The "Islamic State" terrorist group wants to present itself as a state but is little more than a mafia regime. It may be rich but the "caliphate" is in a state of crisis, as an investigation in seven countries shows. By Onur Burcak Belli, Andrea Böhm, Alexander Bühler, Kerstin Kohlenberg, Stefan Meining, Yassin Musharbash, Mark Schieritz, Ahmet Senyurt, Birgit Svensson, Michael Thumann, Tobias Timm and Fritz Zimmermann
A man and a woman are sitting at a coffee table in northern Germany and would, if they were able to, send a significant sum of money to the terrorist group Islamic State (IS). Not to support the terrorists, but to save lives. But they don't have any money.
Ismail, 58, and Seefi, 50, both Yazidis, want to buy the freedom of family members who were kidnapped by IS and taken to Iraq. It’s not a matter of one or two relatives, but 20, ranging from a young child to a woman in her mid-40s. Ismail and Seefi last had contact with the hostages one month ago.
The tentacles of the IS reach deep into Germany. The jihadists are fond of speaking about God, but in the end it is money that interests them. Indeed, the IS is frequently referred to as "the richest terror group in history," primarily because of the oil that it now has access to. Furthermore, no previous terrorist organization has ever ruled over such a vast territory. At least 4 million people in Syria and Iraq are involuntary "citizens" of the caliphate that IS proclaimed in the summer and the organization has two large cities under its control, Raqqa and Mosul. If the desert areas in its grasp are included, IS reigns supreme over an area roughly the size of England.
That sounds alarming. But is the IS really the vastly wealthy, globally operating terror group it is portrayed to be? A team of 12 reporters from DIE ZEIT and German public television station ARD’s political magazine report München spent several weeks recently reporting in seven countries, including Iraq and Syria, in an effort to expose IS finances. The goal was to find out exactly how the group works, where its money comes from and who is profiting. We wanted to find out how successful IS really is.
We find ourselves in the ballroom of a restaurant in the northern Iraqi city of Erbil, or, to be more precise, in Ainkawa, the city's Christian quarter. On the left side of the room is a stage, complete with a microphone and speakers for live music, and the walls are still festooned with wedding decorations -- for a party which has long since come to an end. Now, the floor is covered with mattresses, toys and bottles of water. Since the beginning of August, 230 refugees from Mosul, Qaraqosh and other towns in the area have been living here. They are all Christians who fled before the advancing Islamic State. With no showers and only eight toilets, the room is stuffy. Two families cook for everybody.
Susanna*, a 43-year-old in grubby pink pajamas, is sitting toward the back of the room. She and her family are from Qaraqosh, a city that, until August, was the largest Christian city in the Middle East with 60,000 faithful. Susanna’s husband is a court officer and has vision problems and her family initially stayed when IS captured their hometown, hoping the Islamists would leave them alone. But suddenly they were all ordered to make their way to a clinic, allegedly for a checkup. "There was a bus and someone ordered us to get in," Susanna says. "They took everything we had with us – money, IDs and jewelry. I climbed aboard with my husband and the children, carrying the youngest in my arms. One man with a beard barked, 'give me the child,’ and went back into the clinic with my daughter. I ran after him and begged him to give me my child back. A different IS fighter approached and told me that if I didn't want to die, I should get on the bus immediately. So I got on. What could I do?" The child they took away is just three years old.
IS members from neighboring villages were among the kidnappers, Susanna says, adding that her relatives in Baghdad have since managed to establish contact with Arabs in Qaraqosh. They say that IS is demanding $20,000 for the child’s release. Susanne doesn’t have that kind of money, but she is determined to try to scrape it together – money that will then benefit IS, just like it has in all the other, similar cases. Twenty-thousand dollars, $30,000, $50,000: Such are the standard ransoms charged for local hostages. Middlemen have long since set up shop to take care of negotiations and organize the money transfers. The fear felt by families of hostages is a well of money that will not run dry.
