Approximately 50 percent from taxation, 43 percent from oil
Most of the Islamic State’s funding comes from taxation on economic
activity and basic services in areas under its control, according to new
analysis released today by IHS Inc. (NYSE: IHS), the leading global
source of critical information and insight.
Analysis of open source intelligence, including social media, conducted
by the team responsible for the monthly Conflict Monitor at IHS
Aerospace, Defence and Security, estimates that the Islamic State’s
overall monthly revenue in late 2015 to be around $80 million. The
majority of this, around 50 percent, comes from taxation and
confiscation, while around 43 percent comes from oil revenue. Drug
smuggling, the sale of electricity and donations make up the remainder.
“Unlike al-Qaeda, the Islamic State has not been dependent on money from
foreign donors, to avoid leaving it vulnerable to their influence,” said
Columb Strack, senior analyst at IHS, and lead analyst for the IHS
Conflict Monitor. “Our analysis indicates that the value of external
donations to the Islamic State is minimal, compared with other revenue
sources.”
Six sources of revenues
The Islamic State maintains at least six main sources of revenues:
production and smuggling of oil and gas; taxation on the profits of all
the commercial activities held in areas under its control; confiscation
of land and properties; trafficking of drugs and antiquities; criminal
activities such as bank robbery and kidnap for ransom; and state-run
businesses, such as running small enterprises including transport
companies or real estate agencies.
“One of the Islamic State’s main sources of income comes from taxation
on economic activity and basic services, including electricity, mobile
phone networks, internet access, retail, industry and agriculture,
within territory it controls,” said Ludovico Carlino, senior analyst at
IHS and also on the IHS Conflict Monitor team. “They charge a 20 percent
tax on all services.”
The lawlessness in Syria and in western Iraq has facilitated the group’s
takeover over normal functions of the state, complemented by its
exploitation of existing criminal and smuggling networks and the
dependence of the local population on black markets.
“Its business model, which is heavily focused on intermediaries and
taking percentage cuts, also means that the Islamic State is able to
make profits from areas and sectors where it is not directly involved,”
Carlino said.
Coalition curbs spending
“According to information gathered from Arabic-language social media,
and our in country source network, efforts to target the Islamic State’s
sources of revenue are paying off,” Strack said.
The US-led coalition has focused primarily on disrupting the Islamic
State’s oil income, which makes up about 43 percent of overall revenue.
Airstrikes have significantly degraded the group’s refining capacity,
and ability to transport oil via tanker convoys.
“Tax revenues are much harder for the US-led coalition to target without
having a substantial negative impact on the civilian population, and
would most likely be counterproductive,” he said.
While the Islamic State’s refining capacity has been largely destroyed,
there is likely to be some reluctance to completely destroy oil wells,
given the risk of irreversible damage to the fields, and the potential
environmental impact.
Trouble balancing budget
There are early indications that the group is struggling to balance its
budget, with reports of cuts to fighters’ salaries, price hikes on
electricity and other basic services, and the introduction of new
agricultural taxes, according to the IHS Conflict Monitor.
Although the Islamic State retains its capacity to produce oil, its loss
of easy access to Turkey after its defeat in Tal Abyad, and the efforts
by Turkish authorities to stop smuggling activities along its border
with Syria, have gradually forced the group to rely increasingly on the
internal markets in Syria and Iraq to smuggle and sell oil.
About IHS (www.ihs.com)
IHS (NYSE: IHS) is the leading source of insight, analytics and
expertise in critical areas that shape today’s business landscape.
Businesses and governments in more than 150 countries around the globe
rely on the comprehensive content, expert independent analysis and
flexible delivery methods of IHS to make high-impact decisions and
develop strategies with speed and confidence. IHS has been in business
since 1959 and became a publicly traded company on the New York Stock
Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is
committed to sustainable, profitable growth and employs about 8,800
people in 32 countries around the world.
IHS is a registered trademark of IHS Inc. All other company and
product names may be trademarks of their respective owners. © 2015 IHS
Inc. All rights reserved.
About the IHS Conflict Monitor
The IHS Conflict Monitor records about 1,000 manually geocoded indicator
events for Iraq and Syria every week from social media and other open
sources, systematically rated for reliability. It is a monthly
deliverable that includes analysis, data and maps.
The Conflict Monitor includes regular analysis of the data providing
unparalleled insight into the structure, operations, strengths and
vulnerabilities of the Islamic State. The dataset reaches back to
January 2014, delivering unique data insights into the tactics, activity
and capabilities of armed actors, as well as mapping the progression of
the conflict in unprecedented detail.
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