The Complex

ISIS Uses Mafia Tactics to Fund Its Own Operations Without Help From Persian Gulf Donors

When fighters from the Islamic State of Syria and al-Sham (ISIS) stole tens of millions of dollars from a bank in Mosul earlier this year, it wasn't simply a startling symbol of the collapse of Baghdad's control over Iraq's second-largest city. The brazen theft was instead a stark illustration of one of the most alarming aspects of ISIS's rise: the group's growing ability to fund its own operations through bank heists, extortion, kidnappings, and other tactics more commonly associated with the mob than with violent Islamist extremists.

In its early years ISIS -- like the Taliban and other Sunni militants -- received most of its funding from wealthy donors in Kuwait, Qatar, and other Persian Gulf countries. Extremists in those U.S. ally states continue to send money to ISIS, but American counterterrorism officials believe that the group now finances the bulk of its recruitment, weapons purchases, and attacks without outside help. In other words, even if the United States and its allies somehow stopped the flow of money from the Persian Gulf to the battlefields of Iraq and Syria, it would be too late to prevent ISIS from banking enough money to fight on for years.

"The overwhelming majority of their money comes from criminal activities like bank heists, extortion, robberies, and smuggling," said one U.S. counterterrorism official. "They're getting some money from outside donors, but that pales in comparison to their self-funding."

The exact amount of money in ISIS's possession is the subject of intense debate among Western intelligence officials. At the high end, some analysts estimate that the group may have access to at least $500 million in cash drawn from bank robberies, oil smuggling, and old-fashioned extortion and protection rackets. Other analysts believe the number is far lower, with one official putting it at between $100 million and $200 million. Those numbers are moving higher as the group conquers more cities on its seemingly inexorable drive toward Baghdad and is able to loot the local private and government banks. On Monday, ISIS fighters took the strategically important town of Tal Afar, adding to the territory under its direct control.  

Calculating the true size of ISIS's coffers is complicated by the lack of U.S. intelligence assets in the areas the group controls in Syria and Iraq and by the difficulty of sorting through the group's sophisticated propaganda efforts. In closed-door briefings on Capitol Hill, senior officials from the intelligence community dismissed the initial reports that ISIS may have stolen more than $400 million from the bank in Mosul and said those figures were highly exaggerated. "We're talking tens of millions from Mosul, not hundreds of millions," one official said.

Either way, ISIS is one of the best-funded extremist organizations in the world. The group's immense cash holdings, meanwhile, don't paint a full picture of the group's resources. The Iraqi military has largely collapsed since ISIS launched its surprise offensive earlier this year, allowing an array of major cities -- including several within striking distance of Baghdad -- to fall into the hands of the insurgents. The fleeing Iraqi troops left behind enormous quantities of American-donated armored vehicles, weapons, ammunition, and other military supplies. All of that is now in the hands of ISIS fighters.

Juan Zarate, a former assistant Treasury secretary who led the department's crackdown on terrorism financing, said ISIS was carrying out significant amounts of smuggling operations, extortion, kidnapping, and other run-of-the-mill crimes in the growing swaths of Syria and Iraq that it controls. Foreign donors, he added, were stepping up their support for the group because of its successes against the hated secular government of Syrian strongman Bashar al-Assad and the equally unpopular Western-backed, Shiite-dominated Maliki government.

"It's the worst of all worlds: external funding from wealthy outside donors, state sponsorship from across the Persian Gulf, and the ability to raise large amounts of money locally," Zarate said.

ISIS's ability to self-fund its operations comes from its willingness to blend traditional criminal techniques like kidnapping with the lucrative smuggling opportunities that come from controlling oil-rich swaths of land.   

A recent research note from the Council on Foreign Relations concluded that even before the group's conquest of Mosul, ISIS "extorted taxes from businesses small and large, netting upwards of $8 million a month, according to some estimates."

An April report from the Carnegie Endowment for International Peace, citing the work of Syrian journalist Malik al-Abdeh, said that rival rebel groups had taken control of Syrian oil fields in Hasakah and the Euphrates Valley. The report said that six refineries in the border town of Tal Abyad were being used to produce diesel and gasoline that was then smuggled into Turkey. All told, the report estimated, the groups could be raking in $50 million per month in oil revenues.

ISIS's success at funding its own operations is indicative of a broader trend. Extremist groups throughout much of the world, particularly Africa, are beginning to reduce their dependence on outside donors. In a speech earlier this month, David Cohen, the undersecretary of the Treasury for terrorism and financial intelligence, said the success of Western interdiction efforts meant that terror groups were increasingly reliant on kidnapping to fund their operations. "Aside from state sponsorship of terrorism, ransom payments are the greatest source of terrorist funding today," he said.

In the case of ISIS, Western intelligence and counterterrorism officials believe that the group is using the money to pay its fighters, buy more weaponry, and bribe Sunni tribal leaders to either openly or tacitly support their offensive against Maliki. Zarate said the group's bulging coffers meant that ISIS's leaders now have the resources, if they chose to use them, to begin setting up training camps or command-and-control infrastructure in the areas they control and to look for ways to extend their fight to other regions and countries.

