Islamic State monthly revenue drops to $56 million, IHS Says

Oil production down to 21,000 barrels per day from 33,000; new taxes on broken satellite dishes, fines for driving on wrong side of road

Islamic_State_FinancingThe Islamic State’s monthly revenue has dropped by almost 30 per cent in the last year, according to new analysis released today by IHS Inc.

The latest report from the team responsible for the IHS Conflict Monitor outlines the decline in primary revenue sources for the Islamic State.

“In mid-2015, the Islamic State’s overall monthly revenue was around $80 million,” said Ludovico Carlino, senior analyst at IHS.

“As of March 2016, the Islamic State’s monthly revenue dropped to $56 million.”

Around 50 per cent of the group’s revenue comes from taxation and confiscation, while around 43 percent comes from oil revenue. Drug smuggling, the sale of electricity and donations make up the remainder.

“The Islamic State is still a force in the region, but, this drop in revenue is a significant figure and will increase the challenge for the group to run its territory in the long term,” Carlino said.

Decline in overall production of oil

The latest IHS Conflict Monitor report also highlights the decline in overall production of oil.

ISIS“Our research and analysis indicates that the production of oil in the Islamic State-operated oilfields has dropped to approximately 21,000 barrels per day, from the 33,000 we saw during summer 2015,” said Ludovico Carlino, senior analyst at IHS. “This means that the income the group is generating from the sale of crude has fallen by approximately 26 per cent”.

According to the report, this decline is highly likely to reflect the intensification of the US-led coalition’s military, and to a lesser extent, Russian, efforts to degrade the Islamic State’s capability to produce oil. Almost all the main oilfields operated by the group have been targeted by airstrikes, predominantly by the US-led coalition, resulting in reports of extensive structural damage.

“However, oil production has not completely stopped,” Strack said. “Due to the Islamic State’s enduring capacity to repair, or improvise ways of working around disabled infrastructure, we should look at this as an interruption of production, not a complete stoppage.”

Significantly, the decline in production has not been followed by the Islamic State significantly raising the price of its oil. “This is not due to any reduction in demand on the black markets in Syria and Iraq,” Carlino said. “Rather, we assess that this reflects the Islamic State’s priority interest in quick sales of the oil in order to generate cash.

Fewer people to tax, less revenue for the caliphate

The Islamic State collects the majority of its monthly revenue from taxation and confiscation. However, income from these activities has fallen by approximately 23 per cent since summer 2015.

“The Islamic State has lost about 22 per cent of its territory in the past 15 months,” said Columb Strack, senior analyst at IHS. “Its population has declined from around nine million to around six million. There are fewer people and business activities to tax; the same applies to properties and land to confiscate.”

The general decline in income for the group is also affecting other financial streams, such as the money generating from kidnapping, drug smuggling and taxation on bank account holders and transactions.

New taxes indicate financial difficulties

“Our research has found that the Islamic State is increasing taxes on basic services and coming up with new ways to get money from the population,” Carlino said. “These taxes include tolls for truck drivers, fees for anyone installing new or repairing broken satellite dishes, and ‘exit fees’ for anyone trying to leave a city.”

To make up for lost revenue, the Islamic State is also imposing fines. “You can be fined for driving on the wrong side of the road and for not being able to answer questions correctly on the Quran,” Carlino said.

The Islamic State has also started to accept payment of fines in cash as an alternative penalty to the hudud (corporal punishments proscribed under Shari’a law). As the Islamic State considers hudud punishments as the backbone of its Shari’a law-based governance system, this new stance represents a strong indicator of the financial difficulties the group is going through.

However, there is no indication as of yet that this increased burden of taxation has triggered even localised discontent among the population living in the Islamic State’s caliphate.

 

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