{"id":252625,"date":"2015-09-20T20:47:19","date_gmt":"2015-09-20T15:17:19","guid":{"rendered":"http:\/\/www.tehelka.com\/?p=252625"},"modified":"2015-09-20T20:47:19","modified_gmt":"2015-09-20T15:17:19","slug":"from-cash-to-crude","status":"publish","type":"post","link":"https:\/\/tehelka.com\/from-cash-to-crude\/","title":{"rendered":"From cash to crude"},"content":{"rendered":"
\"A
Oil harvest<\/strong> A worker rides a bicycle at an oil refinery in Najaf, Iraq. Photo: Reuters<\/em><\/figcaption><\/figure>\n

Did you know that the Islamic State, with its roots in Iraq and presence in Syria, Jordan, Libya and Lebanon, among other nations, is the wealthiest terror organisation in the world? Its annual earnings are estimated to be $350-700 million, or 12-24 times higher than the al-Qaeda\u2019s yearly income at the latter\u2019s peak. Islamic State\u2019s annual profits are $100-200 million, after covering all its costs. US experts contend that the terror outfit owns assets worth $1-2 billion.<\/p>\n

Compare this to what the world\u2019s wealthiest nation, America, spends every year to fight the various wars against global terror. The country\u2019s budget on \u2018Overseas Contingency Operations\u2019, or what it spends on external wars, for the fiscal year 2016 was almost $51 billion. This amount includes the expenditure on the war in Afghanistan, training and equipment for Iraqi and Syrian opposition forces to fight the Islamic State, support to NATO, and responses to other terrorist threats.<\/p>\n

Clearly, despite the financial upper hand that the US has in the fight against terror, its initiatives have been unsuccessful, especially in its bid to curb the rise and spread of Islamic State. A terror outfit that earns $1-2 million a day has boldly and brazenly taken on a country, whose war expenses are almost $140 million a day. Even if one considers that America spends more in Afghanistan than in Iraq and Syria, its budget for the West Asian operations is 20-40 times that of the Islamic State.<\/p>\n

However, experts feel that it is not the money that matters. What is crucial is to realise that the means to finance global terror have changed over the past 15 years. In 2000-01, just before the attacks on the twin towers and the Pentagon in September 2001, al-Qaeda\u2019s (AQ\u2019s) finances peaked. However, Osama bin Laden\u2019s sources of funds were drastically different from those of the Islamic State. In fact, these differences are critical to plans for a successful global war against the Islamic State.<\/p>\n

SCALE OF THE MONEY<\/span><\/p>\n

According to the staff report, which was presented to the US\u2019 9\/11 Commission that went into the 2001 attacks on the twin towers and the Pentagon, AQ\u2019s annual earnings were $30 million. Of this, bin Laden spent $10-20 million to appease the Taliban, which then ruled Afghanistan and provided him a safe haven. The remaining amount was used by the AQ to maintain a small but loyal cadre, finance its own operations, and aid other jihadists across the globe.<\/p>\n

Still, the intelligence community was unclear about AQ\u2019s financial state. In April 2001, the Central Intelligence Agency said that bin Laden\u2019s \u201cfinancial assets are difficult to track because he uses a wide variety of mechanisms to move and raise money\u201d. It added that \u201cgaps in our understanding contribute to the difficulty we have in pursuing the bin Laden financial target.\u201d The Commission\u2019s staff report said: \u201cUnderstanding al-Qaeda\u2019s money flows\u2026 present ongoing challenges because of the speed, diversity and complexity of the means and methods for raising money.\u201d<\/p>\n

In contrast, the extent of the Islamic State\u2019s financial empire seems to be welldocumented. As mentioned above, its annual income is several times that of AQ. Terrorism experts Patrick B Johnston and Benjamin Bahney feel that the is has a \u201csophisticated and strategicallydriven financial scheme\u201d that will make it tough for the US to fight the outfit. The Islamic State\u2019s earnings are on the increase, when compared to AQ. The latter\u2019s fund flow was squeezed after 9\/11 due to global initiatives against it, more so after the 2003 attacks in Riyadh, when Saudi Arabia clamped down on several of its money sources.<\/p>\n

COLOUR OF THE MONEY<\/span><\/p>\n

After 9\/11, there were several myths about bin Laden\u2019s money. One of them was that he used his family inheritance, which was estimated at $300 million, and proceeds from the sale of his businesses in Sudan, where he lived from 1992 to 1996. Neither of this was true. The Commission\u2019s staff report said that he received $1 million a year from his family between 1973 and 1993-94, which added up to a \u201csignificant sum\u201d but was nowhere in the range of a \u201c$300 million fortune\u201d.<\/p>\n

