Tuesday,25 September, 2018
Current issue | Issue 1240, (2 - 8 April 2015)
Tuesday,25 September, 2018
Issue 1240, (2 - 8 April 2015)

Ahram Weekly

How Islamic State gets its cash

Diverse sources of funding mean that Islamic State may now have a budget in excess of $2 billion, writes Haytham Mouzahem

Al-Ahram Weekly

Sheikh Abu Saad Al-Ansari, a senior religious figure in Mosul in northern Iraq, revealed earlier this year that the Islamic State (IS) group had approved its first annual budget of $2 billion for 2015, with an expected surplus of $250 million.

David S. Cohen, the US Treasury’s undersecretary for terrorism and financial intelligence, has also seemingly confirmed this number by saying that the budget for the areas controlled by IS is more than $2 billion a year. If true, this would make IS the wealthiest jihadist movement in history, exceeding even the central branch of Al-Qaeda.

While the international community has increasingly tightened the squeeze on the group and moved to impose a string of financial sanctions, the impact of these moves has been difficult to ascertain due to the lack of transparency of some regional governments.

In order to move forward more effectively, it is necessary to better understand the murky but complex funding structure of the group, this being spread out across three main streams of criminal activity, internal revenue and foreign income.

In an article in the US journal Foreign Affairs, Louise Shelley pointed out that IS’s revenues are largely derived from smuggling operations, blackmail and organised crime.

Ransom revenues from the kidnapping of foreign citizens, including employees of international organisations and Western journalists, have helped to raise untold millions, but the group’s realm of operations is much broader.

According to medical sources in Mosul, IS is trafficking human organs harvested from the bodies of kidnapped captives, dead soldiers and injured prisoners. The Office of the UN High Commissioner for Human Rights (OHCHR) has also claimed that the group sells the bodies and organs of injured people it arrests. Through this trade, IS is believed to have established links with international mafia groups as well as medical institutions abroad.

The extent of these kinds of activities is contested, however. Mohamed Allouch, a Lebanese researcher specialising in Islamist groups and author of ISIS and its Sisters, says he is sceptical about the reports, arguing that there are no Sunni jurisprudential texts that allow the trading of human organs.

Drug trafficking is also believed to be contributing to IS coffers. According to the Russian Federal Drug Control Service (RFDCS), IS drug money is transforming the city of Nineveh, on the Turkish border in Iraq, into a new centre for drug trafficking.

RFDCS claims that IS has been earning $1 billion annually from the sale of drugs throughout its conquered lands and by providing half of the total heroin supplied to Europe via Iraq and some unstable African countries.

Allouch has also queried these allegations, saying that the proof is limited at best, although he acknowledges that drug smuggling might be allowed to non-Muslims under the pretext of war requirements.

The trafficking of people has been better documented, both by aid groups and IS, which has produced several texts on the matter. There are now believed to be human-trafficking networks in Mosul and Raqqa, where Yazidi and Christian women and children have been sold into slavery. A report by OHCHR confirmed that more than 25,000 women and children have been imprisoned, sexually harassed and sold by IS as war captives.

In addition, IS has also reportedly profited from smuggling migrants, with some migrants saying they have paid up to $8,000 each to IS to be allowed to travel to Turkey in the hope of escaping the fighting. Clearly, as long as the regional turbulence continues, IS will be able to profit from people’s desperation.

DOMESTIC REVENUE: While IS may have gained international prominence for its criminal activities, it has also developed several more mainstream funding sources.

 Even before IS seized Mosul in June 2014, the group was collecting monthly taxes from business operations in Iraq estimated at between $6 million and $8 million. As the group has expanded its control over large areas of Iraq and Syria, its finances have only swelled.

There are also revenues from agriculture, and IS has up to one third of Iraq’s wheat production at its disposal, as well as funds derived from the selling and smuggling of livestock. This is not to mention the vast resources that have been plundered. In one notable instance, IS managed to seize tens of millions of dollars from banks and government institutions in the city after Mosul’s fall.

Furthermore, IS controls resources such as hospitals, shopping centres, restaurants and power and water utilities, which provide millions of dollars in revenue every month. More lucratively, it has also taken possession of oil and gas resources in Iraq and Syria.