"This kind of money allows them to start thinking bigger and broader, and about a long-term strategy for where they want to go," Zarate said. "That begins to give them reach, which is really dangerous."

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National Security

Obama Considering Military Action in Iraq

President Obama said Friday that he has asked his national security team to draw up military options for countering the growing threat posed by the Islamic State of Iraq and al-Sham (ISIS), which seized two Iraqi cities this week and is threatening an assault on Baghdad. They won't be able to give him a very long list.

The White House has ruled out sending American troops back to Iraq, and the CIA pulled many of its operatives out of the country shortly after the last U.S. forces left Iraq in December 2011. That means the administration will almost certainly have to rely solely on airpower -- and hope that the Pentagon will be able to hit ISIS hard enough to halt its advance toward Baghdad and begin evicting the militants from the territory they already control.

In brief remarks on the South Lawn of the White House, Obama said that ISIS had made "significant gains" in the the past several days and that Iraqi security forces had proven unable to defend some cities. "This poses a danger to Iraq and its people. And given the nature of these terrorists, it could pose a threat eventually to American interests as well," Obama said.

Obama didn't announce any movements of troops or military equipment toward Iraq, but CNN reported that he has ordered the aircraft carrier George H. W. Bush into the Persian Gulf. The administration and the Pentagon have refused to confirm or deny those reports.  A senior U.S. intelligence official told Foreign Policy that the United States had ramped up its collection of satellite imagery from Iraq, which would be crucial for pinpointing ISIS fighters. The president, in his remarks at the White House, said he would ensure the intelligence community had provided him with enough information that "if, in fact, I do direct and order any actions there, that they're targeted, they're precise, and they're going to have an effect."

If Obama greenlights a military intervention into Iraq, he will have a range of aircraft, guided missiles, and unmanned drones at his disposal. In addition to the warplanes that can be launched from an aircraft carrier, the constellation of smaller ships that travel with it usually include ships that can fire up to 100 Tomahawk cruise missiles, said Christopher Harmer, a former Navy officer and an analyst with the Institute for the Study of War. Those missiles can be guided in the air, making them a potentially useful weapon for hitting quick-moving ISIS fighters.

But if those fighters are holing up in Iraqi cities and and hiding out among civilians, any strikes could carry a high risk of collateral damage. Harmer said that for air strikes to do any significant damage to ISIS forces without risking innocent Iraqis, the United States would have to attack when the fighters are moving along public roads. But even then, it could be hard for military targeters to distinguish ISIS's vehicles from those of ordinary Iraqi civilians. ISIS fighters tend to move around in pickup trucks, and have sneaked across Syria's border with Iraq in small numbers -- sometimes fewer than six people at a time -- making them exceptionally difficult for intelligence agencies to track and the military to target.

"All the things that are easy for the U.S. to hit," in terms of traditional military targets like tanks or artillery batteries, "ISIS doesn't use those," Harmer said. "U.S. strike options are going to get very limited unless we strike ISIS when they're out in the open."

The Pentagon had great success in the Iraq War tracking down small bands of fighters and insurgents. But that was when tens of thousands of troops were on the ground, bolstered by elite military commandos, intelligence analysts who could monitor fighters' communications, and a constant stream of data from reconnaissance drones and other aircraft hovering in the skies above the country. That extensive intelligence network is no longer active in Iraq, though officials have said they are collecting more information from satellites and reconnaissance aircraft in an effort to share information about ISIS forces with the Iraqis.

If Obama ordered airstrikes from land-based aircraft, he'd have a wider menu of weapons to choose from. The U.S. operates a constellation of air bases and other facilities in Turkey, Kuwait, Bahrain, Qatar, and the United Arab Emirates, and warplanes ranging from the Air Force's next-generation F-22 to workhorses like the F-15 and F-16 can be flown out from them. The U.S. would need to get permission from those countries to launch air strikes against Iraq, and the military would have to secure overflight rights to conduct missions. But the most important permissions would have to come from the Iraqis, and they would be easy to get. The Iraqi government has been pleading with the U.S. to conduct air strikes against jihadists, and any new U.S. attacks would presumably come with the permission of the Iraqi government to use their air bases, said retired Air Force. Lt. Gen. David Deptula, who was the principal attack planner for the Desert Storm air campaign in Iraq in 1991 and also orchestrated air strikes in Afghanistan in 2001.

Deptula argued that Obama's military options might not be as restricted as they appear. ISIS fighters move about in small groups, but when they attack a city, they have to gather in larger numbers, making them easier to attack. "It wasn't a couple of six-man teams that overthrew Mosul," Deptula said, referring to Iraq's second largest city, which ISIS took over earlier this week.

Still, the long-term prospects for repelling ISIS entirely seem dim, particularly given the group's stronghold in neighboring Syria, where it gathered strength amid a brutal civil war before spilling over into Iraq.

"We're probably looking at a de facto enclave run by ISIS in large parts of Iraq," said Thomas Henriksen, a senior fellow at the Hoover Institution who studies terrorist groups and insurgencies. "I think the real concern is that these will serve as bases for terrorist attacks upon our allies in the region or even the United States. It's almost inevitable that these groups will turn their interests towards the West once they consolidated power."

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