In solving
any mystery, at least with regard to an organization as wealthy and capable as
the Islamic State, perhaps the second most important question that needs to be
asked after qui bono is qui solvit or ‘who pays?’ After all, not
only has the Islamic State proven itself capable of procuring or buying
advanced weaponry that has been more than a match for its adversaries, but , as
demonstrated, it was also able to set up very quickly public services for a
population of several million along with
an extensive network of public sector employment, and, so it would seem,
a subsidy system far more generous than that of any of the states or groups it
has been supplanting. In this sense almost overnight the new caliphate was able
to establish some of the same sort of allocative state structures, albeit more
modest, than one might find in the oil-rich rentier state Gulf Monarchies. But
puzzlingly, of course, this new Islamic proto-rentier state does not seem to have
the kind of sustained access to the billions of dollars in export revenues it
would really need to pay for everything.
To forestall or undermine a real investigation into ISIS funding, most efforts through the latter part of 2014, and most of 2015, duly concentrated on building up a ‘self-funding narrative for the Islamic State. In many ways this was a better orchestrated repeat of an earlier attempt to do the same for al-Qaeda in the weeks following 9/11. The self-funding narrative was also applied to Abu Musab al- Zarqawi’s al-Qaeda in Iraq in 2006 and then ultimately to the same Islamic State in Iraq that Abu Bakr al- Baghdadi was to join and eventually lead. In particular, a classified US intelligence report from October that year cited by the New York Times stated that al-Zarqawi’s Sunni insurgency had managed to become ‘self-sustaining financially, raising tens of millions of dollars a year from oil smuggling, kidnapping, counterfeiting, connivance by corrupt Islamic charities and other crimes that the Iraqi government and its US patrons.’ Declining to take the document at face value, on this occasion the Times made sure to interview a number of independent analysts, one of whom described the report’s findings as ‘imprecise and speculative’ while another noted ‘the absence of documentation of how the authors of the report arrived at their estimates.’[Lengthy testimonies by former veteran jihadists published by Oxford University since, has helped exposed such facile self-funding narratives].
Adopting much the same template as the 2006 US intelligence document after the Islamic State’s dramatic capture of Mosul in 2014, a slew of analysis pieces and think-tank reports have tried to build up a similar self-funding narratives. Mostly fueled by tidbits of gossip from the intelligence community or heavily recycled factoids only loosely checked at the point of origin, these have collectively, though mostly unwittingly, served to distract attention from the real networks responsible for boosting and then sustaining the Islamic State’s coffers.
First out of the starting blocks was the Brookings Institution, with a report published by its Qatar branch in November 2014 practically being a reproduction of the 2006 assessment. Of ISIS’s multiple sources of funding, these were understood to ‘include oil, gas, agriculture, taxation, extortion, kidnapping for ransom, black market antique selling, and other illicit trades.’ In an excellent article for Middle East Policy, Ahmad Hashim rightly cautioned against ‘many unverified statement’s about the sources of the Islamic State’s funding but nonetheless made no mention of possible external sponsors and instead simply put forward oil, tax, and extortion as the most likely explanations.
With the consensus quickly building, by March 2015 the Washington Post was confident enough to support the lede “It’s all about oil and extortion.” Neither the article nor its accompanying video included any discussion of possible donor networks. Similarly in May 2015 the New York Times broke down ISIS financing with extortion, bank looting and oil representing the lion’s share, again with no mention made of external sponsorship. In December 2015, the director of the US Department of the Treasury’s Office of Terrorism and Financial Intelligence told a British audience that “ the Islamic State has made more than $500 million from black market oil sales and looted between $500 million and $1 billion from bank vaults captured in Iraq and Syria… ‘unlike many other terrorists groups, the Islamic State derives a relatively small share of its funding from donors abroad.” Even as late as January 2016 the defense editor of the Daily Telegraph still felt comfortable in coming to the same conclusion adding that ‘a Saudi initiative to fund moderate Muslim leaders could prove vital in curbing the growth of Islamist-inspired terrorism.’
There is no doubt that the activities briefly cited in such reports have been generating at least some income for the Islamic State. According to a local activist’s account, for example, the organization was said to have been collecting 2.5 percent of all proceeds from business owners under the guise of zakat or obligatory religious charity. The same sources did, however, acknowledge that the zakat was then being used for services. But most of the more widely circulated claims, including those put forward by US and British officials, that the Islamic State has been enriching itself by running a punishing tax heavy regime, have simply made no sense, not least given the organization’s need to boost its popularity, but also in view of its efforts to provide local businessmen with a fairer and more consistent fiscal system than those found in neighboring territories.
