ISIS is the richest terrorist organization in the world — and is likely to stay that way, according to a New York Times investigation published Tuesday morning.
But although the Times found that ISIS's revenues are currently in good shape, the details of the report point to some significant weaknesses in the way ISIS runs its caliphate. The group has not spent its money in a way that is likely to earn the loyalty of civilians under its rule. In the long run, that could make it more difficult for ISIS to hold on to its territory.
ISIS makes most of its money from taxes and extortion, not oil
The Times, citing research by RAND Corporation analysts, reported that ISIS took somewhere around $1.2 billion in 2014.
About half of that came from "extortion and taxation in Iraq" — that is, taking money directly from people and businesses in the Iraqi territory ISIS governs. (The report didn't include any significant extortion or taxation revenue from Syria.) This source of funding has become more important as time has gone on. Oil and bank robbery used to be more significant sources of revenue, but those have faded over time as the list of banks to rob has shrunk and coalition airstrikes have pounded away at ISIS's oil infrastructure.
ISIS watchers have known about its heavy, effective use of taxation for some time. But the Times-RAND report provides new information about ISIS's spending — and with it, some insight into the group's strengths and weaknesses:
The largest expenditure is salaries, which is estimated to be between $3 million and $10 million every month. The Islamic State also invests in police-state institutions, such as committees, media, courts, and market regulation, but provides relatively few services. The group avoids investment in infrastructure because it can be an easy target for attacks, and the territory it holds can change quickly.
The finances underscore ISIS's civilian problem
The key issue for a group like ISIS is that in order to maintain control over its territory, it needs to keep control over the civilians who live there. Otherwise, locals may cooperate with the Iraqi government to identify ISIS fighters and strongholds, and might even join local government-aligned militias, both of which would be very helpful in clearing ISIS out of territory and keeping it gone. For that control to be effective, the group needs to breed loyalty as well as fear.
Buying loyalty can be as useful as earning it, so ISIS's ability to spend a large amount of money on salaries is a strategic advantage. The Times reports that ISIS salaries are "relatively low," indicating that it's managing to employ a relatively large number of people given its overall budget. In a war where ISIS is fairly outnumbered, that's really helpful.
But the fact that ISIS "provides few services" and "avoids investment in infrastructure" could be a significant weakness for the group. It can't employ or pay off every citizen, and the people who don't get money directly from ISIS will judge its rule by the quality of its governance rather than the depth of its pockets.
And dispatches from ISIS-held territory suggest that life under the group is hellish. Citizens live in fear of ISIS, which has a record of horrifying violence against civilians, like crucifying children, burying them alive, and forcing them to be suicide bombers. Water and power services are sporadic at best, and unemployment is widespread. Without some reason to actually appreciate ISIS rule — like effective social services — civilians will be more willing to help Iraqi forces uproot the group.
That won't happen automatically: Iraqi forces need to show that they're strong enough to protect civilian cooperators and that the mostly Sunni residents in ISIS territory can trust forces aligned with the Shia-dominated Iraqi government.
But even though ISIS may have money, the way it's spending it won't solve its problems.