Isis finds escape route for the
profits of war
The jihadi group’s priority is taking
cash out of its dwindling territory in Syria and Iraq
AUGUST 23, 2017 by: Erika Solomon and Ahmad Mhidi in
southern Turkey
For years, Ammar’s tiny money transfer shop in the Turkish
city of Antakya caught no one’s attention but the fellow Syrian
refugees who pressed inside to send and receive money from abroad, until
this summer, when security officials started visiting every week.
“I’ve had to show them my accounting books each week, and
they took the shopkeeper next door and detained him for three months,” he says.
“Everyone is scared.”
Ammar, who asked not to be identified by his real name, knew
what they were hunting for — businesses transferring money on behalf
of Isis. He just didn’t understand why the officials were interested in
him. He did not hail from an Isis-held area, and the border region he lives in
is nowhere near the jihadi group’s last remaining strongholds.
What Ammar had not realised was that his town had become a
conduit for illicit funds. While international attention has been focused on
the jihadis’ territorial losses to the US-backed international coalition,
Isis has been waging another, silent campaign: to make as much money as it
can, as fast as it can, and get that money out of its collapsing,
self-proclaimed caliphate.
“They’re dividing up the family estate,” joked one former
black market trader from an Isis stronghold. “They’ll spread that money
everywhere, to keep it working for the organisation long after the caliphate is
gone.”
Workers at a makeshift refinery in northwestern Syria. Staff
at the site said their oil was transported from Isis held fields © Reuters
The group’s race to move its money is a prime concern
for western governments, as the fight against Isis shifts from Syrian and Iraqi
battlefields to European capitals. As its money spreads further afield,
especially into Europe, they believe Isis will try to use those funds to launch
further attacks.
Isis gained prominence in 2014, exploiting the chaos of
Syria’s civil war to seize more than a third of Iraq and almost half of
Syria. Territorial control and self-financing distinguished it from
its predecessor, al-Qaeda, and helped make it the world’s richest jihadi
group, earning hundreds of millions in revenues a year.
But now, Iraq’s second city of Mosul is back in government
hands, US-backed Kurdish forces are bearing down on Raqqa, the group’s de facto
capital, and Syrian President Bashar al-Assad’s forces, backed by Russia, are
encircling the militants’ eastern desert territory.
Analysts expect Isis will soon be forced to revert to
the amorphous insurgency it once was. Yet interviews with people inside or
recently escaped from Isis-controlled areas say the group is still making
aggressive efforts to produce oil and impose its own currency, a bid to garner
as many dollars as it can to funnel through a secret trail of money transfers
and business investments.
“Now that they are losing territory, this has become a
priority for them,” says Renad Mansour, an analyst at the UK’s Chatham House
think-tank, who has been studying the issue. “They need to maintain financial
influence and power.”
In Syria’s oil-rich
east, traders survey daily caravans of “whales” — their nickname
for large trucks that haul up to 220 barrels of Isis crude, sometimes 60
vehicles at a time, across the desert toward government-held parts of Syria.
Despite constant coalition air strikes that have degraded production, they say
Isis has kept the trade going.
“The oil never stopped . . . People need oil, Isis needs to
sell and business keeps moving,” says the owner of one of the makeshift oil
refineries that dot the eastern province of Deir Ezzor. Isis seized the wells
in 2014, and now Deir Ezzor is expected to be the place it wages its last
stand.
Analysts at IHS Markit this year calculated an 88 per cent
drop in monthly Isis revenues compared with January 2015, while the
International Centre for the Study of Radicalisation in London says Isis has
now lost 90 per cent of its wells. Both estimate oil revenues were cut in half
this year. Yet interviews with more than a dozen Syrian oil workers and traders
suggest Isis can still make up to $1m a day, thanks to its ability to shift
costs — and risk — to eager buyers. They say Isis has maintained its original
pricing at $20-$45 a barrel, depending on quality.
One trader, who has fled to Turkey, recalled a recent visit
to an oil well, minutes after a coalition air strike. He requested a discount
from the Isis official taking payments, as dirt had mixed into the crude. “But
he replied, ‘Let the oil spill on the ground. We won’t sell for less, not even
by one dollar,’” the trader says. “Isis always sells, even if the coalition is
striking and the sales are stalled the price never changes.”
Despite losses, Isis holds Syria’s two most productive
fields: al-Omar and al-Tanak. Together, traders and well workers say the fields
can still produce up to 25,000 barrels a day.
“Isis is making a good profit, even if production isn’t like
before. It may even be more profitable,” one fuel trader says. “Two years ago,
they may have made double or even four times as much. Now, their territory has
drastically shrunk, but so have their expenses.”
Earlier this year, some traders expected the Isis oil trade
to founder, after coalition advances blocked routes into the
rebel-held north-west, once its main external market. Instead, the
group doubled down on another market: traders close to the Assad regime.
Government-held areas struggle to maintain fuel supplies due to western
sanctions, relying mostly on Iran, its regional patron which has shown a
willingness to halt supplies to pressure Damascus.