Likely derived from comments made by Iraqi lawmaker and one-time CIA asset Ahmed Chalabi, Fox News came up with a surprisingly accurate figure of $429 million that had been supposedly looted from Mosul’s central vaults. Quickly gong viral, the narrative went mostly unchallenged, and US officials waited for more than a year before acknowledging that the Mosul Central Bank had in fact not been pillaged and that the Islamic State kept it open for several months, while even continuing to pay the salaries of its staff. Indeed, as the Financial Times noted, ‘Not a single witness account has emerged of the Islamic State making off with any money, and the executives and employees from among twenty private banks and fifteen government bank branches in Mosul say there is no evidence that militants stole any money. Adding more to the picture, in May 2015 the chairman of Jordan’s Capital Bank revealed in an interview that his Mosul branch was still going strong, having been completely unaffected by the Islamic State’s presence. He also remarked that everything was ‘business as usual’ in Mosul and that the ‘lifestyle of the people’ was also unchanged.
Neither is there any evidence that the Islamic State issued a ruling permitting the removal of organs from apostates in order to save the lives of Muslims and it seems unlikely that such activity could really have been serving as a major source of income. A bit more credible, it seems, has been the idea that the Islamic State is doing a healthy trade in selling off Iraqi and Syrian antiquities. By Spring 2015 Interpol estimated that $100 million a year was being made in this way, with its database having logged more than five thousand missing artifacts. Using archives of satellite imagery of archeological sites to investigate these claims, a Dartmouth College anthropologists determined that antiquities were certainly being stolen, but that the activity was actually more widespread in areas controlled by Syrian rebels and Kurdish groups.
Of all the self-funding explanations, the most convincing has been that the Islamic State operates a lucrative black market oil-smuggling network. No other combination of funding sources is enough to explain the hundreds of millions or even billions of dollars to which the organization seemed to have access. By the summer 2014 descriptions began to circulate of the new caliphate being effectively a “petro state” on the basis that it had cut out the oil middleman and was receiving as much as $25 to $60 a barrel from oilfields in its possession. Others, meanwhile, claimed that ISIS was generating between $3 and $5 million a day from an estimated daily production of eighty thousand barrels. For the next six months, more or less every Islamic-State –related article that appeared in the Western media recycled at least one of these statistics, but in almost every case offered no further evidence.
Only in February 2015 did the Department of Defense officials acknowledge that oil was unlikely to be the Islamic State’s main income stream. Within a few weeks the G7’s intergovernmental Financial Action Task Force managed to reach the same conclusion, stating that although ‘the Islamic State has been engaging in energy-related commerce’ there was no sound estimate in existence for its revenues and that the trade ‘had probably diminished in importance,’ though some US officials persisted with claims that oil continued to generate hundreds of millions of dollars in revenue for the Islamic State. Nonetheless, as the secretary general of the Union of Arab banks described, a number of banks in the Middle East had been coming under increased scrutiny by the US because, as he put it, the Department of the Treasury knows that the Islamic State ‘needs constant funding, unlike al-Qaeda, which may require a small amount of money to conduct specific operations.’
By September 2015 the self-funding myth seemed to be coming to an end, with the Department of the Treasury’s assistant secretary for terrorism financing admitted that the Islamic State had ‘immense wealth’ and was a ‘sprawling international network with tentacles across Europe, Asia, and the Middle East. After describing this latter scenario to them, more than ninety percent of the author’s interviewees on this topic agreed it was accurate, although a substantial number pointed out that the tentacles were actually going into the Islamic State rather than coming out of it.
Given their ideological similarities and the demonstrable strategic value of the Islamic State to their foreign policies, some have naturally suggested that the organization is the latest baby of conservative Gulf monarchies such as Saudi Arabia, Qatar, and Kuwait (in addition: Oman, UAR, Dubai and the Gulf Cooperation Council generally). Indeed, in the context of the well-documented roles of some of their state-backed bodies in the earlier financed al-Qaeda, along with known permissiveness of their security and judicial institutions towards al-Qaeda operatives, this has been both a reasonable and logical inquiry. Getting the ball rolling just a few weeks after the Islamic State arrived in Mosul, former M16 director Richard Dearlove told an audience that he had no doubt that wealthy Saudis had ‘played a central role in the Islamic State’s surge into Sunni areas of Iraq and Syria.. Going further, he pointed to a Riyadh-led sectarian plot by noting that in the immediate wake of 9/11 a senior Saudi had once warned him that ‘the time is not far off in the Middle East, Richard, when it will be literally be God help the Shia.” A few months later US vice president Joe Biden waded in, telling a gathering at Harvard University that ‘the biggest problem the US faces in dealing with Syria and the rise of the Islamic State is America’s allies in the region.” Adelfattah Sisi has used these disclosures as an opportunity to pin Islamic State funding on Qatar, the backers of his Muslim Brotherhood enemies.” In Kuwait, despite the government’s public efforts that aim to show it is at least its trying to do something about the Islamic State, MP’s such as Faisal al-Duwaisan have continued to claim that ‘parties in Kuwait are contributing to the Islamic State and have warned that ‘if the government does nor educate its children. . . the Islamic State would be in Kuwait in less than two years.
