© Reuters
Experimental feature

Listen to this article

00:00
00:00
Experimental feature
or

In its polished online propaganda, Isis sometimes calls its health sector the Islamic State Health Service — the ISHS. The logo and typography are taken from the NHS, the UK’s free-of-charge state healthcare provider. The glossy pictures of doctors in their scrubs and sparkling well-equipped wards — featured in ISHS posters — could be too.

It is an illusion. True to its ambitions of statehood, Isis rakes in tens of millions of dollars each month from the resources in the territories it controls across half of Syria and a third of neighbouring Iraq. But while it holds more territory than some countries, and imposes taxes and provides some services for its “citizens”, the budget of the self-proclaimed caliphate shows that its priorities are still those of a militant organisation. Isis has built an efficient war machine that lavishes money on loyal members while squeezing others.

When Abu Qitada, a 16-year-old from eastern Syria, joined Isis as a fighter, he was assured he would receive medical care, whether that meant treatment at a frontline clinic or smuggling him to Turkey with cash. “They pay for everything,” he told the FT a few weeks after defecting. Like all those from Isis territory, he asked not to be identified with his real name.

In contrast, civilians like Um Eyyad, from Mosul, the Iraqi city that Isis seized in June, are treated like second-class citizens. She stopped going to public hospitals, even though she could barely afford private treatment for her sickly son. “When I entered the hospital, I’d feel scared,” says the housewife who fled to Kurdish-controlled Erbil in northern Iraq in June. “Everyone inside was Isis. Other patients have to bring their own medicine.”

An investigation based on interviews with dozens of Iraqis and Syrians trapped under Isis rule, as well as with senior diplomats and intelligence officials in the international coalition against Isis, undermines the group’s claims of governance. “They are a very rich terrorist organisation,” says one senior diplomat in the US-led anti-Isis coalition. “But they are a very poor state.”

The Ledger

The war effort dominates Isis’ accounts.

Over the past year, as the jihadis have expanded the territory they control in Syria and Iraq, they have netted at least $900m from oil, taxation and confiscations, the FT investigation has found. But this revenue is a moving target: the international coalition has significantly ramped up its air campaign against Isis oil wells in recent weeks in an effort to staunch the flow of crude — and cash — into the group’s war chest.

Constructing a holistic picture of Isis’ outlays is fiendishly complex. While Isis’ top leaders exercise careful control over what flows into their coffers from key resources like oil, the group’s decentralised structure means they have a looser grip on how locally raised revenues are spent.

The group operates a centralised budget, run from Mosul, and dozens of regional budgets managed by its walis, or governors. Taxes and fines are collected and circulated within each wilaya (province), and former members say that the funds are distributed to several branches of local government, such as fighting units or education authorities. Income and expenditure varies depending on provinces’ resources and fighting forces.

The FT gathered payment details for fighters, civilians and projects, first hand and from documents, which were then cross-checked across Isis’ disparate territories, to produce spending bands for the biggest items of expenditure in Isis’ budget.

The FT’s analysis shows that approximately two-thirds of the group’s annual revenues — about $600m — are ploughed into its fighting forces.

About $20m is spent every month to pay for the group’s core fighting force, which is mostly comprised of foreign militants (muhajireen). A further $15m-$20m is spent on local fighters and auxiliaries. Estimates from coalition intelligence officials on the exact size of Isis’ armies vary, but most agree that the core force is at least 30,000-strong, with 50,000-70,000 more split between local members and auxiliary and part-time forces.

Tens of millions of dollars more are spent on small munitions and explosives. A single one-week offensive can cost at least $1m in munitions alone, according to FT estimates. Millions of dollars also are spent acquiring other military assets. Because Isis extracts tens of thousands of barrels of oil daily, fuel is free.

Isis’ security apparatus costs $10m-$15m each month, according to one coalition official who monitors the group’s finances. This encompasses the police, the hisba, or “morality” police, intelligence forces known as amniyat, and auxiliaries to collect taxes and levy fines. Isis’ broad security spending has ramped up in recent months as the jihadis have become increasingly concerned about internal security. Amniyat agents now operate well beyond the caliphate, including in Turkey and Jordan, and the group is spending money to build a domestic wiretapping system, says the official.

Meanwhile, hospitals, healthcare and schooling across Isis territory appear to receive less than $10m a month. Deir Ezzor is one of Isis’ largest and most carefully administered provinces. Yet the jihadis run just nine hospitals there, each with no more than 50 doctors and nurses paid a maximum of $300 a month — for a province-wide total of just $135,000 a month.

