The United States expended a large amount of resources to fight the Islamic State of Iraq and Syria (ISIS), but what would have happened if the United States did not fight ISIS or at least put less resources towards fighting ISIS. From what I can tell, we may not be living in a world very much different from today. To be clear, I’m not saying that the United States should not have fought ISIS, this article is just explaining why ISIS may have fallen apart as a self proclaimed state even without outside intervention.
The reason I believe ISIS would have fallen apart as a state is because of a paper I wrote several years back. The paper explains how ISIS had inefficient and extractive revenue streams and due to this reason would likely collapse into a different organization structure. In fact, the paper seems to have been correct. ISIS now has more of a skeleton structure similar to al Qaeda.
This article will provide a brief overview of ISIS’ historical revenue and compare it to Al Qaeda and Hizballah’s historical revenue streams. The article will then provide a more detailed explanation of how inefficient and extractive revenue streams could have led to ISIS collapsing into a skeleton structure even without US intervention.
Revenue in the Islamic State
In its early stages, ISIS had a lot of costs. For instance, in March 2014, ISIS spent $5,587,000. However, the terror group also had a large amount of revenue, estimated at $8,438,000 for March 2014. According to leaked accounting documents, the majority of this revenue came from oil wells (27.7% of income), electricity (3.9% of income), taxes (23.7% of income), and confiscations (47.7% of income). Some of their revenue also came from criminal activities in the forms of extortion and kidnapping for ransom.
Despite selling oil at below market prices, the organization was able to make one million USD per day from the selling of oil. Oil sales continued while air strikes pounded ISIS controlled oil fields and while security tightened at the Turkish and Kurdistan borders, which was where much of ISIS’ oil was sold. Kidnappings also generated millions of dollars for the organization. It was estimated that in one year alone ISIS received $20 million to $45 million in ransoms. Additionally, $200 million of ISIS’ funds were estimated to have come from cultural looting (classified as taxes under ISIS’ accounting system).
Although ISIS generated much money from these revenue streams, these revenue streams were inefficient in the long run and contrary to other terrorist organizations were based on local extractive sources. Other terrorist organizations had revenue based on more global revenue streams such as global trafficking and the utilization of front organizations and financial institutions.
Efficient Revenue in Other Terror Organizations
As mentioned earlier, other terrorist organizations base their revenue on global sources such as money laundering and trafficking. For example, Hizballah used human, arms, and drug trafficking to obtain funding while al-Qaeda used drug trafficking to obtain funds. Both al-Qaeda and Hizballah obtained funds from financial institutions and from donations taken from front organizations.
In particular, it has been reported that Hizballah has used Bayt al-Mal and the Youser company for banking, investing, crediting, the securement of loans, and to make business deals that support Hizballah’s operations. Al Qaeda has also used companies to fund its operations. Most notably, al-Qaeda used Barakaat, a network of companies that performed telecommunication, construction, and cash exchange services. The owners of Barakaat transferred millions of dollars from the US to al-Qaeda. Al-Qaeda also used inactive and liquidating companies in the Bahamas and Delaware to receive funds.
Inefficiency in the Islamic State
Hizballah and Al Qaeda’s historical revenue streams stand in stark contrast to the revenue streams that were held by ISIS. The inefficiency in ISIS’ revenue streams applied to ISIS’ oil fields, funds generated from criminal activities, and ISIS’ taxation measures. In particular, the terrorist organization’s oil fields in Syria were mature and in need of water injection, which would have been complex to complete. At the time, Iraq had more lucrative oil fields but these were mostly out of ISIS control.
In terms of funds generated from criminal activities, these revenue streams were not something that could be sustained in the long term. For instance, funds obtained from looting cultural artifacts depend on continually finding new cultural artifacts which depends on gaining new territory. As more territory is gained it increases the terrorist organization’s costs. This means that cultural looting would have only worked in the short term. Other criminal activities ISIS participated in to raise funds followed this same pattern and logic, including kidnappings and extortion. More explicitly stated, this pattern of logic is that ISIS had to expand their territory to simply gain more revenue. So as the organization gained more revenue, they also gained more expenses, mostly related to administering territory. For ISIS, this loop was compounded by ISIS’ revenue being inefficient, which increased the need to seek out even more extractive revenue streams.
Today, ISIS is now best explained as a global network of loosely organized branches and cells with different financial activities that are coordinated under a central financial system. Due to the terrorist organization now stretching across several regions in a loosely organized form, ISIS is currently funded by various activities, including drug trafficking and international donations.
This restructuring into loosely organized branches and cells may have happened even without the United States working toward the destruction of ISIS due to the terrorist organization’s inefficient and extractive revenue streams. It is likely that financial pressure and continual pressure to expand the terrorist organization would have been placed on ISIS and that the group would have still had to restructure and seek out more international revenue streams.