Videos of Islamic State fighters driving brand-name S.U.V.s and pickup trucks in Syria, Iraq and Libya are graphic proof that efforts to squeeze the group financially have not done nearly enough. Now that the Obama administration’s program to train and equip anti-Islamic State fighters has ended in failure, there is even more reason to double down on efforts to choke off the group’s ability to raise funds and buy supplies.
For the Islamic State, which is seeking to establish a caliphate across Iraq and Syria, money is a potential Achilles’ heel. Unlike nations like Iran, which have been under international financial sanctions and controls, the Islamic State — also known as ISIS or ISIL — is not a state. It lacks traditional economic relationships, it generates the vast majority of its revenue from within the territory it controls, and the sources of its revenues are not fully understood — all of which present a difficult challenge, American officials say.
The Treasury Department is leading an international effort to disrupt trade routes, cut access to the international financial system, and impose sanctions on Islamic State leaders and anyone who assists them. Last week, the State Department offered a reward of up to $5 million for information that leads to a significant disruption of sales of oil or antiquities benefiting the group.
Administration officials say they are making progress in starving the Islamic State of revenue and the ability to spend that money in world markets for military equipment and other supplies like oil production gear. But the sight of brand-name vehicles in the group’s convoys is a sure sign that something is awry, especially when Toyota, the manufacturer, says it has a policy of not selling to purchasers who might modify vehicles for terrorist activities.
Nearly a year ago, David Cohen, then the Treasury undersecretary for terrorism and financial intelligence, told Congress the Islamic state “does not have the money to meet its costs.” Yet the terrorists now control a huge swath of territory in Syria and Iraq with millions of people and have drawn thousands of recruits from Europe and elsewhere. They are waging war against an American-led coalition and other forces. That takes hundreds of millions of dollars. They also must provide services to mollify civilians under their control, pay fighters’ salaries estimated at $500 a month or more and equip an army.
American officials say the Islamic State generates most of its revenue within the territory it rules, beyond the reach of the usual counterterrorism tools. Extorting civilians and businesses has brought in hundreds of millions of dollars, they say. Despite American efforts to cut off the group’s oil revenues, the most recent estimate is that ISIS earns about $40 million a month selling oil from fields in Syria and Iraq, with refined products going to local buyers, while crude oil is sold to middlemen and smugglers with customers in Iraq and Syria, including the Syrian regime, and beyond.
The Islamic State is also looting banks; demanding ransom from kidnap victims; engaging in human trafficking; selling off plundered antiquities; and leaning on private donors, mainly in Qatar, Kuwait and Saudi Arabia.
When it began bombing the Islamic State last year, the United States had some success disrupting the group’s oil revenues by targeting pipelines and refineries. Since then, producers have moved from using mobile refineries to using homegrown operations that are harder to target, officials told The Times. Concerns about leaving local citizens without crucial refining facilities and with the daunting job of rebuilding them later may be tempering the American approach, some experts say.
Last November Mr. Cohen stressed the importance of working with Turkey and Kurdish leaders to clamp down on cross-border smuggling, but that hasn’t been effective enough. Some American officials now say they are less confident that tightening Turkey’s border will disrupt the Islamic State’s profits from black-market oil sales.
The top priority now seems to be the blocking of the Islamic State’s use of banks and financial exchanges in Iraq, so the group won’t be able to buy weapons and other supplies. Treasury officials say they have succeeded in cutting off dozens of banks in Islamic State territory from the Iraqi and international financial systems. As the Islamic State moves to establish affiliates in other countries it may become easier to uncover those networks, because they will have to communicate over long distances and possibly assist one another financially, officials say.
If the group’s brutal rampage is to be halted, more effective efforts to undermine its finances are essential. Military force can be only one element of a multipronged strategy.