ISIS Economic Rise and Sources of Financing its Terrorist Operations – Part II

From the early stage of its geographic and military expansion, the Islamic State in Iraq and Syria (ISIS), also known in the Levant as (Daesh), recognized the importance of financing its civilian activities and military operations, so the organization was very active in laying foundations for fiscal policies which contribute to maximizing the organization’s public revenues in the areas it controls. Particularly through policies to achieve diversity in their sources of income, in order to achieve their strategic objectives. Accordingly, financial independence and diversification of funding sources were prerequisites for the organization(1). 

In general, the sources of funding for ISIS can be cited as follows:

Oil: Extracting oil from ISIS-controlled areas in Iraq and Syria was one of its most important sources of funding. At the height of its expansion in 2014 and 2015, ISIS controlled seven Syrian oil fields in Hasakah, Deir ez-Zor, Raqqa and Homs. It was able to extract 61,700 barrels per day, also it had controlled thirteen oil fields in Iraq and extracted at least 60,000 barrels per day.

Figure (3)

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1- Jean Charles Brisared and Damien Martienz, Islamic State: the economy –Based Terrorist  Funding, from the site: : http://cat-int.org/wp-content/uploads/2016/06/White-Paper-IS-Funding_Final.pdf

Hussein Almohamad and Andreas Dittman, Oil in Syria between Terrorism and Dictatorship, Social Science, p: 8

During 2015, ISIS was expected to have made $2 million to $3 million a day of oil sales to local smugglers, who in turn were selling the oil to regional actors and countries (3), as well as the countries which ISIS controlled roads to, such as Jordan and the Kurdistan Region of Iraq, Iran and Turkey (4). This didn’t stop here for Turkey, as some sources pointed to the 4,8-kilometer-long underground oil smuggling pipeline from Syria to Turkey (5).  According to Razek Radek Maximo, a former Azerbaijani and senior ISIS leader, the Islamic State was selling oil and gas to Turkey and the Syrian government (6).

Oil has played a major role in imposing ISIS control over territories in Syria and Iraq, and the spread to Africa and South Asia, becoming the most dangerous and largest global terrorist organization, as it had made up the main source of funding for its various terrorist activities and operations.

Natural gas: ISIS control was not limited to oil resources, but it included control over the most important gas fields in Iraq and Syria. On top of the facilities controlled by the terrorist organization is Iraq’s largest natural gas reserve in Akkas field in Anbar governorate, which has a proven reserve of 5,3 trillion cubic feet (510,079 billion cubic meters) of natural gas (7). Konico plant, which was considered the most important gas processing plant in Syria, had a production capacity of 13 million cubic meters of natural gas per day, the field was controlled by ISIS from the years of 2014 to 2017 (8).

In general, the theoretical production capacity in ISIS areas of control amounted 1,360 million cubic feet per day, equivalent to 38,5 million cubic meters, of natural gas, as the organization gained from its trade in natural gas, 489 million US dollars annually (9).
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2 -Matthew Levitt, Countering ISIS Financing: A Realistic Assessment, . A Study form the book “The Rise of ISIL”, Matthew Levitt (Editor), The Washington Institute for Near East Policy, 2016, p: 73

3 – Jennifer L. Fowler, U.S. Efforts to Counter the Financing of ISIS. A Study form the book “The Rise of ISIL”, Matthew Levitt (Editor), The Washington Institute for Near East Policy, 2016, p: 66

4-“ISIS Earning 1m$ per day from Iraqi Oil Smuggling” Iraq Oil Report, July 9, 2014

5- Matthew Levitt, Countering ISIS Financing: A Realistic Assessment, A Study form the book “The Rise of ISIL”, Matthew Levitt (Editor), The Washington Institute for Near East Policy, 2016, p: 74

6 – http://oilprice.com/Geopolitics/Middle-East/Confirmed-ISIS-Sold-oil-To-Assad-Turkey.html

