There’s Only One Way To Bleed ISIS Dry

ISIS is the world's richest terror organization. Bombs and sanctions by the U.S. and its allies won't change that

ISIS fighters parade through Raqqa, Syria in June 2014 — REUTERS
Dec 11, 2015 at 4:08 PM ET

A steady barrage of U.S.-led airstrikes in Iraq and Syria over the last few weeks have killed the Islamic State’s finance minister and annihilated hundreds of oil tankers purportedly used for smuggling crude, a major source of ISIS’ revenue. But it will take far more than bombs to blow the terror group’s billion-dollar war chest to bits.

These displays of force may be spectacular at times, but they and the other tools that the U.S. has most readily available for fighting ISIS economically have thus far been ineffective. Even if America and its allies crushed ISIS’ entire oil outfit, which is estimated to be generating $500 million in revenue a year, the group would still be one of the best-funded terrorist organizations in the world, counter-terrorism experts concede. And it would still have the money and the capability to carry out another Paris-style attack or inspire the type of carnage that unfolded in San Bernardino last week.

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The same would be true were the U.S. to succeed in completely cutting off ISIS from the international financial system, which it has also been working to do.

The Islamic State’s diverse portfolio of criminal enterprises has kept the jihadist group flush with cash and frustrated those who have sought to shut off the funding spigot. It doesn’t just rely on oil for money. ISIS has plundered banks and looted antiquities. It’s kidnapped foreigners and sold off women and children as sex slaves. And, through a ruthless system of graft and coercion, ISIS has reportedly managed to bilk nearly a billion dollars out of the people living within its self-declared caliphate.

From the beginning, U.S. counter-terrorism officials have said that bleeding ISIS dry would not be easy. “We have no silver bullet, no secret weapon to empty ISIL’s coffers overnight,” said David Cohen, the then-Under Secretary for Terrorism and Financial Intelligence at the U.S. Treasury, in October 2014. “This will be a sustained fight, and we are in the early stages.”

But beyond the aggressive targeting of ISIS oil production and smuggling operations, which increased dramatically last month, the U.S. has thus far struggled to cut off its revenue. To date, the Treasury Department, which says it’s focused on keeping ISIS from accessing the international financial system in order to move money abroad or purchase needed imports, has imposed sanctions on nearly three dozen people linked to the terror group’s finances. It has also worked to shut down dozens of bank branches that were in areas under ISIS control in Iraq to further financially isolate the group. In September, the State Department announced that it would offer up to $5 million for information leading to the “disruption” of ISIS’ oil trade and trafficking of antiquities.

“That’s not going to put a big dent in their activities,” said Howard Shatz, a senior economist at the RAND Corporation who has studied the militant group’s finances, management and organization. The reason? ISIS doesn’t need foreign funds to flourish.

ISIS received around $5 million in foreign donations in 2014, said analysts and U.S. officials, less than one percent of the $1 billion-plus it brought in that year. That’s a marked departure from ISIS’ well-known rival, al-Qaeda, which has since its inception been bankrolled almost entirely by deep-pocketed donors abroad. Through years of counter-terrorism work, the Treasury Department and its international counterparts became adept at successfully targeting those financiers and their networks. But it has found those skills of far less use against ISIS, considering how little of tis money comes from such donations.

The revenue that ISIS takes in from stolen antiquities and oil exported beyond its borders is also relatively modest compared to other ISIS enterprises, experts say. As for vital imports, they can be covertly trucked into ISIS-held territory from Turkey or rebel-controlled areas in Syria with relative ease and purchased with cash by Islamic State militants, said Aymenn Jawad Al-Tamini, a fellow at the Middle East Forum.

“Border smuggling could be reduced if IS loses the remainder of the northern border territory it holds,” said Al-Tamini, using a different acronym for the Islamic State. “But that won’t stop these goods coming into IS-held territory.”

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ISIS also doesn’t need the international banking system to finance prospective terror attacks outside its territory, analysts say. Foreign fighters can potentially smuggle money out of Syria without being detected. Homegrown jihadists have also proven resourceful self-financers. Louise Shelley, the director of the Terrorism, Transnational Crime and Corruption Center at George Mason University, recently noted that ISIS members in Europe, including some involved in the Paris attacks, made money from illicit trade and petty crime.

“There is no evidence of bank transfers from ISIS in the Middle East funding the terrorist attacks in Europe,” Shelley told Vocativ by email.

The same is true with the ISIS-inspired rampage last week in San Bernardino, which left 14 people dead and another 2w wounded. Law enforcement officials in the U.S. believe that the killers, Tashfeen Malik and Syed Farook, carried out the attack with no financial or logistical support the militant group.

ISIS’ most lucrative money-making scheme comes in the form of taxes, fees and other types of extortion the Islamic State imposes on the people living under its rule. It collects cash from road tolls, traffic tickets and utilities. It skims off the top of workers’ paychecks and business transactions. The militant group even enforces stiff fines against those who smoke or wear improper clothing in its territory, which stretches across broad swaths of Syria and Iraq and is roughly the size of Belgium.

The payout is substantial. Some American and European officials estimate that the Islamic State now earns as much as $900 million a year through its system of shakedowns, the New York Times reported. Leaked financial documents kept by the Islamic State and reviewed by Vocativ showed that in just one of its 19 provinces the group made millions of dollars a month by confiscating homes, livestock and cartons of cigarettes, among other items. The ledger, which came from ISIS’ oil-rich Deir ez-Zor province, also showed that crude and gas accounted for less than a third of all revenue.

Even as thousands flee from ISIS-held territory and its spoils diminish, the terror group will be able to continue to drum up cash from the areas it controls, with or without oil, said Shatz and other experts who spoke with Vocativ.

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“Until the economy goes into complete collapse there’s money to be taken,” said Shatz., adding that he believes such a scenario is unlikely in the foreseeable future. “Ultimately, they need to be deprived of territory.”

A growing number of military strategists believe that would require sending U.S. combat troops into battle, a proposal that the Obama administration ardently opposes. Meanwhile, ISIS will continue to bank millions of dollars a day inside its territory—with or without oil, said Patrick Skinner, a terrorism expert and former CIA case officer.

“You can’t remove the Syrian and Iraqi economies from ISIS,” he said. “You have to remove ISIS from the economy.”