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Could the Islamic State’s financial troubles spell its doom?

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With loss of territory, ISIS is getting hit hard in the pocketbook, report says

Defeat of the Islamic State of Iraq and Syria might depend on finances as much as bombs and bullets, according to a new study.

King’s College London reports that as the Islamic State group has lost territory, its financial capabilities are shrinking. If Iraqi forces, aided by the Global Coalition of nations that are fighting ISIS, complete their recapture of Mosul from the terror group, it may be a turning point.

But, the report warns, that might not be enough to forestall future terrorist attacks outside ISIS territory.

The report, “Caliphate in Decline,” is an estimate of ISIS’ finances between 2014-2016, conducted by the international auditing firm EY (formerly Ernst & Young) and the International Center for the Study of Radicalization (ICSR) at King’s College London. Researchers warn that reliable data are difficult to come by but said they used leaked documents, congressional testimony, government reports, media articles, journalistic investigations, think tank studies, and  interviews with officials and experts.

ISIS’s most significant sources of income are the taxes and fees it levies on the people who live in its territory in Syria and Iraq; oil; looting banks and shops; fines, and confiscation of the property of those who have fled the territory.

But, as the terror group has lost 62 percent of the territory it controlled Iraq in mid-2014 and 30 percent in Syria, according to the Global Coalition, the King’s College report estimates that ISIS’s annual revenue has been cut in half, from a high of $1.9 billion in 2014 down to $870 million in 2016.

It was in 2014 that the group declared itself a caliphate and made headlines by capturing wide swaths of territory in Syria and Iraq, beheading hostages and killing religions minorities.

“There are no signs yet that the group has created significant new funding streams that would make up for recent losses,” says the report, which was presented recently at the Munich Security Conference.

A finding that could have geopolitical implications is that there is “no hard evidence that foreign donations continue to be significant,” the report says. As Der Spiegel points out, “Politicians have … demanded that money from foreign sources be blocked, a call that seems to come from assumptions based on al-Qaida having received money from Persian Gulf states in the past.” Al Qaida in Iraq (AQI) is ISIS’s immediate predecessor. “But there isn’t proof that Islamic State is using that model either.”

The study warns that ISIS and Al Qaida have “repeatedly demonstrated that financial and military setbacks can be overcome.” The shrinking finances might be made up for in part by smuggling and extortion, if ISIS takes a page out of AQI’s playbook.

As well, terrorist operations outside ISIS territory are “relatively cheap and funded without relying on official grants or support from the group in Syria and Iraq,” the report warns. “This is especially true for purely inspired attacks or ‘remote-controlled’ operations, which rely on the ‘mentoring’ of lone attackers via personal messenger apps.”

The Iraqi Security Forces recaptured the Mosul Airport and Ghazlani military base on February 24, from where they advanced into neighborhoods in western Mosul, the Institute for the Study of War reports. Meanwhile, in Syria, the Syrian Kurdish-led Syrian Democratic Forces seized the majority of ISIS-held territory in the eastern countryside of Raqqah, the Caliphate’s capital, in ongoing efforts to isolate the city.

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