7 –https://ar.wikipedia.org/wiki/%D8%AD%D9%82%D9%84_%D8%B9%D9%83%D8%A7%D8%B3

8 –https://www.raialyoum.com/index.php/

9 -“ISIS Earning 1m$ per day from Iraqi Oil Smuggling” Iraq Oil Report, July 9, 2014, p: 8

Phosphate and Sulfur: The Islamic State organization took control of Akashat Phosphate Mine near Al-Rutba in the Iraqi governorate of al-Anbar, as its production capacity under the organization had reached one million tons annually (10). Investment in phosphates at low prices of $50 per ton, made $50 million a year for ISIS. The organization also controlled Al-Qaim plant, which produced both sulfuric acid with a production capacity of 1,5 million tons per year, and phosphoric acid with a production capacity of 400 thousand tons per year. These products were sold at a price of $200 per ton of sulfuric acid and $800 per ton of phosphoric acid. The sale of these materials by ISIS at a 50% discount means that it was making $310 million annually (11).

Cement: ISIS took control over five cement production plants in Syria and Iraq, where Jalabiya (Lafarge Cement Plant) southern Kobani in northern Syria comes to the forefront of them, which is owned by the Global Cement Industrial Company of Lafarge, which has 2,500 cement plants in 90 countries around the world, and achieve annual profits equivalent of 32 billion U.S. dollars. Leaked documents that the plant, which was producing 3 million tons of cement annually in Syria, confirms paying bribes estimated at $100,000 per month to ISIS to facilitate its tasks after taking control over the city of Manbij. However, there are studies confirming ISIS control over the entire plant production after 2014.

The terrorist organization also controlled Raqqa plant, which produced 1,5 million tons per year, in addition to three plants in Fallujah and Kubaisa, and al-Qaim in Iraq with a total production capacity of 3 million tons, that is, the organization had controlled cement plants capable of producing 7,5 million tons of cement. Unconfirmed studies indicate that the organization achieved profits estimated at 292 million U.S. dollars (12).
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10 –http://webcache.googleuserconted.com/search?q=cache:TXSPLMKNPUQJ, p: 8

11 -Ibid, page 8

12 -Ibid, page 8

Agriculture: According to a report made by Food and Agriculture Organization of the United Nations (FAO), the areas controlled by ISIS in Iraq in Nineveh, Salah al-Din and al-Anbar produced 40% of wheat in Iraq and 53.3% of barley. It was expected that the organization has achieved an income equivalent to 120 million U.S. dollars as a result of its control of 1,1 million tons of wheat in silos in Iraq. While in Syria, it controlled an area which produces a quantity equivalent of 30% of Syria’s wheat production, and was expected to achieve $200 million during its control over large areas that reached reached the city of Kobani.

2. Criminal Revenues (financing by organized crime)

In 2006, the Islamic State’s ancestors raised $70 million to $200 million through criminal activities. According to the U.S. government’s assessment in November 2006, gasoline smuggling, hostage-taking for ransom (targeting local businessmen, politicians, religious figures, and foreigners) and political corruption, were among ISIS’s most revenue-generating activities. The sources of funding for the terrorist organization are as follows:

 I. Kidnap and Ransom: Taking advantage of the experience of their ancestors in Iraq, ISIS members found that the most effective way of financing terrorism is to practice terror against local people and international travelers to areas of their control. Since its foundation, it had relied on kidnapping, ransom, and criminal activities to finance its activities and targeting local businessmen, politicians and religious men, in addition to foreign citizens.

The most heinous crimes committed by the Islamic State organization were lied in abduction and exploitation of the Yazidi women, girls and children in  order to increase their sources of funding, after they attacked Mount Shengal (Sinjar district), and besieged about 50,000 Yazidi Kurds, the terrorist organization abducted thousands of Yazidi women, girls and children and enslaved them as infidels who did not followed their religion. And they relied on their studies which confirm that the Yazidi religion is older than the Islamic religion, which requires – in their point of view – the practice of slavery against them.

ISIS used different ways to sell the Yazidi women and girls and generate financial revenues from these operations. The most popular ways used to sell Yazidi Kurdish women and girls are as follows:

– Selling women in markets.

– Selling women online and via precise networks of smugglers.