Traders say the main regime middleman has set up an office
in Sabha, in Isis territory where young men line up each day for a chance
to drive his “whales”, for about $130 a trip. “In recent months, this trend of
selling oil to the regime has become normal,” one trader says. “At Friday
prayers, the imam lectures that there is a fatwa allowing it,
after people complained it was shameful.”
Isis has also begun imposing more strictly its own
currency in eastern Syria. It minted its own coins in 2015 — golden
“dinars”, silver “dirhams” and copper “fils”. But locals rarely saw the coins
until about six months ago, when Isis began ordering their use.
“At first, we ignored them. But when people wanted to pay
for their water or phone bills or zakat (religious tax), they asked us to
bring the currency,” says one pharmacist who recently fled Deir Ezzor. “Three
months ago, they said their currency is obligatory at all times.”
Currency dealers say they are now required to sell Syrian
pounds and US dollars to the Isis “economy office” each week, in return
for its coins as the group seeks to soak up all the available
convertible currency. Aymenn Jawad al-Tamimi, an analyst at the Middle
East Forum who studies leaked Isis documents, obtained a June order for all
money transfers to be converted into Isis currency.
“Any other currency that gets into the market, they suck it
up now and exchange it for their own,” says one food warehouse owner in Deir
Ezzor. “They want to monopolise hard currency.”
Only local merchants bringing in supplies from Syrian
areas outside Isis control are given permission to buy US dollars.
Traders who buy Isis oil in US dollars are also exempt.
The gold dinar, which weighs 4.25 grams, is sold at a rate
higher than the market value of gold (currently about $45 pergram). Local
businessmen estimate that Isis has sold more than 100,000 dinars, generating
hundreds of thousands of dollars in profit for the jihadi group.
Coalition forces are aware of the dangers if the Isis war
chest is allowed to leave its territory. In June, before evening prayers,
hawala and currency dealer Samer Idris was struck dead by a coalition air
strike as he drove home. Few of his fellow traders were surprised.
For weeks, several of those interviewed said they had
avoided working with him over suspicions that he was acting as an Isis
frontman. A US Centcom statement on the killing described
Idris as an Isis “financial facilitator” and “international
money launderer”.
“Two years ago, Idris could barely afford to open one money
transfer office,” a fellow dealer explains. “Then, over a few months, he could
open two.”
Hawala, derived from Arabic for “transfer”, is like an
unregulated Western Union — a network of money dealers built on family ties and
connections that spans the Middle East and stretches into Europe. Its informal,
hard-to-track nature makes it ideal for illicit transfers, and it was already
being used by Isis to move funds for purchases, particularly weapons and parts
for bombs. But with 80 per cent of the Syrian population living below the
poverty line, it is also a lifeline for civilians dependent on relatives
abroad. Refugees can use it to get their money out. Traders crossing enemy
lines to bring in food and supplies can use it to avoid carrying cash.
Western sanctions, as well as regulations to combat
terrorism financing, make it hard for Syrians to transfer funds, pushing them
towards hawala. “Go to any village in Syria and you’ll find at least one hawala
office,” says Ammar, the dealer in Turkey. “If we stopped transferring, people
would die.”
Civilians who fled Raqqa and Mosul under Isis rule describe
entire streets lined with currency and hawala dealers. Turkish border towns
often have dozens of jewellers and exchange shops running a side business in
hawala.
Some dealers say Isis develops relationships with
merchants transporting food or medicine to help transfer tens of thousands of
dollars a day. Several dealers say that before he died Idris transferred $10m
in eight batches over 25 days to Sarmada, a town in Syria’s north-west under
the control of a different jihadi group.
One regional hawala dealer says he tallied at least $25m in
transfers in recent months to Sarmada — where it can be easily smuggled to
Turkey. This summer, coalition air strikes killed the three dealers
accused of being behind those transfers — Idris, Fawaz al-Rawi and Bassam
al-Jayfus.
Iraqi officials long suspected Isis had money exchange
offices in Baghdad and other Iraqi cities — two years ago it used some to bid
in central bank auctions for dollars, until US authorities caught on.
Mr Mansour says Isis later realised it could profit by buying businesses
like hotels, pharmaceutical groups and hospitals. A UN Security Council
report, seen by the FT, warns that Isis-controlled business may even seek
to exploit postwar reconstruction-financing in Iraq and Syria.
Iraqi ministries have repeatedly failed to co-ordinate and
share information. Mr Mansour says several people told him they were
afraid to help the government. “First, because they didn’t think anything would
be done. And second, they feared moles within the authorities,” he says.
Syria is too devastated to have any official oversight,
but many hawala dealers have noticed a rise in interrogations, detentions and
even deportations among correspondent dealers in Saudi Arabia and the United
Arab Emirates.
Many of them suspect that the ultimate goal for Isis is to
move money to Europe, and argue it is already camouflaging transfers amid those
done by refugees. “If it wanted to send $1m to Europe right now, it
could,” another dealer adds. “But who are the ones receiving it? That knowledge
is only with Isis, the dealers, and God.”
Additional reporting by Katrina Manson in Washington
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