Financial Futures of the Islamic State of Iraq and the Levant: Findings from a rand corporation Workshop

ISIL’s Finances    13

Decreasing Liquidity

A relatively new coalition effort is underway to decrease cash flowing into ISIL-held territory. 

By summer 2015, the Iraqi government had decided to ban the distribution of government 

salaries into ISIL-held territories and instead hold them in escrow; ISIL had been taxing these 

salaries as a source of revenue. Before this decision was taken, the Iraqi government was paying 

approximately $170 million per month in 2015—the equivalent of $2 billion per year—into 

ISIL-held territory.

40

 Furthermore, Iraq has begun to prohibit bank branches in cities and 

towns held by ISIL from making international transfers, instead ordering all requests to be 

routed through the central bank in Baghdad, where they can, in theory, be intercepted and 

stopped. The U.S. Treasury, in cooperation with the Central Bank of Iraq, is working to pre-

vent ISIL from accessing the international financial system. Ninety bank branches within 

ISIL-held territory have been cut off from both the international and Iraqi banking system, 

and 150 exchange houses have been banned from participation in Central Bank of Iraq dollar 

auctions. These banking restraints mean that ISIL will have to continue to store its cash in 

warehouses and vaults, which are increasingly vulnerable to airstrikes.

41

 Furthermore, a block 

on access to exchange houses and currency auctions will limit ISIL’s ability to procure U.S. 

dollars and deny the group potential revenue from exchange rate arbitrage. 

On the multilateral front, the Counter-ISIL Finance Group is tasked with preventing 

ISIL from using the international financial system, including unregulated money remitters; 

countering ISIL extortion and exploitation of economic assets and resources; denying ISIL 

external funding; and preventing ISIL from providing financial or material support to for-

eign affiliates.

42

 The Financial Action Task Force, the intergovernmental standard-setting body 

against money laundering and terrorism financing, is working with the Counter-ISIL Finance 

Group.

43

In addition, the United States and Iraq have established the Bilateral Commission to 

Counter Terrorist Financing, focused on information and intelligence exchanges; the United 

States has sanctioned 30 ISIL-linked senior leaders, financiers, foreign terrorist fighter facilita-

tors, and ISIL branches; and the United Nations has passed Security Council Resolution 2253, 

which builds upon the existing al-Qa’ida sanctions regime and seeks to cement multilateral 

cooperation to counter ISIL financing.

Will ISIL Be Able to Weather the Financial Storm?

ISIL is resilient—some might say regenerative.

44

 Its ability to mitigate efforts countering its 

financing is directly related to several factors. ISIL has retained technical expertise from pre-

vious governments and the private sector (for example, the corporate oil structure), promotes 

40  

Glaser, 2016a.

41  

Jim Michaels, “Air Campaign Shifts to ISIL’s Cash and Oil,” USA Today, April 17, 2016a.

42  

U.S. Department of State, “Establishment of the Counter-ISIL Finance Group in Rome, Italy,” media note,  

March 20, 2015.

43  

Financial Action Task Force, Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (ISIL), Paris, 

2015.

44  

Howard J. Shatz and Erin-Elizabeth Johnston, The Islamic State We Knew: Insights Before the Resurgence and Their Impli-

cations, RR-1267-OSD, Santa Monica, Calif.: RAND Corporation, 2015.

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14    Financial Futures of the Islamic State of Iraq and the Levant

limited state ownership of industry beyond regulatory and taxation roles, and boasts an ability 

to balance its expenditures and revenues.

45

 ISIL has territorially based sources of revenue other 

than oil, such as phosphate mines and agriculture; at various points, ISIL has controlled as 

many as five important cement plants in Iraq and Syria.

46

 Unlike al-Qa’ida, ISIL does not rely 

on donations as a major source of revenue and so is less susceptible to traditional sanctions. The 

sheer volume of money initially accumulated by ISIL is more than any group in modern his-

tory, which would certainly insulate it against its current losses for a time and allow the group 

to remain financially autonomous as it deals with ongoing austerity measures.

47

 In addition, 

in its past as a clandestine group, ISIL was able to cut expenses and continue raising money 

through extortion rackets and other fundraising activities. These factors leave ISIL’s future 

uncertain, even as the group faces greater military and financial pressure. 

45  

Johnston, 2016.

46  

Center for the Analysis of Terrorism, 2016, p.13. See also Eckart Woertz and Hadi Jaafar, “It’s Not Funded Just By Oil 

and Looting. How the Islamic State Uses Agriculture.” Washington Post, September 27, 2016.

47  

Tom Keatinge, “The Importance of Financing in Enabling and Sustaining the Conflict in Syria (and Beyond),” Perspec-

tives on Terrorism, Vol. 8, No. 4, August 2014a.

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15

CHAPTER THREE

Major Themes in ISIL’s Financial Futures

Workshop participants discussed the implications of three ISIL scenarios for the future of 

ISIL finances: a status quo situation, in which present political and military trends continued; 

a negotiated settlement in Syria and political reconciliation in Iraq; or a total combat victory 

against ISIL, without any negotiated settlement or political reconciliation. During the discus-

sion, several important themes and common conclusions emerged across each scenario. We 

highlight those themes in this chapter, both in terms of workshop participants’ agreements and 

disagreements. These findings were current as of late June 2016.

Points of agreement suggest how ISIL will evolve financially regardless of the actions of 

the counter-ISIL coalition and provide stronger confidence in certain baseline assumptions 

regarding ISIL’s financial future. Points of disagreement could become collection and analysis 

priorities to gain visibility into ISIL’s evolution.

Themes discussed included ISIL’s adaptability and resilience; ISIL’s ability to maintain its 

brand, with or without the loss of its caliphate; other actors’ views of ISIL if it remains locked 

in a military stalemate with the international coalition; the ability and willingness of govern-

ments in Syria and Iraq to address the underlying grievances that provide ISIL with legitimacy 

among parts of their respective populations; and the level of future involvement by external 

state actors, nonstate actors, and the group’s global roster of affiliates.

Areas of Agreement Across Scenarios 

Workshop participants agreed on several issues. These included ISIL’s adaptability and resil-

ience, ISIL’s persistence, and the effects of stalemate on ISIL.

ISIL Is a Highly Adaptable and Resilient Organization 

Perhaps the least controversial observation within the workshop was the statement that as an 

organization, ISIL is particularly adaptable and resilient. Participants agreed on this point 

even in scenarios of political reconciliation or combat victory against the group. Participants 

offered myriad examples from the past several years in which ISIL has overcome challenges and 

obstacles, even without unilateral control over territory. Part of what makes ISIL so adaptable 

is its organizational structure. Although ISIL is well organized, with a defined bureaucracy and 

lines of reporting, it is not monolithic, and the autonomy given to its constituent parts make 

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