ISIS is one of the best-funded militant groups in the world, but it could run into serious problems for the long-term if it doesn't keep seizing more territory.
Much of ISIS' money comes from extortion and pillaging, essentially ripping off the people and institutions in conquered territory, and while the group's tactics might bring it windfalls of cash every time it moves into a new city, funding operations requires a constant flow of cash.
“Confiscation makes up a huge part of ISIS revenue”, said J.M. Berger, a Brookings Institution fellow who co-wrote the recent book "ISIS: The State of Terror”. “Confiscation is different from taxation because it's not sustainable. There's only so much you can confiscate before you need to conquer new territories with new wealth.”
ISIS has took over places like Palmyra, an ancient city in Syria that the group conquered in May, for artifacts it can sell on the black market. The militants also bring in money from robbing banks. This nets the group hundreds of millions of dollars, but it's all one-time hits.
"Pillage is a central contributor for ISIS's wealth, and its dependence on strip-mining its holdings for revenue and equipment could be its biggest structural weakness, as this approach will create diminishing returns if ISIS is held to roughly its current geographic limits," Berger said.
While ISIS aims to take over more territory in the Middle East to grow its so-called Islamic caliphate, which was established after the group took control of Iraq's second-largest city, Mosul, in August 2014, the group is struggling to continue making significant gains as it fights government forces and rebel groups in Iraq and Syria.
Moreover, the Iraqi government has reportedly stopped paying the salaries of its employees who work in ISIS-controlled areas in an effort to prevent the militants from taking the money.
Furthermore, people are reportedly struggling to pay the taxes ISIS imposes on the residents of its territory. ISIS has reportedly raised the prices of everyday necessities like gas, water, and electricity, partly in an effort to drive people to become fighters for the group, whose salaries are higher than those of average citizens living under ISIS control.
This approach is a double-edged sword, as ISIS has seen some success with using money to lure in desperate people with few options, the group is struggling to meet some of the other financial obligations of a functioning government.
For example, ISIS has made promises to care for the poor in its caliphate, which it markets as an autonomous state, but the group largely hasn't been able to deliver.
In conclusion, ISIS will have to conquer more territories and more cities in order to keep a flowing income. If it fails to do so, its money will start to diminish as time goes by.
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