The IS radicals are particularly harsh when it comes to Yazidi women, many of whom are forcibly converted after being taken prisoner. As newly minted Muslims, they are then given to IS fighters to become their wives. Several such cases have been documented. There are also unverifiable accounts of Yazidi women being auctioned off at public slave markets. Neither in Mosul nor in Raqqa were Die Zeit sources able to observe or confirm such practices. But the trade in women exists nonetheless, as IS has admitted itself. "Enslaved families are now being sold," reads an item in one online IS magazine. "Sharia students," the item reassures, had reviewed the practice for its legality.
Amir – who once worked in a Bavarian factory before returning to Iraq in 2009 – has also had dealings with the terrorists. It came in the form of a telephone call: "I belong to IS," said an unknown voice on the other end of the line, "and I am now living in your house."
It was shortly before midnight on August 6 when Amir and his family learned that IS was advancing toward their city. Immediately, they left everything behind and fled Qaraqosh as quickly as they could, just two hours ahead of the militants. The family lost everything they had, says Amir: their car, gold jewelry, television and cash. He estimates the total value of their lost possessions at $50,000. The IS man who called later said that the family was welcome to return to Qaraqosh in exchange for the payment of a Christian tax, allegedly just $20 per month per person. But Amir declined, presuming it was nothing but a deadly trap.
Precise calculations are impossible, but it is safe to say that IS has seized the possessions of thousands of fleeing families worth at least tens of millions of dollars, though the total likely reaches into the hundreds of millions. The exploitation of local populations is an important revenue source for IS. Some analysts, in fact, believe it is the most important. Mosul is one of the capitals of that exploitation.
"You are not you / And home is not home": This verse was penned by the 9th century poet Abu Tammam. Even back then, he thought it wise to remain silent about his Christian father and to establish a Muslim genealogy. A statue of the poet stood until recently in the northern Iraqi city of Mosul, but IS has since destroyed it. Nothing should remain that recalls the humane, tolerant and joyful way of life that prevailed here before the proclamation of the caliphate.
"Home is not home." The verse is sadly applicable to Nawzat Khalil, a journalist and novelist originally from Mosul now living in European exile (safety concerns dictate that his exact location not be revealed). Mosul used to be a city where several different religions co-existed, but that was before IS jihadists arrived in June, 2014. With his name having been included on an IS black list, Khalil and his family fled a couple of weeks before Mosul fell.
Since then he has fastidiously sought to document what is happening there, as a kind of chronicler from afar. Every day he skypes and telephones with those friends and acquaintances who are still alive. No journalist is able to report freely from Mosul at the moment, and certainly no one from the West. It is only people like Khalil who are able to provide a glimpse into the heart of darkness.
The most important institutions established by IS in Mosul are the so-called Sharia courts. They hand down their verdicts in a province administration building, in an army barracks and in the Turkish consulate. It is here that IS-appointed judges interpret the "law" and where people can register complaints or report on othersor file a petition . (There are also "ministries" , such as those for education, labor and justice, but they work behind closed doors and have no public hours.) Both foreign and local IS members work in the courthouses, determining the fates of the city's residents. They also send out the morality police known as the Hisba, who make sure, for example, that women are completely covered. And they ensure that civil servants continue to do their work so that the garbage is collected and other institutions keep running. Tax collectors are also headquartered in these buildings.
The tax collectors are both systematic and arbitrary. Ten percent of everything is the policy, on both profits and capital. When bookkeeping is lacking, they resort to estimates and those who have a new car or a large residence are in danger of being spontaneously taxed, according to the collector’s eye and discretion. In addition, a 2.5 percent charity tax is levied. Some "taxes," though, are nothing more than protection money in disguise, particularly when it comes to factory owners. Furthermore, truck drivers delivering goods to the city have to pay a $200 fee while tanker trucks carrying gasoline or diesel are charged $500.
When Mosul fell, IS made a grab for the city’s banks, including the central bank which reportedly had more than $400 million on hand. It hasn’t been possible to determine exactly what happened to the money, but bank accounts belonging to Christians, Yazidis, Shiites and Iraqi army officers were immediately seized. Now, those wishing to withdraw money from their accounts must report where it came from to IS. If it is determined to be the product of speculation, it is confiscated. "What are you planning to do with it," is the second question posed. If the answer is satisfactory, a maximum of 10 percent of the customer's account balance is paid out to prevent people from fleeing. Conversely, Sunnis who have already fled the city are contacted by IS and told to return immediately or their accounts will be emptied. "This," says Nawzat Khalil, "is how they are trying to force engineers and doctors to return."
