isis-isil-daesh-is the financial & economical aspects · isis oil revenue: islamic state makes...

Isis-Isil-Daesh-IS The Financial & Economical aspects

Gen. ITA (R) Fabio Mini - Bonn- Feb. 2nd 2016

Myths

• Solid and tough organization

• A model Islamic fighting system

• A welfare state

• Centralized control of territory,

• Expanding , Omnipotent, Omnipresent

The richest insurgent group in the world

• They do all by themselves

• Global Fighting against IS

Organizational structure

An offset of Al Qaeda

A State, a Caliphate

Omnipotent, Omnipresent, Expanding

Controlling a territory

Following the Islamic religion or laws

IS is NOT

IS NOT

Financially able

Self-sufficient,

Politically Independent

A structured /hierarchical /centralized

organization with long term plans

Highest peak of control

Other 42 different names

Predatory War strategy

• The control of the territory is not centralized but held by each group under its own commander. Upon seizing control of an area, local IS leaders secure water, flour and hydrocarbon. They take control of government stockpiles, military equipment, dams, power stations, transportation and oil fields . Their administration is a replica of the previous one.

• Each Leader centralizes distribution making the population dependent for survival.

• They should give 20% of revenues to Central Headquarters, but very few of them fully comply.

The Myth of Global Fighting, But......

The Us help Syrian rebels (that include Al Nusra and

other Al Qaeda factions)

France bombs Syrians, Russia bombs Rebels

Turkey bombs Syrians and Curds

Israel bombs Syria and Lebanon

Iran helps Hezbollah in Lebanon and Syria

Saudi Arabia , Emirates and Iraq Help IS

• International Criminal Court Says ISIS Is Out of Its Jurisdiction

VERY LITTLE IS DONE ON THE FINANCIAL SIDE

WHAT OUR MEDIA SAY

• In 2014, after killing the IS leader Abdulrahman al-Bilawi near Mosul, Iraqi Police seized 162 flash sticks containing names, nom de guerre of all foreign fighters and leaders. There were also initials of sources inside Iraq ministries (not identified) and full accounts of the group's finances.

• No evidence of foreign state support !

TOTAL INCOME 2 billions $ Arab states financing: 100 mln $ (5%) Oil revenue: 1 mln/day = 370 mln$ Wheat : (30% Iraqi prod.) =1mln ton; 200.000 export x230$= 46 mln$ Tolls: 200 $ per truck X 20000= 48 mln$ Racketeering: 1 mln per month: 12 mln$ Bank –cash robbery: 420 mln $ (one time) Ransom : 25 mln /month = 300 mln $ Antiquities: 50mln $= 600 mln $ 1.896 mln$

Funding sources

• Autonomous: About 500 mln

• Extortion, robbery, levies, tolls, revolutionary tax, Levy on money transfers, sales of women and children as sex slaves

• All the rest (1.5 Bln ) comes from SMUGGLING (goods, food, cigarettes, drugs, human , Oil, Antiquities,..) ,Direct and Indirect FUNDING and MEDIA coverage which depends on foreign involvement (Middle East and Western sources).

Oil production: 30.000 BpD at avg 35 $ = 1.050 mln

At its peak(Sept. 2014) controlled 11 oil fields in Iraq and Syria.

However • Russians spotted 12000 oil trucks on Syria-

Turkey roads.

• The waiting time to get a truckload is a month. Every truck can transport from 75 (13.500 Lt) on rough roads, to 250 barrels (45.000 Lt) HW.

• 75 x 12000= 900.000 b/Month= 30.000 b/D

• IS uses up to 30% of oil production

• IS should sell no more than 20.000 b/D

• IS sold at as high as 40 $ and as low as 7$ /B AVG.25 $= 500.000/D=180 mlns IF They get more money is not coming from the oil they sell

• =30000 b/d

IS sells directly to independent traders. Syrian rebels buy oil from IS. Once long queue of trucks - Now traders pick up their number in line and come on the fixed date. Many traders resell the certificate while waiting. Isis also seized the Ajil and Allas fields in Kirkuk and Kurdish areas.

Mule-Trains

ISIS Oil Revenue: Islamic State Makes Money By Selling Gas To Bashar Assad, New BBC2 Documentary Claims

• Israel buys most oil smuggled from ISIS territory - report

• Turkish-ISIL Oil Trade: The Role of Britain, Israel, and the Kurdistan Regional Government

• ISIS Oil Tied to Kurdistan, Erdogan and Lots of American Tanker Trucks Shipped from Houston

•

Big Oil in Syria

• China National Petroleum Corporation

• ConocoPhillips (US)

• Marathon Oil Corporation (US).

• Shell (Anglo-Dutch)

• ONGC Videsh –OVL (India).

• PetroCanada Suncor: Syria and Lybia

• Gulfsands Petroleum (US-UK): Joint Venture with Assad’s family (8 mln $ per week).

• Tatneft (Russia)

• Total (France)

Oil Companies in Iraqi Kurdistan (KRG)

• Australia: Papua New Guinea Oil Search, Austria :OMV, Canada: Groundstar Resources, Niko Resources, Vast Exploration, WesternZagros , Shamaran Petroleum, Talisman Energy ,Heritage Oil, China: Addax Petroleum, CNOOC, CNPC. Emirates: ENOC, Dragon Oil, Abu Dhabi National Energy Company (TAQA), Kuwait Energy. France:Total. Hungary: MOL. India: Reliance Industries. Italy: Eni . Japan:Japex, Inpex, Kazakstan:Kaz Munai Gas .

