to 500 barrels per day of petroleum products” (Humud et al., 2015, p. 5).
The process of selling IS oil is technically difficult. Unable to use standard export facilities, the group has to ship oil to the Turkish border. Oil brokers and traders buy it and make payments, normally in cash (Humud et al., 2015). Criminals from Turkey and Kurdish soldiers in Iraq assist ISIL’s oil smuggling operations and sales. Transport companies, truck drivers, and bankers also reap benefits (Kan, 2014). Since late 2015, IS oil assets have been attacked, and the organization’s income decreased from $3 to $1 million per day (Johnston et al., 2016).
In both Syria and Iraq, the Islamic State is using different forms of violence to make money. For example, carrying out kidnapping and demanding ransom add up to a fifth of all income; proceeds totaled about $20 million in 2014 and involved both foreigners (aid workers and journalists) and locals (Al-Shishani, 2014). Great Britain and America have claimed that “they refuse to pay for the release of their citizens”, but some European governments are said to have paid seven-figure ransoms (Gordts, 2014, para. 13). Moreover, human trafficking is believed to be another source of IS income. Women and children are kidnapped as slaves and sold (Gordts, 2014).
Bank looting is quite profitable for IS. The approaches to banks differ. In 2014 alone, the group controlled branches of state-owned banks in Ninevah, Al-Anbar, Salah Din, and Kirkuk in Iraq and accessed at least a half billion dollars in cash. As for the Iraqi private banking sector, the Islamic State has imposed 5% cash withdrawal fee on all clients’ cash (Humud et al., 2015). Finally, some Syrian banks have branches in the territory under IS control, but it is not clear whether they function and, if so, how.
The system of taxation introduced by the Islamic State is highly profitable. They levy taxes on trucks passing through their territory. With the tax about $200-1000 per vehicle, IS collects presumably $500,000 a month (Al-Shishani, 2014). The Islamic State obliges those who do business to pay from 10 to 35% of the value of goods sold; housing units pay utilities tax (payment for electricity, water, and other utility services) that is $10 per month; and there is also a religious tax, jizyah, imposed on some Christian communities where people do not convert to Islam (Humud et al., 2015). Threatened with death, people are forced to pay these taxes. It is estimated that IS generates up to $360 million per annum through taxation and extortion (Humud et al., 2015).
Funding Usage
The organization of ISIS is built on a top-down multidivisional hierarchy. Multiple lower geographical units are autonomous, while issues demanding coordination between various levels are handled by a central department (Johnston et al., 2016). Resource assignment is controlled from a top level. The amount of income resources stands at $2 to $2.5 billion per year. It makes ISIS one of the most powerful terror groups in the world (Al-Shishani, 2014). However, the revenue does not seem to cover all expenses (Humud et al., 2015). There are several key expenditure items that require heavy spending.
Rather than striving for wealth, IS fighters combat for the promised Caliphate (Al-Shishani, 2014). Money is nonetheless important because it can help to launch operations. Thus, one of the significant expenditures is salaries. The Islamic State is thought to pay $400-$600 monthly to a fighter; a married person receives an extra stipend per wife and child (Humud, et al., 2015).
Battle equipment is also vital. IS possesses a wide range of weapons, such as “tanks, armored personnel carriers, field artillery, self-propelled howitzers, and multiple-rocket launchers, as well as an assortment of anti-tank guided missiles (ATGMs), anti-aircraft guns, and a small number of man-portable air-defense systems” (Lister, 2014, pp. 16-17). A large part of them is stored in schools, hospitals, and other buildings; it is impossible to estimate how much money is spent for this purpose.
Trying to prove its state status, ISIS is implementing its vision of governance, and social welfare is an object of expenditure. The prices on products, especially bread, are frequently subsidized; civilian transport services are established. IS provides free health care and Islam-oriented schools for boys and girls. Public infrastructure, such as electricity, roads, and hospitals, is under construction (Lister, 2014). To put it bluntly, the Islamic State attempts to run its state services in a more intense manner. The strict form of sharia is established: obligatory attendance of daily prayers; prohibition of alcohol, smoking, drugs, and gambling; controlling appearance and garments; and other rules. Executions are used as punishment for murder, adultery, and robbery (Lister, 2014). Thus, IS concentrates on the carrot and stick approach.