The IS regime pays salaries to its own people: Active Fighters, for example, receive $500 per month and up. That isn’t much, comparable to the earnings of an average worker or policeman, but they receive a share of the "war loot" as well. IS has also taken control of all formerly city-run facilities, including tens of thousands of apartments and shops. Assuming each of these properties generates average revenue of $150 per month and one makes a conservative estimate of 20,000 such holdings, that would mean that IS brings in $3 million each month in rent alone.
Pleasures of almost all kinds have been banned, even dominoes. "Earlier," Nawzat Khalil recalls, "it was the greatest joy to listen to songs by Umm Kulthum at top volume in the city park. That’s all over now." Even the tailors have had to adapt, by abandoning suits and instead sewing Afghan-style robes. Lawyers are no longer allowed to practice and judges have been killed. Executioners, though, have more work than ever. Executions have become an almost daily occurrence, sometimes for a transgression as banal as a critical post on Facebook. And IS groups are constantly on patrol in the city, such that nobody feels safe anymore. "The IS people are like ghosts," says Khalil. Everywhere and nowhere.
Gravel sprays out from under the tires of the monstrous pick-up as the driver hits the gas. The mood inside the vehicle is tense, even though we are being escorted by Kurdish police. We are in no-man's-land in the Daquq district, 180 kilometers southeast of Mosul in a strip of half-desert between the southernmost Peshmerga position on the one side and IS fighters on the other. "The shack back there, that’s IS," says one of the policemen. About two kilometers in the distance, the black flag of the terrorists can indeed be seen fluttering in the wind. "And over there are the oil tankers that we burned," the policeman continues. Two blackened metal skeletons jut out of the soft desert background. The tankers were part of a 12-vehicle convoy full of oil that smugglers had purchased from IS. Each of the trucks contained 42,000 liters of crude worth $6,000, roughly a fifth of the price on global markets. But these two tankers remained behind. Amid the flashes of gathered photographers, the Kirkuk police chief arrested the drivers and had their vehicles set on fire.
That is the image the Peshmerga would like to convey to the world: We are fighting IS! But it represents only half of the truth. The other half becomes clear that evening, during a visit with soldiers in the area who are charged with guarding a pipeline leading into Erbil, a vital artery serving the Kurdish capital. On this night, they are warming themselves and their dented tea pots at a small fire, but not long ago, they were fighting against IS jihadists at the front near Kirkuk. "Six weeks ago," the first one began, "we received the order to cease shooting at the oil tankers." The trucks in question were from the IS-held area in Tikrit. How many? "We stopped counting at 100," he says. They passed by from morning to evening on the way into the Kurdish-controlled area where their payloads were to be sold. The men were shocked. They had fought and seen their friends die – and here were their superiors cooperating with the enemy.
The story holds the most important lesson about the IS oil business: It only works because enough corrupt, criminal or desperate people in the region play along. Given that these people also all take a cut, profit margins are narrow. Since IS began expanding in the summer and conquered a number of oil fields, numerous estimates have been in circulation regarding how much the terrorists actually earn from oil. David Cohen from the US Treasury Department, suggested at the end of October that revenues stand at roughly $1 million per day . Others believe it is three times that amount.
Lower estimates are likely more realistic. Before international airstrikes began, IS was able to produce 50,000 barrels per day (bpd) in Syria and 30,000 bpd in Iraq. At a discounted price of $40 per barrel, that calculates to $3 million per day. Today, though, the amount produced is at most 20,000 bpd, experts believe. According to our research, a barrel of oil at the source in the Syrian city of Hasakah costs just $18. That would mean they are making a mere $360,000 per day. One Western intelligence agency believes the number is even lower than that, estimating a maximum of $270,000 per day.
