Outside the deserted town of al Hawl in northern Syria, a network
of pipes converges on a plant with three oil storage tanks.
It’s a small facility, but for more than a year it helped ISIS’ war
economy, dispensing crude to middlemen willing to risk being
bombed to trade it.
ISIS fighters were forced to abandon al Hawl in November. They
scrawled graffiti on the tanks and rigged booby-traps. They also
left behind a bomb factory and a source of taxation: al Hawl had
Its retreat from al Hawl is one small example of a growing
problem for the “caliphate.” Its revenues are declining as its
control over populations and resources shrink.
In 2015, ISIS lost about 40% of the area it held in Iraq, as well as
parts of northeastern Syria that have both good farmland and oil.
Airstrikes on the oil infrastructure it controlled have further
diminished the balance sheet. Some of its senior financial officials
have been killed. Trading through Turkey has become much
more difficult. Its cash depots have been bombed.
ISIS isn’t about to file for bankruptcy — but its balance sheet is
How come ISIS got so rich so quick?
A terror group that claims to be a state, or a “caliphate,” needs a
lot of money, especially when — according to most estimates —
some 4 to 5 million people live under its control.
ISIS did have a lot of money. Even before it went on its land-grab
in 2014 it probably had assets worth $875 million, according to a
study by the Rand Corporation. Much of that came through
It also enjoyed windfall profits in the expansionary days of 2014.
These included, according to U.S. estimates, between $500 million
and $1 billion seized from Iraqi bank vaults. The branch of the
Central Bank in Mosul alone was said to contain more than $400
It also grabbed thousands of tons of military equipment left
behind by fleeing Iraqi security forces, and oil wells and refineries.
The cash was rolling in. Speaking in October 2014, senior U.S.
Treasury official David S. Cohen said ISIS “has amassed wealth at
an unprecedented pace.”
Last year, the group captured valuable phosphate deposits near
Palmyra in Syria, to add to those parts of Anbar province in Iraq
which are rich in the material. Phosphates are an important
ingredient in fertilizer.
A conservative estimate would be that ISIS’ cash pile and
revenues amounted to at least $1.5 billion a year ago. But ISIS was
also spending money — fast.
Of course, ISIS doesn’t publish accounts, so it’s tough to estimate
its spending. The Iraqi government budgeted $2 billion in 2014 for
the provinces which ISIS then seized. The terror group is unlikely
to be spending anything like that.
Even so, ISIS still has to provide basic social services, health care,
water and electricity, and maintain roads and sewage systems. It
has to pay wages, even more so when the Iraqi government
decided last September not to continue paying civil servants in
areas under ISIS control, a loss estimated at some $170 million a
month to the local economy.
What about oil?
In late 2014, ISIS-controlled oil refineries were producing about
50,000 barrels a day, worth an estimated $500 million annually.
Rather than handle the sales itself, ISIS tapped into existing
smuggling networks which sold some of that oil into Turkey.
The margins were slim because there were many parties
involved. Still, it was a lucrative trade.
But hasn’t oil crashed?
Yes, it has, but that’s not ISIS’ biggest problem. Last autumn, the
anti-ISIS coalition decided to go after the terror group’s oil
infrastructure with an operation called Tidal Wave II. It began
targeting oil trucks, gas-oil separation plants and oil collection
On one day alone last November, according to a coalition
estimate, 283 oil tankers were hit near Deir Ezzour in Syria, home
to about two-thirds of ISIS’ oil production. Mobile refineries have
also been targeted, making it more expensive for ISIS to obtain
refined products. The spare parts and expertise needed to repair
infrastructure were hard to come by.
It’s difficult to estimate current production from ISIS-controlled
fields. Col. Steve Warren, spokesman for the Combined Joint Task
Force in Baghdad, says it may have fallen to about 34,000 barrels
a day. Another source tells CNN that at times it has fallen below
20,000 barrels per day — a drop of 60%.
Sources in northern Syria say the price per barrel in places like
Hasakah — outside ISIS control — is about $20, while in ISIS-held
territory it has stayed above $40. That price likely reflects
shortages. There are many reports of fuel rationing, and
opposition activists say the price of gas in Raqqa has risen 25%.
The Financial Times reported in February that ISIS has cut its fleet
of cars in Deir Ezzour from 60 to 10.
Who else is buying oil?
ISIS still has one major customer for the oil and gas it has
appropriated: the Syrian regime. According to one analyst, the
regime may be buying up to 20,000 barrels per day from ISIS.
But isn’t ISIS fighting against the Syrian regime?
“The two are trying to slaughter each other and they are still
engaged in millions and millions of dollars of trade,” says Adam
Szubin, acting under secretary for Terrorism and Financial
Intelligence at the U.S. Treasury.
ISIS’ seizure of the Palmyra area in May last year included two gas
fields and a pumping station known as T3. That pushed the Syrian
regime into a bargain with ISIS: “Continued flow of gas from
eastern fields to regime power plants in return for payment or
electricity supply,” according to Yezid Sayigh, a senior research
associate at the Carnegie Endowment for International Peace.