More than 80 minor oil fields are under its control, the output of which is sold either locally or internationally, via Iraqi Kurdistan and, possibly, to the Syrian regime.

 Revenues have been estimated by some at $2 million per day. In November 2014 the UN said its analysis showed that the jihadist militants were earning upwards of $850,000 a day from oil sales alone.

The combination of falling global oil prices, US-led coalition targeting of IS-held oil sites and international sanctions introduced in February against trade with IS have helped to stem this. But while US officials said on 5 February that oil is no longer the main source of revenue for IS, the group has simply fallen back on its other revenue streams.

It is still believed to have enough money to survive for two or three years, despite the huge amounts it needs to spend on its fighters, logistics, weapons and food, as well as to satisfy the inhabitants of its so-called state.

Another source of funding that will be virtually impossible to stamp out as long as IS controls territory has been the imposition of taxes on people for what IS calls “services and protection.”

Some Iraqi sources have claimed that IS imposes a tax of 50,000 dinars ($43) on each family, and the amount is doubled if the families refuse to allow their children join IS, according to testimony by Sheikh Mohamed Abu Ziab, a prominent tribal figure in Nineveh.

Hassan Abou Hanieh, a Jordanian researcher specialising in militant groups, has also concluded that IS’s funding network is not only extremely varied but much older than many have assumed. While IS only recently burst onto the international stage, the group has built upon and adapted more traditional channels of jihadist funding.

The Islamic State in Iraq and Al-Sham (the Levant [ISIL]) was officially declared in April 2013, but the group was actually established in 2003, following the US-led occupation of Iraq by Abu Musab Al-Zarqawi under the name of Al-Tawhid and Al-Jihad Group.

Al-Zarqawi paid allegiance to Al-Qaeda, led by Osama bin Laden, in 2004. Following his death, the group merged with others to form the Islamic State of Iraq on 15 October 2006, selecting Abu Omar Al-Baghdadi as emir.

After the assassination of Abu Omar Al-Baghdadi on 19 April 2010, the group’s leadership announced on 16 May that it had agreed to pledge allegiance to Abu Bakr Al-Baghdadi as emir of the Islamic State of Iraq.

Hanieh believes that the group has had an effective financing mechanism since the foundation of Al-Tawhid and Al-Jihad Group in 2004. He concludes that the group has relied on a network of fundraisers who collect funds from businessmen and mosques, especially in the wealthy Gulf States and Europe.

IS announced its first cabinet in 2006, he says, with ministries assigned to control revenues from oil and natural resources. Since declaring its so-called caliphate in June 2014, Abu Bakr Al-Baghdadi has overseen management of the group’s Beit Al-Mal (Ministry of Finance), headed by Mowaffaq Mustafa Al-Karmoosh.

FOREIGN FUNDING: But the terrorist group’s money does not only come from areas it controls. One of the main avenues of funding has been donations and grants gathered from wealthy Gulf citizens who support and fund the group in both Iraq and Syria.

Charitable donations and income from zakat, a form of obligatory alms-giving by Muslims paid to poor Muslims, have also helped bolster the coffers of groups like IS and Al-Nusra Front.

 When it comes to foreign funding, the groups have developed schemes that are difficult to uncover, despite intensive local and international monitoring. The groups have networks tasked with collecting donations from wealthy individuals in support of jihad.

 Another method uses established trade routes. According to Newsweek magazine, the relatively open banking systems of some Gulf States have been exploited by IS since “they do not automatically raise red flags when money is siphoned to Islamist causes.”

These funds reach IS militants by circuitous routes from such states, “which operate as a clearinghouse for funds headed to Syria and Iraq,” according to the Washington think tank the Brookings Institution.

Furthermore, IS has been selling ancient Iraqi and Syrian artefacts on the black market to finance its military operations, according to Iraqi and Western officials, as well as the UN cultural agency, UNESCO.

A BBC investigation found that the trade in antiquities is one of IS’s main sources of funding, and the precious goods have being trafficked across the Syrian border through Turkey and Lebanon to Europe.

The UN has stepped up action against these various sources of funding and moved to clamp down on charitable donations, but external pressure is only a small part of the puzzle of IS funding, and the world will have to dig deeper if it wants to drain IS’s reserves.

The writer is director of the Beirut Centre for Middle East Studies.

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