As territory shrinks, ISIL looks for new money sources

As the battle to retake Mosul gets under way, ISIL is being denied access to revenue sources such as oil and gas, and cash reserves that amounted to more than US$1 billion (Dh3.7bn) in 2014, the US treasury departments says.

WASHINGTON // As ISIL’s territory shrinks to half its original size and its dreams of a caliphate evaporate, the group’s fighters are losing access to the sources of revenue that once gave them their power, prompting them to turn to extortion, kidnapping or foreign donations like its predecessor, Al Qaeda.

ISIL had a unique ability to capitalise on the natural resources of its territory in Iraq and Syria and swiftly implement a system of taxation and governance that allowed it to rule an area that once was the size of Switzerland.

As the battle to retake Mosul – the group’s last major stronghold in Iraq – gets under way, ISIL is being denied access to revenue sources such as oil and gas, and cash reserves that amounted to more than US$1 billion (Dh3.7bn) in 2014, according to Daniel Glaser, the US treasury department’s assistant secretary for terrorist financing.

With those resources slipping away, ISIL is expected to revert to “traditional methods we see Al Qaeda using – whether it’s deep-pocket donors, whether it’s charities, whether it’s NGOs, whether it’s criminal activity,” Mr Glaser said.

Beyond oil and gas sales, ISIL generated some $30 million per month in Iraq from taxation and extortion in 2015.

Hisham Al Hashimi, an expert on ISIL who advises the Iraqi government, said the militant group makes about $4m per month from taxes in Mosul alone. He added that the group charges a 4 per cent income tax on salaries less than $600 per month, and 5 per cent on monthly salaries between $600 and $1,000.

Bank robberies made up the group’s third-biggest source of revenue, mainly in Mosul where there was more than $500m in state-owned bank vaults when the extremists captured the city in June 2014. But that was “a one-time take for them” and they are quickly burning through that cash, Mr Glaser noted.

Mr Glaser said fighter salaries have halved in some areas, including in the Syrian city of Raqqa, the group’s de facto capital. ISIL has also set up an internal corruption agency, suggesting that corruption may be a factor.

To compensate, there has been a noticeable spike in ISIL’s revenue from criminal activity, such as extortion. The Paris-based Centre for the Analysis of Terrorism said extortion accounted for a third of its revenue in 2015, compared to 12 per cent in 2014.

In Deir Ezzour, Ziad Awad, the editor of online publication The Eye of the City, said the militants’ access to resources, including oil, has been halved amid ongoing coalition airstrikes, which are complicating oil sales and transportation.

The oil wells were “bringing in about $2 million daily”, Mr Awad said. “This has shrunk because they’ve lost markets inside Syria and Iraq, due to shrinking territory.”

The group is shifting from a governing force to a militant group on the run.

“ISIS losing territory is good, but to launch an attack in Europe or the US or any part of the world doesn’t cost a lot,” said Yaya J Fanusie, director of analysis at the Foundation for the Defence of Democracies’ Centere on Sanctions and Illicit Finances and a former CIA counterterrorism analyst.

“If they’re being squeezed in Syria and Iraq and directing their resources on attacks externally and less on governance, then it doesn’t mean they’re not a dangerous force.”

* Associated Press