ISIS’s wealth: Stronger than ever or in decline?

Though its financial strength was initially dependent on oil, a report shows that oil now only makes up a fraction of its revenue

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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.

“I don't see any clear vulnerabilities” to ISIS’s financial strength, said RAND’s Ben Bahney, who co-authored the findings that the NYT published. “The airstrikes have helped reduce ISIS's oil revenue, probably to a fraction of the proceeds they were making nine months ago. Beyond that, the coalition has worked to reduce donations from abroad but this is not a major ISIS funding source.”

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.

“Over the medium to long term, ISIS will only exist if the international community finds new ways to make mistakes. It should not have long-term roots. It does not have, over time, a sustainable economic model, even though it is aptly described as the best financed terrorist group that ever existed,” said Dr Matt Levitt, a fellow at the Washington Institute for Near East Policy.

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.


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.

What can be done now?

The United States and the European Union have worked toward targeting the middlemen that have been facilitating these deals for ISIS. However, this is currently not the focus of the international campaign against the group.

Coalition forces have been engaged in a steady air campaign that has proven effective in slowing ISIS’s territorial gains and oil-refining capabilities. “In the near term, the best tool at our disposal is military… If they don’t control the territory, [ISIS] can’t engage in these schemes and frauds,” Levitt said.

In Syria last week, American special forces launched a rate military raid that resulted in the killing of a man known as Abu Sayyaf, who was a member of ISIS’s leadership. He was described as the “emir of oil and gas” who directed ISIS’s “illicit oil, gas and financial operations,” according to a statement by U.S. Defense Secretary Ashton Carter. Abu Sayyaf’s wife, known as Um Sayyaf, was taken into custody by the Americans following the raid.

While there have been small yet significant blows to ISIS’s growth and leadership, the key to sustaining these gains is for the Iraqi government to work to regain control and governance of the territories that ISIS now controls.

ISIS has been “successful because it’s engaging in insurgency against failing regimes in Syria and Iraq… In Iraq, there is a credible government” but it needs to create greater stability and inclusiveness in an effort to fill the gaps that ISIS is exploiting, Levitt said.

There may be some disagreement among experts on how strong ISIS is financially, but most agree that political and social stability in Iraq and Syria would suffocate the leave group with few life lines at its disposal.