‘Robbery, Extortion, Trafficking’

Sen. Marco Rubio (left) and Sen. Bob Casey (Consolidated News Photos/Newscom, Bill Clark/CQ Roll Call/Newscom)

Sen. Marco Rubio (left) and Sen. Bob Casey
(Consolidated News Photos/Newscom, Bill Clark/CQ Roll Call/Newscom)

With concern over the apparent growing strength and spread of the Islamic State, the terror group that has beheaded two American journalists in as many weeks, Sens. Bob Casey (D-Pa.) and Marco Rubio (R-Fla.), despite the Senate’s summer recess, have sent a joint letter to Secretary of State John Kerry calling on the administration to target all aspects of the Islamic State’s operation funding and to have the Treasury Department classify the group as a Transnational Criminal Organization (TCO).

The senators praised current efforts by the administration to combat the Islamic State, which is also known as ISIS and ISIL, in the letter, but they expressed concern that the jihadi group remains a threat to both the region and U.S. national security interests.

“ISIS’s criminal activities — robbery, extortion, and trafficking — have helped the organization become the best-funded terrorist group in history,” the senators wrote. “This wealth has helped expand their operational capacity and incentivized both local and foreign fighters to join them.”

The senators’ letter described some of the methods used by the terror group to fund itself.

The “cash flow from this criminal enterprise relies on smuggling routes and black market sales. Reporting indicates that some smuggling routes cross through other countries in the region, which, like the United States, have a clear national security interest in maintaining stability,” Casey and Rubio wrote. “Additionally, there are reports that some government officials in the region have helped to facilitate this illicit cross-border trade.”

The black market the senators referred to is believed to have sprouted as a result of the region’s growing instability, a consequence of the civil war in Syria and the marginalization of minorities, specifically Iraq’s Sunni Muslims by outgoing Iraqi Prime Minister Nouri al-Maliki’s majority Shiite Muslim administration in Baghdad.

The Islamic State is an offshoot of al-Qaeda in Iraq, which was led by the late Jordanian militant Islamist, Abu Musab al-Zarqawi. The group’s extreme viciousness led al-Qaeda to cut ties with it, and, according to Thomas Joscelyn, senior fellow at the Washington D.C.-based think tank Foundation for Defense of Democracies, most of al-Qaeda’s deep-pocketed, Gulf-based terror financiers remained with the parent organization, forcing the Islamic State to adopt unorthodox revenue methods.

At first glance, the senators’ request that the administration cut off the group’s funding sources looked to some like political posturing. The Islamic State, after all, was classified by the State Department as a Foreign Terrorist Organization in 2004, and its assets within the United States’ control were frozen. That designation further established sanctions for cooperating economically with the group.

The State Department has not yet replied to the senators’ letter, but one Senate staffer familiar with the letter said the administration’s reply might be that it already has all the tools necessary to restrict funding, given the Islamic State’s current designation, and is using them.

Some, however, say the administration could do more.

“I think there are [additional] things we can do to try and cut off the funding; it’s really hard,” said Austin Long, assistant professor in security policy at Columbia University’s School of International and Public Affairs. “Even when there were 100,000 U.S. troops in Iraq at the height of the surge, we couldn’t cut off all the funding to al-Qaeda in Iraq, the predecessor of the Islamic State.”

When a group is designated a TCO, its operations are restricted as outlined in Executive Order 13581, which prevents members of TCO-designated organizations, and those aiding and abetting them, from transferring, paying, exporting or withdrawing assets in the United States “or in an overseas branch of a U.S. entity.” Some of the groups presently listed as TCOs include the Brothers’ Circle (Eurasia), Camorra (Italy), Yakuza (Japan), Los Zetas (Mexico), Yamaguchi-Gumi (Japan) and Mara Salvatrucha (El Salvador).

Casey and Rubio are part of a larger group of lawmakers pushing to include the Lebanon-based terrorist organization Hezbollah under TCO classification in the Hezbollah International Financing Prevention Act. The bill was passed unanimously by the House in July and is awaiting approval from the Senate Committee on Banking, Housing and Urban Affairs.

Jonathan Schanzer, vice president for research at the Foundation for Defense of Democracies and a former terrorism finance analyst at the Treasury Department, said that the additional designation would allow for a broader scope to investigate and cut off the group’s funding sources.

