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

Summary    xi

stalemate continues between ISIL and coalition forces, the better off ISIL will be, as it becomes 

further entrenched as a political entity in parts of Iraq and Syria. 

Participants also disagreed on several issues, including whether ISIL might seek exter-

nal state sponsorship if it continues to face financial strain; the extent to which ISIL affiliates 

would remain connected to the core financially in the event of combat defeat or a political 

settlement; whether the group would attempt to construct a closed economy or shift more of 

its resources towards governance in any territory that remains; and how quickly ISIL’s brand 

would falter after military or political defeat. 

Implications for Counter-ISIL Actions

The discussion of potential consequences for ISIL across these three contrasting scenarios 

offered a number of implications for the counter-ISIL effort. These included taking actions to 

counter specific means of raising money within ISIL territory, using financial information to 

damage the group, degrading its ability to raise money across its territory, and ensuring that it 

does not shift to raising money from beyond its territory. 

To cripple the group’s main sources of wealth, it will remain necessary to continue pres-

sure on ISIL’s oil operations and its bulk-cash sites inside Iraq and Syria through airstrikes and 

raids. 

Beyond oil, in the short term, the absence of opposition forces capable of reclaiming 

and holding all of ISIL’s territory means that the group will continue to control important 

economic resources, including portions of Iraq and Syria’s agricultural, manufacturing, and 

financial sectors. ISIL will continue to compensate for losses in certain revenue streams by 

increasing revenue generation in other areas, such as from the economic resources it may con-

trol. Those resources should be considered for targeting or sanctioning. 

ISIL supply chains for the trade of goods and services with non-ISIL elements, any inter-

mediaries that facilitate that trade, and end purchasers who know they are dealing with ISIL 

should also be identified and considered for sanctioning and targeting. Consideration of any 

necessary new authorities should begin early.

If the coalition can degrade ISIL finances to the point where the group struggles to pay 

salaries, this may rupture internal cohesion between fighters and senior leadership and may 

hamper recruitment. Prior analysis of declassified documents from ISIL’s predecessor group, 

the Islamic State of Iraq, suggests that ISIL is also concerned about embezzlement of funds by 

its own fighters. Highlighting these financial failures through effective messaging could only 

worsen public perceptions of the group’s solvency and trustworthiness, especially among mem-

bers, prospective members, or sympathizers. Declassifying more-recent captured ISIL docu-

ments citing any signs of financial strain would further reinforce this message and aid coordi-

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

Beyond specific sectors and activities, such as oil or trade, it is crucial for coalition forces 

to break ISIL control over the economy and separate ISIL from the population from which it 

profits. 

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 is because even after it has lost territorial control, ISIL 

will still maintain access to territories and their associated revenues, as its predecessor al-Qa’ida 

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

in Iraq (AQI) did when it was a clandestine group involved in a number of extortion rackets 

and other fundraising activities that kept the group functioning. This suggests a need to invest 

more resources in training Iraqi and other law enforcement entities, beyond advising, assisting, 

training, and equipping their military efforts. 

ISIL has 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 to financing occur, particularly from countries where 

wealthy individuals have historically funded jihadist causes. Over a decade of war against  

al-Qa’ida has afforded the U.S. Treasury Department and other U.S. agencies valuable expe-

rience in identifying and countering terrorist funds that are connected to the licit financial 

sector. 

Regardless of the next steps in the war against ISIL, whether a continuation of the status 

quo, a negotiated settlement in Syria and political accommodation in Iraq, or combat victory 

over ISIL in both Iraq and Syria, 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 exercising influence over the Iraqi gov-

ernment to make a more earnest attempt at ending the sectarianism that characterizes Iraqi 

politics. Military victory alone will not achieve this. Without steps toward political reconcilia-

tion in each country, ISIL will continue to operate among and raise revenues from local Sunni 

populations even in the absence of territorial control. 

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