Islamic State : the Funding Dilemma

Christina Anagnostopoulos
10 Octobre 2014

ISIS ISIL IS... The "new" Al Qaeda is everywhere we look. The amount of information and articles can be overwhelming. When filtering through, one aspect that should be more accentuated is who funds IS, or better, how has this group become perhaps the wealthiest terror group in history in under a year.

Credit Reuters
Credit Reuters
For any group or entity, funding is key. It is what enables them to carry out their political and military agenda, what provides a "salary" for their fighters. Funding means more advanced training, more efficient military advances, and more hard power - as they have the economic strength to back up their politics and ideology.

IS's increased wealth is perhaps the most important factor in explaining its rapid ascension this year.

So where does the money come from ?

A large portion of IS's wealth comes from the revenue made through oil exports. As it has expanded and conquered more territory, the group has gained control of several oil fields in eastern Syria and Iraq. These have provided an immense source of income through black market oil trade. IS is now in control of 60% of Syria's oil fields, producing 50,000 barrels a day. Overall, the revenue they make from this black market trade is estimated at $1 to $3 million a day.

The majority of this oil is being passed through the porous borders of southern Turkey. The US recently confronted Ankara for neglecting the flow of black market oil being traded through Turkey, but they refuse to take a strong stance against the terrorist group for fear of retaliation on their 49 diplomats being held hostage. Some say Turkey may be profiting from this oil trade at all bureaucratic levels, an assumption quite difficult to prove.

Where else does the oil flow to ? Some goes to Iraqi Kurdistan and some through to Iran, smuggled through middlemen in secretive operations. The majority of the blame for facilitating and turning a blind eye to the trade, however, has been put on Turkey. 
Brookings Doha Center; Caerus Associates; Energy Information Administration; International Energy Agency; Iraq Oil Report; Platts via the New York Times
Brookings Doha Center; Caerus Associates; Energy Information Administration; International Energy Agency; Iraq Oil Report; Platts via the New York Times

Hostages and extortions

The money IS procures through hostage ransoms is being estimated at $1 million a day. The amounts received in exchange of wealthy ransom victims is reportedly never below $25 million, and some European governments are paying well into the millions for hostages.

IS had apparently asked for €100 million for the return of James Foley, the american journalist who was horrendously beheaded on camera.  

Aid & Donation

Last but certainly not least, IS has been funded by generous donations from private donors, primarily from the Arab Gulf. Most of these come more specifically from (the extremely wealthy) Saudi Arabia, Kuwait and Qatar. They were the primary initial guarantors and funders of IS when it first established itself as an emerging terrorist unit (two years ago) in the context of the Syrian civil war. 

Let's look at Kuwait. ISIL stems from the Baathist movement, which has its roots in the US invasion of Kuwait against Saddam Hussein in 1990. While the US had successfully "freed" Kuwait of Saddam's invasion, remnants of Baathist activism did not die out, and it is now Kuwaiti entities who have in turn provided funding to the IS militants. 

The Iraqi now former Prime Minister Nouri al-Maliki has long blamed the Saudis and Qatari's of hosting and funding extremists. The Saudi government has been accused of allowing "commissions" to flow into Iraq, a complementary policy following their open, vehement support for Syrian rebel groups. However the destination of their donations has not been very selective. Clearly these donors do not wish to excessively distinguish between shades of militant, as long as they can contribute in toppling a Shi'ite government (both Al-Assad and Al-Maliki are Shi'a). 

Reuters via the Daily Beast
Reuters via the Daily Beast
Overall, IS is funded from a spectrum of sources. Not only have they increased in power through the takeover of oil fields, through hostage extortions, and private donation, but also through looting banks in conquered territories ($430 million were stolen from Mosul's central bank), internal taxation under their form of governance, and human trafficking. We should not underestimate the importance of where their wealth comes from, as targeting the source of an issue is one the most efficient ways to tackle the problem itself. Having a good think about who the US holds as its closest regional allies might partly solve the dilemma of how to cut off the Islamic State's funds.