In terms of financing, the Islamic State militant group is more than a very well-oiled machine.
Its diverse funding streams include kidnapping, human trafficking, smuggling and theft, plus extortion and shakedowns passed off as taxes and fines, analysts say.
Black-market oil sales primarily bankroll the Sunni extremist group, however, generating at least $1 million a day for its campaign to establish a caliphate, U.S. intelligence experts and analysts estimate.
The group, which has seized parts of Iraq and Syria, is "largely self-sustaining. It’s operating as a state, but it is a criminal state," said Howard Shatz, a RAND Corp. senior economist who has studied management, operations and financing of the Islamic State and its precursor, al-Qaida in Iraq.
More than 8 million Iraqis and Syrians live in areas controlled by that state, The Wall Street Journal reported, citing estimates by Iraqi officials and Syrian opposition leaders.
Still, any economics discussion about the Islamic State, also known as ISIL or ISIS, requires a caveat.
"The real unknown is the range of money being raised. ... Different people are talking to different sources who are giving them different amounts" about the organization's fundraising ability, Shatz said.
"Obviously, it’s in ISIS’ interests to portray their financing as much more impressive" than it actually is, added Elizabeth Dickinson, author of a Brookings Institution report on private Gulf financing for Syrian extremists and also Middle East correspondent for Monitor Global Outlook, a U.S.-based news outlet.
Oil fuels the fight
Islamist jihadists set their sights on the vital, lucrative oil infrastructure years ago.
From 2006 to 2009, they raised roughly $2 billion by extorting payoffs from employees at the Beiji oil refinery in northern Iraq, said Shatz, who’s part of a group still researching documents, manuals and ledgers seized by coalition forces in 2010 in the northwest Iraqi town of Sinjar. Shatz also has served on the U.S. President’s Council of Economic Advisers.
In June, the jihadists battled Iraqi government troops over the refinery – Iraqi’s largest. By July, it had been disabled and its workers evacuated.
Though the government claims control, militants still attack intermittently, the International Business Times reported last week. Repairs are expected to take a year.
As of August 15, the Islamic State held six oil fields in northern Iraq, the Business Times reported. But by late August, its fighters had lost control over the highly productive Ajeel oil field – a result attributed to U.S. airstrikes and Iraqi and Kurdish troops’ assaults.
The Associated Press estimated that the IS oversees 11 oil fields between Iraq and Syria, as of last weekend.
The Islamic State smuggles the oil out of Iraq, selling to middlemen at cut-rate prices – as little as $25 a barrel, Iraq Oil Report’s editor told NPR News recently. The market rate for a barrel of crude was almost $93 on Tuesday, according to the Oil Price Information Service's Oil-Price.net.
The United States, aiming to disrupt the jihadists’ black-market oil pipeline, is using political pressure as well as airstrikes.
"We believe that oil smuggled out by trucks through the Jordanian and Turkish borders is a serious problem," a senior State Department official said in a September 10 press briefing. "Both those countries have pledged to do all they can to stop it, but we’ll be working with them more intently over the next few weeks on intelligence sharing and border control."
Western intelligence officials have been monitoring Islamic State tanker trucks rolling from Iraq into southern Turkey, as The New York Times reported, but so far have refrained from military action. The Times also has reported that the militant group continues to provide natural gas to Syria’s Bashar al-Assad regime so it can operate electrical power plants.
The militants’ machinations have had little lasting effect on global prices, said Tom Kloza, an Oil-Price.net founder and chief oil analyst for GasBuddy, whose consumer website lists local fuel prices.
When the IS fighters in June overran Mosul, Iraq’s second-largest city, "there was fear" in the industry, Kloza told VOA. "Prices went up – but then they fell. So far, the process has been: They fight, industry prices spike here [in the United States]. Subsequently, they fall."
Kidnapping and human trafficking
Recent videos of beheadings of American journalists James Foley and Steven Sotloff and British aid worker David Haines function not only as propaganda but as high-profile ransom notes for other hostages, analysts say.
The Islamic State demanded 100 million euros or $132 million for Foley’s release, NBC News said in a report. The group also has demanded $6.6 million for the release of a female American aid worker, ABC News reported in late August.
The United States and Britain, as a matter of policy, do not pay ransoms for the release of their citizens. But some countries do.
France allegedly paid $18 million to free four of its citizens from the Islamic State, NBC News said, citing the German magazine Focus' report attributing the information to NATO sources. (French officials said the country does not pay ransoms.) Last month, CBS News reported that "a Scandinavian corporation recently paid a $70,000 ransom for a kidnapped employee."
Human trafficking also enriches the Islamic State.
The group earns millions by selling captive women and children into the sex trade, the Associated Press reported this weekend, citing research by Luay al-Khatteeb, a visiting fellow at the Brookings Institution’s Doha Center in Qatar. In August, United Nations officials said IS militants may have forced 1,500 Christian and Yazidi religious refugees into sexual slavery.
Theft and smuggling
When IS fighters took control of Mosul in June, they stole millions in cash and gold bullion from the Bank of Mosul and other financial enterprises, according news reports.
IS and other militants also plundered Syria’s medieval Christian cemeteries, archeological sites and museums, looting antiquities such as Byzantine mosaics. In July, the United States’ Smithsonian Institution and Penn Museum co-sponsored a Syrian training session to safeguard precious artifacts that are part of the country’s cultural heritage.
The militants also traffic in goods from stolen cars to appliances to jewelry.
