The Islamic State (of Iraq and the Levant – ‘ISIS’) currently controls key parts of an area larger than the U.K., and a not insignificant population base. This territory holds oil, which is then sold on the black market and is ostensibly used to fund terrorist operations. This is important because other terrorist organisations that are often funded near entirely by donations that can be easily squeezed by better law enforcement, sanctions, or just basic diplomacy.
Areas under ISIS control
ISIS sells oil at below market prices, a rate which creates added incentives for small-scale middlemen or troubled regional actors for them to take (and cover up) the risk. To put this in perspective, ISIS would be selling oil from as low as $25/barrel; it is rumoured that even Assad is buying oil (in a very unholy alliance).
The revenues from oil are estimated to be around $2m a day, with approximately half of its 80,000 barrels a day capacity being produced. This can increase its ability to conduct terrorist operations more frequently and with greater competency, and the group’s ability to project power in general. A study by RAND supported the idea that increased revenues resulted in increased terrorist attacks (see page 74 onwards).
Whilst ISIS does tax cities, and hold the local population under its control for rents, they also have a duty to administrate, govern, and keep the streets clean. It is not clear how much money this will cost them, but it could be an issue, that it is easy for ISIS to capture cities but not to hold or make use of them.
To sum up, whilst ISIS are often depicted as simply a bunch of militants and gunners, they are not. They have engineers, doctors, and businessmen at their disposal. They also have the potential for legitimacy in the eyes of the local population, if they use oil to provide basic governmental services – something other groups in the Syrian Civil War were unable to do.
It’s also worth noting that ISIS mainly exports crude oil, but is making pushes for a large refinery base in Baiji. Exporting refined oil would be more profitable and maybe even less risky.
