To Understand Why the Islamic State Is So Dangerous, Follow the Money

To Understand Why the Islamic State Is So Dangerous, Follow the Money

The news: What the Islamic State lacks in subtlety and tolerance, it makes up for in cash.

According to Bloomberg, the U.S.-designated terror organization rakes in over $2 million daily from a combination of "oil sales, extortion, taxes and smuggling." That's $730 million a year, making it "the wealthiest terrorist group" in recorded history.

For perspective, most American businesses earn less than $50,000 in annual receipts.

How they do it: Of course, U.S. businesses have the clear disadvantage of being bound by law and paying taxes. IS does not, and revenue options are plentiful when you command an area of Iraq and Syria larger than the U.K. 

Bloomberg reports that IS extracts 40,000 barrels daily from the seven oil fields it controls in Iraq alone. Add that to the six it runs in Syria, and the group hauls in about $2 million a day in "cash or bartered goods" -- charging between $25 and $60 per barrel throughout Kurdistan, Syria, Turkey and Jordan.

It doesn't stop there: Tactics like extortion and kidnapping – the latter of which gained notoriety with the group's recent execution of journalist James Foley – are an additional multimillion-dollar revenue source. Bloomberg claims IS has raised $10 million in ransom payments in recent years.

Patrick Johnson, a counterterrorism specialist with Rand Corp., also told Bloomberg the group "makes their money primarily – if not entirely – locally," suggesting it uses strategies similar to the targeted extortion of "drug smugglers, mobile phone operators ... aid projects" and local citizens that made the Taliban $400 million in 2011.

Is there precedent for this? Not at this scale.

What sets IS apart is its access to oil fields and local tax revenue, according to Bloomberg. When it seized the northern Iraqi city of Mosul in June, IS gained control of the region's densely populated cities and has taxed residents heavily ever since.

While its ambition toward national governance suggests it will eventually have to pay for running entire nations, for now its money is funneled primarily into maintaining local institutions, keeping its "war machine" running and recruitment.

Why it's so successful: In a word, self-sufficiency.

Where organizations like al-Qaida and the Taliban rely heavily on foreign donations and sympathetic governments -- all of which are subject to "squeezing" through "sanctions, diplomacy and law enforcement" -- the Islamic State's emphasis on local revenue streams makes them relatively immune to the same concerns.

It also makes it "very resilient," New American Foundation research fellow Brian Fishman told Bloomberg. "It's going to take a long time to crunch them."

So where do we start? Follow the money.

According to Bloomberg, some experts are skeptical the $2 million-a-day estimate accurately represents the money IS has at its disposal. Yet even if it controls less than the "purported $2 billion" some suggest, a large-scale attack on the U.S. or Europe is easily within its grasp: The Sept. 11, 2001 World Trade Center attacks cost just $1 million, Bloomberg says.

Current plans to disrupt the Islamic State's cash flow include targeting its oil distribution networks and bolstering financial intelligence. No matter how you look at it, this battle doesn't appear to be ending anytime soon.

h/t The Daily Beast