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

27

APPENDIX B 

Current State of ISIL’s Finances

This appendix reproduces the background memo on ISIL’s finances sent to all workshop par-

ticipants in advance of the workshop in June 2016. We present this memo unchanged from the 

content given to participants at the time (except for minor edits to fix typographical and gram-

matical errors, as well as a minor administrative change) to provide an identical baseline on the 

state of ISIL’s finances at the time of the workshop. Although most factors remain unchanged, 

ISIL’s territorial losses have only worsened since June 2016. 

The memo begins here:

Shortly after the Islamic State of Iraq and the Levant (ISIL) stormed onto the world stage 

in the summer of 2014, overrunning major cities in western and northern Iraq, the group’s 

actions were characterized by superlatives and hyperbole. However, it was not wholly inac-

curate to claim, as many did, that after its seizure of resources throughout Iraq, including 

approximately $500 million to $1 billion from various banks, it stood as the richest terrorist 

group in the world. Today, there are concerted efforts to counter ISIL financial activity. U.S. 

government agencies, the multilateral Financial Action Task Force (FATF), and the multina-

tional Counter-ISIL Finance Group (CIFG) are among several organizations responsible for 

preventing ISIL from raising, transferring, and spending money in support of its war aims. 

Understanding ISIL finances is important because their revenues allow them to conduct 

military operations to defend their borders and grab new territory, security operations to quash 

opposition, media operations to attract new followers, and state-like activities to provide at 

least some services to their population and present an image of a functioning state. Previous 

research has shown that the pace of military operations can be tied to expenditure patterns.

1

 

The multiple counter-ISIL finance efforts lead to an important question: how can policy-

makers know what effects degrading ISIL finances will have under a variety of scenarios? To 

consider this, it helps to better understand ISIL finances. 

How ISIL Makes its Money

One of the reasons ISIL has been so successful in financing its organization has been 

the group’s ability to earn vast sums of income from numerous revenue streams. To date, two 

sources of revenue in particular have provided ISIL with the lion’s share of its war chest: oil 

1  

Bahney, Shatz, Ganier, et al., 2010.

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

and taxation, the latter of which includes what we would more normally consider extortion. 

Overall revenues for 2015 have been estimated to range from about $1 billion to $2.4 billion.

2

Oil 

A significant portion of the money raised by ISIL came from the group’s capture of key oil 

fields and refineries in northeastern Syria as well as parts of Northern Iraq between June 2014 

and September 2014, in addition to its control of key arterial roads and other centers of com-

merce.

3

 By mid-2016, ISIL was still in control of approximately 60 percent of the oil wells in 

Syria and 5 percent of the oil wells in Iraq.

4

 The money comes from oil, oil products, and gas,

5

 

which are sold to a range of buyers, including dealers in Syria and Iraq, who resell onto the local 

market, and the Assad regime itself.

6

 The majority of oil revenues are from local sales, which 

are taxed multiple times along the supply chain from oil field to refinery to local markets. The 

most recent estimates range from $250 million per year to nearly $365 million per year.

7

Taxation and Extortion

ISIL makes more money from oil in Syria than in Iraq, although it remains unclear which 

country provides it with more money through taxation. ISIL’s extortion practices demand 

between 2.5 and 20 percent of revenue from businesses in its territories and operates other 

“mafia-style” rackets that help the group earn money. These taxes have included fines collected 

by the ISIL al-Hisbah, or morality police.

8

 ISIL couches its extortion-related activities in terms 

of zakat, the traditional Muslim tax on capital or wealth, and jizya, which is traditionally a tax 

paid by non-Muslims living in Muslim lands and is similar to other forms of “revolutionary” 

taxes collected by a number of other insurgent groups.

9

 

The Iraqi city of Mosul has been a major source of taxation revenue for ISIL, with the 

bulk of funding coming from commercial, reconstruction, and oil sectors.

10

 ISIL also extorts 

individuals or groups moving back and forth through border crossings into and out of its terri-

tory and between Syria and Iraq.

11

 The group has even gained revenue from the Syrian govern-

ment, as was the case in February 2013, when ISIL militants seized the Tabqa Dam and sold 

electricity back to the Assad regime.

12

2  

Glaser, 2016b; Center for the Analysis of Terrorism, 2016.

3  

Keatinge, 2014b.

4  

Warrick and Sly, 2016.

5  

Glaser, 2016a.

6  

Solomon and Faucon, 2016.

7  

Torbati, 2016; Faucon and Coker, 2016.

8  

Johnston, 2016.

9  

Jonsson, 2014.

10  

Johnston and Bahney, 2014.

11  

Hubbard, Krauss, and Schmitt, 2014; Abdulrahim, 2016. 

12  

Ahram, 2014. See also Saad and Gladstone, 2013.

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