Cash-strapped jihadists look for revenues | Middle East| News and analysis of events in the Arab world | DW | 21.04.2016
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Middle East

Cash-strapped jihadists look for revenues

The "Islamic State" is losing money. Its income is dwindling in many areas. That is hampering the jihadists, but it is not taking them out of the fight. Europe still faces a threat.

Knowing Koran texts can save Iraqis and Syrians living in areas controlled by the terrorist organization "Islamic State" (IS) money. Because knowing the answers to questions about the Muslim holy book can save them from having to pay fines. These are levied when citizens are unable to correctly answer such questions.

Not only has the terror organization found another way to ideologically harass those living under its yoke, it also uses such measures to make money. Their financial situation is apparently so dismal that the group is now dependent upon even the smallest amounts of cash that it can raise.

At least that is what a new study on IS' financial situation concludes. The report, conducted by the consulting firm Information Holding Services (IHS), claims that the group's income has shrunk massively of late. Though IS was taking in upwards of $80 million (70 million euros) a month in the middle of last year, they currently only earn about $56 million a month. IS is still a major power in the region, but its earnings losses are serious and represent a growing challenge to its survival," says Ludovico Carlino, one of the study's authors.

The impact of airstrikes on revenue

The IHS study says that Russian airstrikes, but especially those carried out by the United States, have had a great effect. Columb Strack, another of the study's authors, says that IS has lost about 22 percent of its territory over the past 15 months. Even more dramatic are the rapidly shrinking numbers of people still living in IS territories. Early last year that number was around nine million, now it is about six million.

That represents a major loss of income for IS, as half of its finances are generated by taxation and confiscations. People living in IS territories are required to pay taxes and others - especially non-Sunni citizens - are also expropriated.

Bombing refineries

IS earns another 43 percent of its income through the sale of oil on the black market. The loss of extraction areas in this sector has resulted in great losses of income. Moreover, the Americans have specifically targeted oil installations with their strikes.

The airstrikes point to a change in US strategy. For a long time the US turned a blind eye to such oil sales: Too many civilians were involved. The Americans were afraid that the civilian population would turn against them if they attacked production sites or transportation routes. A truck driver that can successfully transport 30,000 liters (8,000 gallons) of crude oil can earn about $4,000 per delivery.

But after the November 2015 attacks in Paris, the Americans and Europeans changed their strategy. Within a few weeks about one-third of IS' fleet of 900 oil trucks had been destroyed.

Capping bank accounts

IS also finances itself through donations. These were very useful at the beginning of the civil war. A great many donations came from private initiatives in the Gulf region, especially Saudi Arabia. Sebastian Sons from the German Council on Foreign Relations says that governments have realized that they need to do something to cut off such funding. "Nevertheless they have been unable to stop the flow of money coming from private circles, charity organizations and foundations. Despite the fact that work to that end has been intensified since 9/11 and the Saudi's are also working to improve the situation," Sons told DW in a recent interview.

The airstrikes and the momentum of the Iraqi and Syrian armies are putting pressure on IS in other ways, too. Because as their territory shrinks, so does the potential for revenues earned through ransom, human trafficking and drug smuggling.

Palmyra World Heritage Site

The UNESCO World Heritage Site of Palmyra in Syria was recaptured from 'Islamic State' militants

IS finances are also being cut off by non-military means. Iraq, for instance, has forbidden banks operating in IS territories from making international transactions. Until that point, transactions had been averaging about $170 million (150 million euros) a month. IS raised about ten percent of that money through taxes.

Persons and institutions with connections to IS have also been black-listed internationally. Now, no one found on that list can use a bank.

Pay cuts

IS has already reacted to these losses; for instance, by cutting soldiers' pay in half, as the New York Times has reported.

IS has been weakened, but it has not been defeated, says Middle East expert Günter Meyer from the University of Mainz. He says that thousands of IS fighters have been pulled out of Syria and sent to Libya. "Libya is a failed state, and IS apparently sees its future there. So even if IS can be defeated in Syria, that will not mean the end of the group." Thus, IS remains a force to be reckoned with. "One cannot count on utterly defeating IS in the Muslim countries, nor with a lessening of the threat of terror in Europe."

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