Cntd KRG

• Malaysia:Petronas. The Netherland:Shell. Norway:DNO , Statoil. Pakistan Petrol. Portugal: Sonangol. Russia: Gazprom, Lukoil. South Korea: Kogas, Korea National Oil Company. Turkey: PetOil , Genel Energy , Dogan Energy. United Kingdom: Afren, BP, Gulf Keystone Petroleum, Perenco, Sterling Energy. United States: Aspect Energy, Chevron, Marathon, ExxonMobil, Hess, Hunt Petroleum, Murphy Oil Corporation , Occidental Petrol.

Oil equivalent money

• Big Oil companies cannot ignore IS

• Moreover , IS cannot ignore them

• Big Oil and their local Reps-Joint Ventures prefer keeping quiet and pay .

• While we monitor mules and trucks, hundreds of oil tankers leave the Syrian, Turkish and Iraqi ports full of oil. Part of its value has already gone to IS.

• A GP tanker can carry between 70,000 and 190,000 barrels of gasoline and an MR tanker can carry between 190,000 and 345,000 barrels .

The Antiquities’ Narrative

• IS destroys treasures of humanity

• We need to buy in order to rescue them

• Iraqi Authorities do not know to whom IS sells but they believe it earns over 100 million a month

However

• Isis does not destroy every antiquity.

• Copies or fake artifacts were destroyed to frighten the market.

• They tend to destroy what cannot be moved or sold and sell the rest on the black market.

• The Shariah : You sell and 20% of the profits goes as a tax.

IS earned 36 mln $ selling Al Nabek antiquities”

• The statement proved the importance of Antiquity smuggling but raised Two questions :

• 1. Did the artifacts come from all over Syria or just from the site of Al Nabek?

• In the first case IS can freely move truckloads of artifacts out of their areas. In the second case the traffic concentrates in the vicinity of the sites. Therefore IS manages a market for each archeological area it controls at the borders with Lebanon, Jordan, Turkey etc.

2. How much do they get?

• Normally the actual looters get 1-2% of the market value. The rest goes to a long chain of middlemen. 36 mln income means that either the value of the relics was around 1.8 bln or the transaction was at high level, almost directly sold with a few or no intermediaries at all. In this case the value of the trade was from 50 to 100 mln at the most. This means that Antiquity is a business the leaders keep for themselves. And it means that foreign collectors and western traders have direct access to the terrorist leadership.

Indirect Funding: Frauds

• Italian Police discovered 38 persons involved in huge fiscal fraud.

• They belong to an Anglo-Pakistani and an Israeli-French organization.

• 80 mln Euros confiscated

• Between 2009 and 2012 they made One Billion of fiscal evasion.

Using the Green Economy

• Kyoto Protocol allows “Carbon Credits” (CC) to contain emissions. Industries are given a cap of Carbon emission expressed in hard currency. If they stay under the cap can sell the rest of the quota, if they excede must change way of production or buy extra quotas. The CC certificates are VAT exempt within EU.

Finance Fraud

PM 1

PM2

Carbon Credits

FB

The Fraud

• 1. Fictional companies (PM1) bought CC from UK, France, The Netherland and Germany issueing fictional invoices VAT exempt.

• 2. They sold CC to other fictional firms (PM2) adding VAT 20%.

• 3.PM2 re-sold to final buyer (FB) at same price.

• 4. Fictional firms PM1 and PM2 were just Paper Mills and disappeared without giving VAT to the Italian Revenue Service.

• 5. VAT money (1 Billion euros) went through Cyprus- Hong Kong banks to Dubai banks and recycled in diamonds/ real estate and to finance IS.

Media Inc.

• I.e. VICE has immersed thousands of reporters into Iraqi culture, many of whom have splintered off into groups that regularly demand ride-alongs with ISIS police patrols and others who generate innumerable hours of documentary-style reports

•

Big Media provide world wide

coverage to IS propaganda and pay cash for IS

extortion, ransom and “escort”

services

Expenses

• Fighter monthly wages 400-800 $ x 30.000 = 18 millions$ = 216 mln $

• Vehicles, weapons, ammunitions: ???

• Food for 1 million families: 2 mln/day= 700 mln

• Support to terrorist operations abroad: ???

• Public services and subsidies:???

• Wages for employees and workers: ????

• Bribery: many Iraqi officials, including military and security agents are corrupted

• Subsidies for suicide / victims families: ???

Hidden losses

• They have evertyhing money can buy, BUT

• - Engaged in self consuming practices

• - Locked to illicit trafficking with profiteers

• - Iraqi Government does not pay public employees in IS areas

• - Rapidly degrading private properties and savings.

• - Human resources are fleeing

• Soon they’ll badly need things money cannot buy: Trust , smart people, financial autonomy

Conclusions • Too many myths : IS economy is worse than

Failed states

• We have so far engaged IS by elusive force and propaganda: both had boomerangs.

• The political and economical constraints weakened our willingness and strenght

• We cannot win on the ideological ground either: their narrative of Western sins is much more effective on Islamic (and some “non islamic”) peoples than our “Good guys-Bad guys” rhetoric.

•

Change of Strategy

• Most of IS success is due to foreign direct and indirect support.

• They sell because we buy, They extort because we pay, They profit because we don’t care enough.

• We need to deny what they can buy from outside and cut the in-out flow of money and supply

• IS can be defeated with a 4 step strategy: Isolate, Strike, Insert, Secure (I.S.I.S.).

I.S.I.S.

• Direct or indirect (Proxy) Military means only: bloody and long fight favoring war profiteers and destabilizers.

• Financial means only: difficult to control

• Combined political-economical-military:

– Isolate: Security belt with bordering territories & economy strangling strategy

– Strike: direct or indirect military opns on the ground & financial sanctions/crime prosecution abroad

– Insert : international military and political take over.

– Secure: secure environment, sound administration and return of refugees. Political Handover.

But we cannot let IS escape both military and financial.