The jihadists have developed a comprehensive war economy that is fundamental to their strategy.
The lightning war launched by the Islamic State (IS) (formerly ISIS) has surprised and terrified Western observers. Over about a month’s time, the group has captured large swathes of territory—from parts of the al-Anbar province to Nineveh, Diyala, Kirkuk and Salahaddin in the north. Yet this phenomenon and these gains have been part of a long-standing strategy. IS’s offensive, initiated by hundreds of jihadists in the city of Mosul in early June, marks the final step of its plan to create a Sunni emirate beyond the Middle East’s contemporary borders and thereby restore the historical caliphate. For jihadists, this also means suppressing Shia Islam and its followers in the region.
Since first announcing their project in October 2006, the jihadists have understood that their credibility would depend on the successful realisation of a state, through the recruiting of men, the conquering of territories, and acquiring new resources. They have thus developed a comprehensive war economy that is fundamental to their strategy. Since the US occupation (2003-2011), IS has obtained control over contraband and numerous crude oil reserves in Iraq and more recently in Syria, leading to open conflicts with other local actors, including tribes and insurgents competing for the same resources.
In 2007, the decision of some Sunni tribes to ally with the Americans against the jihadists was informed primarily by economic thinking: to regain control of energy resource trafficking, which Saddam Hussein had partly conceded to them during the 1990s in exchange for securing the country’s borders, in particular on the route linking Amman to Baghdad. Under the jihadists’ terror regime, even ordinary citizens had joined the mobilisation. The security gains they made were nevertheless short-term, permitting the jihadists to pursue their project and spread to Syria upon the uprising in 2011.
From this perspective, the control of northern Iraq around the city of Mosul, the second richest region in hydrocarbons, had become a nearly existential necessity for the Islamic State, which has fallen back on its Iraqi base following fratricidal fighting in opposition to more moderate factions in northeast Syria. In addition to oil fields, the Islamic State seeks infrastructure, facilities and pumping stations, a strategy made evident by its mid-June attack on the Baiji refinery in the Salahaddin province, the biggest in Iraq supplying 60 percent of its fuel; it slipped out of government control and become the place of violent clashes. According to Iraqi sources, the Islamic State has been present in this area since 2008 – involved in lucrative traffic based on oil operations. Each oil and gas field under its indirect control is said to provide the Islamic State millions of dollars.
Added to the exploitation of oil resources and raw materials are other illicit activities, including the selling of electric power, and private donations, notably from the Gulf, which have made the Islamic State self-sufficient today. The group’s pillage of regions and particularly of banks is a significant source of income, like in Mosul, which housed a considerable amount of gold and loot worth over $450 million. Such a fortune reinforces IS’s capacity to purchase heavy arms and to bribe authorities and tribes, and recruit even more combatants. IS has the reputation of being the movement that pays its members best, enhanced by the looting of archeological sites and trafficking of antiquities—reportedly generating over $36 million. IS also levies taxes on local businesses like any state would, and extracts various extortions, particularly of minorities in exchange for their alleged protection.
With million dollars at its disposal, the Islamic State is the world’s wealthiest terrorist group, far ahead of al-Qaeda’s central command, from which it has deliberately distanced itself. This solid economic entrenchment will make the jihadists’ defeat even harder and can only be countered by the adoption of quick and adequate socioeconomic reforms by the next Iraqi government, regardless of its political composition.
This article is adapted from an op-ed originally published in French newspaper Les Échos on 27 June 2014.
The European Council on Foreign Relations does not take collective positions. This commentary, like all publications of the European Council on Foreign Relations, represents only the views of its authors.