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(report based on materials of the V Moscow International Security Conference held under the auspices of the Russian MoD)

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Terrorist finance: sources of income of the Islamic State

20.02.2016

Мостовюк Михаил Анатольевич imageMOSCOW, FEBRUARY 20, 2016. PIR-PRESS – “For the ‘Islamic State’, maintaining stable sources of income is of key importance. As the measures of the international community against IS become more coordinated, the militants are forced to seek out new sources of income or adjust their old strategies to changed circumstances. This is reflected, for example, in illegal organ and tissue trafficking, cotton smuggling, or the mass confiscation of funds of the population. In order to ensure the financial stability of their terrorist organization, the IS leaders have established a reserve fund of $2.3 billion” – Mikhail Mostovyuk, expert on emerging threats and challenges.

Today, the “Islamic State” (IS) is not only the wealthiest terrorist organization in the world. Experts also agree that IS constitutes a qualitatively new manifestation of terrorism, since the “Islamic State”, in contrast to previous terrorist groups, considers its purpose to be the establishment of its own state. Its various activities – attempts to expand the territory under its control, the administrative control of occupied territories, active engagement in informational work and propaganda in conjunction with the conduct of military operations – require an unprecedented level of resources. Mikhail Mostovyuk, expert on emerging challenges and threats, provides an analysis of the financing strategies and principal sources of income of the terrorist organization in his article “Funding sources of the terrorist organization Islamic State” (link in Russian).

According to the expert, “from an economic point of view, the organization is self-sufficient, and the occupation of territory allows them to conduct this experiment of the establishment of a state-like entity that displays many of the attributes traditionally associated with a state.” The militant group generates the income needed for such activities from a variety of internal and external sources. Rather than relying on traditional sources of terrorist financing, such as kidnapping for ransom, the IS receives most of its proceeds from the administration of the occupied territories: the sale of oil, oil products, and other natural resources, antiques trade, “tax revenue” extorted from the local population and full control of the existing banking system.

Financial support from the outside merely plays a subordinate role in the budget of the terrorist organization. Mostovyuk maintains that “in comparison with other sources of income, such as the proceeds from oil sales, external donations are not a significant factor in the income structure of IS. However, given the constant risk of a fall in other sources of income, this particular revenue source is quite stable.” The expert emphasizes that the unusual financial strategy of IS entails active usage of information technologies both to communicate with potential supporters and to raise funds on social networks. 

Other articles on this topic can be found in previous issues of the Security Index journal: “The ‘Islamic State’ and nuclear weapons”, “The ‘Islamic State’ – a new participant in chemical warfare?”, “Discord among the Jihadis: The ideological fight between al-Qaeda and the Islamic State”, and “Islamic State Media: DABIQ, propaganda magazine of Islamic State, 9th edition. A review by Polina Kolozaridi and Alexander Ilyin” (all links in Russian).

For questions concerning the Security Index journal, please contact the Editor-in-Chief Olga Mostinskaya by telephone +7 (495) 987 19 15 or via email at mostinskaya at pircenter.org.

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