ISIS political economy: financing a terror state
| Date | 03 May 2016 |
| Published date | 03 May 2016 |
| DOI | https://doi.org/10.1108/JMLC-06-2015-0021 |
| Pages | 189-207 |
| Author | Dimitrios Stergiou |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
ISIS political economy: nancing
a terror state
Dimitrios Stergiou
Department of Economics, University of Peloponnese, Tripoli, Greece
Abstract
Purpose – This paper aims to investigate the nancial aspects of the Islamic State of Iraq and Syria
(ISIS), its sources of nancing and the management of funds in a State-like apparatus.
Design/methodology/approach – It is argued that ISIS constitutes a phenomenon not only due to
the extreme violence, instrumentalized via “marketing” methods but also on grounds of its declared
aspiration to occupy and control land and population with ever expanding borders. After analyzing the
group’s sources of funding which are closely interlinked to the areas it controls and its coordinated
efforts to establish a proto-terror state framework, a strategy for addressing this threat based on
international practices and decisions is being highlighted.
Findings – ISIS represents a “sui generis”, primarily self-funded State Scale Entity, a case study for
Defense and Security Geo-economics. Its “economic model”, an amalgam of terrorist and criminal
practices, could not be used for a viable proto-state it aspires to be.
Research limitations/implications – No ofcial data of any kind are available by international
recognized organizations or bodies. The sources for this paper are primarily Western media, journalists,
indirect habitants’ testimonies and very few ofcial reports.
Practical implications – Caution must be exercised, when using even trivial platforms of social
media and mobile applications, linked even remotely with ISIS or its afliates.
Originality/value – This paper is a comprehensive presentation of the economic facets of this rst
modern endeavor for a terror-state.
Keywords Terrorist nancing, Defense and security, Geo-economics
Paper type Research paper
Introduction
In 2014, the phenomenon of the so-called Islamic State of Iraq and Syria (ISIS) was one
of the prominent key points worldwide. It astonished the world with its fear terror
tactics and the methodical mediatization of fear. Its leader Abou Bakr al-Baghdadi,
assumed command of the group in May 2010 and declared the formation of ISIS in April
2013, expanding the Islamic State of Iraq (ISI) to include Syria. He emerged in the public
scene in June 2014 when he proclaimed himself the rst “caliph” in generations (Caris
and Reynolds, 2014;Wood, 2015), while Forbes Magazine classied him as No. 54 at the
list of most powerful people in the planet.
The major difculty of this research lies on the fact that ISIS controlled territory
resembles a hermit kingdom. No ofcial data of any kind are available by international
recognized organizations or bodies, and no audit of any sort are presented neither
balanced sheet are published. The sources for this paper are primarily Western media,
journalists, indirect habitants testimonies and very few ofcial reports, whose sources
JEL classication – D740, F51, H56
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ISIS political
economy
189
Journalof Money Laundering
Control
Vol.19 No. 2, 2016
pp.189-207
©Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-06-2015-0021
are also direct or indirect journalism. Part of the information derives also from ISIS’s
own propaganda apparatus. Valuable data about the group, especially it’s precursors,
have been produced by the study of the US Department of Defense’s classied Harmony
Database, which included some 200 Iraq-related documents, declassied recently
through West Point’s Combating Terrorism Center (Allam, 2014). Consequently,
numbers often present signicant deviations depending on the source.
ISIS constitutes a phenomenon and a “sui generis” organization for three main
reasons. First, the unspeakable cruelty that is used for recruitment and “marketing”.
Surely, is it not the rst (or the last) terrorist/criminal organization that endorses public
executions, beheadings and inhumane methods in general. But it is the rst that it has
explicitly declared proud of it. Violations of international and humanitarian law are not
any more subject of detailed investigation but carefully and methodically projected by
the perpetrator himself. Second, it ghts for the occupation and control of land in the
frame of an “active and integrated endeavor to build an alternative to modern states from
the remains of Iraq and Syria”(
Caris and Reynolds, 2014). ISIS has been organized as a
pro-state. As noted in an L’Orient LE JOUR article on November 11, 2014, it has also
divided the territory it controls in “wilayas” (administrative regions) which have their
own local government, administrative and military structure. It endeavors to acquire
statehood characteristics by exercising core-state activities from disciplined military
parades to minting a currency. According to a Jordanian journalist, ISIS has “undergone
the quickest transformation in statehood in modern history”(
Russia Today, 2014).
Third, it pursues global dominance. It is not representing a revolutionary movement or
a political organization that aspires the ascension into power in a given State Fuerzas
Armadas Revolucionarias de Colombia – Revolutionary Armed Forces of Colombia
(FARC) or a secession from it to establish an ethnic one Euskadi Ta Askatasuna –
Basque Country and Freedom (ETA), Palestine Liberation Organization (PLO) nor a
terrorist organization hidden in the structures of a rogue state, seeking shadow power
(Al-Qaeda). After the mediatized, alleged, abolishment of Sykes-Pikot frontiers aspires
the end of Westphalian notion of Statehood and the establishment of the world caliphate.
Christophe Reuter, a journalist in Der Spiegel magazine captures ISIS’s “essence”: an
“Islamic Intelligence State”, a caliphate run by an organization that resembled East
Germany’s notorious Stasi domestic intelligence agency […] Criminologists see ISIS as a
maa-like holding company out to maximize prot. Scholars in the humanities point to
the apocalyptic statement by the ISIS media department, its glorication of death and the
belief that Islamic State is involved in a holy mission. But apocalyptic visions alone are not
enough to capture cities and take over countries. Terrorists do not establish countries.
And a criminal cartel is unlikely to generate enthusiasm among supporters around the
world, who are willing to give up their lives to travel to the “Caliphate” and potentially
their deaths’ (Reuter, 2015).
But terror is not the only way that al-Baghdadi, has astonished the world. ISIS in just
three years from an unknown branch of Al Qaida in Iraq became according to David
Cohen US Treasury Under Secretary for terrorism and nancial intelligence (FININT)
“the best-funded terrorist organization we’ve confronted”. Matthew Levitt, Director of
the Stein Program on Counterterrorism and Intelligence at the Washington Institute for
Near East Policy, calls ISIS “the best-nanced group we’ve ever seen”. Robust nance
constitutes also an excellent tool of Propaganda; Abu Bilal al-Homsi, the nom de guerre
of a Syrian activist who serves as liaison to ISIS proclaimed: “It’s a victory that the
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