And what about taxes?
As it rampaged through Iraq and much of northern Syria in 2014,
ISIS seized huge amounts of personal property. In Mosul it simply
appropriated and resold the homes of those who fled and seized
their bank accounts. It may also have made $100 million from the
sale of antiquities, according to Iraqi officials.
And it made obscene sums from ransom payments and the sale
of slaves, especially young Yazidi women. In 2014, ISIS made
about $20 million from ransom payments, the U.S. Treasury
According to several studies, revenues from what is essentially
looting and pillage probably made up 40% of the group’s income.
But you can only confiscate a property, rob a bank or sell a
ISIS also levies heavy and various taxes on the populations under
its control. Its zakat tax takes about 10% of people’s income and
it’s been known to take about a tenth of the amount whenever
someone withdraws cash from a bank account. There are fees for
using water, electricity and cell phone services.
Ludovico Carlino, a senior analyst at IHS/Janes, says: “They charge
a 20% tax on all services.”
ISIS also makes money from Christians through an Islamic tax
known as jizya. “If they refuse this, they will have nothing but the
sword,” ISIS announced in 2014. ‘”Apostates” have to pay a
repentance fee of some $2,500, according to ISIS documents
analyzed by Aymenn Jawad Al-Tamimi at the Middle East Forum.
Donations from the Gulf and elsewhere have helped, though not
as much as with al Qaeda. International sanctions have hit donors
and facilitators. ISIS has even tried — with unknown results — to
exploit Bitcoin accounts to raise money overseas, even putting out
an English-language guide.
So where is ISIS losing money?
Perhaps ISIS’ biggest problem now is a shrinking tax base as
people have fled territory under its control, especially the
professionals it needs such as doctors and engineers. ISIS
documents have threatened medical professionals with having
their property confiscated unless they return home.
The caliphate’s economy is largely isolated from the outside
world, making it more difficult to develop and sell the resources
under its control — from hydro-electric power to oil, cement and
wheat. That’s in part because of a major crackdown by Turkish
authorities on widespread illicit trade from which ISIS benefited.
ISIS also lost control of stretches of the Syria-Turkish border to
The anti-ISIS coalition has also made a priority of targeting the
group’s financial experts — men like Abu Salah, described by Col.
Warren as “one of the most senior and experienced members of
its financial network,” who was killed last November.
That sort of expertise is not easily replicated. Other key officials
have also been sanctioned, including those involved in oil.
ISIS revenues are now some $80 million a month, with half
coming from taxation and confiscation, according to a recent
analysis by IHS/Janes. But that may not be enough.
What’s ISIS doing about all this?
Late last year, a document from Raqqa analyzed by Al-Tamimi
revealed a 50% wage cut for fighters and civil servants “on
account of the exceptional circumstances the Islamic State is
Al-Tamimi told CNN the pay cut appears to have applied only to
Raqqa. But he notes other austerity measures: “Reductions in
‘perks’ for IS fighters and cracking down on ‘waste expenditure’
definitely exist,” he explained, including restricting the use of
vehicles when not needed for operations.
The squeeze may have been aggravated by a U.S. airstrike on
January 11 against an ISIS depot in Mosul, which destroyed
“millions” in bills, according to U.S. officials. That appears to have
provoked ISIS into stepping up tax collection efforts. In Mosul and
Fallujah, according to anecdotal evidence, it has also begun
“selling” the right to leave to the few who can afford to do so. It
costs $1,000 — $2,000.
According to some Iraqi sources, ISIS also began dispersing its
cash holdings. The coalition announced last weekend that an
airstrike hit an ISIS financial distribution center near Qarraya, 45
miles south of Mosul.
Where else does ISIS have problems?
As its supply lines are cut, in northern Iraq for example, ISIS has
to spend more to transport fighters, weapons and supplies via
more circuitous routes across the Jazeera desert.
Moving cash to buy supplies is also becoming more difficult. The
U.S. Treasury Department, working with some 30 other countries
and organizations, is trying to cut bank branches in ISIS-held
territory in Iraq out of the international system.
But for now, ISIS is still able to access money-changers in Iraq,
Turkey and Lebanon who operate outside the formal financial
“Don’t underestimate continued cash flow with the outside world,”
Al-Tamimi told CNN. “So long as that continues, I don’t see a fatal
economic collapse from within — just the standard of living
getting worse and worse.”
So what’s going to happen?
ISIS is adaptive and resilient. It continues to function, with a
sophisticated bureaucracy driving tax collection. Were it a typical
terrorist group not focused on governing an area larger than
Belgium, money might not be such a concern. But its credo is
about maintaining and expanding a state.
And in the areas it rules, all the evidence points to rising inflation,
growing shortages and an increased emphasis on force to retain
Outside the deserted town of al Hawl in northern Syria, a network