While military means can be an effective way to reduce the power of a terrorist group, Rep. Michael Fitzpatrick, R-Pa., said money for a terrorist organization “is like air.”
“Without it, they can’t survive,” he told the Washington Examiner.
Fitzpatrick said members of the House Task Force to Investigate Terrorism Financing, which he chairs, are working on bipartisan legislation to stem the flow of money to terrorist organizations like the Islamic State, but declined to get into any specifics on what a new bill might entail.
“We’re working on potential legislative and policy actions presently with staff and you’ll see them emerge in the new year,” he said.
Despite the military effort to disable oil infrastructure in Syria, the Islamic State is still making money through lines of revenue that can’t be knocked out with airstrikes alone, analysts say.
The military took an aggressive approach in the end of 2015 to wipe out the Islamic State’s access to oil as part of Operation Tidal Wave II, but the terrorist group still has access to other lines of revenue from kidnapping, taxes and human trafficking, among other things.
“They clearly will need to replace some of that revenue, we’ve seen some of the efforts in that regard. But the energy piece was such an important and significant part of their revenue generation, it would be very difficult to replace those dollars dollar-for-dollar,” a senior official said.
Most agree that the sale of oil on the black market comprises the largest piece of the Islamic State’s yearly budget. The senior official, however, said the administration is starting to see that flow of money be hampered by airstrikes, including fewer trucks congregating farther from wells to transport the oil and drivers being less likely to work for the Islamic State given the dangers.
But the group still has other ways to make money, including taxing people in its area of control, seizing the property of those who disagree with its core tenets, ransoms for hostages, selling sex slaves, smuggling antiquities it loots from archaeological sites under its control and even fines for smoking cigarettes or improper dress, said Jim Phillips, an analyst with the Heritage Foundation.
“A lot of those sources of income are tied to control of territory or people, they can’t be cut back just by bombing,” Phillips said. “It’ll take some kind of military presence on the ground to cut into those economic resources.”
Jimmy Gurule, a professor at Notre Dame Law School, said that since the terrorist group has three of the four characteristics of a state — controlling territory, controlling people and governing — the U.S. needs to respond to it as a state, not as a terrorist group like al Qaeda.
“I think what’s happening now is they’ve taken the al Qaeda model and they’ve applied that to ISIS, but the problem is the two organizations are fundamentally different,” he said. “ISIS is more like Iran than al Qaeda because al Qaeda never controlled any territory.”
The Islamic State controls an area about the size of Belgium and a population of as many as 8-10 million people, as well as all the natural resources in that area.
As a result, Gurule said the U.S. should leverage an Iran-like sanctions regime on the Islamic State, prohibiting both business with the terrorist group as well as a secondary boycott that sanctions foreign entities for doing business with the Islamic State.
“What needs to be done is to tell those foreign businesses, ‘You can’t do business with the Islamic State and if you do, then there’s a penalty that you’re going to pay,'” he said. “I’d like to see a more state-like regime of economic sanctions imposed.”
Adam Szubin, the acting undersecretary for terrorism and financial intelligence at the Treasury Department, said the administration is working to sever the Islamic State’s ties to the international financial system and levied sanctions against 30 senior Islamic State leaders in 2015.
“ISIS needs access to the international financial system, they are not self-reliant. They need to be able to move money, whether that is with respect to importing oil infrastructure, oil pieces, whether that’s with respect to procuring weapons on communications equipment or whether that’s with respect to moving money to their offshore affiliates,” Szubin said last month.
But Gurule said imposing sanctions on individual Islamic State leaders or financiers won’t be as effective as sanctioning those who do business with the group.
“Then what? Saying with respect to those people we’ve designated … their assets in the U.S. have to be blocked. Guess what: Those guys don’t have assets in U.S. It’s ineffective,” he said.
The senior official said the Islamic State’s oil is either used by the group itself to keep the caliphate going or sold to Syrians, with a small amount making it across the border to Turkey. But it’s unclear who is doing business with the terrorist group for sex slaves or antiquities.
Rep. Robert Pittenger, R-N.C., said some of America’s allies are also “complicit and turning the other cheek” to individuals or organizations within their countries that are supporting the Islamic State, including Turkey, Qatar and Saudi Arabia.
But Pittenger said he doesn’t expect these countries to get entirely onboard with the U.S. plan to take out the terrorist group until President Obama takes ownership of a clear American strategy.
“Getting the support of our friends demands their understanding and their commitment to a real American strategy that they will support. I’ve had every major head of state in the Middle East and foreign ministers and others say that they want America to lead,” he said.
