- By David FrancisDavid Francis is a senior reporter for Foreign Policy, where he covers international finance. An award-winning journalist, David has reported from all over Europe, Nigeria, Kenya, Mexico, and Afghanistan on terrorism, national security, the geopolitics of energy, global economics, and the European financial crisis. His work has been published in outlets including the Christian Science Monitor, the Financial Times Deutschland, Slate, and SportsIllustrated.com.
The Islamic State’s self-proclaimed caliphate is no more, according to an Iraqi military spokesman, and a new report on the group’s shrinking revenue suggests he might be right.
The group’s apparent collapse is backed up a study released Thursday morning that found three years after Islamic State declared its caliphate on parts of Iraq and Syria, it has lost 80 percent of its revenue and roughly two thirds of its territory. The report, by IHS Markit, a London-based information and analytics group, found the Islamic State’s average monthly revenue has fallen dramatically from $81 million in the second quarter of 2015 to $16 million in the second quarter of 2017 — an 80 percent drop.
Revenue is down across all of the terror group’s income streams: taxation of the people under its control, confiscation of goods, oil smuggling and production, and trade in illegal antiquities. IHS found that monthly oil revenue is down 88 percent, and income from taxation and confiscation has fallen by 79 percent from initial estimates in 2015.
“Territorial losses are the main factor contributing to the Islamic State’s loss of revenue,” said Ludovico Carlino, senior Middle East analyst at IHS Markit. “Losing control of the heavily populated Iraqi city of Mosul, and oil rich areas in the Syrian provinces of Raqqa and Homs, has had a particularly significant impact on the group’s ability to generate revenue.”
As it rose to power, the Islamic State became a financial behemoth. According to a 2014 Thomson Reuters study, the terrorist group had more than $2 trillion in assets under its control, with an annual income of $2.9 billion. Other estimates vary, but they all show a group with once-deep pockets.
Much of this money is raised through the “taxes” the group imposes on those who live within its territory. This included an $800-per-truck levy on vehicles entering Iraq from Jordan and Syria, a 5 percent tax collected for social welfare and salaries, a $200 road tax on drivers in northern Iraq, a 50 percent tax for the ability to loot Raqqa’s archaeological sites, and a 20 percent tax at similar sites in Aleppo, according to the Thomson Reuters study. Mohamed Ali Alhakim, Iraq’s ambassador to the United Nations, has said that the Islamic State earns up to $100 million a year in the illicit artifact trade.
In addition, garbage pickup, heating oil, and electricity generators were all taxed. These payments generated up to $30 million each month, according to Thomson Reuters. A 2015 report by the New York Times, supported with data from Rand Corp., put annual tax and extortion revenue higher, at $600 million in 2014.
Loss of revenue combined with loss of territory means that “it is evident that the group’s governance project has failed,” said Columb Strack, senior Middle East analyst at IHS Markit.
However, IHS warned that the Islamic State is still potent. It said the loss of territory in Syria and Iraq makes it more likely that the group will try to strike abroad, as it has across Europe, the report found. It also determined that crackdowns on the group in the west could lead to more violence outside of Syria and Iraq.
“Terrorism risks from Islamist groups are therefore likely to increase before they decrease,” said Firas Modad, senior Middle East analyst at IHS Markit.
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