IS militarily weak, but economically strong

November 9, 2015 2:27 AM (UTC+8)

 

Some recent revelations by the Australian Government have re-opened the critical question about the self-styled Islamic State’s (IS) shadowy financial resources. Just like IS’s very emergence, the source(s) of its financial strength, too, remain an enigma.

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Although IS does have certain oil fields under its control, the big question is who buys that oil and how? Unlike the recently resolved mystery of IS’s ‘Toyota army’, the answer to this questions remains considerably shrouded.

Some of it is, somehow, available now as the latest information provided by the AUSTRAC showed that between July 2014 and June 2015, the Australian Government monitored more than 100 people ‘of interest’ and investigated 536 suspicious transactions valued at A$53 million, most of which were associated with militant groups in Iraq and Syria.

“Those 100 are obviously part of a wider group of people who we’re worried about supporting IS,” Justice Minister Michael Keenan told reporters in Canberra.

It was almost a year ago that CNN published a report stating that IS makes between $1 and $2 million in oil sales per day. Their earnings have, according to some recent reports, reached the ‘hallmark’ of $500 million per year.  What a progress within the time span of just one year!

Despite a year-long US ‘campaign’ against IS, the group’s financial resources have grown immensely. It was blatantly attested to by a recently published report of Financial Times which told the world that even after more than one year and 10,500 air strikes since the beginning of the West’s anti-terrorist campaign, the result has been the complete failure of US efforts to undermine the financial income of the terrorist group.

An important question is why has the US-led coalition been unable to deny IS the essential territorial channels that it uses to smuggle oil into Turkey, Ukraine and some other Mid-Eastern States?

Hypothetically speaking, and as some circumstantial evidences indicate, an important reason for this “failure” is that bumping of oil into external markets suits US interests as it allows the US, indirectly though, to cause financial damage to Russia and Iran, both of which greatly depend upon oil for their economic strength.

The oil that they produce is sold at the cost 2-3 times lower than the global price. Every day, IS receives $3-3.5 million into its budget. The IS’ oil business was established as a ‘National Oil Corporation.’ Even warring Syrian rebels, including the US’ so-called “friendly forces”, do not disdain from purchasing IS products.

Although the US President Barak Obama did restrain certain “individuals”, following Vladimir Putin’s strong criticism of US policies with regard to curbing IS’s financial resources, involved in providing funds to IS, Washington continues to support those countries, such as Saudi Arabia, Qatar, and Turkey, that have been (and still are) supporting IS. That it has not placed embargoes on any of them speaks volumes about the inner reality of the US policy vis-à-vis IS i.e., US’ own support for the group.

An evidence of this policy can be had from the statements given by Yousaf al Salafi, an IS commander who was arrested in Pakistan in January 2015

“During the investigations, Yousaf al Salafi revealed that he was getting funding – routed through America – to run the organisation in Pakistan and recruit young people to fight in Syria,” a source privy to the investigations revealed to the Pakistan-based Express Tribune, an affiliate of New York Times, on the condition of anonymity.

Indeed, the story reveals several troubling aspects regarding IS’ operations in Syria. First, Al Salafi’s ability to effortlessly enter into Syria through NATO-member Turkey and then escape back to Pakistan, again, via Turkey confirms that the source of IS’ strength is not only captured Syrian oil fields or ransoms paid in exchange for hostages, but rather from a torrent of fighters, arms, equipment, and cash, transaction for which are globally distributed to avoid leaving any trails behind.

As a matter of fact, according to a report of the UK-based The Independent, IS receive substantial funds through a “sophisticated money laundering scheme”. These funds, the report said, are partly generated by shady transactions carried out in the south of the UK with banking services provided on the phone and the import of cars from England to Africa.

Indeed, IS’s financial strength is no just oil fields only.  It has literally expanded its “business” into other fields as it is reported to have set its foot in smuggling, bank robberies, kidnapping and extortion.

In particular, in June 2014 IS gunmen robbed a branch of the Central Bank of Iraq in Mosul, pocketing, according to various estimates, a sum ranging from $900 million to $2 billion. Almost two weeks ago, IS gunmen captured a branch of the Al-Rafidin bank in Mosul, and according to witnesses, they drove away with three trucks full of money. The exact amount of the money robbed remains unknown.

They receive substantial amount of money through ‘private sources’ from Gulf countries, especially Saudi Arabia and Qatar where ‘Islamic charities’ continue to operate rather freely, and without the fear of government clampdown.

A member of Iran’s Majlis (Parliament) Mohammad Saleh asserted that IS has received financial assistance, including from Saudi Arabia, of $4 billion to conduct terrorist activities in Iraq.

Besides it, according to the estimates of some experts, the organization’s budget could reach $ 7 billion, which until recently, allowed the terrorist organizations to actively recruit mercenaries to its ranks and finance various propaganda, especially anti-Shia campaigns in Sunni majority areas to attract finance and jewelry from them.

On February 18, 2015, Mohammed al-Hakim, the representative of Iraq to the United Nations, said IS has been killing people to sell their organs. According to him, in the mass graves of IS victims, bodies of people have been found with signs of surgery and kidneys and other internal organs missing.

IS also gains income from drug trafficking. According to Viktor Ivanov, the head of the Federal Drug Control Service in Russia, IS’ annual income from the transit of heroin from Afghanistan to Europe is up to one billion dollars.

Given these “various sources” of income, it appears highly unlikely that IS has suffered, as the US upbeat assessments claim, any real damage, especially financially. Despite claiming that Qatar provides a “permissive environment for financing terrorist groups”, the US has largely failed to do anything to change this “permissive environment” into a “non-permissive” one.

The question that we must therefore be asking is this: given Russia’s aggressive campaign against IS, as also other terrorist organizations, will Russia decide to send its troops to Syria to deny IS enough territorial space to seek production as well as smuggling of oil to regional countries? And, if such an eventuality takes place, how will the US and its allies react to it and where will such a development take the Syrian war to?

The situation on the ground is certainly extremely dicey. However, what is abundantly clear is that the US and Russia are far from the point of really coordinating. As a matter of fact, both of them are as much fighting terrorists as each other.

While some tend to be skeptical about the US’ real intentions behind its policy against IS, there is hardly any doubt that Russia’s military presence in the Middle East is the source of American discomfiture. Will this discomfiture turn into a potentially direct war? Only time will tell.

However, if the US does want to avoid such a scenario, it will have to develop a comprehensive strategy to bock IS’ financial resources. Russia cannot be expected to do the task because IS (and other terrorist organizations as well) operates through the Western banking system which is largely under the control of the United States of America.

Without addressing all dimensions of this financing, groups like IS will continue to exist and grow in a system that has consistently permitted them to run economies and consolidate their power.

Salman Rafi Sheikh is a freelance journalist and research analyst of international relations and Pakistan affairs. His area of interest is South and West Asian politics, the foreign policies of major powers, and Pakistani politics. He can be reached at salmansheikh.ss11.sr@gmail.com

The opinions expressed in this column are the author’s own and do not necessarily reflect the view of Asia Times.

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