Although it was believed that bin Laden owned 35 companies in Sudan, the staff report concluded that \u201csome may never have actually been owned by him and others were small or not economically viable. Bin Laden\u2019s investments may well have been designed to gain influence with the Sudanese government rather than be a revenue source. When bin Laden was pressured to leave Sudan\u2026 the Sudanese government apparently expropriated his assets and seized his accounts.\u201d<\/p>\n

The second belief was that after he shifted his base to Afghanistan, AQ, along with the Taliban, used illegal incomes from smuggling of opium and heroin to finance their joint and respective activities. This turned out to be false when it was revealed that bin Laden was against the narcotics trade, and asked his loyalists and other terrorist groups to stay away from it. However, the Taliban had no such compulsions, and engaged freely in the large-scale illicit business.<\/p>\n

So, where did AQ\u2019s funds come from? The staff report concluded that the organisation depended on fund-raising to support itself; such funds comprised 70 percent of its annual funds. \u201cIt appears that al-Qaeda relied heavily on a score of financial facilitators who raised money from a variety of donors and other fund-raisers. Those donors were primarily in the Gulf countries, especially Saudi Arabia. Some donors knew of the ultimate destination of their donations, and others did not\u2026 The financial facilitators also appeared to rely heavily on imams in mosques, who diverted zakat donations\u2026 al-Qaeda fund-raising was largely cyclical, with the bulk of the money coming in during the Islamic holy month of Ramadan (when zakat is paid by most Muslims as a mandatory contribution).\u201d<\/p>\n

<\/p>\n

\"ISIS\"
Show of strength<\/strong> The Islamic State holds a rally. Photo: AFP<\/em><\/figcaption><\/figure>\n

Two aspects that characterised AQ finances were its global sourcing \u2014 from the various Gulf nations \u2014 and its cyclical nature. The Islamic State runs on different parameters. Expert Howard J Shatz believed that despite the rumours that the group has \u201cforeign patrons in Gulf states such as Saudi Arabia, Kuwait and Qatar there is precious little evidence that it ever depended on foreign largesse\u201d. In 2005-06, the Islamic State was at the peak of its power in Iraq\u2019s Anbar province. But only 5 percent of its revenues in the region came from donations, either raised locally in Iraq or from foreign sources.<\/p>\n

Documents seized by Iraq and the US military show that the bulk of is\u2019 money is local in nature and generated through the year by smuggling of crude oil. With control over a dozen oil fields and a number of oil refineries in Iraq and Syria, oil is sold in the two countries, and in Turkey and possibly Iran. To envisage the scale of these operations, Shatz estimated that the Islamic State raised $2 billion \u201cwith a smuggling operation based at the Bayji refinery in Iraq\u201d between 2006 and 2009.<\/p>\n

Islamic State has other sources. For instance, according to Shatz, the organisation behaves like a criminal gang. \u201cIt smuggles, it extorts, it skims, it fences, it kidnaps and it shakes down. Although supposedly religiously inspired, its actions are more like those of an organised criminal cult. To borrow from mobster Salvatore (Sammy Bull) Gravano, members in ISIS don\u2019t get ahead just by being thugs \u2014 at some point you have to learn to be a racketeer as well,\u2019\u201d he explained.<\/p>\n

However, in the areas which the is controls, it acts like a government. Therefore, it collects taxes in all forms, and also commissions in areas where it facilitates trade. \u201cIn the illegal markets the criminal organisation can often be regarded as the equivalent of the policy-maker and therefore, once the monopoly over coercion is relatively stable, its main interest consists in maximising the rents to be extracted from its territory,\u201d says a book, The Economics of Organised Crime.<\/em><\/p>\n

USES OF THE MONEY<\/span><\/p>\n

AQ\u00a0was believed to be a \u201cmiser\u201d outfit that kept elaborate financial records to track each dollar it spent. It forced its operatives to also keep a tab on their expenses. According to the Commission\u2019s staff report, its expenditure on key operations was also quite low. At the height of its activities, AQ used global money changers to transfer $1 million from the United Arab Emirates to Pakistan, and then used human couriers to transfer the cash into Afghanistan.<\/p>\n

For the 9\/11 attack itself, aq spent a mere $400,000-500,000. According to a paper titled \u2018Terrorism Financing Methods: An Overview\u2019 by Michael Freeman and Moyara Ruehsen<\/em>, Khalid Sheikh Mohammed gave $10,000 each in cash to the 13 hijackers of the four planes, and $120,000 to Ali Abdul Aziz Ali, which was transferred through money exchangers to the terrorists. Another $36,000 was transferred by Ramzi Binalshibh and Mustafa al-Hawsawi to the hijackers.<\/p>\n

