Why ISIS Has All the Money It Needs
It’s more than just oil.
Weeks before the attacks that killed 129 people in Paris,
U.S. warplanes resumed sorties above Syria and Iraq, targeting anew oil
fields and other parts of a vast petroleum infrastructure that
fuels—and funds—Islamic State, one of the richest terrorist armies the world has known.
These
airstrikes were launched not because U.S. officials were prescient.
They came after the Obama administration found and quietly fixed a
colossal miscalculation. U.S. intelligence had grossly overestimated the
damage they’d inflicted during airstrikes on the militants’ oil
production apparatus last year, while underestimating Islamic State’s
oil revenue by $400 million. According to U.S. Department of the
Treasury officials and data they released in the wake of the Paris
mayhem, the terrorist group is actually taking in $500 million from oil a
year. What’s more, just a few hours before the first Islamic State
suicide bomber blew himself up outside the Stade de France on Nov. 13,
U.S. Army Colonel Steve Warren conceded at a press briefing that some
American airstrikes disrupted IS oil operations for no more than a day
or two.
The
Obama administration “misunderstood the [oil] problem at first, and
then they wildly overestimated the impact of what they did,” says
Benjamin Bahney, an international policy analyst at the Rand Corp., a
U.S. Department of Defense-funded think tank, where he helped lead a
2010 study on Islamic State’s finances and back-office operations based
on captured ledgers. He says the radical revision on oil revenue came
after Treasury officials gained new intelligence on Islamic State’s
petroleum operations—similar to the ledgers Rand used for its
study—following a rare ground assault by American Special Operations
Forces this May. U.S. forces, operating deep into the group’s territory
in eastern Syria, targeted and killed an Islamic State “oil emir,” a man
known by the Arabic nom de guerre Abu Sayyaf, Pentagon officials said
at the time. (Treasury officials, who are charged with leading the
administration’s war on Islamic State’s finances, declined to comment
specifically on whether Abu Sayyaf’s ledgers were at the root of their
new estimates, but the agency has said the figures are extrapolated from
the militant group’s oil earnings from a single region in a single
month earlier this year.)
It’s
not clear how the U.S. got it so wrong, Bahney says, but he suspects
that the latest round of airstrikes are directly related to the
administration’s new math. “You have to go after the oil, and you have
to do it in a serious way, and we’ve just begun to do that now,” he
says. Yet even if the U.S. finally weakens the group’s oil income,
Bahney and other analysts in the U.S., the Middle East, and Europe
contend, Islamic State has resources beyond crude—from selling sex
slaves to ransoming hostages to plundering stolen farmland—that can
likely keep it fighting for years. In any case, $500 million buys a lot
of $500 black-market AK-47s.
Islamic
State got into the oil business long before it captured global
attention through barbaric beheading videos in the summer of 2014. It
seized Syrian border crossings to profit from oil smuggling. And it
tapped a network that’s operated for decades, dating to at least the
1990s, when Saddam Hussein evaded sanctions by smuggling billions of
dollars’ worth of oil out of Iraq under the United Nations’ Oil-for-Food
program.
Photographer: Yann Renoult
Most
often refined in Syria, the group’s oil is trucked to cities such as
Mosul to provide people living under its black banner with fuel for
generators and other basic needs. It’s also used to power the war
machine. “They have quite an organized supply chain running fuel into
Iraq and [throughout] the ‘caliphate,’ ” says Michael Knights, an Iraq
expert at the Washington Institute for Near East Policy, using the
militant group’s religiously loaded term for itself. Because the U.S.
apparently believed the real money for Islamic State came primarily via
selling refined oil, rather than crude, last year’s strikes heavily
targeted refineries and storage depots, says Bahney. He and other
experts say that strategy missed an important shift: Militants
increasingly sell raw crude to truckers and middlemen, rather than
refining it themselves. So while Islamic State probably maintains some
refining capacity, the majority of the oil in IS territory is refined by
locals who operate thousands of rudimentary, roadside furnaces that dot
the Syrian desert.
Pentagon
officials also acknowledge that for more than a year they avoided
striking tanker trucks to limit civilian casualties. “None of these guys
are ISIS. We don’t feel right vaporizing them, so we have been watching
ISIS oil flowing around for a year,” says Knights. That changed on
Nov. 16, when four U.S. attack planes and two gunships destroyed 116 oil
trucks. A Pentagon spokesman says the U.S. first dropped leaflets
warning drivers to scatter.
Beyond
oil, the caliphate is believed by U.S. officials to have assets
including $500 million to $1 billion that it seized from Iraqi bank
branches last year, untold “hundreds of millions” of dollars that U.S.
officials say are extorted and taxed out of populations under the
group’s control, and tens of millions of dollars more earned from looted
antiquities and ransoms paid to free kidnap victims.
The
taxes bring in real money. One example: Islamic State allows policemen,
soldiers, and teachers in its territory to atone for the “sin” of
having worked under religiously inappropriate regimes—for a fee.
Forgiveness comes in the form of a repentance ID card costing up to
$2,500, which requires an additional $200 a year to renew, according to
Aymenn Jawad al-Tami, a fellow at the Middle East Forum who closely
follows the group.
Arguably
the least appreciated resource for Islamic State is its fertile farms.
Before even starting the engine of a single tractor, the group is
believed to have grabbed as much as $200 million in wheat from Iraqi
silos alone. Beyond harvested grains, the acreage now controlled by
militants across the Tigris and Euphrates river valleys has historically
produced half of Syria’s annual wheat crop, about one-third of Iraq’s,
and almost 40 percent of Iraqi barley, according to UN agricultural
officials and a Syrian economist. Its fields could yield $200 million
per year if those crops are sold, even at the cut rates paid on black
markets. And how do you conduct airstrikes on farm fields?
For
his part, Bahney contends that the group’s real financial strength is
its fanatical spending discipline. Rand estimates the biggest and most
important drain on Islamic State’s budget is the salary line for up to
100,000 fighters. But the oil revenue alone could likely pay those
salaries almost two times over, Bahney says. He also believes they’ve
been running at a surplus. Bahney says that if the U.S. and its allies
are going to diminish the threat from Islamic State, they must recognize
that knocking out oil, while critical, isn’t enough. “They’ve built up
quite a bit of excess cash flow in the last year,” he warns. “So they’re
going to be able to keep this going for a while.”
—With Donna Abu-Nasr in Beirut and Larry Liebert in Washington
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