WASHINGTON – The Islamic State of Iraq and Sham (ISIS), also known as ISIL or the Islamic State, is now one of the world’s wealthiest militant groups and is gaining financial strength quickly as it broadens its money-raising schemes.
David Cohen, the U.S. Treasury Department’s under secretary for terrorism and financial intelligence, said ISIS is the best-funded terrorist group the United States has ever faced, with the exception of other state-sponsored terrorist organizations. This is mainly because, unlike al-Qaeda and other terrorist organizations, ISIS does not rely on “deep-pocketed donors” for funding.
“ISIL’s primary funding tactics enable it today to generate tens of millions of dollars per month. Those tactics include the sale of stolen oil, the ransoming of kidnap victims, theft and extortion from the people it currently dominates, and to a lesser extent, donations from supporters outside of Syria and Iraq,” Cohen said in a speech at the Carnegie Endowment for International Peace. “ISIL’s revenue streams are, to be sure, diverse and deep.”
ISIS earns about $1 million each day in oil sales alone and has obtained approximately $20 million in ransom payments this year.
He said the Treasury Department would target with sanctions anyone who deals with stolen oil coming from ISIS.
“At some point,” Cohen said, “that oil is acquired by someone who operates in the legitimate economy and who makes use of the financial system – he has a bank account, his business may be financed, his trucks may be insured, his facilities may be licensed.”
Cohen said the Treasury Department is “hard at work” trying to identify those individuals.
“We will target for financial sanctions anyone who trades in ISIL’s stolen oil,” Cohen said, acknowledging that the effort is complicated by the fact that the oil “moves in illicit networks that are largely outside the formal economy, where individuals are less vulnerable to financial pressure.”
Despite such hurdles, he said, the Obama administration believes it is possible to choke off the revenue stream.
The U.S. and allied airstrikes have targeted small oil refineries that ISIS captured in eastern Syria. The International Energy Agency recently reported that the militant group’s ability to produce, refine, and smuggle oil has been reduced to around 20,000 barrels per day from a high of about 70,000 barrels per day reached over the summer, when the group had recently expanded its territory and its access to oil fields and refineries.
ISIS has been able to tap into black markets connecting traders around the area. After extracting oil from fields in Syria and Iraq, the group sells it at discounted prices to middlemen and smugglers who then transport it out of ISIS strongholds. ISIS controls oil refineries of various sizes and earns some revenue from the sale of refined petroleum products.
The militant group has also sold oil to Kurds in Iraq who then have resold it in Turkey. The U.S. government is working together with Turkey and the Kurdistan regional government to prevent ISIS-derived oil from crossing their borders, Cohen said.
According to some estimates, ISIS could be making as much as $3 million per day selling oil.
Charles Lister of the Brookings Institution has pointed out that ISIS is now focused on establishing an internal market and creating local dependence on the group’s cheap oil. If ISIS fails to deliver oil to civilians, it could play right into the hands of the group’s anti-U.S. propaganda.
“The fact that recent coalition strikes have targeted oil at its source – rather than its means of transport or sale, for example –may prove deeply damaging to the international community’s efforts to counter ISIS,” Lister said.
ISIS has also raised several million dollars per month by going door to door demanding cash at gunpoint from businesses and families. The group has also robbed banks, looted antiquities, and sold abducted women and girls as sex slaves.
The Treasury Department’s multi-pronged strategy, which is part of the Obama administration’s push to “degrade and ultimately destroy” ISIS, has three main targets: cutting off ISIS’ revenue streams, limiting what the group can do with its funds by restricting its access to the international financial system, and imposing sanctions on its senior leadership and financial facilitators.
Cohen cautioned that the financial war on ISIS might not produce immediate results and the effort will require “dislodging [ISIS] from territory in which it operates.”
“This is not going to be an exercise where we are going to, you know, at the end of every month, be able to…produce a balance sheet that shows what ISIL’s finances look like. This is going to be, you know, a steady effort that will degrade ISIL’s financing over time,” he said.
Cohen said both Saudi Arabia and the United Arab Emirates have made progress in disrupting funds from wealthy financiers to ISIS, al-Qaeda, and the al-Nusra Front. However, he singled out Qatar and Kuwait for remaining “permissive jurisdictions for terrorist financing” and not doing enough to block UN and U.S. designated terrorist financiers. This is in spite of Kuwait setting up a financial intelligence unit and Qatar passing a law regulating fundraising by charities.
“Both countries have more work to do,” he said.
Two high-profile financiers based in Kuwait are believed to use a Twitter account to attract donations for militants, including donors from Kuwait, Saudi Arabia and other countries in the region.
“You see these appeals on Twitter in particular from well-known terrorist financiers…asking for donations to be made to ISIL for their military campaign,” Cohen said at a White House press briefing.
In addition to using Twitter to solicit donations, ISIS has used social media and video websites extensively to recruit fighters, intimidate enemies and promote its claim to have established a caliphate.
A dozen coalition countries met in Kuwait on Oct. 27 to decide the course of action on the best tools to cut off ISIS financing and how to undermine ISIS propaganda in the Middle East.
Retired Gen. John Allen, who is tasked with coordinating the international effort against ISIS, told coalition members that they must counter ISIS’ message presenting themselves as “true leaders worthy of financial support.”
“It is only when we contest ISIL’s presence online, deny the legitimacy of the message it sends to vulnerable young people and expose ISIL for the un-Islamic cult of violence it really is. It is only then that ISIL will truly be defeated,” he said.