Other AQ operations cost even less. The Commission\u2019s staff report estimated that the expense on the 1998 US embassy bombing in East Africa was $10,000, the 2002 Bali bombing cost $20,000, and \u201cpotential maritime operations against oil tankers in the Strait of Hormuz\u201d around $130,000.<\/p>\n

\u201cThe actual operations themselves were relatively cheap, although these figures do not include such \u2018overhead\u2019 as training at camps, evaluation of trainees, and recruitment,\u201d said the report.<\/p>\n

In comparison, Shatz revealed that while the Islamic State was a \u201cformidable fund-raiser\u201d, it was simultaneously a \u201cformidable spender\u201d. He added that it \u201cpays regular salaries to members based on family size and even has promised to maintain those payments if the member is killed or captured. When casualties are high, this can mean high personnel costs relative to active manpower.\u201d<\/p>\n

Johnston and Bahney explained that the Islamic State\u2019s internal records showed that in 2005-06, \u201cthe rate (of salary) in Iraq\u2019s Anbar province was $491 a year, with an additional $245 per year for each dependent. The group\u2026 helps its fighters with rent, medical expenses, legal costs and performance bonuses, all of which are audited to mitigate potential abuse. Taken together, its own documents show it has long invested in its organisation, growing its infrastructure base and incentivising recruits to join and existing members and their families to remain loyal.\u201d<\/p>\n

\"Osama-binladan\"
Terror mastermind<\/strong> Osama bin Laden in Afghanistan in 1989<\/figcaption><\/figure>\n

\n

The two terrorism experts added that is also makes \u201clong-term investments in state building. This, too, requires money that can be invested in administering controlled territory and establishing institutions to implement and sustain Sharia governance. In some areas, it is able to provide reliable electricity, access to clean water and serviceable infrastructure.\u201d is also governs its territory to an extent, \u201cpaying salaries to civil servants, facilitating trade\u2026 and engaging in other forms of statecraft aimed at keeping populations content and passive.\u201d<\/p>\n

Obviously, apart from the above mentioned costs, the Islamic State has to maintain a sizeable army to fight against Iraqi, Syrian and American military, apart from Kurdish and other rebel groups propped up by the western nations. For this, the outfit requires huge numbers of modern and sophisticated weapons and equipment, apart from large amounts of ammunition.<\/p>\n

FUTURE COURSE OF THE MONEY<\/span><\/p>\n

In his testimony before the United States House of Representatives\u2019 Committee on Financial Services in November 2014, Johnston speculated on how the Islamic State is likely to spend the huge surplus that it has generated over the past few years. He talked of four options:<\/p>\n

\u2022 Expand its territorial base in Iraq and the Levant<\/p>\n

\u2022 Grow its influence in other strategic parts of the Muslim world, like Pakistan and Afghanistan<\/p>\n

\u2022 Fund attacks in North America and Europe<\/p>\n

\u2022 Finance its members to provide services and maintain Sharia-based order in its territories<\/p>\n

\u201cOf the four options, the first and the last appears to be the most likely. ISIL\u2019s top priority appears to be building an Islamic caliphate emanating from Iraq and the Levant. For now, ISIL is focussed primarily on controlling territory and establishing a viable caliphate in the region. It likely will spend a large share of its revenues on \u2018state building\u2019\u2026\u201d But it may simultaneously pursue the second and third for other reasons. Influence in the larger Muslim world can add legitimacy to the first option. An attack in the West can boost the group\u2019s \u201cstanding among Jihadist elements worldwide and attract another wave of foreign Jihadis to fight with ISIL\u2026 \u201d<\/p>\n

Clearly, it is imperative for the US and other western nations to attack the financial sources and assets of the Islamic State to prevent its expansion, growth and influence. However, the strategies they adopted to curtail and curb AQ, with their focus on international movement of the money, may not work in this case. Therefore, there is a clear, immediate and an urgent need to change tracks, and fight the Islamic State on both the military and financial fronts.<\/p>\n

editor@tehelka.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Over the past decade, the means to finance global terror have changed. While al-Qaeda depends on donations, the Islamic State earns from oil smuggling.<\/p>\n","protected":false},"author":78,"featured_media":252626,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[56],"tags":[9401,428,9215,890,2219,9029,7373,9402,2130,9403,50,6497,9404],"_links":{"self":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts\/252625"}],"collection":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/users\/78"}],"replies":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/comments?post=252625"}],"version-history":[{"count":0,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts\/252625\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/"}],"wp:attachment":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/media?parent=252625"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/categories?post=252625"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/tags?post=252625"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}