Recently declassified materials show the extent to which an Islamic State of Iraq and Syria (ISIS) financier used antiquities smuggling for revenues. The scope of ISIS’s reliance on smuggling artifacts has been a point of disagreement among analysts for several years. The indications from a May raid against ISIS are that at least hundreds of millions of dollars worth of transactions have been involved. Roll tape from CBS News:
Given the territory it controls, the economic prospects of the Islamic State of Iraq and Syria (ISIS) are crummy, researchers have argued. Oil notwithstanding, the economies of northern Syria and western and northern Iraq weren’t so great to begin with before the rise of ISIS (also known as Daesh). The economy in areas of ISIS control has probably worsened given the number of people who have fled or who otherwise lost their jobs when ISIS took control. On top of that, ISIS spends its money on aggression, not on public service delivery.
This is a persuasive argument. It has a bit more substance to it than the usual happy talk from than speeches from U.S. Treasury Department officials. Kudos to Jamie Hansen-Lewis and Jacob N. Shapiro for their research, which was published in the journal Perspectives on Terrorism (hat tip to El Grillo). A salient excerpt from their article follows:
…Daesh has limited economic activity to draw on. Daesh area’s total economic activity according to G-Econ was at most one-fifth of the rest of Iraq’s and one-third of the rest of Syria’s. Using the more refined DMSP-OLS data the group’s poverty is equally stark, with 2012 illumination in the regions it now controls amounting to no more than one-third of the rest of Syria and one-eighth of the rest of Iraq.
And these methods almost surely overestimate Daesh’s current revenue base. First, we included areas of Daesh support from which their economy might draw in part, but it is not clear how much authority the group has to extract in these areas. Second, we use pre-war data, but the massive population movements that accompanied the Daesh takeover means these areas surely have less economic activity than they did in 1990 (for the GEcon data) or 2012 (for the DMSP-OLS data).[39]
Assuming Daesh is able to transform that economic activity into military spending at rates similar to comparably sized states we should not expect it to be able to sustain large defense expenditures. Worldwide defense expenditures peak at 10.2% of GDP in South Sudan, with many conflict-affected countries spending only 3% of GDP on defense.[40] Countries close to Daesh’s Gross Cell Product had a 2014 GDP of approximately $30B or $4,700 per capita. Combined with the range of observed expenditures this suggests the group could support defense expenditures in the range of $900M to $3B per year. While Daesh’s potential spending totals are large compared to its economic neighbors, they pale in comparison to Iraq’s 2014 spending of $9.5B, Turkey’s $20B, UAE’s $22.6B, or Saudi Arabia’s $80B.[41] While spending clearly translates only indirectly into military power, the gap between what is monetarily feasible for Daesh over the long-run and what its neighbors spend is striking.
Moreover, if we turn to the population under Daesh’s control it is fairly sparse…
Further clues have emerged that that the looting of museums following the 2003 invasion of Iraq wasn’t really the result of lax security or random looters from the street. It was probably a systematic inside job by an organized syndicate of corrupt Baathist officials before they went underground. The antiquities they stole were either sold to help fund the insurgency or were kept by former officials who later joined AQI which became ISIS.
At least the Washington Post reported on the discovery (h/t MFS001), although it buried the most important connection in paragraph 15 of a 17 paragraph article (in bold below, emphasis mine):
Artifacts looted during the Iraq invasion turned up in the house of an Islamic State leader
BAGHDAD — The United States handed over more than 400 ancient artifacts to Iraq on Wednesday, part of ongoing efforts to repatriate the country’s looted heritage. But this latest batch has a particularly intriguing back story — the antiquities were seized by U.S. Special Operations forces members as they raided the house of a leader of the Islamic State militant group.
The nighttime operation to capture the militant took place in eastern Syria in May, and the Delta Force troops did not come back with their prize. It was their first such ground mission in the country, and their main target, a man known as Abu Sayyaf who ran oil operations for the Islamic State in the area, was killed in an ensuing firefight.
But as the commandos scoured the compound for documents and laptops that could provide intelligence about the organization, they stumbled across artifacts thought to be dating back as far as 4,000 years.
Among them was a religious text written in Aramaic, the ancient Semitic language said to have been spoken by Jesus. An official at the National Museum of Iraq in Baghdad said Wednesday that it was about 500 years old but has not yet been properly dated. (Museum officials also said that, as with many of the items found, they could not be sure whether the text was of Syrian or Iraqi origin.)
There were hundreds of coins — some of them gold from the Abbassid era, others silver pieces from the Umayyad period. There were stone cylindrical seals from the ancient city of Nimrud and fragments of pottery.
