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Islamic State is in deep financial trouble, study says

LONDON — When the Islamic State advanced in Syria and Iraq in 2014, its fighters looted banks, took over oil fields and kidnapped foreigners, seemingly without facing much resistance. But fortunes have changed, and the caliphate is in deep financial trouble, according to a new study.

The report, released by the London-based International Center for the Study of Radicalization and accounting group Ernst & Young, estimates that the revenue for the Islamic State, also known as ISIS, has fallen by about 50 percent over the past two years.

"It is clear that the Islamic State's business model is failing," said ICSR director Peter Neumann. "It used to be the world's richest terror group because it basically was a state. But its biggest strength at that time — the ability to loot and extract money through taxes in newly conquered territories — became its most significant weakness as it suffered battlefield losses."

The new numbers, based on internal Islamic State documents obtained by the researchers as well as a review of previous analyses, challenge previous estimates of the Islamic State's finances by the U.S.-led coalition against the group, which may have been exaggerated. The study will be presented at the Munich Security Conference today.

The fragility of the Islamic State's financing model was already evident in 2014. Looting, confiscations and taxes constituted the most significant revenue source for the jihadist group at the time. As the group's advance began to stall, the overall share of looting among the group's total revenue dropped from 52 percent in 2014 to 20 percent in 2015.

Taxes and oil revenue became more important, but both are inherently risky ways of earning money for militant groups. The coalition led by the United States targeted the group's oil fields in air strikes as more locals fled its territory.

As local fighters started to push back Islamic State militants in Syria and Iraq in 2016, all revenue sources declined — apart from ransom money paid by governments for kidnapped citizens. The researchers believe that ISIS losing control over the densely populated Iraqi city of Mosul would result in a major drop in revenue for the group and in a significant setback for the financing of its battlefield apparatus.

Islamic State is in deep financial trouble, study says 02/17/17 [Last modified: Friday, February 17, 2017 8:03pm]
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