BloombergBusiness reports on the finance part of Islamic State. Instead of (or next to) backing from wealthy regional supporters, extracting ransoms, or smuggling drugs—the usual way in which other terrorist or rebel groups in the world tend to finance their operations—IS had until recently a very rewarding oil exports business going on. "U.S. officials and terrorism experts believe that by late June, Islamic State was raising as much as $2 million a day in petroleum revenue—though that amount is declining as it loses control of some oil fields and authorities crack down on cross-border smuggling."
Interesting details in the report: since the oil needs to be smuggled through middlemen, IS can only sell the oil at a ~50% discount from the world price. The middlemen tend to be locals, and much oil goes via the Kurdish region in Iraq to Turkey and Iran. Trade is done in cash, they hold no international network of bank accounts.
Regarding the last point, this cash is, I presume, American dollars (the report does not say anything about this). There must be piles of cash being stored somewhere, which the report says some intelligent agencies are looking into. The cash is used for recruitment abroad, and "its growing operations and territorial expansion." I'm missing some details here. On the famous Vice News report on Islamic State, you can see locals in the Syrian town of Raqqa, bulwark of IS, still using Syrian cash (see at 21:19, I checked the note, it looks like 100 Syrian Pound [£0.40]). How come this has still any value for use in a society that does not control the supply of it? Anyways, this oil trade generates dollar reserves that are perhaps kept separate of the local economy and is used solely for other smuggling/trade of food, weapons and whatever a typical terrorist organisation needs and cannot produce by itself. IS is also known to raise local taxes, which must be Syrian and Iraqi dollars. So this tax-cash may be used only for their local 'civilian' operations such as running the courts and paying those who patrol the streets to check on 'unislamic' behavior. In general, the details of governance of Islamic State remain largely unknown, which includes its fiscal and monetary policy and how they manage 'their' natural resources.
A while ago there were these startling reports that ISIS had robbed banks in Mosul, Iraq, allegedly taking 500bn Iraqi dinars ($430m) in cash. This, according to the FT, actually never happened. ISIS never even attempted to rob the banks.
update 11/09/2014: See NPR article and podcast.
ps. Many Muslims are not flattered by these people calling themselves Islamic State. An alternative is proposed as QS, but I find not many media using it thus far.
Interesting details in the report: since the oil needs to be smuggled through middlemen, IS can only sell the oil at a ~50% discount from the world price. The middlemen tend to be locals, and much oil goes via the Kurdish region in Iraq to Turkey and Iran. Trade is done in cash, they hold no international network of bank accounts.
Regarding the last point, this cash is, I presume, American dollars (the report does not say anything about this). There must be piles of cash being stored somewhere, which the report says some intelligent agencies are looking into. The cash is used for recruitment abroad, and "its growing operations and territorial expansion." I'm missing some details here. On the famous Vice News report on Islamic State, you can see locals in the Syrian town of Raqqa, bulwark of IS, still using Syrian cash (see at 21:19, I checked the note, it looks like 100 Syrian Pound [£0.40]). How come this has still any value for use in a society that does not control the supply of it? Anyways, this oil trade generates dollar reserves that are perhaps kept separate of the local economy and is used solely for other smuggling/trade of food, weapons and whatever a typical terrorist organisation needs and cannot produce by itself. IS is also known to raise local taxes, which must be Syrian and Iraqi dollars. So this tax-cash may be used only for their local 'civilian' operations such as running the courts and paying those who patrol the streets to check on 'unislamic' behavior. In general, the details of governance of Islamic State remain largely unknown, which includes its fiscal and monetary policy and how they manage 'their' natural resources.
A while ago there were these startling reports that ISIS had robbed banks in Mosul, Iraq, allegedly taking 500bn Iraqi dinars ($430m) in cash. This, according to the FT, actually never happened. ISIS never even attempted to rob the banks.
update 11/09/2014: See NPR article and podcast.
ps. Many Muslims are not flattered by these people calling themselves Islamic State. An alternative is proposed as QS, but I find not many media using it thus far.
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