Despite bombings and financial sanctions the Islamic State is still coming up with ways to bring in cash. The Wall Street Journal and Financial Times just documented IS’s deals with Iraqi money exchangers and Syrian oil traders to keep money flowing into the caliphate. It’s yet to be seen whether that’s enough to sustain itself, but it shows that it will still take a lot more to cut off the group’s sources of funding.
Erika Solomon from the Financial Times reported on how the Islamic State is offering bulk oil deals in an attempt to avoid coalition air strikes. IS is issuing 1,000 barrel petroleum licenses to oil traders in Syria. A Syrian trucker said that three businesses had been given these offerings that involve the al-Omar field. This was in direct response to coalition air strikes that have been hitting tanker trucks at oil fields and IS’s storage facilities. By making these large deals IS can be assured of sales and arrange times and places for deliveries to avoid a large number of trucks cuing up at the Omar field, which might invite an air strike. It also keeps their oil flowing to local markets in Syria and Iraq, which the group has come to rely upon. For the traders they can buy a large quantity of oil from IS instead of waiting for small purchases with everyone else.
The Wall Street Journal added another piece on money exchangers who continue to operate in IS controlled territory. These businesses play a crucial role in sustaining the caliphate as they deliver cash. At the center of this network is allegedly Abu Omar, a Mosul based businessman who also operates in Irbil, Sulaymaniya and Hit. After Mosul was taken in June 2014 he agreed to handle the organization’s money affairs. He and other exchanges reportedly bring in cash into the caliphate through three main routes. One is from Istanbul through Kurdistan to Mosul. Another is from Amman to Anbar and Baghdad, and the third is from Turkey’s Gaziantep to Raqqa, Syria. Allegedly Peshmerga and Hashd accept bribes to allow these businesses to delivery cash into IS areas. At the end of 2014, the U.S. warned the Central Bank of Iraq about these companies and how they were buying U.S. dollars at the Bank’s auctions to support IS. The Central Bank responded by handing out fines to banks and then banned 142 money exchangers in December 2014 from the auctions. The problem was that Iraq has no real regulators so all these businesses had to do was set up a front company and they could get right back into buying dollars. Baghdad cannot crackdown on the money exchanges or auctions for two main reasons. First, many of Iraq’s traders rely upon exchanges rather than banks to provide cash for their transactions, so they can’t be shut down without crippling the economy. Second, Iran, Syria, Iraqi organized crime rings, and the nation’s ruling parties are all involved in buying dollars from the Central Bank to either gain access to hard currency or to sell on the open market for a profit. That is a powerful group of actors, which banking officials do not want to confront. That means there will be no real reform of the auctions or effective measures taken against the exchanges to limit the Islamic State’s access to dollars and cash.
One of the defining features of the Islamic State is its resilience. Faced with powerful enemies the group is still working on counter moves. It is attempting to create new oil contracts to deal with air strikes. It has also continued to bring in cash through money exchangers, which keeps its economy going. Western reports have IS struggling. It has allegedly cut the salaries of its fighters, imposed fuel rationing, and is facing rising prices. As one of its key phrases says however, the group is enduring these setbacks and attempting to find ways to overcome them. They highlight the fact that the caliphate is being hurt, but there is still a long way to go before it is defeated.
Solomon, Erika, “Isis oil: deal with traders nets jihadist badly needed funds,” Financial Times, 2/26/16
Wall Street Journal, “Why ISIS’s secret banking network prospers despite air strikes,” 2/25/16