Isegoria

According to U.S. Department of the Treasury officials, ISIS is taking in $500 million from oil a year — and that’s not their only source of revenue:

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.

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.

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