When the Islamic State of Iraq and Syria stormed the gates of the Iraqi city of Mosul at 2:30AM on June 4th, 2014, the entire world had to face that the terror group had evolved beyond what anyone had expected. Years earlier, the United States had snuffed out the Ba’athist government under Saddam Hussein, and set up a democratic government led by a Shia majority within a country with a massive Sunni population. It’s no surprise that after the withdrawal of troops in 2014 that the Sunni Triangle awoke again, and the Iraqi Civil War began, coming from the western provinces of Iraq, which are majority Sunni Arabs. After routing Iraqi forces from key cities like Mosul and Fallujah, ISIS had achieved a total enough victory to evolve from simple terror organization, to semi-legitimate governing body with significant land ownership.
After carving out a piece of real estate that ripped up the Sykes-Picot Treaty, ISIS set to work operating as a semi-legitimate government in the absence of both Syrian and Iraqi influence. The various lands under the ISIS banner were reorganized to imitate other historical Islamic states, handing out traditional titles to new governors such as “Wali” or “Emir”. The new state then set to work creating laws for taxes, tariffs, and exports to generate revenue for the war machine that was still rolling towards Damascus and Baghdad to the east and west of the Euphrates. Some critics even described the structure of the government as a welfare state that incentivized participation in the military with institutionalized slavery and systematically handing out the spoils of war to the troops. To an outside observer, the government walked the thin line between actual government entity that could exist in the third world, and an extremely complicated and large organized terror operation.
The multiple revenue streams that ISIS had coming from conquered populations was supplemented by other government-sponsored ventures, both of which existed within black market exportation. The first came from liquidating antiquities sites. When the Islamic State wasn’t destroying relics on video for the world to see, they were emptying museums and archaeological sites. Local governments sold licenses to archaeologists who would then pay taxes on any items found within dig sites, and these items would be sold within the international antiquities black market. Although this income stream was local and less impactful on the successes of the state as a whole, the existence of a complex bureaucratic framework to participate in black market dealings on small scales gives us insight into a larger, internationally based revenue stream.
The second, and possibly largest form of revenue for the expanding state, was oil sales. Around 2014 and 2015, ISIS had maintained control of the oil fields of Iraq and Syria, as well as some oil wells in Libya belonging to an affiliate organization. Once Iraqi and Syrian forces were routed as far as Fallujah and Palmyra, respectively, the Islamic State had in their hands one of the world’s largest oil producing areas. Because of the cordial relationships that ISIS had with some of their neighbors such as Turkey, ISIS operatives were able to smuggle barrels of oil onto the black markets of neighboring states. With the creation of a national enterprise to fuel the war machine in its goal to conquer the rest of Syria and Iraq, the Islamic State took their operations one step further into the realm of legitimacy.
The first report of the Islamic State gold dinar appeared in late 2014. The dinar, a monetary instrument that finds its roots dating back to the Umayyad Caliphate, showcases the productive capabilities of the state, and the rejection of other money instruments in the area. It made sense to switch to this new gold-based dinar, if only because with the growth of the state came the international devaluation, or at least the internal discouraged use, of both the Syrian Pound and Iraqi Dinar. In addition, money minted in gold removes any traceability that could link goods like gold or US dollars to smuggling routes connected with the Islamic State. Although the widespread usage of the coins is debatable, it shows the capabilities of an organization desperately attempting to entrench itself enough to withstand international pressure.
Although the actual usage is dubious, the creation of the ISIS dinar is a high-water mark for the failed revolution. As of now, the Islamic State has been reduced to a few villages on the Euphrates, a far cry from the war machine that threatened the very existence of both Iraq and Syria. For what it’s worth, the internal dealings of the Islamic signal a new breed of terrorist organization, one that becomes powerful enough to generate not only its own internal economy, but an independent currency based in gold. For lack of better phrasing, the previously economically dependent or parasitic terrorist organization had somehow clawed out of the muck to become an income-generating force all on its own, which is one of the reasons that the Syrian and Iraqi governments are still at war with the insurgents six years after the first violent clashes broke out from around the Euphrates.
ISIS as an organization is a departure from traditional thought, as the military juggernaut was able to smash two sovereign states in the Middle East, mint its own currency, and implement its own laws and ordinances to orchestrate the collection of income through what could be argued are legitimate means, like taxes. In addition, ISIS operations existed without traditional “hosts,” as the state didn’t rely on outside funding like the IRA, or small-scale smuggling like Hezbollah, and instead was able to negotiate long-term, albeit secretive, contracts with neighbors to facilitate black market creation. Instead of being part of and benefiting from a larger instability, ISIS became the instability, and then the rule of law in the areas they controlled.