The 'biggest structural weakness' of ISIS could bleed the 'caliphate' financially

ISIS might be one of the most well-funded terror groups on the planet right now, but it might run into problems long-term if it doesn’t keep seizing more territory.

Much of ISIS’s money comes from extortion and pillaging — essentially ripping off the people and institutions in conquered territory — and while the group’s tactics might bring it windfalls of cash every time it moves into a new city, funding operations require a constant flow of cash.

“Confiscation makes up a huge part of [ISIS’s] revenue picture,”J.M. Berger, a Brookings Institution fellow and coauthor of the recent book “ISIS: The State of Terror,” told Business Insider in an email.

“Confiscation is different from taxation because it’s not sustainable. There’s only so much you can confiscate before you need to conquer new territories with new wealth.”

ISIS has mined places like Palmyra, an ancient city in Syria that the group conquered in May, for artifacts that it can sell on the black market. The militants also bring in money from robbing banks. This nets the group hundreds of millions of dollars, but it’s all one-time cash.

“Pillage is a central contributor for ISIS’s wealth, and its dependence on strip-mining its holdings for revenue and equipment could be its biggest structural weakness, as this approach will yield diminishing returns if ISIS is held to roughly its current geographic limits,” Berger said.

While ISIS (also known as the Islamic State, ISIL, and Daesh) aims to take over more territory in the Middle East to grow its so-called Islamic “caliphate” — which was established after taking Iraq’s second largest city of Mosul in August 2014 — the terror army is struggling to continue making significant gains as it fights government forces and rebel groups in Iraq and Syria.

And the Iraqi government has reportedly stopped paying the salaries of its employees who work in ISIS-controlled areas in an effort to prevent the militants from taking the money, according to Newsweek.

Furthermore, people are reportedly struggling to pay the taxes ISIS imposes on the residents of its territory. ISIS has reportedly jacked up the prices of everyday necessities like gas, water, and electricity, partly in an effort to drive people to become fighters for the group, which pays its militants higher salaries than average citizens of the caliphate make.

This approach is a double-edged sword — as ISIS has seen some success with using money to lure in desperate people with few options, the group is struggling to meet some of the other financial obligations of a functioning government.

For example, Newsweek notes that ISIS has made promises to care for the poor in its ‘caliphate,’ which it markets as an autonomous state, but the group largely hasn’t been able to deliver.

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