“It allows the intelligence community to work with a broader array of actors to counter [the Islamic State], and it allows for the FBI to have a greater role as well,” said Schanzer. “It basically widens the ability of the United States government to act on multiple levels with multiple players inside and outside the United States. If it’s considered a criminal organization, the FBI can look into whatever assets may be here. So, in other words, it becomes a warfare issue as well as a criminal one.”

Operating like an organized crime family, the Islamic State has surprised — and even, in a dark sense, impressed — the international community with its numerous creative methods to fund itself.

“IS has managed to successfully translate territorial control in northern Syria and portions of Iraq into a means of revenue generation,” said a Treasury Department spokesperson. “IS generates a large portion of its revenue from smuggling, extortion and robbery in areas under the group’s control as well as from ransoms received for hostages it has kidnapped. The group also benefits from extortion-derived proceeds from Iraqi and Syrian oil resources.”

Taking a page from al-Qaeda in Iraq’s former playbook, it has developed sophisticated fundraising tactics to make use of the resources in the areas they conquer. Once in control of a city or resource rich area, it threatens the local population with violence and seizes control of basic resources such as water and other necessities, said experts.

“The common assumption has been for a long time, and I don’t know where it comes from, but there are a lot of people who have surmised that IS’s funding comes from various Gulf individuals or a number of different Gulf governments including Qatar and Kuwait. This is not true,” said Lee Smith, senior fellow at the Hudson Institute. “There has been some money in the past, but this is not the main source of IS’s funding. The main source of funding comes from the fact that IS sells oil on the black market. That’s the No. 1 source of income. The No. 2 source of IS income is its extortion rackets in towns it runs — and it runs a few, including Raqqa in Syria and Mosul in Iraq, which are both fairly large Arab cities.”

IS’s single most profitable venture is the selling of oil that is produced in areas under the group’s control. Upon occupying an oil field or oil-producing city, the group makes the local populace an offer it can’t refuse, said Columbia’s Long.

“That’s what they try to do. People don’t always cooperate, but in general, if somebody says, ‘We’re going to keep paying your salary, just keep showing up for work [because] the alternative might be something bad happens to you, then you can either keep showing up for work or you can become a refugee, and I think a decent number of people don’t want to become refugees understandably,” explained Long, who previously served in Iraq as an analyst and adviser to the Multinational Force Iraq and the U.S. military.

Much of the oil is then sold internally to the Syrian and Iraqi residents of Islamic State-occupied territories.

“People have lots of cars,” said Long. “Iraq [is] just like every modern country but in some sense it is more dependent on [oil]. You need trucks to move food around — without gasoline, the economy grinds to a halt.”

The rest of the oil is smuggled out and sold abroad and, surprisingly, some of the buyers include opposing governments, such as the Syrian regime and Turkey.

“That’s a pretty typical feature of Arab warfare,” said Smith. “People make all sorts of deals with all sorts of different people.”

Determining who exactly is bypassing sanctions and buying oil from IS sources — or even exactly how much of it is being bought — is difficult to determine.

“The oil could be going across the border in Turkey and the Turks maybe aren’t asking too many question about who it comes from, hypothetically, because of course it won’t be necessarily somebody waving the Islamic State flag who drives the tanker truck across the border,” said Long.

According to a recent estimate by BBC News, the Islamic State exports about 9,000 barrels of oil per day at prices ranging from about $25 to $45 a barrel — a significant discount from the current international price of around $100 a barrel.

Casey and Rubio’s letter mentions that some of the Islamic State’s funding is supported by allied countries in the region, and Schanzer sees room for the United States to do more to pressure these nations, specifically Turkey, into doing more to crackdown on this illicit trade, even though Turkish officials have publicly denied that country’s involvement and condemned the terror group.

“If you look at the map, you will see that IS maintains a presence all along the eastern Turkish frontier, just on the other side of the border, and we don’t have definitive proof that there’s been direct assistance, but anecdotally we continue to hear that there are individuals and entities operating on the other side of the Turkish border who are facilitating this activity,” said Schanzer. “I think that it is fair to say at this point that Turkey’s permissive border policies over the last two years or more have led to a rise in jihadi groups’ ability to finance their operations, arm their fighters and provide other assistance to these groups.”


JNS.org contributed to this story.

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