The Islamic State of Iraq and Syria (ISIS) is the most well-funded terrorist organization in history, and it currently controls a swath of territory larger than the United Kingdom. As ISIS continues to expand throughout Iraq and Syria, it will need renewable revenue sources to hold conquered territory. In light of this, the Obama administration has pointed to the undermining of ISIS’s financial foundation as its chief objective in its campaign to defeat the terrorist organization.
ISIS’s primary sources of funding are (1) robbery and extortion, also sometimes referred to as taxation; (2) the sale of oil; (3) ransom payments for kidnapping victims; (4) donations from abroad; and (5) the sale of antiquities. Of these revenue sources, “taxation” and the sale of oil represent the terrorist group’s only real prospects for establishing a continuous, renewable revenue stream with which to fund its operations. In 2014, it is estimated that ISIS made 100 million dollars by selling oil from Iraqi and Syrian oil fields under its control, and in early 2015 the Department of the Treasury estimated that ISIS oil revenues hovered around 40 million dollars each month. Indeed, reports indicate that ISIS currently controls around 60 percent of Syrian oilfields. ISIS’s oil revenues represent its second greatest source of funding. However, it faces two significant obstacles in maintaining this income moving forward.
First, a decrease in the price of oil threatens ISIS’s profit margins. Since June of 2014, global crude prices have fallen by more than 70 percent. When oil prices began to fall significantly, the Treasury Department estimated that ISIS’s oil revenues were around 1 to 2 million dollars per day. As the bear market continued, a spokesperson for the State Department said that ISIS oil revenues have “come down significantly . . . the value [of oil] has gone down.” ISIS derives its revenues from the sale of petroleum to local customers, and the sale of petroleum and crude oil routed through middlemen and smugglers to end users within ISIS held territory and surrounding areas, including the Assad-Syrian regime. It is reported that ISIS sold oil near the well-head for around 20-35 dollars per barrel when the international price of oil was around 80 dollars per barrel As oil prices have plummeted, ISIS has likely had to lower its prices to stay competitive. Additionally, profit margins are withering for middlemen as global crude prices contract towards ISIS’s discounted price, thus decreasing the incentive to smuggle the illicit crude and petroleum.
The second obstacle ISIS faces is its ability to efficiently extract, refine, and sell petroleum products from the territory in which it operates, which has significantly diminished since the launch of international coalition airstrikes. The Obama administration has indentified a multi-prong approach to disrupting ISIS’s revenues from the sale of oil. First, it has used airstrikes to destroy the group’s refining facilities and trucking routes. The withdrawal of national and private sector companies, their equipment, and expertise from ISIS-held territory prevents ISIS from fully utilizing the energy assets it now controls. ISIS primarily refines oil through the use of modular refineries, which can be attached to trucks or wells and allow for small-scale refining of crude. These modular refineries—as well as tanker trucks and storage units—are the main targets of coalition airstrikes As a result, ISIS has been forced to utilize even more primitive refining techniques, such as burning crude oil in open pits that produce limited yields of poor-quality product.
As ISIS’s refining capabilities are diminished, it has become reliant on petroleum products smuggled from Southern Turkey in exchange for crude oil. The second strategy utilized by the coalition involves increasing counter-smuggling efforts on the Turkish border, and identifying smugglers and middlemen. In 2014, Turkish authorities reported an increase in seizures of smuggled petroleum products from 6,238,759 million liters, totaling 79,238,759 million liters. Additionally, the number of intercepted smuggling incidents has increased by 250 percent over the last two years. With petroleum and petroleum product stores dwindling throughout the territory in which ISIS operates, the group’s related revenue streams and fuel sources are increasingly vulnerable to coalition measures. Additionally, coalition airstrikes have destroyed an estimated 283 oil tanker trucks, undoubtedly causing oil smugglers to think twice before filling up with ISIS.
Although ISIS has several different sources of revenue, many of these sources are unreliable in terms of their potential future revenue generation. The sale of antiquities and money stolen from banks in ISIS-held regions are non-renewable revenue streams. Additionally, the International community has taken measures to limit ISIS’s ability to conduct international transactions and receive cash infusions through banks that operate within ISIS occupied territory. It may rely on ransoms and donations as renewable revenue streams, but these funds are currently de minimis in the grand scheme of its financing structure. The group’s ability to tax and extort the 8 million inhabitants of the area it controls remains its best source of revenue. However, without making any of the infrastructure investments that legitimate governments typically make with such tax revenues, the overburdened local economy will undoubtedly experience decreased productivity over time unless it is able to conquer more and more territory. It remains to be seen what effects the efforts to disrupt ISIS’s oil revenues will have in combination with falling global crude prices. However, with a decreased ability to gain access to refined products to power its militia it is likely the effects will permeate beyond financing to its ability to wage war. It is the hope of the international coalition that this will significantly undermine ISIS’s ability to take and hold territory, making it vulnerable to continued efforts to topple the regime.
 Jay Solomon, ISIS’s Oil Revenue is Falling, Administration Says, Wall St. J. (Dec. 15, 2014, 7:05 AM),
 Graeme Wood, What ISIS Really Wants, The Atlantic Mag., (Mar. 2015)
available at http://www.theatlantic.com/features/archive/2015/02/what-isis-really-wants/384980/.
 Jennifer Fowler, Deputy Assistant Sec’y for Terrorist Financing, U.S. Dept. of the Treasury, Address at the Washington Institute for Near East Policy (Feb. 2, 2015) available at http://iipdigital.usembassy.gov/st/english/texttrans/2015/02/20150202313345.html#ixzz3TpcikHl1.
 Pagliary, Jose. U.S. Takes Aim at ISIS Oil Business. CNN Money (Dec. 15, 2015, 9;59 AM), available at http://money.cnn.com/2015/12/10/news/world/isis-oil/.
 Solomon, supra note 1.
 Fowler, supra note 3.
 Krauss, Clifford. Oil Prices: What’s Behind the Drop? Simple Economics. New York Times (Feb. 3, 2015) available at http://www.nytimes.com/interactive/2016/business/energy-environment/oil-prices.html?_r=0
 Solomon, supra note 1.
 Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (ISIL) 14, (2015) [hereinafter FATF Report], available at
 Id., at 15.
 David Blair. Oil middleman between Syria and ISIL is new target for EU sanctions. The Telegraph (Mar. 7, 2015, 12:01 AM), available at
see also Pagliary, supra note 5.
 FATF Report, supra note 11; see also Pagliary, supra note 5.
 Luay Al-Khatteeb. The UN Strikes Back at ISIL’s Black Economy. Huffington Post (Aug. 23, 2014, 3:22 AM),
 Solomon, supra note 1; see FATF Report, supra note 11, at 14.
 FATF Report, supra note 11, at 34.
 Blair, supra note 17.
 See Pagliary, supra note 5.
 Fowler, supra note 3.
 See id.; see generally FATF Report, supra note 11.