Beirut: By most estimates, Daesh is the world’s richest terrorist organisation. But it appears to be wrestling with money problems that could affect its ability to wage war while trying to govern millions of people in its self-declared caliphate.
US-backed forces in Iraq and Syria have retaken significant amounts of territory from the group, depriving it of traditional sources of income, analysts say. Towns and villages that Daesh had relied on for tax revenue have been captured by Arab and Kurdish opponents. And lucrative spoils of war, including oil fields, properties to confiscate and captives to ransom off, have become scarcer as the group struggles to seize new areas.
“A problem they face is that much of their income over the last two years has been through conquest, confiscation and extortion, and those are all one-time things that aren’t sustainable,” said Quinn Mecham, an assistant professor of political science at Brigham Young University. “And now they’re losing territory, and that makes it difficult to continue to extract revenues. The pressure is on.”
Information about Daesh’s finances is murky. But the group’s diverse sources of income, including extortion and antiquities smuggling, have helped it weather more than a year of air strikes from a US-led coalition, analysts say.
A senior State Department official estimated Friday that the militants are making between $1 million and $1.5 million a day selling oil products, but the official insisted that a new coalition focus on bombing their infrastructure and delivery trucks has lowered the quality - and the price - of the product and made distribution more difficult, and eventually will have a monetary impact.
Through a complex bureaucracy that uses the threat of violence, including floggings and beheadings, Daesh also raises cash by taxing and fining the roughly 6 million to 9 million people in parts of Iraq and Syria who live under its rule.
A Daesh official told Arabic-language media outlets in January that the group had a 2015 budget of $2 billion. Although that’s probably an exaggerated figure, the group may have accumulated enough cash to run a large budget surplus, said Benjamin Bahney, a terrorism analyst at the Rand Corp. think tank.
But Daesh has lost as much as a third of the territory it had controlled in Iraq, including the city of Tikrit and the Baiji oil refinery. Iraq’s military and pro-government militias have recaptured those areas with the help of air strikes from the US-led coalition. In Syria, too, coalition air support has aided an alliance of Kurdish and Arab forces in seizing from Daesh militants key areas near the group’s self-declared capital, Raqqa.
“As it loses control of cities and as its economy suffers because of the war, its tax revenues are reduced,” said William McCants, a Brookings Institution expert on the militant group.
The territorial setbacks also may have compelled the group to turn to terrorism abroad - including the recent attacks in Paris that left 130 people dead - as a way to apply new pressure on its enemies, analysts say. The group, they say, appears to be shifting resources to reinforce affiliates in other areas of the world, including Libya, possibly to secure a safe haven in case it loses more territory in Syria and Iraq.
There are signs that the group might be tightening its budget. Fighters’ salaries have been reduced recently, from roughly $400 a month to about $300, said Columb Strack, a Middle East analyst at Jane’s Information Group. In addition to a tax system rooted in a radical interpretation of Islamic law, he said, the group appears to be imposing more fees on a range of activities and products, including farming and mobile phones.
Aid programmes that benefit the needy in Daesh areas appear to have been scaled back, causing poverty to deepen, Syrian activists and aid workers say. These areas, they say, are experiencing acute shortages of medicine for chronic diseases such as diabetes, as well as prolonged electricity cuts.
Ayman Al Tamimi, a fellow at the Middle East Forum who studies Daesh’s finances, said the group took a big hit this summer when Iraq’s government stopped paying civil servants living in areas the militants had captured, including the city of Mosul.
For months, Iraqi authorities had continued to pay the salaries, and Daesh taxed that income, earning the group a windfall that some estimates put at tens of millions of dollars a month.
Without such easy money, Daesh has raised its fees, even on high school registration and textbooks, Al Tamimi said.
“Now, evidence seems to point to hardship in Mosul, and [Daesh] has been resorting to measures to try to deal with the new reality of having to pay those working under its authority who no longer get salaries directly from the Iraqi government,” he said.
But few expect widespread dissent in Daesh-controlled areas anytime soon, in large part because of fear of the group’s brutality. The threat of violence also prevents many people from fleeing, along with war, anemic economies and sectarian-driven politics in neighboring areas.
Colin P. Clarke, a terrorism analyst at the Rand Corp., said he expects the group’s finances to tighten as air strikes intensify.
“There will be a lag in seeing the effects, but in order to keep operations going, the group will likely have to reduce payments and the number of people working for it,” Clarke said.
British warplanes began bombing targets in Syria on Thursday, striking an Daesh-controlled oil field, the BBC reported.
Russia, which does not coordinate with the coalition, also has stepped up air raids in Daesh’s key oil-producing areas in eastern Syria.
Russia has charged that Daesh is selling much of its Syrian oil to Turkey, but the State Department official said the amount traveling into Turkey is minuscule and trafficked only by smugglers outside government control.
“The oil is being consumed almost entirely inside areas of [Daesh] control of Syria” and is being traded with the regime of Syrian President Bashar Al Assad, said the official, who spoke on the condition of anonymity under State Department ground rules.
The official described a steady degrading of the militants’ ability to refine oil products over the past year, and a sharp increase in recent weeks in the destruction of infrastructure and trucks that ship the oil as a result of US air strikes, now supplemented by French and British warplanes.
Asked whether the strikes have begun to have an impact on Daesh income, the official said: “Ask me again in three, four weeks from now, when we’ve had more time to analyse and see what’s lasting versus what’s temporary adjustments, and I’ll be able to give you a better answer on that.”
