Financial Futures of the Islamic State of Iraq and the Levant: Findings from a rand corporation Workshop

20    Financial Futures of the Islamic State of Iraq and the Levant

coordination among the countries of the international counter-ISIL coalition.

1

 Beyond specific 

sectors and activities, such as oil or trade, coalition forces must break ISIL control over the 

economy and separate ISIL from the population from which it profits. Continuing to reassert 

control over ISIL-held territories will help damage the organization’s brand and dispel its myth 

of invincibility. Furthermore, as ISIL comes under more pressure, its ability to govern and 

control the population will also decline, and with that, potentially, its ability to raise money.

As territory is reclaimed from ISIL, much of the counter-ISIL finance mission will need 

to rely upon law enforcement tools rather than strictly military ones to address ISIL’s persistent 

extortion and taxation revenues. This suggests a need to invest more resources in training Iraqi 

and other law enforcement entities. 

ISIL has so far avoided relying on external actors for financing, but this trend may not 

continue indefinitely. Traditional counterterrorism financing tools must continue to keep the 

group isolated from deep-pocket donors. The coalition should continue to monitor financial 

flows into ISIL-held territory to see if changes occur and particularly watch for financial flows 

from countries where wealthy individuals have historically funded jihadist causes, such as 

Saudi Arabia, Kuwait, and Qatar.

Regardless of the next steps in the war against ISIL, workshop participants overwhelm-

ingly agreed that addressing the core grievances and underlying structural factors that led to 

the rise of ISIL must be an important component of the comprehensive coalition response. 

This line of effort is fundamentally based upon diplomacy, both in terms of working toward 

a negotiated settlement in Syria and exerting leverage over the Iraqi government to make a 

more earnest attempt at easing the sectarianism of Iraqi politics. Military victory alone will not 

achieve this. Without steps toward political reconciliation in each country, ISIL will continue 

to operate among and raise revenues from local Sunni populations even in the absence of ter-

ritorial control. 

1  

Johnston, Shapiro, Shatz, et al., 2016.

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APPENDIX A 

Detailed Description of Points Raised in Each Scenario 

Chapter Three described areas of collective agreement and significant points of disagreement 

across all the scenarios. However, workshop participants also raised points specific to each sce-

nario. This appendix describes those points. 

Scenario One: Status Quo

The first scenario presented the status quo, in which current counter-ISIL actions continue 

without any major changes to the military campaign or the actions of the Iraqi and Syrian gov-

ernments. Specifically, ISIL remains under pressure in areas of both Syria and Iraq but main-

tains its capital in Raqqa as well as control of significant swaths of territory, including Mosul 

and areas to its south. It also maintains the ability to conduct terrorist attacks throughout the 

region.

The discussion of the status quo scenario included several variables that could affect ISIL 

revenues and expenditures in a nonlinear manner. These included oil prices, the ability of the 

coalition to continue aggressively targeting bulk cash storage sites, the closed or open nature of 

ISIL’s economy, changes in external funding to ISIL, and operational fluctuations, including 

the value of the group’s brand.

Operational and Financial Adaptation 

Under the status quo scenario, although ISIL remains under pressure, it still maintains its 

capital in Raqqa as well as control of significant swaths of territory throughout both Syria and 

Iraq. Workshop participants judged ISIL finances would remain relatively strong into the near 

future and determined that ISIL would continue to spend money at its current rate within 

the following six months, potentially spending on weapons and fighter salaries in an effort to 

broaden its support base among local militants not currently under its command. 

Workshop participants noted that even if current territorial losses extended into the 

future, ISIL’s ability to adapt would allow it to compensate for continued losses of revenue, at 

least in the near term. For example, ISIL could increase taxation on goods transiting through 

its remaining territory. Some participants suggested that there would be no significant change 

in revenues, while others believed that ISIL could generate even more revenue if the group was 

able to offset some of the losses recently experienced in its oil portfolio.

In the medium term, some participants believed that ISIL might be tempted to expand its 

base of operations beyond Iraq and Syria. In turn, continuing territorial losses could also spur 

ISIL to cut costs by pursuing more modest goals. 

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22    Financial Futures of the Islamic State of Iraq and the Levant

About one year out, extortion would remain a viable source of income. Among the partic-

ipants, those who believed a status quo scenario would lead to a drop in revenues over time sur-

mised that ISIL might asphyxiate itself in a manner similar to AQI in the mid-2000s. In AQI’s 

case, the group was so eager to earn revenue that it committed a series of critical missteps; in 

the lead up to the Anbar Awakening, its heavy reliance on criminal activities and attempts to 

co-opt traditional tribal rackets, such as smuggling, led Sunni tribal sheikhs to turn against the 

group, triggering its severe decline. ISIL is currently pursuing some similar activities.

Further, several participants assessed that if a stalemate existed approximately one year 

out, the number of foreign fighters would stabilize. To move beyond the impasse, ISIL might 

need to dedicate greater financial resources to paying additional suicide attackers, using these 

fighters to complement a more conventional warfare approach. Members of the group pon-

dered whether the use of suicide bombers in insurgent-style attacks could signal a sign of weak-

ness on the part of ISIL. Other possibilities cited by participants included a renewed recruit-

ment drive to replenish personnel lost on the battlefield and the “wild card” option of seeking 

to acquire WMD to conduct a highly lethal, headline-dominating attack that could increase 

morale among members and supporters.

Potential Revenue Increases and Changes in Protecting Assets

A major theme that emerged during the discussion of ISIL finances one year out in the status 

quo scenario was whether or not mechanisms (local or otherwise) would be established that 

would provide ISIL with new streams of revenue, particularly through taxation. Developments 

elsewhere in Iraq or Syria, especially in terms of territory and key arterial roads changing 

hands, could divert trade and commodity transports into ISIL territory, allowing the group 

to tax trucks transiting through its territory. Although oil may be a source of revenue genera-

tion in and of itself, ISIL can also make money by taxing any commodity, such as oil, that 

has to traverse its territory. If ISIL is able to continue to act like a state, participants felt the 

group could increase revenue by gaining footholds in territories with high levels of trade and 

economic activity. 

An important variable that participants identified is the amount of targetable bulk cash 

storage sites left and to what extent ISIL will protect its reserves by storing cash in smaller 

quantities in more facilities. Beyond one year in the status quo scenario, participants said 

that ISIL might become more proficient at storing its cash in places that the coalition would 

have a more difficult time identifying or destroying, such as civil institutions with human 

shields inside. In addition, ISIL could also seek to establish more normalized relationships with 

other entities in the region, including external actors (although workshop participants did not 

identify specific external actors). Participants generally agreed that the longer the status quo 

remains, the more ISIL will appear to other entities as a fixture in daily life. In effect, simply 

by not losing, ISIL could win. 

A stalemate could serve to help ISIL further solidify its brand in the immediate areas 

currently under its control. Under a status quo scenario, one point participants raised was that 

the economy might begin to function as a closed state, with very little movement of goods 

into or out of the territory controlled by ISIL, depending on what influence other actors are 

able to exert. A major question on this arrangement’s sustainability depends on whether or not 

the system remains truly closed and the degree of pressure that other actors can exert to alter 

the situation. Workshop participants said that ISIL’s ability to increase its revenue will depend 

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