ISIS Financing

Interesting point from The Economist about the financing of the would-be Islamic State:

IS's mission is to create its own caliphate, but until now many of its sources of revenue have depended on its host states. In Iraq, the money that IS extorted from contractors, businesses and institutions ultimately derived from the expenditure of the central government in Baghdad. In both countries, IS’s “subjects” include thousands of employees of the respective central governments, who are still drawing their salaries from the government and carrying out their functions.

IS also depends on established infrastructure. Most of the electricity generated in Syria comes from power stations in regime-controlled areas and is transmitted through a national grid, which includes IS-held zones. These plants run on natural gas produced from fields under regime control. One exception has been an associated gas plant known as Conoco (after the American company that built it in the early 2000s) not far from Deir ez-Zor. Until recently it was operated under the protection of Jabhat al-Nusra, al-Qaeda's official branch in Syria, which was kicked out of Deir ez-Zor in July, and the gas was pumped to the Jandar power station, south of Homs. It is not clear whether this arrangement has continued since IS seized control.

In July IS overran the Al Shaer natural gas plant between Homs and Palmyra. On this occasion the regime had no interest in ceding control of a vital energy asset to IS, and within two weeks it was back in Mr Assad’s army’s control, albeit badly damaged. The prospect of the Mosul dam and hydroelectric plant remaining under IS control prompted a similarly robust response from the Iraqi government and its Kurdish and Western backers, who on August 18th to have recaptured it.

In other words, Syria and Iraq both have large public sectors, with lots of government employees and significant government contracts, and these, along with infrastructure, have continued to direct wealth into ISIS-controlled territory.  The blog post suggests that this is a spigot governments can turn off, forcing ISIS to spend money on their territory rather than simply extracting it.