Sun, Feb 19, 2017 - Page 4 News List

Islamic State ‘business model’ falters: report

‘NOT JUST TERRORISTS’:A London-based group said that less money may not make the group less dangerous, as attacks do not need to be expensive


Paramilitary personnel guard a defensive position near the village of Shariah, Iraq, on Friday.

Photo: AFP

The Islamic State group is hemorrhaging money with every piece of territory it loses, according to a new analysis that found the group’s “business model” is on the path to failure.

The analysis released yesterday by the International Centre for the Study of Radicalisation and Political Violence and accounting firm EY found that the self-proclaimed caliphate’s financial resources have been drained substantially since the days beginning in mid-2014 when it captured banks, oil wells and entire warehouses of weapons as it amassed land.

The report found that Islamic State revenue has declined from up to US$1.9 billion in 2014 to at most US$870 million last year.

“One of the mistakes that’s been made in the past when we were talking about Islamic State was talking about it purely as a terrorist organization. It is a terrorist organization, but it is more than that. It holds territory,” said Peter Neumann, director of the center at King’s College London. “That also means it has a lot more expenses. It needs to fix roads. It needs to pay teachers. It needs to run health services. It needs to pay for these things that al-Qaeda never had to.”

However, less money might not make the group less dangerous, the report said.

“We know from the attacks in Paris and Brussels and Berlin that none of them was expensive,” Neumann said.

Most of the recent attacks in Europe and the US were self-financed by the people who carried them out, with little input or money from the Islamic State leadership in the war zone of Syria and Iraq.

Among the top sources of revenue for the Islamic State group were taxes and fees, oil, ransoms, and looting or other extortion, Neumann said. All of those required newly captured territory to be sustainable and to keep the group’s promise of a caliphate.

A federal lawsuit filed in December last year was a prime example of the Islamic State’s revenues from a combination of seized land, taxes and extortion.

According to the court filing, the group received at least 20 percent of the proceeds of items excavated from archaeological sites under its control and taxed antiquities sold in its territories.

At one point, a child was kidnapped to force an antiquities merchant to pay, said the lawsuit, which sought the recovery of four ancient artifacts believed to have been put up for sale by the group.

However, that income only flows when the Islamic State can exert absolute control.

According to an update on Friday from the global coalition against the Islamic State, the group has lost 62 percent of the territory it controlled in Iraq at its height in August 2014 and 30 percent of its territory in Syria.

“The business model was also to constantly expand and to plunder the areas that were becoming part of the caliphate. It was essentially a pyramid scheme which relied upon constant expansion,” Neumann said.

A US defense official said that the Islamic State still has enough money to pay its bills, despite the fact that it has lost sources of income and has reduced what it pays foot soldiers.

The official said the US certainly has not seen the militant group’s financial situation damaged to the point that it has degraded its ability to conduct external attacks.

The official was not authorized to publicly discuss the Islamic State group and spoke on condition of anonymity.

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