The loss of territory as a result of anti-Daesh operations have almost halved the group's revenue, according to a new report by the The International Centre for the Study of Radicalisation.
The financial fortunes of Daesh — once referred to as the world's richest terrorist organisation — are declining with a loss of territory under its control, according to a report by the The International Centre for the Study of Radicalisation (ICSR).
The group's revenues have almost halved from approximately $1.89 billion in 2014 to $870 million in 2016, said the report, which estimates the group's main sources of revenue and the impact of anti-Daesh operations on its money supply.
Daesh's most significant sources of revenue are closely tied to its territory and include fines, taxes and fees, oil, looting and the confiscation of property.
The report found no hard evidence to suggest that foreign donations continue to be significant source of funding. It added that "revenues from the sale of antiquities and kidnap for ransom, while difficult to quantify, are unlikely to have been major sources of income."
The reliance on population and territory and territorial expansion helps to explain Daesh's current financial troubles.
By November 2016, Daesh had lost 62 percent of its mid-2014 "peak" territory in Iraq, and 30 percent in Syria, according to figures provided by the Global Coalition.
That means fewer people or businesses to tax — and less control over natural resources such as oil fields.
Daesh revenues will probably decline further and the capture of Mosul, its "commercial capital", will have a significant and detrimental impact on the outlawed outfit's finances, the report predicts.
The group has not had any new funding streams to compensate for the recent losses incurred as a result of various anti-Daesh operations.
Apart from loss of territory other measures that have hurt the group's source of funding include:
- the Iraqi government's decision in 2015 to stop payment of salaries to government employees in areas under control of Daesh
- the launch of Operation Tidal Wave II in October 2015 that allowed for the targeting of key oil infrastructure, transportation systems, and cash depots
- continued efforts to stop cross-border smuggling
The report says that "Daesh's business model will soon fail" if the currents trends continued.
However, the ICSR warns that Daesh and Al Qaeda, both, have "repeatedly demonstrated that financial and military setbacks can be overcome."
Daesh may resort to illicit activities like extortion and smuggling as these methods do not rely on control of swathes of land to replensish its coffers.
The report adds that the decline in revenues may also not have an immediate effect on the group's ability to carry out terrorist attacks outside its territory. The findings note that Daesh operations and attacks are relatively cheap and funding is not much of an issue especially in case of inspired attacks.
It also calls for wider efforts against Daesh to continue in order to ultimately defeat the group.