From cash to crude

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A worker rides a bicycle at an oil refinery in Najaf, Iraq. Photo: Reuters
Oil harvest A worker rides a bicycle at an oil refinery in Najaf, Iraq. Photo: Reuters

Did you know that the Islamic State, with its roots in Iraq and presence in Syria, Jordan, Libya and Lebanon, among other nations, is the wealthiest terror organisation in the world? Its annual earnings are estimated to be $350-700 million, or 12-24 times higher than the al-Qaeda’s yearly income at the latter’s peak. Islamic State’s annual profits are $100-200 million, after covering all its costs. US experts contend that the terror outfit owns assets worth $1-2 billion.

Compare this to what the world’s wealthiest nation, America, spends every year to fight the various wars against global terror. The country’s budget on ‘Overseas Contingency Operations’, or what it spends on external wars, for the fiscal year 2016 was almost $51 billion. This amount includes the expenditure on the war in Afghanistan, training and equipment for Iraqi and Syrian opposition forces to fight the Islamic State, support to NATO, and responses to other terrorist threats.

Clearly, despite the financial upper hand that the US has in the fight against terror, its initiatives have been unsuccessful, especially in its bid to curb the rise and spread of Islamic State. A terror outfit that earns $1-2 million a day has boldly and brazenly taken on a country, whose war expenses are almost $140 million a day. Even if one considers that America spends more in Afghanistan than in Iraq and Syria, its budget for the West Asian operations is 20-40 times that of the Islamic State.

However, experts feel that it is not the money that matters. What is crucial is to realise that the means to finance global terror have changed over the past 15 years. In 2000-01, just before the attacks on the twin towers and the Pentagon in September 2001, al-Qaeda’s (AQ’s) finances peaked. However, Osama bin Laden’s sources of funds were drastically different from those of the Islamic State. In fact, these differences are critical to plans for a successful global war against the Islamic State.

SCALE OF THE MONEY

According to the staff report, which was presented to the US’ 9/11 Commission that went into the 2001 attacks on the twin towers and the Pentagon, AQ’s annual earnings were $30 million. Of this, bin Laden spent $10-20 million to appease the Taliban, which then ruled Afghanistan and provided him a safe haven. The remaining amount was used by the AQ to maintain a small but loyal cadre, finance its own operations, and aid other jihadists across the globe.

Still, the intelligence community was unclear about AQ’s financial state. In April 2001, the Central Intelligence Agency said that bin Laden’s “financial assets are difficult to track because he uses a wide variety of mechanisms to move and raise money”. It added that “gaps in our understanding contribute to the difficulty we have in pursuing the bin Laden financial target.” The Commission’s staff report said: “Understanding al-Qaeda’s money flows… present ongoing challenges because of the speed, diversity and complexity of the means and methods for raising money.”

In contrast, the extent of the Islamic State’s financial empire seems to be welldocumented. As mentioned above, its annual income is several times that of AQ. Terrorism experts Patrick B Johnston and Benjamin Bahney feel that the is has a “sophisticated and strategicallydriven financial scheme” that will make it tough for the US to fight the outfit. The Islamic State’s earnings are on the increase, when compared to AQ. The latter’s fund flow was squeezed after 9/11 due to global initiatives against it, more so after the 2003 attacks in Riyadh, when Saudi Arabia clamped down on several of its money sources.

COLOUR OF THE MONEY

After 9/11, there were several myths about bin Laden’s money. One of them was that he used his family inheritance, which was estimated at $300 million, and proceeds from the sale of his businesses in Sudan, where he lived from 1992 to 1996. Neither of this was true. The Commission’s staff report said that he received $1 million a year from his family between 1973 and 1993-94, which added up to a “significant sum” but was nowhere in the range of a “$300 million fortune”.

Although it was believed that bin Laden owned 35 companies in Sudan, the staff report concluded that “some may never have actually been owned by him and others were small or not economically viable. Bin Laden’s investments may well have been designed to gain influence with the Sudanese government rather than be a revenue source. When bin Laden was pressured to leave Sudan… the Sudanese government apparently expropriated his assets and seized his accounts.”

The second belief was that after he shifted his base to Afghanistan, AQ, along with the Taliban, used illegal incomes from smuggling of opium and heroin to finance their joint and respective activities. This turned out to be false when it was revealed that bin Laden was against the narcotics trade, and asked his loyalists and other terrorist groups to stay away from it. However, the Taliban had no such compulsions, and engaged freely in the large-scale illicit business.

So, where did AQ’s funds come from? The staff report concluded that the organisation depended on fund-raising to support itself; such funds comprised 70 percent of its annual funds. “It appears that al-Qaeda relied heavily on a score of financial facilitators who raised money from a variety of donors and other fund-raisers. Those donors were primarily in the Gulf countries, especially Saudi Arabia. Some donors knew of the ultimate destination of their donations, and others did not… The financial facilitators also appeared to rely heavily on imams in mosques, who diverted zakat donations… al-Qaeda fund-raising was largely cyclical, with the bulk of the money coming in during the Islamic holy month of Ramadan (when zakat is paid by most Muslims as a mandatory contribution).”

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