Iraq Analysis: “Who Funds the Islamic State of Iraq?” — The Surprise Answer

Scott Lucas
By Scott Lucas June 29, 2014 10:45 Updated

Iraq Analysis: “Who Funds the Islamic State of Iraq?” — The Surprise Answer

Story Highlights

  • "Who Funds ISIS?" ---- ISIS
  • Group has local bases of smuggling, extortion, and ransoms
  • Mythical figure of "up to $2 billion" circulating in media

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Since the rise of the insurgent offensive in Iraq three weeks ago, there has been a Mexican stand-off over “Who created the Islamic State of Iraq and as-Sham?”, the leading force in the insurgency.

Iranian leaders have claimed that the US and the Saudis fostered the organization. American pundits, using outlets like Foreign Policy Magazine, have said Iran is behind ISIS. Other stories pin blame on Turkey.

But what if the ISIS relies on no State? What if it supports itself?

That scenario — replacing propaganda from all sides with a more challenging explanation of “an organization whose structure and attention to detail allowed it to prosper even during the toughest U.S. counterterrorism efforts” — has been raised by a series of articles based on documents from the organization.

Hannah Allam of McClatchy News summarizes analyses of about 200 documents from the Pentagon’s Harmony Database, declassified for evaluation by RAND:

(By 2010) the group…had begun siphoning a share of Iraq’s oil wealth, opening gas stations in the north, smuggling oil and extorting money from industry contractors — enterprises that (leader Abu Bakr al-) Baghdadi would build on and replicate as he expanded operations across the border into Syria.

The documents describe a developed financial system based on local income — — long before Mosul, Iraq’s second-largest city, was captured by insurgents earlier this month, it was the “moneymaker” for ISIS — such as payments for “protection” of businesses and ransoms for kidnapping . Cells send up to 20% of revenue to the next-highest level of leadership, which then distributes the funds.

More than half of expenditures have been devoted to members and families of slain fighters. Funds have also been used to entice “tribal committees” to work with ISIS.

The extent of ISIS’s assets is unclear — a figure of “up to $2 billion”, widely circulated by media, was put out by an Iraqi official two weeks ago — but they were boosted by the takeover of Mosul, even if the figure of $420 million taken from banks is an exaggeration.

But what of the oft-cited “fact”, bolstered by Iranian propaganda, that the Saudi State is the financial driver of ISIS?

Allam’s alternative depiction is complemented by Lori Plotkin Boghardt at the Washington Institute for Near East Policy:

Although Saudi donors and other private contributors were believed to be the most significant funding source for ISIS in the past, the importance of such donations has been marginalized by the group’s independent sources of income.

Boghardt makes the essential observation that Riyadh “views (ISIS) as a terrorist organization that poses a direct threat to the kingdom’s security”. A statement in May from the Interior Ministry accused accused Saudi members of ISIS in the Syria conflict of encouraging Saudi citizens to assassinate leading religious figures and security officials and attack government installations and foreign interests.

Boghardt also offers context for the claim of private Saudi backing of ISIS. She notes that Saudi authorities, in the name of counter-terrorism, monitor the financial sector to block suspect donations.

That does not halt all the activity. Boghardt notes, “Riyadh could do much more to limit private funding.” Saudis supporting insurgents in Syria — including ISIS — can send the money via Kuwait, whose permissive environment for private funders has been highlighted by Elizabeth Dickinson.

However, that support is not the base for ISIS’s expansion, in Iraq and in Syria, and the “blame game” of State responsibility for the Iraqi group owes far more to power politics than to reality.

It is the “local” that matters here, and years of local operations means that the best answer to “Who funds ISIS” is….

ISIS.

Scott Lucas
By Scott Lucas June 29, 2014 10:45 Updated
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