CNNMoney has interviewed military scholars and financial investigators, and it has reviewed dozens of reports from ISIS, the U.S. Treasury, Defense Department, United Nations, British government, and several terrorism research institutes. Together, they show why ISIS is so powerful. It ditched Al-Qaeda’s old model of relying on rich donors in the Arabian Gulf. Instead, the Islamic State is a self-funded powerhouse.
ISIS subsidizes bread for the public, experts say. Soldiers earn $400 to $1,200 a month, plus a $50 stipend for their wives and $25 for each child, according to the Congressional Research Service. Highly skilled engineers and technicians can make upwards of $1,500 a month, according to an investigative team of UN researchers.
“The Islamic State is certainly the best financially endowed terrorist organization in history. That is particularly due to its ability to govern ungoverned spaces,” said Andreas Krieg, a military scholar at King’s College London in Qatar.
Here’s how ISIS pays for it all.
Taxes: $360 million-plus a year
A huge amount of the money comes from the 8 million civilians who live and work in territory taken over by ISIS soldiers. Everything in the Islamic State is taxed. According to the Geneva Centre for Security Policy:
Income tax: 10%
Business tax: 10%-15%
Sales tax: 2%
All bank cash withdrawals: 5%
Pharmaceutical drugs: 10%-35%
ISIS says all taxes are zakat, Islamic religious alms similar to a Christian tithe.
Oil: $500 million a year
ISIS has hijacked oil wells and refineries. But it doesn’t have the expertise or equipment to properly manage it at full capacity. Numbers are all over the place. But the best estimates say ISIS in 2014 was producing close to 50,000 barrels per day, less than half the region’s potential. And it was still raking in up to $1.6 million daily, according to the UN. International sanctions prevented ISIS from selling this oil legally, so it has resorted to unregulated underground markets. But that’s not hard. ISIS tapped into long-established smuggling routes that were set up back in the 1990s. Back then, Saddam Hussein used them t
o circumvent United Nations sanctions.ISIS draws crude oil from captured wells. It sells that to middlemen at a quarter of the market price. When oil was at $80 a barrel last year, ISIS was selling it at $20 a barrel, according to the Financial Action Task Force. ISIS is selling oil to its enemies. Syrian dictator Bashar al-Assad needs oil to keep lights on his part of the country. U.S.-backed Syrian rebels need diesel to keep engines running. ISIS doesn’t mind literally fueling its enemies for now, because its goal is to keep funding the expansion of the Islamic State — in any direction — said Christina Schori Liang, senior fellow at the Geneva Centre for Security Policy. “They have to keep the war economy going, because they don’t have legitimate economies,” she said. “The problem with war is everything is very blurry. They fight in the day and make deals at night.”
Bank looting: $500 million to $1 billion
When ISIS gains new territory, it claims control of banks. In 2014, the Islamic State stole up to $1 billion from banks this way, according to the U.S. Treasury. “Importantly, though, this source of revenue is not renewable,” a Treasury representative said. But that one-time injection of money made ISIS the wealthiest terrorist organization on the planet. ISIS treats private banks and state banks differently. It’s trying to build a functioning country, so it needs to maintain some sense of normalcy for the people stuck there. For example, ISIS doesn’t touch the money in private banks — it would rather tax that cash as people withdraw it. But Iraq’s central bank branches get looted. When ISIS overran the Iraqi city of Mosul last year, it seized an estimated $450 million in cash and gold from the central bank branch there. ISIS now claims it’s using gold to mint its own gold coin currency.
Kidnapping ransoms: $20 million to $45 million a year
American journalist James Foley was kidnapped in 2012, and ISIS demanded $132 million. It wanted $200 million for two Japanese hostages, Kenji Goto Jogo and Haruna Yukawa. Neither country paid, and both were murdered on video.
Most countries stick to a UN resolution to not fund terrorists this way — under any circumstances. It’s an agonizing decision to make. Don’t pay, and family members watch loved ones die. Pay up, and you buy terrorists weapons that kill thousands more. Plus, you give incentive for them to do it again. But some nations do pay ransoms. One by one, Foley’s cell mates in Raqqa, Syria were released because their countries paid for them. French, Italian and Spanish hostages were freed, according to a New York Times investigation last year. ISIS collected $20 million to $45 million this way in 2014, according to the U.S. Treasury.