Islamic State's like Taliban - with oil wells
WITH its reign of terror over a large population and ability to self-finance on a staggering scale, the extremist group that beheaded American journalist James Foley resembles the Taliban - with oil wells.
The Islamic State, which now controls an area of Iraq and Syria larger than Britain, may be raising more than US$2 million (S$2.5 million) a day in revenue from oil sales, extortion, taxes and smuggling.
Unlike other extremist groups' reliance on foreign donations that can be squeezed by sanctions, diplomacy and law enforcement, the Islamic State's predominantly local revenue stream poses a unique challenge to governments seeking to halt its advance and undermine its ability to launch terrorist attacks that, in time, might be aimed at the United States and Europe.
"The Islamic State is probably the wealthiest terrorist group we've ever known," said Matthew Levitt, a former US Treasury terrorism and financial intelligence official who is now director of the counterterrorism and intelligence programme at the Washington Institute for Near East Policy.
"They're not as integrated with the international financial system, and therefore not as vulnerable" to sanctions, anti-money laundering laws and banking regulations.
In contrast, the late Al-Qaeda chief Osama bin Laden was from a wealthy family and enjoyed a network of foreign patrons, and his funding sources were squeezed by financial intelligence officers.
The Islamic State "makes their money primarily - if not entirely - locally", said Patrick Johnston, a counterterrorism specialist at Rand Corporation.
The money that the Islamic State receives from outside donors pales in comparison to its income from extortion, kidnapping, robbery, oil smuggling and the like, said a US intelligence official who spoke on the condition of anonymity.
With its control of seven oil fields and two refineries in northern Iraq, and six out of 10 oil fields in eastern Syria, the terror group is selling crude at between US$25 and US$60 a barrel, said Luay Al-Khatteeb, a visiting fellow at the Brookings Institution's Doha Center in Qatar.
Based on Dr Al-Khatteeb's interviews with contacts in Iraq, the extremist group controls Iraqi fields with a production capacity of 80,000 barrels a day and is now extracting about half that amount.
The Islamic State, he said, is probably earning some US$2 million a day from crude sales, paid in cash or bartered goods as the oil crosses into the Kurdistan region of Iraq, Syria, Turkey and Jordan.
Said Brian Fishman, former director of the Combating Terrorism Center at the US Military Academy at West Point: "It's not totally clear where they're storing all this money, but there may be ways to actually go after it."
Whether or not it's in a bank account, "you've got to put it somewhere".