ISIS's economy is in shambles.

The black flag of ISIS. 

The economy of the Islamic State is in shambles according to a new report by the International Centre for the study of Radicalization and Political Violence. AP/The Republic. At it's peak in 2014, ISIS collected $1.9 billion in revenue but last year they only gathered $870 million. ISIS is not a traditional terrorist organization and functions much like a legitimate state with expenses focused on infrastructure and public services. ISIS's economic model was largely dependent on looting newly captured territory for resources such as oil, ancient artifacts and even stealing cold hard cash. With ISIS losing 60% of their territory in Iraq and 30% in Syria, their fortunes on the battlefield have changed to the point where they have had little opportunity to loot. Despite the loss of revenue, ISIS is still a dangerous force and is able to pay it's bills even as it had to cut pay for it's soldiers. It still remains a very dangerous terrorist threat since the attacks it funds are relatively cheap and many terrorists are self funding their own attacks. 

My Comment:

Though ISIS isn't in a whole lot of danger of collapsing in the immediate future, it is clear that cracks are starting to form in the organization. Though ISIS is still able to pay for what it needs to do, it's clear that their economy is largely a farce. Most of their economy is dependent on looting and with very little offensive operations going on right now, other than in Western Syria near Palmyra. They have lost a critical source of income. 

It's probably even worse then the report says because some of ISIS's main streams of income have been cut off. Oil, one of the largest sources, is largely worthless now. The main route for selling oil, the Turkish border, has been completely cut off. Furthermore, the Russians and Americans have largely destroyed their transportation fleet of oil trucks leaving them very little chance to sell their oil, even if they can find a buyer. 

Further more, ISIS's cash stores have been a target for attacks as well. Back in January of last year, ISIS lost tens of millions of dollars in an air raid against one of their banks. Though sources are conflicting about how much they lost there, some have said it was almost a billion dollars, but no matter what it hurt them dearly. No organization can easily recover from that much money being destroyed. 

ISIS still has sources of income that will be there as long as they still control territory. Taxes are a major source of income for ISIS and as long as they control people, they will collect taxes from them. They are also in control of quite a bit of traditional farmland as well as controlling fish farms that are an effective 2nd source of income that is rather resistant to airstrikes. After all, killing a bunch of farmers and letting people starve would not play well and would go beyond the normal rules of war. And given the importance of food, it's not a source of income that they are likely to lose anytime soon.

ISIS also operates like a criminal organization as well. Their income from kidnapping, extortion and smuggling, will not just end. I've often asked why anyone would ever surrender after battle with ISIS, but the truth is that if you are an Iraqi or Syrian, you have a decent chance of being sold back for ransom if your family can come up with the money. I still wouldn't want to risk the consequences of not paying, given how brutal ISIS executions are, but ransom is still a major source of income for ISIS. Again, there isn't much to be done about this income stream short of not letting them capture anyone. Putting ISIS on the defensive has helped with this problem, but as long as ISIS is fighting they will capture prisoners to ransom. And given the alternative, people will continue to pay to get their loved ones back. Can you really blame them after what ISIS does to prisoners? 

All that being said, it's clear that ISIS is on the backslide now. Not only is ISIS's entire economic model dependent on expansion, they also have lost a lot of their credibility as well. They need to keep expanding if they want to survive, but given the circumstances on the battlefield, they have little chance to do so. Iraq has finally recovered from the disaster of the 1st Battle of Mosul and have pushed ISIS out for the most part. And thanks to the combined actions of the Turks, Kurds and Syrians, ISIS has little room for expansion in Syria either. Overseas, they might make inroads in Afghanistan but everywhere else they are on the retreat. 

The report did point out something critical. ISIS has been able to fund terror attacks on the cheap. The massive terror attack in Paris, for example, only cost about $10,000. That's a rounding error even for a government that only made $870 million last year. Even better, from ISIS's perspective, many of the terror attacks done in their name cost the core organization nothing. 

This is another reason why "lone wolf" attacks are so dangerous. An attack done in ISIS's name but without funding or input from the terror group gives ISIS all the benefits of the attack without any of the risk. Not only does it cost nothing for them, if it fails they lose nothing, but they gain just as much from a successful attack as they would if it was funded by them. Indeed, the only cost that ISIS is likely to incur from lone wolf terror attacks is the costs creating the propaganda that inspires these attacks.