At the same time, the IS is also inflicting a lot of wear and tear on oil production facilities. "They won't be able to continue for very long," says Suleiman Chalaf. "I give them a year." Chalaf, a former engineer in the oil business, is "energy minister" for the Kurdish autonomous administration in Syria's Jazira canton. He says IS has a lack of skilled workers because so many had fled. They also needed spare parts and experts who could prevent water from contaminating the oil. "That's going to happen sooner or later," he says, and if it does, it will make the oil almost impossible to refine, rendering it worthless. With air strikes ongoing, IS tends to lease its wells to third parties, often members of wealthy Syrian families who have access to the kind of money necessary. IS prefers imposing taxes on oil production and sales, which has proven to be a safer business for the jihadists.
This result is what intelligence officials refer to as "ant trading." The oil is sold down a long chain of middlemen in ever-smaller batches. Criminal bands, tribes, corrupt civil servants, Shiites, Sunnis, Kurds and Turkmen: People from all parts of society seem to be involved. The end users are in the Kurdish regions of Iraq or Syria, in Iran or in Turkey – in places like Beşaslan near the Syrian border.
Here, oil smuggling takes place in broad daylight. The black gold is pumped from Syria to the edge of town using improvised pipelines made of irrigation pipes where it is pumped into blue canisters in the shadow of a tent and then sold. Those asking questions are told: "You have two minutes to get lost!" In this poor border region, residents consider it to be their ancestral right to engage in smuggling. So far, the Turkish government has done little to stop the activities. By the time the oil reaches Beşaslan, nobody really knows where it actually originated. But the trail likely leads back to IS-held territories. At the same time the IS, for lack of refineries, is often forced to spend sizable sums buying diesel and petrol.
It’s quite possible that the story of Dimitri Bontinck and his son Jejoen may one day be given the Hollywood treatment. At the end of the film, though, viewers are likely to be left asking themselves if Bontinck is a hero, a lunatic or both. He spends three hours telling us his story at a café in Antwerp's historic city center.
The story begins in 2013, when Bontinck, a former soldier with the Belgian army and bailiff, began noticing changes in his 17-year-old son Jejoen. He had converted to Islam and it was becoming increasingly apparent he had radicalized. Jejoen told his dad he wanted to leave Belgium to study in Egypt, though it soon became clear to Dimitri Bontinck that his son had gone to Syria to join the "holy war". He attempted to contact Jejoen by text message to persuade him to return home, but by then, he had already joined up with the Islamist group Shura Council of the Mujahedeen. Then, in April 2013, his father wrote a text message that would have dire consequences for his son. "Should I ask for help in Israel?" he wrote. "It was my fault that they subsequently locked him up," Bontinck says today. "Because from that point on they thought Jejoen was a spy." When asked why he wrote the message, he says it was out of desperation. "I have Jewish friends in Antwerp, and I thought that might be of some help," he explains.
At home in Antwerp, Dimitri had no idea that the terrorists had jailed his son as a suspected traitor. Instead, his father made the decision to go to Syria to fetch Jejoen on his own. Dimitri Bontinck made three trips to the civil war-torn country, where he himself was captured and tortured by rebels. At one point, unbeknownst to him, he was even at a location near the jail where Jejoen was imprisoned. It was a mind-blowing odyssey. In the fall of 2013, a miracle took place: The rebels freed Jejoen. To this day, nobody knows why, although it’s probably safe to assume that it had little to do with Dimitri’s efforts.
Back in Antwerp, Jejoen is currently playing every conceivable role in the criminal trial now underway: He is a defendant, standing accused of membership in a terrorist group; he is a key witness, because he has told the police everything; and he is a victim, because some of the co-defendants in the case – Belgian nationals who returned from Syria – are believed to have guarded Jejoen when he was held hostage there.
Jejoen’s case illustrates just how badly things can go wrong for European jihadists in Syria. The perils are no different for volunteers from Germany who make the journey. According to information gathered by DIE ZEIT and the TV newsmagazine report München the opposition Free Syrian Army has arrested a half dozen German jihadists this year alone and turned them over to German authorities.
