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What’s made the Islamic State one of the richest terrorist armies in history?

How does the Islamic State militant group make money to fund its operations? A key source is oil extraction, which has helped make the group one of the richest terrorist armies in history. Economics correspondent Paul Solman takes a look at the Islamic State’s revenue sources, while William Brangham learns more from Cam Simpson of Bloomberg Businessweek.

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  • Editor’s note:

    Due to an editing error, a sequence in a report last Thursday about funding for ISIS included footage of Russian air strikes on ISIS oil resources, instead of the US air strikes referenced. Keen observers in the NewsHour audience picked up on the mistake and alerted us to it. The NewsHour regrets the error.

  • GWEN IFILL:

    But, first, we turn to the question of why it’s so tough to choke off the supply of money to ISIS. There are new calls for countries to crack down on groups that may be financing them.

    Earlier today, authorities in Kuwait, which suffered its worst attack from ISIS this summer, arrested members of a cell providing money and arms to the terrorists. New estimates show the militants have resources in the Middle East that go much deeper.

    Our economics correspondent, Paul Solman, begins, part of our Making Sense series, which airs every Thursday on the NewsHour.

  • PAUL SOLMAN:

    Since the Paris attacks this weekend, the forces arrayed against ISIS have been pounding the territory it holds, and, specifically, hitting oil it’s been extracting for sale, as oil is a key source of ISIS revenue, having made the group one of the richest terrorist armies in history.

    Earlier today, Democratic presidential candidate Hillary Clinton insisted the U.S. should be targeting ISIS’ money.

  • HILLARY RODHAM CLINTON, Democratic Presidential Candidate:

    When it comes to terrorist financing, we have to go after the nodes that facilitate illicit trade and transactions. The U.N. Security Council should update its terrorism sanctions.

    They have a resolution that does try to block terrorist financing and other enabling activities. But we have to place more obligations on countries to police their own banks.

  • PAUL SOLMAN:

    Republican candidate Donald Trump has been even more aggressive.

  • DONALD TRUMP, Republican Presidential Candidate:

    ISIS is making a tremendous amount of money because they have certain oil caps, right? They have certain areas of oil that they took away. There’s some in Syria, some in Iraq. I would bomb the (EXPLETIVE DELETED) out of them.

  • PAUL SOLMAN:

    Meanwhile, there’s been a debate over just how much money ISIS actually has.

  • Last year, David Cohen, then with the U.S. Treasury Department, said on the “NewsHour”:

  • DAVID COHEN, Former U.S. Undersecretary for Terrorism and Financial Intelligence:

    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.

  • PAUL SOLMAN:

    A report this week in Bloomberg Businessweek suggests Cohen was overly optimistic, citing new data from the Treasury that ISIS actually took in as much as half-a-billion dollars in the past year from oil.

    But just yesterday, Army Colonel Steve Warren, spokesman for the joint task force, said the stepped-up offensive against ISIS’ main source of revenue is paying off. For the first time, the U.S. is attacking oil delivery trucks.

  • COL. STEVEN WARREN, Spokesman, Combined Joint Task Force :

    We destroyed 116 tanker trucks, which we believe will reduce ISIL’s ability to transport its stolen oil products.

  • PAUL SOLMAN:

    Besides the oil fields in Iraq and Syria that ISIS controls, there are, however, three other major sources of terrorist funding, taxation, which might just as easily be called extortion in the case of ISIS, kidnapping for ransom, and, finally, the looting and the sale of precious antiquities smuggled from the region.

    This is economics correspondent Paul Solman reporting for the “PBS NewsHour.”

  • GWEN IFILL:

    And now William Brangham has more about how ISIS gets its funding.

  • WILLIAM BRANGHAM:

    And for that, I’m joined by Cam Simpson from London. He’s a reporter from Bloomberg Businessweek who watches this subject and co-wrote that new cover story.

    So, Cam Simpson, you report on several misconceptions that the U.S. had about ISIS’ capacities with regards to oil. What was it specifically that we got wrong?

  • CAM SIMPSON, Bloomberg Businessweek:

    Boy, I think, you know, William, unfortunately, we pretty much got everything wrong.