– Selling via apps on mobile devices.

– Swapping women for other women or a variety of different things like cars, weapons and everyday items such as shoes.

– Re-selling women to their parents, where parents were being exploited through auctions on electronic sales networks, and some Yazidi women have reached their parents’ payments in excess of $10,000 without being able to meet them.

It is estimated that the contribution of blackmailing to the total sources of ISIS budget increased from 12% in 2014 to 33% in 2015, as it achieved $10 million per month in ransom payments.

After the events in Mosul on June 10, 2014, ISIS seized large quantities of weapons left by the Iraqi army, which reinforced ISIS for two years further in combat. This has saved more than $500 million for the terrorist organization, and contributed to the development of its combating capabilities to carry out brutal attacks on neighboring areas to take control of revenue streams.

Information indicates that ISIS managed to open 500km of fronts in northern Syria with the captured weapons.

There had been some indications that some countries were involved in supplying weapons to ISIS, particularly Turkey, where a shipment of weapons was seized in the southern Turkish city of Adana that was destined for ISIS, and the patrol which seized the shipment was later arrested.

The leader of the Turkish Republican People’s Party Kemal Kilicdaroglu in order to expose the process issued a statement from the Prosecutor’s Office in Adana on October 14, 2014 confirming that Turkey had supplied weapons to the terrorist groups in Syria. 

ISIS carried out smuggling of antiquities in its areas of control, some statistics indicate that it had achieved $24 million in 2015.

Foreign donations accounted for less than 5% of the group’s operational budget; however, ISIS in its early founding relied on donations from the wealthy in the Arab Gulf countries, particularly Kuwait and Saudi Arabia. 

ISIS relied on taxes where some studies considered the extortion activities that contributed to financing its works, in addition it diversified its sources of those taxes to achieve more tax revenues in the seized areas.

Taxes have covered many areas, including:

– Tax on goods.

– The tax on agricultural crops, where a tax was levied by 46% for the income of each irrigated hectare of land per year and 10% for each produced crop of wheat, and the amount with which agricultural crops were sold on the local market.

– ISIS also imposed some types of fees related to the social organization, the provision of public services and the control over population transport.

The following figure shows some types of fees imposed by ISIS and its values in 2016.

Table (4)

Resource:Eric Robinson and Others, When the Islamic State Comes to Town (the Economic Impact of Islamic State Governance in Iraq and Syria), Rand Corporation, Santa Monica, Calif, 2017, p: 12

– Tax on telecommunications companies operating in its areas of control.

– Tax on cash withdrawals from Sunni Muslim Bank accounts.

– Social welfare tax and other general purposes, levied at 5% of all salaries in ISIS-held areas.

– Road tax of $200 in northern Iraq

– A specialized tax of $800 per truck crossing the Syrian and Jordanian borders to Iraq or vice versa.

– Human mobility tax across ISIS control areas

– Looting tax of archaeological sites, where the terrorist organization imposed a tax on looting antiquities by 20% of the estimated value imposed by the organization in Aleppo and by 50% in Raqqa.

– Tax for the Protection of Non-Muslims (Jizya), ISIS imposed an amount of $2,500 per year on the Shiites and non-Muslims (Christians and Jews).  

It was not permissible to apply this tax on the Yazidis, according to their belief, because the Yazidis are not the people of the book, such as Christians and Jews, so their women must be exiled and enslaved as infidels, while their men should be killed.

It should be noted that ISIS generated tax revenues equivalent to $8 million per month in the city of Mosul alone, and its total tax revenue amounted to the equivalent of $30 million per month, which was equivalent to $360 million annually.

Table (5)

Source: Prepared by the researcher.

As shown in Table (5), extortion is the first source of revenues for ISIS, followed by oil and natural gas, while smuggling of antiquities ranks last in the sources of its revenues, because the terrorist group of ISIS relied on imposing specific fees on smuggling of antiquities rather than smuggling antiquities.

It is worth noting that since its inception, ISIS had relied on extortion activities and achieved a budget between $70 million and $200 million in 2006, meaning that ISIS had a legacy in this type of operations.