But there’s another aspect to Jejoen’s case that makes it stand out from others. During his imprisonment, he was the cell mate of US journalist James Foley, who was decapitated by IS in August. (By then, the Islamist group Shura Council of the Mujahedeen had already joined forces with IS, bringing prisoner Foley along with it.) A young man from the German state of Brandenburg, Toni N., also spent time in the same jail as Jejoen. Unlike Foley, IS later freed Toni N. But why? In our research, we determined that someone had been found to pay his ransom.
The collection of ransom has long been a tried and true revenue stream for jihadist groups. In 2014, IS raked in at least $25 million in ransom money, and probably even more. Intelligence services believe the terrorists are still holding 20 to 40 Western hostages. In the course of our reporting, several insiders confirmed that IS usually demands $20 million at the beginning of a kidnapping before then allowing the figure to go down to between $3 million and $5 million in negotiations.
The Foley case, of course, had a grimmer ending. The United States, like Britain, is well known for neither paying ransom nor tolerating its payment by relatives.
By the time of Jejoen Bontinck’s release, Foley had already been missing for a year. The two became friends in jail, spending time playing chess against each other and talking about movies. Both memorized the other's home phone number in jail. "When we called Foley at home, James' brother answered," Dimitri Bontinck says, recalling events after Jejoen’s return to Belgium. "It was the first sign of life he had received."
IS, of course, presumed that Jejoen would tell Foley's family everything and was prepared. The jihadists wrote an email to the American journalist’s brother and his boss, Philip Balboni, the first line of which read: "We are holding your friend Jim." A terrible power struggle ensued, with IS on the one hand demanding the unimaginable sum of $100 million for Foley and US authorities on the other informing his family that it would not allow any payment to the IS . In the end, James Foley was murdered for IS propaganda purposes, a fate which later befell Steven Sotloff, Alan Henning, David Haines and Peter Kassig – all British or American nationals. With IS unable to extract any money from the men, they were no longer useful.
The situation is different for French, Spanish or German nationals, who come from countries where it is not uncommon for ransoms to be paid. There are two options available for freeing hostages. One is by way of internationally operating security firms. Europeans working for NGOs in Syria for example have often taken out "kidnap and ransom" policies. If they go missing, the insurance companies retain security firms who in turn task local employees or contact persons in the region with locating the hostage. One insider says the firms consider IS to be a "reliable business partner". Once a sum has been agreed to, middlemen are dispatched with duffle bags full of cash. The money changes hands and a short time later, the hostage emerges somewhere in the border area.
The alternative is Qatar. The wealthy mini-state on the Persian Gulf presents itself as the international community's best friend and conducts negotiations with the terrorists as needed, sometimes even footing the bill. The emir's pockets are certainly deep enough and the investment pays off in the form of a growth in diplomatic clout. According to our sources, for example, Qatar paid $30 million for the release of a Swiss hostage in Yemen. A short time later, the emirate opened an embassy in Bern. Sources also suggested that Germany, too has profited from Qatar's aid. Nobody, of course, is willing to admit as much, in part because it infuriates the US. Money paid in ransom, after all, is tantamount to development aid for jihadists.
About 80 kilometers north of New York City, one of the main headquarters in the battle against international terrorism can be found: the West Point military academy. It is home to a small treasure: some 153 documents from the holdings of the Islamic State in Iraq, as IS called itself until 2013. The material, which includes things like tables, bills, receipts and notebooks, was captured by American soldiers and intelligence agents.
Officials plan to make the trove accessible to researchers in the near future, but Howard Shatz is already familiar with their contents. An economist with the Rand Corporation think tank, Shatz has reviewed the material using statistical methods. The documents paint a picture of a centrally controlled organization that has several levels of administration, and one that keeps meticulous records of revenues and expenditures. It's not uncommon for two or three copies to be made of receipts, and there are even instructions about who the copies should be given to.
Bureaucracy, it would seem, is part of Islamic State's DNA. Al-Qaida operated with a similar level of officialdom, with fighters even having to submit vacation requests in writing. It is, of course, no secret that jihadists like order. Even today, IS from time to time publishes tables with information about attacks it has carried out or weapons it has captured.
