LONDON--(BUSINESS WIRE)--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.