Understandably, such high profile and widely read accusations have greatly unnerved those who still seek to protect the reputation of the Gulf monarchies.
To forestall or undermine a real investigation into ISIS funding, most efforts through the latter part of 2014, and most of 2015, duly concentrated on building up a ‘self-funding narrative for the Islamic State. In many ways this was a better orchestrated repeat of an earlier attempt to do the same for al-Qaeda in the weeks following 9/11. The self-funding narrative was also applied to Abu Musab al- Zarqawi’s al-Qaeda in Iraq in 2006 and then ultimately to the same Islamic State in Iraq that Abu Bakr al- Baghdadi was to join and eventually lead. In particular, a classified US intelligence report from October that year cited by the New York Times stated that al-Zarqawi’s Sunni insurgency had managed to become ‘self-sustaining financially, raising tens of millions of dollars a year from oil smuggling, kidnapping, counterfeiting, connivance by corrupt Islamic charities and other crimes that the Iraqi government and its US patrons.’ Declining to take the document at face value, on this occasion the Times made sure to interview a number of independent analysts, one of whom described the report’s findings as ‘imprecise and speculative’ while another noted ‘the absence of documentation of how the authors of the report arrived at their estimates.’[Lengthy testimonies by former veteran jihadists published by Oxford University since, has helped exposed such facile self-funding narratives].
Adopting much the same template as the 2006 US intelligence document after the Islamic State’s dramatic capture of Mosul in 2014, a slew of analysis pieces and think-tank reports have tried to build up a similar self-funding narratives. Mostly fueled by tidbits of gossip from the intelligence community or heavily recycled factoids only loosely checked at the point of origin, these have collectively, though mostly unwittingly, served to distract attention from the real networks responsible for boosting and then sustaining the Islamic State’s coffers.
First out of the starting blocks was the Brookings Institution, with a report published by its Qatar branch in November 2014 practically being a reproduction of the 2006 assessment. Of ISIS’s multiple sources of funding, these were understood to ‘include oil, gas, agriculture, taxation, extortion, kidnapping for ransom, black market antique selling, and other illicit trades.’ In an excellent article for Middle East Policy, Ahmad Hashim rightly cautioned against ‘many unverified statement’s about the sources of the Islamic State’s funding but nonetheless made no mention of possible external sponsors and instead simply put forward oil, tax, and extortion as the most likely explanations.
With the consensus quickly building, by March 2015 the Washington Post was confident enough to support the lede “It’s all about oil and extortion.” Neither the article nor its accompanying video included any discussion of possible donor networks. Similarly in May 2015 the New York Times broke down ISIS financing with extortion, bank looting and oil representing the lion’s share, again with no mention made of external sponsorship. In December 2015, the director of the US Department of the Treasury’s Office of Terrorism and Financial Intelligence told a British audience that “ the Islamic State has made more than $500 million from black market oil sales and looted between $500 million and $1 billion from bank vaults captured in Iraq and Syria… ‘unlike many other terrorists groups, the Islamic State derives a relatively small share of its funding from donors abroad.” Even as late as January 2016 the defense editor of the Daily Telegraph still felt comfortable in coming to the same conclusion adding that ‘a Saudi initiative to fund moderate Muslim leaders could prove vital in curbing the growth of Islamist-inspired terrorism.’
There is no doubt that the activities briefly cited in such reports have been generating at least some income for the Islamic State. According to a local activist’s account, for example, the organization was said to have been collecting 2.5 percent of all proceeds from business owners under the guise of zakat or obligatory religious charity. The same sources did, however, acknowledge that the zakat was then being used for services. But most of the more widely circulated claims, including those put forward by US and British officials, that the Islamic State has been enriching itself by running a punishing tax heavy regime, have simply made no sense, not least given the organization’s need to boost its popularity, but also in view of its efforts to provide local businessmen with a fairer and more consistent fiscal system than those found in neighboring territories.
Likely derived from comments made by Iraqi lawmaker and one-time CIA asset Ahmed Chalabi, Fox News came up with a surprisingly accurate figure of $429 million that had been supposedly looted from Mosul’s central vaults. Quickly gong viral, the narrative went mostly unchallenged, and US officials waited for more than a year before acknowledging that the Mosul Central Bank had in fact not been pillaged and that the Islamic State kept it open for several months, while even continuing to pay the salaries of its staff. Indeed, as the Financial Times noted, ‘Not a single witness account has emerged of the Islamic State making off with any money, and the executives and employees from among twenty private banks and fifteen government bank branches in Mosul say there is no evidence that militants stole any money. Adding more to the picture, in May 2015 the chairman of Jordan’s Capital Bank revealed in an interview that his Mosul branch was still going strong, having been completely unaffected by the Islamic State’s presence. He also remarked that everything was ‘business as usual’ in Mosul and that the ‘lifestyle of the people’ was also unchanged.
