Summary
ISIL is facing a constant, and increasingly desperate, struggle to raise money. It is therefore a mischaracterisation to describe it as the world’s “richest” terrorist group. As part of this struggle, the group has come to rely on oil production, taxation, cash storage facilities, and access to national or international financial systems, among other infrastructure and institutions more usually associated with a state. These attributes are key points of vulnerability for ISIL, and targeting them has been at the centre of the UK’s contribution to the economic war against this terrorist organisation.
Oil sales have been one of the primary sources of revenue for ISIL. The UK has contributed to a campaign of Coalition airstrikes that have targeted elements of ISIL’s oil infrastructure that are difficult to replace. The UK is also taking other steps, such as seeking to limit ISIL’s access to the spare parts or chemical additives that the group’s oil operations require. Targeting the wellheads directly carries risks, including that the ultimate capacity for post–war reconstruction in the areas now controlled by ISIL will be undermined. But the Coalition should consider targeting the wellheads more intensively if ISIL’s oil production continues to provide the group with revenue and fuel.
Taxation, the cash economy, and other methods of extorting money from the populations under its control have been another primary source of revenue for ISIL. Airstrikes to destroy ISIL’s bulk cash storage facilities appear to have had a significant impact on ISIL’s financial capacity. But the only way to completely stop ISIL from exploiting the populations and economies under its occupation is to end this occupation itself, by recapturing the territory held by the group. Local ground forces in the region should lead this fight, with UK support taking into account the unreconciled territorial disputes that exist between some of the sides now fighting against ISIL.
The defeat of ISIL depends on ensuring that the group cannot access local or international financial systems as a means of making or moving money, whether through the bank branches under the group’s occupation or through more informal methods of transferring money such as the ‘Hawala’ system. We have specifically examined ISIL’s attempts to infiltrate the legitimate financial structures of Iraq, and the UK should work to ensure that any deficiencies in Iraq’s ability to counter ISIL’s finances are addressed. The Iraqi authorities should have access to UK training and expertise in order to help them build their own capacity in this respect.
ISIL has received funding from donations in the past. The UK should work with local partners in the region to ensure that they have the capacity and resolve to rigorously enforce local laws to prevent the funding of ISIL, so that the group cannot benefit from donations in the future.
As its oil and tax revenues are countered, ISIL is likely to evolve new sources of funding. The UK should play a leading role in the international efforts to counter ISIL’s finances, and be prepared to adapt its response to the evolving threat. The group’s affiliate in Libya may provide an example of how ISIL may raise money in the absence of these sources, and a holistic understanding of ISIL is vital to the effective global defeat of the group. As well as enhancing internal cooperation, Government departments should ensure that procedures are in place to promptly hire and pay external experts when their expertise is required.
© Parliamentary copyright 2015
7 July 2016