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The real strength of Abu Bakr Al Baghdadi's – or Hamed Dawood Mohammed Khalil Al Zawi's - ISIS (Islamic State of Iraq and Syria) is not just in the weapons (many of which were sacked in the Syrian and/or Iraqi military depots), but rather in its capability to administer and control the territories that it occupies. To do so it has set up an extremely efficient organization that can can obtain and use large financial resources and which uses terror to threaten, subdue or drive away local populations. These tools, used in an adequate way, have ensured the ISIS militia with military success and with a territorial expansion that has marked its advance.

Warning signs of the birth of a state

Although the message ISIS sends to the West is one based on the abuses inflicted on defeated enemies or prisoners, in the territories occupied by ISIS there is another, ambivalent tactic adopted: the cruel elimination of those that do not subscribe to the cause or that are considered hostile and the financial support to those that are favorable to the ISIS, with a particular focus on the weakest social groups. True, the freedom of the populations living under ISIS rule is limited, – with the obligations and impositions of the radically interpreted Islamic precepts (the forced closure of shops during prayer time; the obligation to wear a veil for women), the respect of which is monitored by a religious police that resembles the Saudi Wahabism – but there is strong protection for the supply and well-being of the principal commercial activities such as bakeries, gas stations and markets in general.

In a relatively brief time span, the ISIS was able to set up a capillary organization that controls the territory it occupies, both on the military front and under the economic and social aspect. This is perhaps the most peculiar aspect that distinguishes the ISIS from other Islamic militias that operate in the same region. After all, the objective of ISIS is that of proving the thesis that their conquests are not just temporary, but rather lasting. Meaning that these conquests constitute the premise for the creation of a political/territorial/religious entity called the Caliphate which, according to Muslim tradition, should bring together the “umma” (the entire community of Muslim believers), currently geographically scattered and divided by borders that are the heritage of colonial times.

To set up such an organization, Al Baghdadi has split his command structure into 16 administrative districts (wilayat) that are located in Syria (9) and Iraq (7). Each district is responsible for the military, political and financial management of the territories that it administers. The military strength of ISIS, according to the CIA, is esteemed to be roughly composed of 20/30.000 units (a number that seems to grow hand in hand with the military success of the group). Theoretically, this many troops would not be sufficient to manage such a vast territory. From computers found alongside dead militiamen in Mosul, the CIA and other western intelligence services have managed to obtain a glance at a cross section of the organization which most have defined as astonishing. The ISIS does not appear in the territories that it occupies as a terrorist group fighting against a government, be it Iraqi or Syrian, but rather as a structure that manages to maintain and consolidate its power. In other words, as another, alternative State.

Despite the numerous sympathizers in the occupied territories, it is mainly the mass executions and the widely publicized violence that scares and subjugates populations, forcing them to flee their land. This makes it easier for ISIS to control its territories. The homes left abandoned by the fleeing population are often reassigned to Sunni refugees. This is exactly what happened with the homes of the Shiite Turkomans that left Mosul. Those who don't convert and who refuse to send their children to fight alongside the militias, like the Christians, the Yazids, the Sabeis or the Shiites, are threatened with death. Those who survive are forced to pay the “jizya”, protection money for the non-Muslim. The prisoners, especially the women, become objects of commerce or sexual exploitation.

abu bakr al baghdadi
Hamed Dawood Mohammed Khalil Al Zawi (aka Abu Bakr al Baghdadi)

The finances of the Caliph

All of this would not be possible without a solid financial base. It is esteemed that the ISIS has daily earnings of over three million dollars. It is the money needed to pay the militias and to build up the Caliphate. Their principal source of income is the oil produced by the installations situated in the east of Syria. The oil field of Omari (controlled by the terrorists since 2012) extracts between 10 to 30 thousand barrels of crude oil per day. Then there are also the oil fields in the region of Kirkuk in Iraq (presently 7 of which work with two principal refineries and other small, similar structures destined exclusively to contraband activities), from which the ISIS extracts roughly between 25 and 40 thousand daily barrels.

We are presently unable to evaluate whether the recent US bombings of the Syrian refineries (but not of the oil wells) have produced any lasting result in blocking the smuggling of oil out of the country. The commercialization of the oil is ensured by intermediaries and counts, among its clients, the Syrian government itself (through a Lebanese-origin Christian mediator called George Hasnawi; a man with ties with Bashar al Assad and economically connected to Russia), Jordan and Iraqi Kurdistan.

The remaining tankers with crude oil end up in the Turkish black market. In the region bordering Turkey, Syria and Iraq, the contraband of petrol is a consolidated economic activity. The channel used by ISIS is the same that Saddam Hussein used about a decade ago to circumvent the international embargo. Turkey closes both eyes when faced with this traffic in order to indirectly support a region which is economically depresses and subject to the turmoil caused by the Kurdish Combating Party, the PKK. Even the pressure from the US has so far failed to produce concrete results. After all, the terrorists sell their crude oil at a bargain price – between 15 and 40 dollars per barrel, compared to an international quotation on the market of about 100 dollars – and ends up filling the oil duct that goes from Kirkuk to the Turkish port of Ceylan. The US Security Council, on July 28, 2013, approved a resolution that prohibited the procurement of oil from terrorist groups in Iraq and Syria. Ankara must have never gotten the message.

Although petrol is the principal financial resource of ISIS, the terrorist group also taps other resources. After conquering Mosul it ransacked local banks for an esteemed 420 million dollars. In that same city, the taxes on various commercial activities generate roughly 8 million dollars per month. The tax on profit derived from commerce is anywhere between 10 to 20 percent. Those that do not pay are first threatened, then killed. Targets for tax collection include the few remaining government offices in the occupied region. The terrorists also cash in on the toll paid by all vehicles traveling on the region's arterial roads. The collection of taxes is the first step towards the legitimization of the Caliphate.

kirkuk ceyhan pipeline
The Kirkuk - Ceyhan pipeline

Indirect resources

There are also indirect sources of financial support, like the kidnapping of foreigners and the collection of a ransom for their release. The recent release of four French nationals and of two Spanish journalists has surely meant a profit of a few millions for ISIS, despite the denials of the respective governments. It is not clear whether Turkey also forked out cash for the recent release of 49 Turks, including the diplomats captured by ISIS after the conquest of Mosul. There was surely an exchange in prisoners with the release, by the Turks, of a number of Jihadists.

Another source of income for the self-proclaimed Caliph Abu Bakr al Baghdadi and his militias are donations from Arabic non-governmental organizations. The US Department of Treasury has tried to tackle this problem, calling Saudi Arabia, United Arab Emirates, Kuwait and Qatar up to the stand. The difficulty in blocking this kind of transaction is in the opacity of the Kuwaiti banking system, used by almost all Arab NGOs.

It is esteemed that ISIS has a total availability of funds worth roughly 1,5/2 billion dollars. It is hard to evaluate what they could do with such finances but, to give an idea of how dangerous this money can be, it is sufficient to think that the combatants of Jabhat al Nusra – the competition to ISIS – that switched their allegiance to al Baghdadi's group were rewarded with a 200 dollar monthly allowance. The financial self-sufficiency of the terrorists is perhaps the most dangerous aspect of a war that could be won on the battlefield, but which could also ensure the survival in time of the ISIS members. As we write this, no terrorist group operating in the Islamic world has as large an availability of funds as the ISIS.