Evil Is the Islamic State’s Business, and Business Is Good

The New York Times offers a dismaying look at the Islamic State’s financial situation by Sarah Almukhtar: She looks at data from the RAND Corporation and judges that the modern-day Mordor “has revenue and assets that are more than enough to cover its current expenses despite expectations that airstrikes and falling oil prices would hurt the group’s finances.”

Great — there’s one country on Earth running in the black.

Almukhtar writes that the caliphate “takes in more than $1 million per day in extortion and taxation.”  Look on the bright side — unlike some Western nations, at least they understand that extortion and taxation are two different things.

ISIS is taxing its captive citizens at 50 percent, and companies at 20 percent, which is disturbingly close to the kind of tax rates civilized governments impose.  They get $100 million a year from oil, plus $20 million from kidnapping and ransoms.  They’ve plundered some $500 million from Iraqi state-owned banks.  It’s not clear from the article whether this figure includes the sale of stolen historical artifacts, which some sources portray as one of ISIS’ top income streams.

On the expense side of the ledger, ISIS disdains such annoying, thankless tasks as providing public services or building infrastructure that might get blown up by enemy air strikes.  It’s shelling out $3 million to $10 million per month on salaries, along with unspecified investments in “police-state institutions, such as committees, media, courts, and market regulation.”  It obtains a great deal of its military hardware by stealing it, such as the shiny new American armored vehicles and missile launchers it took from the fleeing Iraqi defenders of Ramadi.

From a grand-strategy standpoint, this financial model isn’t sustainable over the long haul.  Opportunities for big-bucks looting will dry up as territorial advances stall out — there’s only so much in the war-torn sphere of operations for the Islamic State to steal.  Kidnapping and ransom income are likely to grow tighter for similar reasons.  Taxes are said to be increasing as other revenue sources decline; ISIS, like every other government in the world, will learn that the goose can only be choked so much before the golden eggs stop coming.

But in the near-term, this picture of flush financial health, coupled with the territorial gains ISIS is still making, is very different from what President Obama’s war strategy promised.  The good guys are the ones wondering what they’re supposed to do now that Ramadi has fallen, not the terror state.  Obama’s reactive policies, intended primarily to relieve domestic political pressure by making it look like he’s doing something low-risk but productive, haven’t dealt any major strategic blows to an enemy that has figured out how to endure high-altitude precision bombing runs.

Unfortunately, the terror state can still afford to spread a great deal of mischief, and the knockout-punch counter attack we’re supposed to land on them — beginning with the liberation of Mosul by Iraqi forces — appears far less likely than it should.  The Islamic State should not have strong finances right now.