    We mis — we severely miscalculated the damage that we had inflicted on ISIL’s oil infrastructure during those strikes that started more than a year ago.

    And you had David Cohen in that setup peace. And those numbers that he cited, we continued — the administration continued to cite for months and months, at least, I think, seven months after that, well into this year, that we had bombed their oil revenue down to about $100 million a year.

    You know, what they discovered this year was that they had not only significantly overestimated the damage that we had done, but I think that they had significantly underestimated the amount of money that ISIS was getting. So the new figure that we have after a raid deep into enemy territory against the oil emir of ISIS, where they seized a massive trove of intelligence ledgers, is that they’re making $500 million a year.

    So that’s a really significant difference. I mean, $400 million is not a rounding error. That’s probably enough to pay most of their armed forces maybe twice over. It’s a lot of money.

  • WILLIAM BRANGHAM:

    You also report that we initially went after ISIS’ refining capacity, but not their crude oil capacity. What does the — why does that distinction matter?

  • CAM SIMPSON:

    Well, I think, initially — and, again, this is what we know from what was said at the time during the strikes and sort of from the approach that they took and the approach that they are taking now going after the trucks — you know, I think that people believed that refined oil is obviously more valuable than crude.

    Refined oil is what you actually burn. It’s what you put in your car. It’s versus crude oil, which you can’t really use until it’s refined. And so since it’s more valuable, I think we thought they have got storage tanks just in places that they have seized that are full of refined oil. They have got refineries. If we take that out, they’re finished.

    Well, that’s not the way either that it worked, or they completely changed the way that they were doing business. Now they have got — when Donald Trump says he is going to bomb it everywhere, it’s just — it doesn’t work like that. You’re talking about, like, literally thousands of hose pipes buried in the desert, where somebody can pull up with a truck or even just fill a jerrican.

    And ISIS gets paid right there, at the end of that hose pipe. And then that guy drives off and he sells the oil. And he’s not a part of ISIS. I mean, oil is the lifeblood not just of ISIS, but of the entire economy in this region for everybody, I mean, for fueling generators, and getting electricity. It’s for asphalt for roads, I mean, for everything. So it’s an incredibly difficult challenge.

    When the Pentagon said this week that they had bombed 116 trucks lined up, and that was the headline, in some ways, to me, it was almost like you could say the headline is there were 116 trucks lined up to get oil, because we’d been watching these trucks drive around now for a year, and we haven’t gone after them, specifically because they’re civilians.

    There have been estimates that some of these lines, these queues at the bigger oil depots where the trucks are filling can be two miles long, can be four miles long. Some of these drivers sit in these lines for a month, you know, with their trucks waiting to fill up, sell the oil, and then come back and get another load.

  • WILLIAM BRANGHAM:

    You detail a lot of the ways that — the different ways that ISIS is able to get money, the selling of sex slaves, ransom from kidnappings, banks’ money that they have seized.

    One of the ways you detail that was incredibly fascinating was their system of taxation. Can you explain a little bit more about that?

  • CAM SIMPSON:

    Yes.

    Yes. I mean, when you have power, brutal power, as they have over eight million people, you can squeeze literally every piece of life in that system. You can tax students. And the tax rates have varied depending on the grade that they’re in. You can tax people for working previously for a religiously inappropriate regime, whether they were soldiers, teachers, whatever. And they have to get an identity card that says they have repented.

    You know, those are — they have charged up to $2,500 for an identity card to say that you have repented that you have to renew every year for, like, $200. They’re squeezing everything. They can squeeze everything.

    There are taxes on utilities. There’s taxes on mobile phones. I mean, the idea that you can hit this with U.N. sanctions and the international banking system, it’s just so far-fetched. It’s impossible.

    When you have control of that many people, you can just continuously squeeze them for all the money that you need. And it’s probably even a bigger income source for them than the oil. And they’re really good at this. They have been doing this from the beginning since we have been dealing with them since 2005.

    This is the same group we went after in the surge in 2007. And they’re just really good at collecting money from every possible source that you can imagine.

  • WILLIAM BRANGHAM:

    All right, Cam Simpson, Bloomberg Businessweek, thank you very much for joining us.

  • CAM SIMPSON:

    It’s my pleasure. Thank you.

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