It's All About That Money

With the recent rise of the Islamic State (IS), many questions have been raised about the finances of extremist groups.  The most common question is: where do they get their funding?

The BBC recently reported an estimation of five different groups' annual incomes and their primary sources.

• Islamic State: $2 billion
• sale of oil, tolls, and 'taxes'
• Afghan Taliban: $400 million
• donors, sale of drugs
• Al-Shabab: up to $100 million
• sale of charcoal and 'taxes'
• Boko Haram: $10 million
• kidnap for ransom, fundraising
• Al Nusra Front: unknown
• donations, kidnap for ransom

Donations, sale of natural resources and drugs, kidnap for ransom, and 'taxes' are the primary money-raisers for these extremist groups.  There are several things one must keep in mind while considering these sources.

1. Donations are likely to continue.
• They are provided by those sympathetic to the cause, often from Gulf state countries or the diaspora community.
• Like-minded terrorist groups send money to each other.  In 2012 al-Qaeda in the Islamic Maghreb (AQIM) sent Boko Haram $250,000.
2. The sale of natural resources is at a discounted rate and therefore likely to be affected by factors such as lower oil costs.
• For example, IS was selling oil at $40-$60/barrel when barrels were selling at around $100/barrel.  Prices are now closer to $60/barrel, so IS is likely to be earning much less per barrel.
3. 'Taxes' include taxation of businesses, people, and transport routes.  Islamic State has forced religious minorities to pay a special tax, convert to Islam, or leave.

Islamic State is particularly notable because it has become fairly self-reliant for funding.  While it still receives donations, IS has internal funding to rely upon in the event of the disruption of donations by the international community.  It's oil sale is the primary source of its funding, but other sources complement it.  The aforementioned 'taxes' are a significant contribution, as well as its receiving some donations.  IS also robs banks, loots and sells antiques, and sells crops and livestock.  Kidnap for ransom also provides IS with funding, an estimated $20 million in 2014.  It has been alleged that IS has sold abducted girls and women as sex slaves.

Al-Shabab is a similar case.  The group controls territory and population, and, like IS, it taxes its people, businesses, and transport.  It has also established a charcoal export business that generates up to $80 million annually.

The Afghan Taliban benefits from the sale of drugs, particularly opium poppies, to earn up to $150 million annually.

AQIM raises its money two ways:

1. The kidnap of foreign tourists and workers for ransom (est. $100 million over 5 years)
2. Control of drug smuggling routes

The Haqqani Network also relies on smuggling.

From these data, it's clear that extremist groups get their funding from a variety of high-paying sources.  It's important to remember, however, that if their costs are higher than their income, it does not necessarily matter how much that income is.  For example, IS and Al-Shabab raise a subtantial amount annually.  But both groups control territory and people and provide these people with services like security, justice, and food.  These groups are responsible for maintaining their populations, as well as the operations of the groups themselves.  This can be very expensive and poor management could prove destructive.

External disruption of funding has proven ineffective thus far in stopping the rise of extremist groups like IS.  It has been argued that this is because we waited too long.  By the time we realized the threat imposed by IS, the group already had a foundation of internal funding.  A proposed counter suggestion: patience.  Al-Qaeda in Iraq identified poor money management and irregular income as critical contributors to its failure.  We can hope, then, that IS and other extremist groups struggle under the burdens of territorial management and their group operations and other factors like the dropping oil prices and fall as a result.  In the meantime, attempts at disruption wouldn't be a bad idea.