The presence of the artifacts in Abu Sayyaf’s house is perhaps not surprising. The Islamic State’s “Diwan al-Rikaz” — a ministry overseeing precious resources — has departments in charge of both oil and gas and antiquities. Abu Sayyaf may well have had a role in the sale of these resources…
…Among the items found in the house were three Babylonian stone seals, which officials said were stolen in 2003 from the National Museum of Iraq in Baghdad during the chaos that followed the U.S.-led invasion of Iraq. Their museum numbering is still visible…
A recent research paper on the Syrian economy included an instructive revelation. Chatham House fellow Hayder al-Khoei drew special attention in a tweet to the off-hand but crucial finding in the report: that Syria’s economy grew 80 percent in 2014 due to a spike in Turkish imports that coincided with the rise of the Islamic State of Iraq and Syria. Specifically, the report found:
… It is not clear what caused this surge in Turkish exports, but it coincided with the height of the advances by ISIS in both Iraq and Syria, and some of the additional sales could have been accounted for by additional procurement from Turkey by ISIS – for example steel pipes and sections for oil refining projects… (p. 26)
It won’t be proven in a court of law, but it is clear what Chatham House is suggesting. It is clear what readers will take from this. And it has been clear for some time that ISIS would not have been able to surge to such a dominant position in Iraq without extensive cross-border Turkish support. Money Jihad reported on the very phenomenon of Turkey’s contributions to ISIS almost to the day one year ago.
Hat tip to Moscow Ghost.
Abu Hajjar, a high-ranking leader of the Islamic State of Iraq and Syria (ISIS), has explains how he distributed hundreds of thousands of dollars to ISIS fighters in a recent interview with BBC Two. Abu Hajjar also addresses what he calls the Islamic State’s principal source of revenue: the taxation of businesses and commerce in the areas under ISIS’s control. He concludes that ISIS will never run out of money as long as businesses are still operating in Iraq.
Over one hundred “very high-risk” account holders have borrowed the maximum amount of money they could from their bank before traveling to countries neighboring Iraq and Syria. Presumably this means Turkey and perhaps Lebanon or Jordan. Typically those are the places ISIS recruits from the West fly into before crossing the border by ground into Syria or Iraq. The credit card accounts have gone dormant and the debts will never be paid back.
Thanks to Gisele for sending this news in about debt-financed travel for jihad from QMI via the Toronto Sun:
114 ‘high-risk’ Canadians bilked RBC before leaving for areas near conflict zones
The Royal Bank of Canada has identified 114 clients as “very high-risk” for maxing out their credit cards before travelling to countries near Syria and Iraq, QMI Agency has learned.
Before leaving Canada, the clients borrowed the maximum amount of money allowed on their credit cards or lines of credit, a senior RBC vice president, Karim Rajwani, told participants during a webinar earlier this year.
QMI Agency obtained the audio recording.
The webinar was organized for anti-money laundering and anti-terrorist financing professionals in the banking industry.
Rajwani, a world expert in the fight against terrorist financing, says he discreetly shared his information with the Canadian Security and Intelligence Service.
None of the 114 clients paid off their debts and their accounts have been inactive since they left the country, he added.
“We aren’t saying that these people are terrorists, just very high-risk individuals,” Rajwani noted.
“They get a line of credit and they leave. We see a few transactions in overseas ATMs in countries neighbouring areas controlled by the Islamic State, and after that they disappear”…
CNN has video of U.S. weapons stolen by ISIS from the Iraqi army a couple weeks ago:
This kind of activity demonstrates the need to safeguard U.S. military equipment in countries where American combat troops withdraw. Giving surplus equipment to allies isn’t a problem, but leaving dysfunctional, foreign military units in charge of that equipment with no residual U.S. force for accountability is a recipe for theft or worse.
Weigh this information carefully as you ponder whether Americans should make a wholesale withdrawal from Afghanistan, or whether we should pursue a more reasoned approach.
Money Jihad 
ISIS slashes their fighters’ paychecks
October 7, 2015The Islamic State of Iraq has cut the wages for jihadists from about $400 to $100. Is it a sign that ISIS is struggling financially, or is it an indication that they’re able to cut wages and still attract volunteers? It’s unclear from this report from the Mirror whether ISIS is able to replenish the fighters that have left for Syria in search of better wages. Hat tip to Shariah Finance Watch:
Posted in News commentary | Tagged Iraq, Islamic State of Iraq, Syria | 1 Comment »