Not only does IS take charge of its territory financially, but it also spends monetary resources on propaganda. One should remember that life in the Islamic State may be less harsh, from the perspective of the poorest people in Iraq and Syria, than the conditions in their countries. As a result, they become a target for ISIS. A special committee in charge of media affairs and propaganda has been created. New recruits are drawn to the organizations’ projected utopianism (Johnston et al., 2016). People may be groomed in the form of one-to-one communication. Recruiters use “Quranic verses, statements from the prophet, and application to what potential recruits are seeing on the news” (Steed, 2016, p. 54). Moreover, there are collective forms of recruitment: video, print, and social media. The production of a video is especially expensive, about $ 200,000, but this mechanism of recruiting is very effective (Steed, 2016).
Taking into consideration the facts above, one may leap to the conclusion that IS possesses a number of characteristics relative to a state: clear boundaries, population, infrastructure, law, social security, penal system, banks, and taxation. What is more, the group is attempting to mint its own currency. It is believed to bring more trouble, as paper money are not anchored by precious metals that are in scarce supply. If IS starts printing paper money, inflation is likely to press the organization (Kan, 2014). However, the group does not want paper money. In 2015, ISIS showed its new currency, coins made of gold; a memorandum banning bank notes appeared (Giedroyc, 2016).
Financing Termination as the Main Weapon
The Islamic State manages to draw on manifold sources of income and obtain benefit that challenges the USA and other countries. Although the group seems to be safe in the short term, further difficulties are probable in the event of coordinated actions, such as those that have already reduced the IS profits. The necessity to restore facilities, pay fighters, and maintain the local economy is pressing. Their financial management is far from being perfect, so the group spends as much as it collects – or even more. (Johnston et al., 2016). Any additional expenditures will take a heavy toll on the group and weaken it. In this case, the Islamic State may logically stop expanding geographically, resort to a more hit-and-run style of attacks, and be caught in a dilemma whether to be a rich terrorist group or a poor state (Al-Shishani, 2014). Thus, financing should become the major hit point in defeating the Islamic State.
In 2014, the U.S. Department of the Treasury directed efforts to apply financial strategies to undermine IS funding (Al-Shishani, 2014). These measures include a complex of both targeted sanctions and enhancements to the international financial regulatory system. The key points of the strategy against ISIS are to “disrupt its main sources of funding, restrict its access to the international financial system, and block access to assets and resources of its senior leadership and financial facilitators” (Humud et al., 2015, p. 15). In this context, the measures may be adopted externally.
First of all, one should pay attention to indirect cash transportation and storage, since the organization is known to be dealing predominantly in cash (Kan, 2014). As for donations, it is the donors, again, in Kuwait and Qatar who should be targeted. This money often comes under the guise of humanitarian aid (Al-Shishani, 2014). Therefore, the new legislation should aim at striking a blow against such funding. There is much work to do in terms of enforcing the laws and making them effective.
Given the fact that oil sales reportedly constitute the major portion of IS funding, the coalition must focus on their efforts to interdict oil transport. On the one hand, a clear message needs to be sent and backed with actions: destroying IS loading points, disrupting roads to the oil fields, and wrecking trucks. Driving a black market oil truck should become an unconscionably risky occupation. On the other hand, politicians and governmental authorities might be involved in oil sales; under these circumstances, there must be more control. For example, oil trucks leaving the territory of the Islamic State are to pass checkpoints, and the data should be recorded. Beyond that, further investigation into the passage of oil trucks will help to reveal corrupted politicians’ secrets. From this perspective, the USA and coalition partners should follow the money trail and fight ISIS financially, paralyzing it with the inability to fall back on any off-board assistance.
Conclusion
To sum it up, the modern world faces a serious danger in the form of ISIS. The idea to establish a caliphate, a single multinational Islamic state, is widespread. It sows civil unrest in Iraq and Syria, involves the neighboring territories, and affects the whole globe. Consequently, what the world needs is to join forces in combating one of the strongest terrorist groups.
The present paper focused on the financing of the Islamic State and considered funding as a target of primary importance. Without sufficient financial support, any organization will weaken in the course of time, and this proposition is also true for ISIS. Since the group is close to a money shortage, cutting off its foreign money sources is an effective strategy. The most profitable revenue item is external: oil sales are estimated to generate $1-3 million per day. If the United States and coalition countries manage to impose a ban on oil sales and transport and enforce it, IS will suffer large revenue contractions.
The financial approach is potentially one of the most promising strategies to combat ISIS. Although the general picture of IS financing is comprehensible, the details are unknown, and only external factors such as foreign donations and oil sales might be estimated approximately. IS domestic policy remains terra incognita, but whether IS internal resources are scarce is questionable. It is entirely possible that the Islamic State will be able to deploy its resources for the group’s military and social benefit. All in all, the example of the Islamic State is an excellent topic for research, despite the lack of data and inconsistent estimates, since it is possible to analyze the processes themselves.
References
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