Islamic State militants have peddled excess weapons and ammunition – including drones, Hellfire missiles and machine guns – left behind by fleeing or captured Iraqi Army troops and sometimes supplied by the United States and its allies, according to analysts and new reports. IS fighters have amassed "about 35 Iraqi military tanks, about 80 armored police vehicles and hundreds of Humvees," the Associated Press reported, citing an unidentified Iraqi official as its source.
Taxes, tolls and extortion
Islamic State militants impose taxes, tolls and fines to ensure a regular flow of money.
"They require drivers to pay 'road taxes' in territories it controls," an unnamed senior intelligence official told NBC News, estimating the shakedown generates several million dollars for the group each month.
In Syria's north-central city of Raqqa, and rural parts of the northeast governorate of Hasakah, Islamic State militants charge each household the equivalent of $13.50 a month for water and electricity, along with a $4 "protection fee," an activist in Raqqa told Alhurra, the U.S.-based Arab-language news organization.
Patrick Johnston, a RAND Corp. associate political scientist and counterterrorism expert, said the Sinjar records show the Islamic State jihadists, in an earlier incarnation, levied taxes of 8 to 20 percent, "and I think [they] still are." He doesn't know how the rate is determined, he conceded. But, "if you don't pay it, it's at your peril."
The Islamic State also may be borrowing from the playbook of rival militant group al-Nusra Front by redistributing "free" or stolen merchandise to win the locals’ loyalty.
In a Twitter feed last week, Andreas Krieg – an assistant professor of defense studies at King’s College London – included a post with several photos of men he identified as Islamic State militants purportedly delivering food and refrigerators.
"These images were released by IS social media machine" as propaganda to suggest that the jihadists "do care for the hearts and minds of people within their area of responsibility," Krieg, who focuses on Persian Gulf security issues, wrote in an email to VOA.
Islamic State leaders sometimes do other things to burnish the group's image, such as staging community meals to break the Ramadan fast, Krieg said. But "most of their extortion money is reinvested into sustaining the war machine."
Steady revenue, along with religious zeal, enables the Islamic State to call up a fighting force that the CIA newly estimates at 20,000 to 31,500. The count, bumped up from 10,000, includes approximately 2,000 Western fighters.
It’s not clear how much money fighters themselves bring to the Islamic State.
Foreign fighters in at least one sector of al-Qaida in Iraq – IS’ precursor – "contributed more than 70 percent of the group’s operating budget," the Combating Terrorism Center at West Point said in a 2008 report. (Back then, the "foreign" designation applied to anyone from outside Iraq; now it’s likely to mean anyone not native to Iraq or Syria.)
These days, "foreigners give up all of their cash upon arrival," said Shatz, co-author of a 2013 paper on insurgent compensation in Iraq. "… The foreign fighters – those who become regular members – probably get a paycheck and rent [allowance] like the locals."
Estimates vary on what that paycheck would be. Shatz said records showed fighters in Anbar province got a monthly base salary of $41 almost 10 years ago, with extra for each dependent adult or child. His RAND colleague, Johnston, calculated that base pay, adjusted for inflation, would be at least $225 a month – still "really below market wages even in a war-torn country like Iraq or Syria."
According to the Syrian Observatory for Human Rights, a network of activists opposed to the Assad regime, a single fighter draws a monthly salary of $400, and a married one gets that base plus $100 for each wife and $50 for each child.
By comparison, a minimum-wage job or apprenticeship for a 19-year-old would start at roughly $92 a month in Iraq and $152 in Syria, a World Bank report indicates.
Small donor pool
Donations likely account for a small fraction of Islamic State financing, analysts say. The organization deliberately moved away from "relying on the whims of private donors, like so many of the brigades in Syria were," said Dickinson, author of the Brookings report on private Gulf financing for Syrian extremists.
And while some Persian Gulf governments are suspected of giving financial support to the Islamic State, no solid evidence has surfaced, researchers say.
But individual donors and solicitors operate in the region – quite openly, in some cases.
The U.S. State Department, in an April report on counterterrorism concerns, said, "Private donations from the Gulf ... remained a major source of funding for Sunni terrorist groups, particularly those operating in Syria."
And the Treasury Department has identified Kuwait and Qatar as "permissive jurisdictions" for terrorist fundraising operations, as The New York Times pointed out in a story earlier this month, citing public and online appeals.
The two countries "have turned a blind eye to terrorist financing within their borders," said Lori Plotkin Boghardt, a fellow specializing in Persian Gulf politics at the Washington Institute for Near East Policy.
She told VOA that by tacitly allowing this kind of fundraising, the two countries’ governments "satisfy other political interests."
"Some of the extremist fundraisers in Kuwait are very powerful individuals with significant domestic constituencies," Boghardt said, noting "the Kuwaiti government is worried that cracking down on this kind of fundraising" could anger key groups and exacerbate any instability.
Qatar doesn’t permit political activism among its nearly 2 million citizens, Boghardt said. When the government ignores Qataris’ fundraising efforts for Islamists in the region, “it releases some pressure to participate,” he said.
Sunni-dominated Saudi Arabia, too, has faced unsubstantiated rumors of supporting the Islamic State. But, as Boghardt explained on her think tank’s website in June, "Riyadh views the group as a terrorist organization that poses a direct threat to the kingdom's security."
The terrorist designation, made in March, outlaws Saudi citizens from supporting the Islamic State. The government monitors the country’s financial sector to thwart suspect donations, and its scrutiny has led fundraisers to encourage donating through lenient Kuwait, Boghardt wrote.
But Saudi Arabia, like other nations, can have shifting, conflicting interests.
As Boghardt wrote, "it would not be surprising to learn of limited, perhaps indirect contact, logistical coordination to further Sunni positions in Syria and beyond, or leaking of funds and materiel from Saudi-supported rebels to ISIS."