Territorial Gains Could Bolster ISIS’ Balance Sheet

Islamic State’s capture of two important Arab cities in recent weeks is opening up new lines of illicit revenue for the terrorist organization, said senior U.S. and Arab officials.

The Islamist militia, which is also called ISIS or ISIL, seized control in mid-May of the western Iraqi city of Ramadi, the administrative capital of al-Anbar Province and a Sunni stronghold. A week later, Islamic State fighters captured the southern Syrian city of Palmyra, renowned for its Roman ruins and historic role as an important Middle East trade route.

The U.S. Treasury and State departments and Pentagon have been focused over the past year on drying up Islamic State’s finances, by destroying both its ability to sell oil and raise donations from overseas benefactors. Senior U.S. officials said they’ve made progress on both fronts. But U.S. and Arab officials are worried Islamic State’s seizure of Ramadi and Palmyra could provide the organization with new avenues to raise funds and bolster its balance sheet.

U.S. officials believe the majority of the terrorist group’s funding comes from extorting money from local populations in the areas it controls in Iraq and Syria. Islamic State also has looted banks and businesses in cities like Mosul and Tikrit in Iraq and Raqqa in Syria.

Ramadi provides Islamic State with a large new population and administrative structure from which to extract funds, said a senior U.S. official who’s working to combat terrorist financing.

The terrorist organization has also financed itself through the smuggling of artifacts and antiquities plundered from Syria and Iraq. Cities such as Aleppo, Idlib and Homs in northern and central Syria have been raided for their Roman, Assyrian and Greek antiques, said U.S. and Arab officials.

Palmyra provides Islamic State with loot to smuggle on the international market. “We think antiquities will continue to be important for their funding,” said the senior U.S. official.

The Obama administration has ratcheted up its efforts to form an international coalition to combat Islamic State’s financing.

Last month in Washington, President Barack Obama and leaders of six Sunni Arabian Gulf states discussed ways to shut off funding of the terrorist organization, said senior U.S. officials. Leaders from Saudi Arabia, Qatar, the United Arab Emirates, Oman, Bahrain and Kuwait agreed to establish a working group to tackle this issue, said U.S. and Arab officials.

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