Isis’ spending for municipal work is also limited, totalling roughly $10m-$15m a month, less than a fifth of its overall income — even taking into account prominent building projects — one coalition intelligence official estimates. The estimate is supported by the documentary record.

“They are trying to put substance to the concept of a caliphate. They want to control what happens in schools, control the hospitals, control the mosques; what people wear; how people behave; the judicial system . . . But that doesn’t mean they have achieved the concept of statehood,” says Sir John Sawers, the former head of Britain’s Secret Intelligence Service, MI6.

Fighters

Across Isis territory, the organisation’s largesse is focused largely on its fighters. Although documents or testimony from one region do not necessarily provide a template for the caliphate as a whole, a picture emerges of a well-organised system to keep the group’s fighting machine working.

The FT obtained the payslip of one fighter that shows the graded scale of fighters’ salaries. The authenticity of the payslip was confirmed by eight Isis defectors.

Regular Isis fighters fall into two categories: local and foreign. All fighters are paid a base salary of about $50-$150 a month. This is supplemented by stipends and bonuses, depending on position. Local fighters tend to average about $200-$300 a month while foreign fighters make an average of $600 a month, which includes a $200 migration allowance. Commanders are also given a petty cash account.

The receipt obtained by the FT also showed that in addition to base pay, a fighter is paid an extra $50 for each wife and “sabaya”, or enslaved woman. Fighters also receive an extra $35 per child, whether it belongs to a wife or a “sabaya”.

According to Isis defectors, every commander receives petty cash — starting at $50 a month and going up to about $1,000, depending on his level. Fighters say leaders use the money to receive guests, buy meals or rent cars. Their spending is rarely questioned.

Despite the organised structure, the system has inefficiencies. There is no electronic accounting system and accountability is patchy.

Former Isis fighters describe months-long periods when salaries were paid late, sometimes with dozens of fighters’ wages forgotten or unpaid.

One Syrian rebel commander, who fought with Isis for more than a year, recalled times when his local financial overseer would arrive at the wali’s office only to find the money for wages was not available. Instead he would be directed to take funds from the zakat or agricultural offices.

“They have this great halo from the outside that makes you think they have rank and order,” he said. “Inside, they don’t have proper planning . . . This isn’t a state. It’s a mockery.”

Financial resilience

In the early days of the international campaign against Isis, which began in September 2014, the coalition optimistically gave Isis about a year until it reached a financial “pinch point” — when the costs of its project would overwhelm the group, and those battling the jihadis would finally gain the upper hand.

“Isis cannot possibly meet the most basic needs of the people it seeks to rule,” said David Cohen, the then US Treasury under secretary for terrorism and financial intelligence, in October 2014.

Yet Isis remains firmly embedded in these communities. One reason is that they were grossly neglected well before the jihadis took over.

Using state budget figures from before the conflict, Syrian researcher Aziz Hallaj, who studies Syria’s war economy, estimates regime spending per resident in eastern Deir Ezzor city was a quarter of what it was in the capital, Damascus. In rural areas of eastern Syria it was only about an eighth.

Moreover, some of the services Isis provides cost the group very little. Some electricity, for example, is produced through bartering arrangements with the regime in Damascus. In northern Iraq the US-led coalition has allowed workers at the Mosul Dam to keep channelling power to Isis areas.

By mid-2015, with reports of fighters being paid late or not at all, and charity services like soup kitchens being cut, there appeared to be small signs of financial trouble for the jihadis in the intelligence reporting back to Washington and Europe.

But as more becomes known about the workings of Isis-controlled areas, western officials fighting Isis say the group’s spending reveals both cynicism and flexibility: it uses money as a tool of oppression and social engineering, they say, rather than government, which limits the possibility of eroding the group’s “state”.

“Things like salaries being stopped — originally we saw that as an indication they were under financial pressure, but now we see it as a means of them just holding on to what they can,” says one European intelligence official. “They know that people who try and run away they can just shoot in the back of the head, if they need to, so why pay?”

The conclusion is bleak: officials say there is enough elasticity in Isis’ finances for the group to weather a serious drop in income. “They could probably go on for three years,” says Benjamin Bahney, who studies Isis sustainability at the Rand Corporation, the US-based think-tank.

Rather than indicating financial weakness, the cutbacks, say coalition officials, could suggest Isis is hunkering down into a more mercenary, and war-oriented posture.

“Will they divert funding to the civilian operation? I doubt it,” says one coalition official. “I suspect that they will be [more] brutal in their oppression.”

Additional reporting by Ahmed Mhidi in Turkey

Copyright The Financial Times Limited 2017. All rights reserved.
myFT

Follow the topics mentioned in this article

Follow the authors of this article