Why the Islamic State’s „caliphate“ is not sustainable

Von Yassin Musharbash

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Teil IX unserer Serie zum "Islamischen Staat"

Last November, the media organisation of the „Islamic State“ (IS) published a video, the sole purpose of which was to prove that the „caliphate“ which the IS has established in June 2014 was in fact a proper state. The video highlighted a host of institutions in order to drive home the claim of real statehood, including examples like a working judiciary, a prison administration, a schooling system, and so on. At one point in the video, the IS claimed that it was also financially independent and had apt resources at its disposal, namely oil and gas.

However, while it is true that the IS controls a number of oil and gas fields in Syria as well as in Iraq, we have by now enough evidence to be rather sure that the economic base of the „caliphate“ is by no means sustainable.

When the „caliphate“ was first announced, some observers took a look at the map of IS controlled territories, calculated the sum total of barrels per day of oil that used to be produced from the oil fields in these areas and then proceeded to calculate how much money the IS could make by selling that amount of oil. Naturally, this approach led to enormous estimates, ranging as high as several millions of dollars of revenue per day.

But these calculations failed to account for limiting factors. Two are particularly important: The IS can't sell oil on the international or regional market as if it were just another ordinary market participant. It has to rely on criminal and black market middlemen who also need to make a cut. And the IS is not good at maintaining these facilities, since it lacks qualified staff, which means that the quantity of oil available to sell will decrease over time.

In November last year, a team of reporters of DIE ZEIT conducted a wide ranging investigation into these matters. One finding was that the IS was then selling crude oil at a price as low as $17 per barrell. We estimated that the group could probably make no more than $270.000 per day from oil.

Of course there are other sources of revenue, extortion and ransoms being among the more important, while most money is likely being made in the form of taxes, levies and rent, since the IS took over municipal and religious housing in Mosul and Raqqa (btw, we found very little evidence that selling antiques was a  source of income).

But all of this income does not add up to enough money to sustain a state. One only needs to look at the roughly $ 2bn that the Iraqi province of Niniveh was granted by the Iraqi state annually for comparison. IS revenue is not nearly as high in its Iraqi territories. Even though the IS spends less than the Iraqi state used to spend, since it doesn't build much or provide for much, it is quite clear that the IS depends on expansion, as it continually needs to broaden its taxation and extortion base to guarantee continuous influx of money. Eckart Woertz described the IS as a ponzi scheme  – and in doing so likened it to “an overvalued stock company” – for a reason.

This expansion is quite likely still an aim of the IS. But it has become difficult to achieve, given that the international anti-IS alliance has recently, driven by Jordan, even intensified its campaign of air strikes.

Trade and commerce have also been significantly impeded in the „caliphate“ - from within (through IS rules and laws) as well as from without (by a de-facto embargo executed by the Iraqi central government). It should be noted that the living conditions of the several millions of people who are forced to live under IS rule have been deteriorating at an alarming rate.

All of this suggests that the „caliphate“ may well crumble at some point in the not too far future – and for economic reasons rather than because of a military defeat. This would, however, not spell the end of the IS. The group would in this case likely resort to increased guerilla warfare and external terrorism. But the collapse of the „caliphate“ would prove that running a state is much more difficult than the IS thought – and also more complicated than some pundits assumed.

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Yassin Musharbash has studied Arab Studies and Political Sciences at the Universities of Göttingen (Germany) and Bir Zeit (Palestine). He is the deputy head of the investigavtive department at DIE ZEIT weekly newspaper. He is also an author of non-fiction (Die neue al-Qaida. Innenansichten eines lernenedes Terrornetzwerks, KiWi 2006) as well as fiction (Radikal, KiWi 2011).

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