IS efforts to prove that the caliphate is, in fact, a genuine state also exhibit the proper dollop of formality. In a propaganda film titled, "A State, not a Group!," they list 16 IS institutions sounding somewhat like a government entities, ranging from "national territory" to "public health" and "consumer protection" to "airport". The caliphate's unofficial anthem plays in the background: "We live a life in safety and peace / Our state is based on Islam / And although it conducts jihad against its enemies / It regulates people's affairs / With love and patience."
Jihadists have long dreamed of a "true" Islamic state, but the presence of trivial bureaucratic matters isn't sufficient to declare the existence of one. Prior to the jihadist invasion, the central government in Baghdad provided $2 billion a year to the Iraqi regions now controlled by IS -- funding used to ensure public order and pay salaries and for infrastructure. All serious estimates thus far have concluded that IS revenues are far lower. It is true that IS fulfills state-like tasks and that it has more money at its disposal than any terrorist group that proceeded it. But it can't live up to the myth it has propagated.
The fact is, the caliphate bears greater resemblance to a failing state than an aspiring one. One need look no further than Mosul. For weeks now, the central government in Baghdad has kept the city largely cut off from electricity. At least one water purification plant has since ceased to operate. Drinking water quality has plunged, leading to the increased threat of epidemic. The city's hospitals are also on the verge of collapse. A shortage of diesel has also meant that large generators, which provide entire blocks with electricity, are being fired with unrefined crude oil tapped directly from the source. In addition to the immense environmental problems this creates, it is also harmful to people's health.
In Raqqa too, residents are suffering under widespread shortages. "Prices for fuel, bread and other goods have risen massively," reports one source based in the caliphate's second most important city. "Right now, the power is out for up to 20 hours a day." Furthermore, people are afraid that grain yields in 2015 may be far too low. The Middle East Security Report, a publication of the American think tank Institute for the Study of War, concludes that IS "has thus far pursued short-term, populist gains at the expense of long-term sustainability."
It is also unlikely that the jihadists' latest PR idea, that of introducing their own currency, will do much to help, despite all the glitzy designs it has touted for the proposed coins. Propaganda claims that oil has made IS self-sufficient are also bald-faced lies. At the end of the day, money is still just money, and it does no good if you can't buy anything with it. And if no goods reach IS-controlled regions, can a productive economy be kept afloat? If not, then oil revenues will merely drive inflation. Economist and oil expert Eckart Woertz () likens the IS to an "overvalued stock company" and speaks of a "Ponzi scheme" in need of constant expansion.
Which is exactly why Islamic State is in fact pursuing an expansionist strategy – presently in the Anbar province of western Iraq. The area doesn't offer much by way of resources, but there is little resistance among the population and it holds the advantage of having close proximity to IS-held regions in Syria.
The U.S. and the United Nations now want to increase economic pressure on the "Caliphate". Sanctions against donors (who are already no longer able to act as freely today as they could two years ago) and oil buyers are in the works as well as efforts to cut IS off from the international banking system and to curb the payment of ransoms. Air strikes will also continue and plans are afoot to better equip the Iraqi armed forces.
The "Islamic State", of course, is largely indifferent to the well-being of the people it oppresses. Furthermore, the stream of volunteers continues unabated and the opposition is cowed in the face of 40,000 armed men. Yet the more unbearable the situation becomes, the greater the risk of revolt will be. At the moment, it is brute force that is holding this caliphate together – not faith in God and certainly not "love and patience." And it is theft that is filling IS coffers, not any kind of functioning economy. The caliphate is unsustainable.
Still, even an implosion wouldn’t necessarily translate to victory over IS. If cornered, Western intelligence analysts fear, IS might resume its previous guerilla tactics and attacks – possibly even exporting them abroad.
That scenario makes one think about the treatise on the dream of a caliphate penned a decade ago by jihadist thinker Abu Bakr Naji. US terror expert William McCants translated it into the English language in 2006. Abu Naji's theory is that a period of savagery in the region will precede the caliphate. "If we succeed in the management of this savagery, that stage (by the permission of God) will be a bridge to the Islamic state," he wrote in 2004. "If we fail – we seek refuge with God from that – it does not mean the end of the matter, rather, this failure will lead to an increase in savagery."