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Targeting the Islamic State’s money supply

November 18, 2014 at 6:30 PM EDT
While much attention has been paid to the military campaign against the Islamic State, an equally important U.S. battle is targeting their funding, gained mostly through ransom, extortion and theft. Chief foreign affairs correspondent Margaret Warner discusses efforts to stifle the militants’ financial fuel with David Cohen, Under Secretary of the Treasury for Terrorism and Financial Intelligence.

JUDY WOODRUFF: Now, stopping the rapid rise of the Islamic State group by addressing a main engine driving the militants, money, a lot of it.

Chief foreign affairs correspondent Margaret Warner explains.

MARGARET WARNER: While media attention to the battle against the Islamic State group has focused on the U.S.-led military campaign of airstrikes and helping local forces opposing it, an equally important part of U.S. strategy has been waged beyond the scenes, targeting the group’s fat pocketbook.

But it’s tough. Islamic militant groups like al-Qaida relied largely on donations from wealthy sympathizers in the Gulf and elsewhere. But I.S. largely pays its own way through criminal activities in the territories it controls in Iraq and Syria.

Late last month, the U.S. Treasury Department reported the group was earning $1 million a day selling oil from seized fields and refineries, $20 million so far in 2014 in ransom payments for captured Westerners, millions more in extortion and theft from local populations and businesses, and millions more looting and selling antiquities.

The point man trying to rein in all these sources of revenue is David Cohen, the treasury undersecretary for terrorism and financial intelligence.

I spoke to him earlier today.

Undersecretary Cohen, thank you for having us.

DAVID COHEN, U.S. Undersecretary for Terrorism and Financial Intelligence: Pleasure to be here.

MARGARET WARNER: So, how does this Islamic State group, ISIS or ISIL, stack up financially against other independent terrorist groups that the U.S. has ever faced?

DAVID COHEN: Today, probably the best funded terrorist organization that we have confronted outside of state-sponsored terrorist organizations.

MARGARET WARNER: And have you been able to make yet a real significant dent in its ability to finance itself, enough that you see an impact on its ability to operate?

DAVID COHEN: One of the ways that ISIL has raised funds is through the sale of stolen oil. And I think we have seen over the past several months some reduction in ISIL’s ability to sell oil on the black market.

MARGARET WARNER: Can you give me an example?

DAVID COHEN: Our estimate over the summer was that ISIL was earning something on the order of something around $1 million a day from these black market oil sales.

I think, today, in the aftermath of some of the airstrikes that have been taken, as well as some of the efforts that have been undertaken to restrict ISIL’s ability to use these smuggling networks, our estimate is that ISIL is now earning something on the order of a couple million dollars a week.

It’s still an enormous amount of money, but it is movement in the right direction.

MARGARET WARNER: These are essentially fixed assets, the oil fields they have taken over, the refineries they have taken over in Iraq and Syria. Why can’t you just bomb them out completely?

DAVID COHEN: I’m not a military targeter, so I don’t…

MARGARET WARNER: You have enough on your plate.

DAVID COHEN: I have enough on my plate without selecting specific targets to hit.

But it is absolutely the case that we’re working very closely with the Department of Defense and — in thinking about going after some of their oil resources.

MARGARET WARNER: You said in a speech that Iraqi Kurds are buying this stolen oil and then smuggling it out through Turkey. Now, the Iraqi Kurdistan regional government is our ally, supposedly, against ISIS.

DAVID COHEN: Right, absolutely, absolutely.

MARGARET WARNER: They are doing that?

DAVID COHEN: The point I was making is that the oil smuggling networks that ISIL has now taken over are longstanding smuggling networks that existed for many years before ISIL came into Syria, came into Iraq.

What we’re working on is to cut off those avenues. And the Kurdish regional government is very much our ally in this and are working with us to cut off the oil sales into Kurdistan.

MARGARET WARNER: With any success?

DAVID COHEN: I think we’re seeing some success there.

MARGARET WARNER: Now, what does I.S. spend all this money on and how rapid a rate?

DAVID COHEN: It’s important to think not just about their funding, but their expenses, what they are spending money on.

So, ISIL pays its fighters upwards of $300 million, $400 million a year just in the fees for their fighters. They’re also trying to portray themselves as if they were a state, and trying to the deliver social services. That is also very expensive.

If you just compare what the Iraq government had budgeted for social services in the area where ISIL is currently operating, it was well over $2 billion for this year. Even the effort to try and do that is going to outstrip the resources that ISIL has been able to amass.

MARGARET WARNER: Can they do this all through a self-contained network? Don’t they at some point have to have a point of access into the global financial system, where you then can sanction the institutions that do business with them?

DAVID COHEN: If they want to purchase whatever it is, whether it’s weaponry or other material to try to continue to hold this territory, having access to the financial system is enormously important to them.

And we do have the ability, working with private financial institutions around the world, to isolate ISIL and to prevent them from being able to access the international financial system. And that’s one way to undermine their financial strength.

MARGARET WARNER: Now, what about ransom payments, obviously a big issue this week?

As we know, most Western European governments allow or even engage in ransom payments to get their citizens back. The U.S. and U.K. refuse. You have said it’s a major source of revenue for I.S. Has there been any progress in getting the Western European governments to stop playing that game?

DAVID COHEN: What we have been doing is everything in our power to try and free the Americans who are held hostages — held hostage and to work with others to have their hostages free, short of paying ransom.

It not only fuels additional hostage-taking, because it rewards the hostage-taking by paying ransoms, but it also fuels these terrorist organizations so that they can conduct other — other terrorist activity. And so we are working with our partners around the world to translate what is now an accepted norm, which is that ransom payments shouldn’t be made to terrorist organizations, into more of a reality.

MARGARET WARNER: And is that working at all?

DAVID COHEN: I think we’re making some progress on this.

But the numbers speak for themselves. If ISIL has received $20 million in ransom payments this year, someone’s paying those ransoms.

MARGARET WARNER: Your job before this one was to formulate the economic sanctions against Iran to try to force them to the negotiating table over their nuclear program. Which is tougher?

DAVID COHEN: Iran presents a different set of challenges than ISIL. They both are hard tasks, but ones where I think we’re making progress on both of them.

MARGARET WARNER: Undersecretary David Cohen, thank you.

DAVID COHEN: Thank you.