The Islamic State (ISIS) and the threat from terrorism has dominated the news for the past 18 months. ISIS emerged from the chaos in Iraq and the Syrian civil war to seize control of large swathes of Iraq and Syria, declare itself a “caliphate,” and become the richest terrorist group in the world. The rise of the Islamic State can be largely credited to the convergence of its terrorist and criminal activities in the occupied territories that provide the critical resources like funding, arms, and foreign fighters for ISIS to thrive. While ISIS initially focused on consolidating its power base in the Levant, the October 2015 downing of a Russian plane over the Sinai, the November 13 terrorist attacks in Paris directed by ISIS, and the December 2 ISIS-inspired attack in San Bernardino, California demonstrate the global aspirations and threat of the Islamic State well beyond Syria and Iraq.
ISIS’ Illicit Economy
ISIS can be characterized as a “criminalized state” with an illicit economy fueled by extortion, robbery, oil sales, human trafficking, kidnap for ransom, and antiquities looting that sustain its self-proclaimed caliphate. ISIS’s income was estimated at some $2 billion for 2014. Though not recognized as a nation-state, ISIS is a state with a government, military, social services, and even its own currency. While Bin Laden’s al Qaeda enjoyed ample donor support and did not engage in crime for fear it might draw law enforcement attention, ISIS relies on crime to generate the revenues needed to run its political, foreign fighter recruitment, and ideological campaigns. It is the most compelling contemporary case of hybrid terror-crime behavior, and this convergence is destabilizing the Middle East.
Much of ISIS’s illicit economy is derived from extortion and taxation rackets. ISIS’s military advances in Syria and Iraq have allowed it to enrich itself with access to new resources and new subjects; it systematically uses violence and terrorism to impose its will in those territories. The takeover of Iraq’s second largest city, Mosul in June 2014, was perhaps the most important military and financial coup for ISIS; according to Iraqi officials, ISIS looted $450 million from Mosul’s central bank and continues to extort businesses in Mosul, netting upwards of $8 million a month. The Islamic State controls every aspect of the economy and key supply routes that facilitate its military and criminal operations across Syria and Iraq.
Illegal oil sales, estimated at $40-50 million per month, serve as another significant source of income for ISIS. The oil is used in Iraq and Syria, sold on the black market and smuggled over the border to Turkey – a route first established by former Iraqi dictator Saddam Hussein to circumvent UN oil sanctions at that time. ISIS set up its own oil company and recruited highly skilled engineers and managers to run its oil business, according to the Financial Times. “Operation Inherent Resolve,” U.S. Central Command’s effort to counter ISIS, is aggressively targeting ISIS-controlled oilfields, refineries, and transportation convoys to disrupt the group's oil production and cut off this critical source of income.
ISIS also derives power and income from kidnap for ransom and human trafficking. Kidnappings reportedly raised over $45 million for ISIS in 2014. Women and children from the occupied territories are trafficked, distributed to ISIS fighters as spoils of war, and subjected to indescribable physical and sexual abuse. According to terrorism and crime expert Louise Shelley, human trafficking generates revenue for the group, provides fighting power, and vanquishes the morale of the enemy.
The looting of antiquities and the razing of archeological sites in Iraq and Syria serve ISIS financially, while at the same time promote its ideology by destroying ancient pagan sites and what it considers false idols. ISIS’s pillage and destruction of ancient sites is considered “cultural cleansing” to erase history and religions counter to ISIS’s ideology. The State Department estimates that ISIS makes several millions of dollars from antiquities trafficking. On February 12, 2015 the UN Security Council adopted Resolution 2199 that focuses extensively on terrorist financial support networks, particularly ISIS's fundraising through oil sales, looting of antiquities, kidnapping for ransom, and other illicit activities.
Countering ISIS’s Criminalized Caliphate
A dangerous convergence of terrorism and crime generates significant revenues for ISIS that has become the richest terrorist group in the world and a threat to security in the Middle East and beyond. The illicit economy of extortion, oil smuggling, kidnap for ransom, human trafficking, and antiquities looting across Syria and Iraq provide vital support for ISIS’s military, financial, recruitment, and propaganda campaigns. To counter ISIS effectively, the terror-crime convergence that boosts its physical, financial, and ideological power must be recognized, degraded, and destroyed by a global, multidisciplinary coalition across the public, private and civic sectors that can harness a broad spectrum of resources to neutralize the terrorism and crime practiced by the Islamic State and take back control of occupied territories in Syria and Iraq.
The views expressed in this chapter as those of the author and do not necessarily reflect the views of the William J. Perry Center for Hemispheric Defense Studies, National Defense University, or the Department of Defense.
