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1 1 (March 2, 2017)

handle is hein.crs/govcezz0001 and id is 1 raw text is: FF. ' iE S .r, i , March 2, 2017 Counterterrorism Issues: Islamic State Financing The Islamic State (IS, aka ISIL/ISIS or the Arabic acronym Da'esh) is a U.S.-designated Foreign Terrorist Organization that has controlled parts of Iraq and Syria since 2014 and has threatened to conduct attacks against the United States and its citizens. As part of broader efforts to restrict the group's ability to operate, the United States has sought to limit the Islamic State's ability to raise funds and access the international financial system. While IS revenue streams are in decline, in part due to U.S. and coalition military strikes, the group retains the capability to conduct operations inside its territory as well as to inspire attacks abroad. Revenme S-our'ce, The Islamic State's revenue is derived primarily from oil sales and taxes levied on local residents, but the amount of revenue from each source has fluctuated. Oil and Natural Gas. During its wide territorial expansion in 2014 IS captured oil and gas facilities in eastern Syria and northern Iraq. Income from these facilities initially provided the majority of the group's revenue, but gradually declined as a percentage of overall IS revenue due to airstrikes by the United States and coalition partners. In July 2016, U.S. officials estimated that Operation Tidal Wave II had reduced the group's monthly oil revenue by half. Operation Tidal Wave II. In October 2015, coalition forces began Operation Tidal Wave II, which targets IS oil and natural gas infrastructure to restrict the group's ability to fund governance activities and terror operations. Strike targets have included oil tankers, oil and gas separation plants, well heads, and pumping infrastructure. Air strikes also targeted the Islamic State's Ministry of Oil headquarters in Mosul, targeting the group's ability to administratively manage illicit oil and gas operations. Coalition forces have expanded strikes against Syrian oil fields, primarily in the eastern province of Dayr az Zawr, which had been providing two-thirds of the oil seized by the Islamic State according to Defense Department officials. * Taxation, Extortion, and Asset Seizure. The Islamic State earned approximately $360 million from taxation in 2015, according to U.S. Treasury Department officials. This includes taxes levied on government workers, traders and business owners, farmers, religious minorities, and other local residents, which in effect amounted to extortion. The Islamic State has increased its taxation of local residents in response to U.S. and coalition military operations that have reduced the group's ability to profit from oil and gas infrastructure. Some estimate that taxation is now the group's largest source of income. * Kidnapping for Ransom, Antiquities, and External Donors. The Treasury Department and independent researchers estimate that the Islamic State earned between $20 and $45 million from kidnapping for ransom in 2014, but significantly less in 2015 and 2016 due in part to the reduced presence of potential Western hostages. Treasury officials indicate that antiquities smuggling has not been a significant source of income for the Islamic State, although the group generates income from taxing those who engage in the activity. U.S. officials have stated that funding received from outside donors makes up only a small portion of the group's overall revenue. Although the Islamic State was once described as the richest terrorist group in the world, its financial prospects are believed to be in decline. One study estimated that its revenue has declined from approximately $1.9 billion in 2014 to some $870 million in 2016. The Treasury Department estimates that the group generated roughly $1 billion in revenue in 2015. Multiple factors may explain why IS revenues are difficult to estimate with precision: * The Islamic State benefits from a mix of regenerating and non-renewable income sources, but the percentage of revenue derived from each source varies by year. * Renewable revenue streams, such as taxation, have fluctuated due to changes in the group's tax base as it gains or loses territory, and changes to residents' available income (in 2015, the Iraqi government suspended the payment of salaries to workers in IS-held territory). * Not all income generated by the group is in liquid cash form or other assessable goods. A significant portion of the group's revenue is generated from confiscations, such as land or items the group declares to be contraband (e.g., cigarettes). It is unclear how the value of real estate or commercial items is assessed in calculations of IS revenue. k-'XP e ,di ' , :,-. \ The Islamic State spends a significant portion of its revenue on salaries for its fighters, as well as on administrative staff that manage its network of ministries within Syria and Iraq. U.S. officials have stated that the Islamic State has cut salaries for fighters defending the group's self-declared capital at Raqqah, likely reflecting cash shortages throughout the organization. The group also expends funds to maintain and repair infrastructure, as well as to provide social services. Terrorist attacks conducted by the Islamic State reportedly cost relatively little when compared to the group's other expenses. .O 'T gognpo goo g , q 'S a X 11LULANJILiN,

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