The end is near for the battle for Raqqa, the de facto capital of ISIS’s self-declared caliphate, but the terrorist group still has ways of raising funds and plenty of cash on hand — and still remains a threat near and far.
Although U.S.-backed Syrian Democratic Forces (SDF) on Tuesday announced they had liberated the city from ISIS control, some fighting remains. Col. Ryan Dillon, the spokesman for the Combined Joint Task Force – Operation Inherent Resolve, said that reports of complete victory are premature, but confirmed that “Raqqa is 90 percent cleared” of ISIS fighters and it is only a matter of time before the terrorist group is completely ousted from the city.
The loss of Raqqa represents another devastating blow to ISIS, which has lost nearly all of its territory in Iraq and has seen its holdings in Syria reduced to a shrinking chunk in the eastern region of Deir al Zour.
Taking Raqqa is “both a major symbolic blow and a concrete step towards forcing the group back to what it used to be, an underground insurgent network more akin to al-Qaeda than to Abu Bakr al-Baghdadi’s idea of a territorially based caliphate,” says Aron Lund, Syria expert and fellow at the Century Foundation.
ISIS is no longer the territorial power it once was in Syria and Iraq. The question now shifts to how the organization will continue to fund its operations without the revenues that it generated by controlling large swaths of territory in Syria and Iraq. At the height of its territorial control in 2015, ISIS enjoyed an estimated monthly revenue of $80 million, according to a report from the analytics firm IHS.
Roughly half of this revenue came from taxing and extorting the local populations under ISIS control. Illegally exported oil from captured wells contributed some 43 percent. The remainder of the group’s cash flowed in from a wide range of criminal activities, including kidnapping, human trafficking, narcotics smuggling, and the sale of looted antiquities, as well as from ransacking the central bank in Mosul.
But by June this year, after losing 60 percent of its territory, the group’s monthly earnings had fallen by 80 percent to just $16 million. The loss of a huge tax base in Mosul in Iraq, and the oil rich areas around Raqqa and Homs in Syria, has cut the bottom out of ISIS’s finances.
Losing territory means the group has less income, but its operating expenses are also lower.
“The fact that they [ISIS] have lost all this territory also means that they need less money to govern,” Daniel Milton, Director of Research at West Point’s Combating Terrorism Center.
Consequently, with less territory to rule and little hope of winning land back, ISIS will inevitably redirect its resources to conducting a sustained insurgency in Iraq and Syria, and carrying out terrorist operations against foreign adversaries in Europe and the United States.
To achieve these goals, the group requires far fewer resources than it did when it was governing city centers and millions of people.
ISIS will still maintain routes of funding, such as individual remittances from supporters, kidnap for ransom, and taxation from local populations where they do manage to retain influence. The group also maintains large cash reserves – either collected from oil and tax revenue or stolen from Iraqi Central Bank reserves in Mosul – that it is almost certainly attempt to launder through foreign middlemen and difficult to trace Hawala networks.
In many ways, while the operation to retake Raqqa is a critical benchmark, the loss of its territory in Iraq and Syria will free ISIS resources up for more traditional terrorist operations abroad.
Fritz Lodge is a Middle East analyst at The Cipher Brief. Follow him on Twitter @FritzLodge.