U.S-led coalition efforts to cut off one of the Islamic State militants’ main funding sources, oil smuggling, by bombing the militants’ improvised oil drilling in Syria and transportation infrastructure has had some success and may have cut profits by half. But analysts and inhabitants in territory the group controls warn the jihadist organization has many other ways to finance itself, including securing ransom for hostages.

Militants from the Islamic State abducted at least 90 people this week from Assyrian Christian villages in northeastern Syria, a human rights watchdog announced Tuesday. The abductions follow the beheading of 21 Egyptian Christians by militants affiliated with the group in Libya.

It is not known if IS is preparing a similar fate for the Assyrians or will exchange them for cash – hundreds of locals held captive have been freed when ransoms are paid, say political activists, and several European captives held by the group last year were traded for ransom, according to U.S. and European officials, who declined to be identified.

Ransom
Ransom payments have generated considerable revenue for the terrorists, but they represent just part of the group’s war economy. Political activists in Raqqa, the IS headquarters, say the militants have deals to supply the Syrian capital of Damascus with electricity and gas from dams and a natural gas fields they control for cash.

“Secret deals are being wrapped up between ISIL [Islamic State] and the Assad regime,” according to Abu Ibrahim, an activist with the opposition group Raqqa is Being Slaughtered Silently, which documents the militants oppressive rule. The group controls several dams in Syria, including Teshreen and Al Ba’eth.
Disrupting the group’s funding has been a key part of the strategy to undermine the militants since the U.S.-coalition started airstrikes in September after a jihadist-led insurgency was mounted across northern and western Iraq.

The U.N. security council adopted an anti-terror resolution last year requiring member states to target funding for terror groups. A high proportion of the coalition’s 2,000 airstrikes have been on oil facilities and the routes and trucks the militants use to transport crude oil for sale in neighboring countries, such as Turkey.
The proceeds from oil smuggling are used to pay fighters’ salaries and fund military operations.

According to U.S. Central Command, IS was producing 300 to 500 barrels of oil a day. U.S. officials estimate an increased effort by Turkey to curb smuggling on its border and the global slump in oil prices has cut the $2 million a day the militants were making from smuggling in half.

But U.S. officials acknowledge depriving the jihadist organization of oil profits remains a monumental task. They say the group only receives about five percent of its revenue from donations from rich sympathizers in the Gulf. But it is financially savvy and highly organized in using the inhabitants of the territory it controls to generate income streams.

Resource management
The picture drawn by activists is of a ruthless and entrepreneurial enterprise run by bosses determined to secure every penny of profit. Militant leaders prioritize quickly what is to be looted when they capture new territory, and there is strict management of resources. “IS fighters don’t steal for themselves – they don’t dare to,” says Abdullah, an opposition activist in Tel Rifaat in northern Syria. “It is all overseen.”

Political activists in Raqqa say the militants are determined to make up for the loss in oil revenue. Properties seized from opponents are auctioned. In Raqqa and other Syrian towns, including al-Bab, the militants are demanding rent from residents living in publicly owned homes and from shopkeepers trading from state-owned property. They have also demanded lump sum payments for any rent that hasn’t been paid to the Syrian government, in some cases since the start of the civil war in 2011.

“The lump sums are large and they have increased the rent,” says Mohammed, a student from al-Bab, whose father runs a store in Raqqa. He declined to give his family name for fear of retaliation. “They are squeezing all the money they can.”

The militants’ revenue streams in Raqqa include charging households higher prices for energy use, landline phones, and public services than the Assad government. “These taxes generate a large cash flow,” says Abu Ibrahim. The activist says taxes, rents and fees are collected by the militant security agency al-Hisba every month.

Added to those fees are duties on goods shipped into IS-controlled territory and stiff fines imposed on violations of strict Sharia law, including failure to attend mosque or being late for prayer. Breaches of the militants strict interpretation of Sharia law can include whippings and death for the gravest of offenses, including adultery, smoking, and drinking alcohol.

But in order to generate more revenue, the enforcers are “adapting” Sharia law. For example, shops were required in Raqqa to close at prayer times, but “Now, you can avoid all this by paying a fine,” says Abu Ibrahim. Drug use is a capital offense, but Raqqa activists say the militants are overseeing the growing of cannabis plants on the outskirts of the town for sale in Turkey.