The so-called Islamic State group (IS) wants to expand its self-proclaimed Caliphate from Syria and Iraq to other parts of the Middle East, North Africa and even Europe.

How will this be funded?

Does IS maintain a budget?

Yes, or at least the militant group – also commonly referred to as Isis and Isil – claims as much.

In January 2015 a tribal leader in Mosul briefed the London-based media outlet Al-Araby al-Jadeed that IS’s first budget had been approved. Up to $2bn had been recorded for expenditure.

This $2bn figure corroborates with later disclosures from US intelligence officials. They claimed to have viewed ledgers kept on 160 flashsticks, raided from the home of IS “paymaster” Abu Hajjar in May this year.


Experts at the US think-tank Rand Corporation have been analysing the financing of terror groups in Iraq for eight years. They identify IS’s biggest cost as fighters’ salaries.

Delivering a speech in July, a US Treasury source claimed “Isil has plenty of money”, citing $360m as the yearly cost for fighters.

What makes this challenging to verify are the widely varying number of militants in Syria and Iraq. The CIA revised its estimate of 10,000 IS fighters upwards to 31,000 in the space of three months last year.

Making it even harder, the militants are paid different wages according where they’re from, where they fight and their number of dependents.

Taking a conservative estimate of there being 10,000 fighters, and an aggregate wage of $500, that equates to a bill of $50,000 a month or $600m a year.

To meet these monthly payments IS needs a constant supply of cash. Where does this revenue come from?

Militant Islamist fighters waving flags, travel in vehicles as they take part in a military parade along streets of Syria's northern Raqqa province


The intergovernmental Financial Action Task Force issued a report on IS financing in February.

It describes “a sophisticated racket by robbing, looting and demanding a portion of the economic resources in areas where it operates”.


In June 2014 a media storm followed allegations that IS had looted the equivalent of $500m in dinars from Mosul’s Central Bank.

But a later investigation questioned why, if this was the biggest bank robbery in history, no eyewitnesses came forward.

According to the Financial Action Task Force, IS has access to “a half billion US dollars in cash alone as it has taken control of state-owned bank branches”.

The US Treasury Department claims IS controls banks across the Iraqi provinces of Ninevah, Al-Anbar, Salah Din, and Kirkuk.

It’s hard to dispute these vast amounts of cash and the gold sitting in bank vaults within these IS-held territories.

Taxation and Extortion

The most sustainable stream of revenue for IS is taxation and extortion. Interviewed in captivity, Abu Hajjar claims they “impose taxes on almost every sector”.

The excavation of antiquities is one of these sectors. IS doesn’t just profit from looted antiquities, it sells licences to criminal excavation teams, according to the US Department of State.


People Smuggling

Not only has IS created a refugee population from its war, it can exacerbate the flow of peoples to increase its funds.

Research published in May by the Global Initiative Against Transnational Organized Crime found that Syrian refugees are travelling via Egypt and Sudan in order to reach Libyan citifies.

According to the report, gangs are charging $800 -1,000 for passage to Libya, then up to $1,900 to cross the Mediterranean.


Illicit Oil Trade

The seizure of oil facilities in Syria and Iraq has been key to IS’s military strategy.

To do so they reactivated generations-old smuggling networks which, according to Dr Valerie Marcel at Chatham House, run to refineries in Iraqi Kurdistan, Turkey and Iran.

Other destinations are the Government-controlled area of Syria. The strongest evidence of co-operation between the Assad regime and IS concerns Syrian businessman George Haswani.

The EU sanctioned Haswani, declaring him: “A middleman in deals for the purchase of oil from ISIL (Islamic State) by the Syrian regime.”

Where else might IS oil end up?

Academics at the University of Greenwich have followed the supply chain even further afield, tracing smuggling hubs across Kurdistan and Southern Turkey to the Port of Ceyhan.

They say they have found “no smoking gun” but identify “an invisible nexus between Ceyhan and ISIS” through their study of tanker charter rates and fighting trends.

The charter rates in question follow the Ceyhan-Lavera sea route, leading to the Port of Marseille. Crude oil is unloaded at the Lavera Terminal in Marseille, and transported in the Southern European Pipeline to refineries in France, Switzerland and Germany.

But IS would have been cut out of the supply chain long before any of their crude is mixed, transported, refined and eventually sold as petrol at European pumps.

So how much is IS actually making from oil?

For the jihadis, peak oil occurred in August 2014 – the same month that US-led airstrikes began.

At this time the US Government estimated IS’s takings at $3m a day. By May 2015 the New York Times claimed that “oil is not the main source of cash”.

But a curveball was thrown in July 2015. At a speech in Aspen the US Assistant Secretary for Terrorist Financing cited intelligence from the Abu Hajjar raid.

IS had allegedly made $40m in a single month earlier in 2015. “If you want to extrapolate that out, you can get to about $500m in the course of the year.”

The dramatic decrease in oil prices this year should cast doubt over the idea that IS has sustained such revenues throughout 2015. It will have become more difficult for illicit traders to undercut market rates.

At the end of July, Iraq’s Deputy Prime Minister claimed IS was selling oil at ten dollars per barrel. This is roughly a 25 per cent reduction on prices in 12 months.

Leaked budget from Deir Ezzor

The only set of IS accounts made public relate to another single month. From 23 December 2014 – 22 January 2015 these provide a snapshot of the oil-rich Deir Ezzor province in Syria from 23 December 2014 – 22 January 2015.

During this period IS made $66,433 a day from oil sales from the 10 fields under its control in this province. Taking this as an aggregate, IS would have been taking only 5-10 per cent of the $3m a day touted some six months earlier.


Boom and bust

And yet reports of 6km-long tanker queues persist.  This, and briefings from Iraqi and US intelligence officials on 23 October, that IS is making $50m in monthly oil sales.

On 27 October the Pentagon announced plans to increase the number of air strikes against IS-controlled oil facilities in Syria.

Will these strikes make an impact?

Or will over-production of oil by the Americans and Saudis do more damage to IS than their bombs?