The Islamic State, popularly known as ISIS, is in many ways an innovative economic actor. But its method of bringing oil to market has been anything but cutting-edge. ISIS took advantage of a black market that had been sharpened long ago, when Saddam Hussein’s regime looked for ways to skirt the sanctions imposed on it after the first Gulf War. Since ISIS had exploited pre-existing market incentives, an obvious coalition response was to change those incentives by significantly driving up the cost of doing business with ISIS. The coalition began to do that in late 2015, when it started targeting the trucks that bring ISIS’s oil to market—but it was quite late in taking this step.
As Charles Duelfer’s 2004 report on Iraq’s weapons of mass destruction program details, Saddam’s regime began to export crude oil through private businessmen almost immediately after sanctions were imposed on it following Iraq’s defeat in the 1991 Gulf War. Though black markets had long existed in the region, they ballooned to an unprecedented size, as Iraq used its state power to bolster them. Saddam’s regime earned around $439 million per year through its exploitation of the black market from 1991 through 1998. Oil was a key commodity that moved through these black markets, but so did other goods and resources.
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