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We are getting an idea of ISIS' greatest asset and 'Achilles' heel'

Jun 12, 2015, 18:50 IST

The Islamic State is one of the most well-funded terrorist organizations in history thanks to the tax base it has managed to establish in its vast swaths of conquered territory in Iraq and Syria.

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Running operations to maintain this tax base, however, may prove unsustainable for ISIS in the long run.

The militants are quickly racking up more expenses than they can cover, and their oil revenues have been cut by nearly two-thirds due to US airstrikes on oil refineries and the low price of crude, Indira Lakshmanan of Bloomberg reported.

The US has tried to cut off ISIS' sources of revenue with little success, however: The group has compensated by levying hefty taxes on salaries and businesses, in some cases demanding residents and companies pay them as much as 20% of their income or revenue - 50% if they are employed by the Iraqi government, the New York Times reported.

And after conquering Mosul in June 2014, ISIS imposed a "protection" tax on every Iraqi Christian who refused to convert to Islam. Christians who refused to pay would not receive the protection of ISIS gunmen, and could either leave or be killed.

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All in all, ISIS takes in an estimated $1 million every day from extortion and taxation, according to analysts at the nonprofit RAND Corporation.

"ISIS makes most of its money from plunder," Jonathan Schanzer, vice president for research at the Foundation for Defense of Democracies, told Business Insider in May. "We're seeing that over and over again. They go from one town to the next and knock over a bank or several banks and go house to house and extract whatever is of value."

"It's a racket," Schanzer said. "And that's how ISIS continues to survive and thrive."

ISIS can continue to tax its captive population for as long as it holds territory, but the militants' wealth is bound to dwindle as holding this territory is in itself an expensive endeavor. Paying soldiers to rampage across the Middle East is not cheap, either - salaries cost ISIS between $3 million and $10 million every month, and the money the group steals from banks is not being replenished, according to Bloomberg.

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"It is important to note that as the sources of ISIL's wealth - notably the money stolen from banks and revenues from oil sales - are either no longer replenished or will diminish over time," Jennifer Fowler, deputy assistant secretary of the Treasury for terrorist Financing and financial Crimes, said in a speech at the Washington Institute for Near East Policy.

"There are already signs that ISIL is unable to provide fundamental services to the people under its control, which Baghdad previously provided or subsidized," she added.

"While it's true they're the best-financed terror group we've seen, they're still an insurgent group, and they have a lot of expenses."

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