How ISIS Makes Bank
Damage at an oil refinery that was targeted by what activists said were U.S. strikes near the Syrian town of Tel Abyad, October 2, 2014. (Courtesy Reuters)
A key element of U.S. President Barack Obama’s strategy against the Islamic State of Iraq and al-Sham (ISIS) has been striking at the oil fields seized by the group to undermine its finances. But ISIS is a diversified criminal business, and oil is only one of its several revenue streams. U.S. officials ignore that fact at their own peril.
It is true that oil is ISIS’ key source of funding right now. The terrorist group has become the world’s richest precisely because it has seized some of the world’s most profitable oil fields in Iraq and Syria. Even with those fields operating below capacity due to a lack of technology and personnel, ISIS is estimated to be producing about 44,000 barrels a day in Syria and 4,000 barrels a day in Iraq. ISIS sells crude at a discount (around $20–$35 per barrel) to either truckers or middlemen. The crude gets to refiners at around $60 per barrel, which is still under market price. Smugglers pay about $5,000 in bribes at checkpoints to move the crude oil out of ISIS controlled territory. Even selling the oil at a discount via pre-invasion smuggling routes out of Iraq, ISIS can still expect over a million dollars in revenue each day.
And ISIS’ enemies are getting richer from the trade, too: Kurdish part-time smugglers who facilitate ISIS’ oil sales can earn up to $300,000 each month. A Kurdish newspaper recently published a list of people involved with ISIS, especially its oil operations. The list includes individuals with the last names of several Kurdish ruling families; a Toyota branch in Erbil, which sells ISIS trucks; a Politburo member and military leader; and oil refineries, among others. Some of those on the list were associated with oil smuggling under Saddam Hussein. Kurdish facilitators also provide goods to ISIS, including trucks, gas cylinders (for cooking and heating), gasoline, and other necessary commodities.
Oil is not ISIS’ only source of revenue. For example, when the group needed seed capital to recruit personnel and acquire military equipment to conquer the Sunni-dominated areas of Iraq, some of it came from donors in the Gulf States, who had funded the antecedents of ISIS. More recently, ISIS funding has come from the usual terrorist businesses—smuggling, kidnapping, extortion, and robberies. In one reported case, a Swedish company paid $70,000 to rescue an employee who had been taken by ISIS. And before the American journalist James Foley was beheaded, ISIS fighters demanded an exorbitant sum for his freedom, which they did not receive.
Still more funding comes from the sale of counterfeit cigarettes, pharmaceuticals, cell phones, antiquities, and foreign passports. The trafficking of some of these commodities into Turkey from Syria has risen dramatically. For example, cigarette smuggling has increased, fuel smuggling is estimated to have tripled, and cell phone smuggling has risen fivefold. ISIS is also taxing black market antiquities at 20–50 percent, depending on the region and type of antiquity. Meanwhile, foreign fighters sell their passports for thousands of dollars in Turkey before entering Syria, where the proceeds help fund them and ISIS. These particular forms of illicit trade are attractive to terrorists because there is less competition, less regulation, and limited law enforcement in these markets compared to others, such as the arms and narcotics trades.