Neither is there any evidence that the Islamic State issued a ruling permitting the removal of organs from apostates in order to save the lives of Muslims and it seems unlikely that such activity could really have been serving as a major source of income. A bit more credible, it seems, has been the idea that the Islamic State is doing a healthy trade in selling off Iraqi and Syrian antiquities. By Spring 2015 Interpol estimated that $100 million a year was being made in this way, with its database having logged more than five thousand missing artifacts. Using archives of satellite imagery of archeological sites to investigate these claims, a Dartmouth College anthropologists determined that antiquities were certainly being stolen, but that the activity was actually more widespread in areas controlled by Syrian rebels and Kurdish groups.
Of all the self-funding explanations, the most convincing has been that the Islamic State operates a lucrative black market oil-smuggling network. No other combination of funding sources is enough to explain the hundreds of millions or even billions of dollars to which the organization seemed to have access. By the summer 2014 descriptions began to circulate of the new caliphate being effectively a “petro state” on the basis that it had cut out the oil middleman and was receiving as much as $25 to $60 a barrel from oilfields in its possession. Others, meanwhile, claimed that ISIS was generating between $3 and $5 million a day from an estimated daily production of eighty thousand barrels. For the next six months, more or less every Islamic-State –related article that appeared in the Western media recycled at least one of these statistics, but in almost every case offered no further evidence.
Only in February 2015 did the Department of Defense officials acknowledge that oil was unlikely to be the Islamic State’s main income stream. Within a few weeks the G7’s intergovernmental Financial Action Task Force managed to reach the same conclusion, stating that although ‘the Islamic State has been engaging in energy-related commerce’ there was no sound estimate in existence for its revenues and that the trade ‘had probably diminished in importance,’ though some US officials persisted with claims that oil continued to generate hundreds of millions of dollars in revenue for the Islamic State. Nonetheless, as the secretary general of the Union of Arab banks described, a number of banks in the Middle East had been coming under increased scrutiny by the US because, as he put it, the Department of the Treasury knows that the Islamic State ‘needs constant funding, unlike al-Qaeda, which may require a small amount of money to conduct specific operations.’
By September 2015 the self-funding myth seemed to be coming to an end, with the Department of the Treasury’s assistant secretary for terrorism financing admitted that the Islamic State had ‘immense wealth’ and was a ‘sprawling international network with tentacles across Europe, Asia, and the Middle East. After describing this latter scenario to them, more than ninety percent of the author’s interviewees on this topic agreed it was accurate, although a substantial number pointed out that the tentacles were actually going into the Islamic State rather than coming out of it.
Given their ideological similarities and the demonstrable strategic value of the Islamic State to their foreign policies, some have naturally suggested that the organization is the latest baby of conservative Gulf monarchies such as Saudi Arabia, Qatar, and Kuwait (in addition: Oman, UAR, Dubai and the Gulf Cooperation Council generally). Indeed, in the context of the well-documented roles of some of their state-backed bodies in the earlier financed al-Qaeda, along with known permissiveness of their security and judicial institutions towards al-Qaeda operatives, this has been both a reasonable and logical inquiry. Getting the ball rolling just a few weeks after the Islamic State arrived in Mosul, former M16 director Richard Dearlove told an audience that he had no doubt that wealthy Saudis had ‘played a central role in the Islamic State’s surge into Sunni areas of Iraq and Syria.. Going further, he pointed to a Riyadh-led sectarian plot by noting that in the immediate wake of 9/11 a senior Saudi had once warned him that ‘the time is not far off in the Middle East, Richard, when it will be literally be God help the Shia.” A few months later US vice president Joe Biden waded in, telling a gathering at Harvard University that ‘the biggest problem the US faces in dealing with Syria and the rise of the Islamic State is America’s allies in the region.” Adelfattah Sisi has used these disclosures as an opportunity to pin Islamic State funding on Qatar, the backers of his Muslim Brotherhood enemies.” In Kuwait, despite the government’s public efforts that aim to show it is at least its trying to do something about the Islamic State, MP’s such as Faisal al-Duwaisan have continued to claim that ‘parties in Kuwait are contributing to the Islamic State and have warned that ‘if the government does nor educate its children. . . the Islamic State would be in Kuwait in less than two years.
Understandably, such high profile and widely read accusations have greatly unnerved those who still seek to protect the reputation of the Gulf monarchies.
Shadow Wars; The
Secret Struggle for the Middle East by Christopher Davidson, Chapter 9.
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