Loretta Napoleoni, author of ‘Islamic Phoenix,’ discusses how the Islamic State is financed

Join thousands of others who rely on our journalism to navigate complex issues, uncover hidden truths, and challenge the status quo with our free newsletter, delivered straight to your inbox twice a week:

Join thousands of others who support our nonprofit journalism and help us deliver the news and analysis you won’t get anywhere else:

Story Transcript

SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to the Real News Network. I’m Sharmini Peries coming to you from Baltimore.

France remains under a state of emergency following terror attacks last Friday that left 129 people dead. As the country considers adopting new anti-terrorism laws, its police force conducted over 100 raids across France in search of suspects. This comes as the G20 wrapped up its summit in Turkey with an agreement to cooperate on policy towards eradicating ISIS. And on Tuesday, U.S. Secretary of State John Kerry met with French President Francois Hollande. Here is some of what he had to say.

JOHN KERRY: We have to step up our efforts to hit them at the core, where they’re planning these things. And obviously to do more on borders and the movement of people. But the level of cooperation could not be higher. We’ve agreed even to exchange more information. And I’m convinced that over the course of the next week’s dash we’ll feel even greater pressure. They’re feeling it today, they felt it yesterday, they felt it in the past weeks.

PERIES: To discuss these developments, we are being joined from London by Loretta Napoleoni. Loretta is an economist who specializes in international terror financing. Her most recent book is the Islamist Phoenix: The Islamic State and the Redrawing of the Middle East. Loretta, thank you so much for joining us today.

LORETTA NAPOLEONI: Thank you for inviting me.

PERIES: Loretta, in our conversation today I would like to get beyond the conversation about radicalism, extremism, and ideology behind it and discuss the roots of the Islamic State, both in terms of their financing and in terms of their foreign policy. So you’ve been tracking their financing for a while. How is Islamic State financed, how do they raise their money, and of course this is somewhat of a changing phenomenon. So give us a sense of where they get their money and where they’ve gotten their money in the past.

NAPOLEONI: Well, the Islamic State is a state, and therefore it funds itself as a state, through taxation. Every single activity, economic activity, commercial activity that takes place inside the territory they control is taxed. So even for what concern the sale of oil, for example, the actual smuggling of oil is not done by the Islamic State, but is done by the population, which leads into inside the caliphate. The tribal leaders are in charge of this business. And in exchange for that they pay royalties, you could define as such, to the Islamic State.

So this is the structure. And because it is a war economy, of course there is a lot of black market, there is a lot of smuggling. There are all of these activities. Including, of course, criminal activity. For example, the smuggling of migrants. So as the migrants cross the border from Syria to Turkey, in the crossings which are controlled by the Islamic State, then the traffickers pay a tax for each single individual that is smuggled to Turkey. With the same vehicles that they carry these individuals to Turkey they come back, the smugglers, with goods that then are sold on the black market. And they pay tax on that also.

So for example, these kind of activities generate about $500,000 per week. Which is, you know, quite a considerable amount of money for a country that is in war.

PERIES: So if you add that up, about $2 million a month doesn’t quite seem enough. And from what I understand that some of the financing also comes from some of the Arab states. So can you describe for us what some of those money financing routes might be?

NAPOLEONI: Well, the financing from Arab states is something that happened before from 2011 until 2013, when the Islamic State was able to conquer a territory big enough to become self sufficient. Now, today we may have funding coming from individuals that still live in these countries, and of course these individuals are funding the Islamic State as a sort of investment. Thinking that simply in the near future it will be a new political power, and therefore they want to obtain this kind of relationship. But there is no funding at all coming from Saudi Arabia officially, say from the government of Saudi Arabia, any more from Qatar or Kuwait, for example.

So it is much, much more difficult to stop the funding, because of course being self-funded and being funded in the same way that a state does, there is very little we can do about that.

PERIES: And Loretta, how much is ISIS financed or how much are they involved in drug trafficking from the region?

NAPOLEONI: I don’t have any information about trafficking at all. They are, again, they do tax trafficking of smugglers of various types, but not of drugs for sure. In fact, I would say that inside the Islamic State the official policy, it is still not to have any drugs. Now, there are several indications from people who have been, especially have been in places that have been abandoned by the Islamic State, so like Khobani, for example, whereby journalists have discovered drugs, in particular we’re talking amphetamines, which is what is used generally in fighting. But officially I would say that the Islamic State is not involved in drugs, and therefore is not involved in smuggling of drugs from Afghanistan, for example, to Europe.

PERIES: And Loretta, the other one thing that concerns everyone is of course the fact that the Islamic State is having such a huge and broad impact now at the borders of Europe. How much of this smuggling of people and the money that they’re making from it also a way of infiltrating into Europe?

NAPOLEONI: I don’t think that the Islamic State needs to use the migrants to infiltrate Europe. And the network of European young people who have been radicalized is actually quite large. So these individuals are already in Europe. They have European passports. So I really doubt that this information is correct. I know that there have been reports from Paris about fake passports. But this is something that a lot of these jihadis, which we may define as European jihadis, use fake Syrian passports to move around because they don’t want to use their true identity that will make it easier to be detected by the anti-terrorism. So that would explain why there was fake Syrian passports.

For what [the] concern of the fingerprints, one of the individuals that’s not been confirmed yet that this was indeed one of the people who participated in the attack, I would think that the Islamic State has everything to gain by projecting this image. Because of course that will create more tension in Europe, and what they want to do is create chaos, of course. But also it will block the European countries from taking refugees, so people will be trapped inside Syria and inside the Islamic State, and then will be forced to be part of this state.

PERIES: Now, Loretta, the G20 meeting is taking place in Turkey, and you saw in the opening John Kerry making a statement about what has come out of it. Do you think the G20 as a group will be able to address the issues faced by Europe, and in terms of dealing with ISIS?

NAPOLEONI: No, I don’t think so. I don’t think the G20 will achieve anything, to be honest. As usual, they will discuss all these issues without reaching an agreement about a true strategy. The real impediment here is the fact that we have other problems of foreign policy which are linked to reaching a common decision in Syria. In particular I’m talking about the relationship between Europe and U.S. and Russia, and the situation in the Ukraine, and also what is the role of NATO in relationship, not only to the Ukraine but also to the Baltic republic. So until we resolve these problems, I’m afraid there is not going to be any agreement on what to do in Syria and in Iraq.

I know that everybody, the entire world hopes that they will achieve a solution. They will present the world with a solution. But I don’t think that’s going to happen.

PERIES: And Loretta, finally, is there any way to strangle the financial aspects of ISIS, and therefore containing its growth by cutting off the refugee exodus, or in terms of breaking their supply lines in terms of the oil industry?

NAPOLEONI: No, I don’t think it’s possible to do anything. We’ve been bombing now for 16 months. So I should think that they’ve been bombing also the oil fields. We don’t know exactly what’s happened there because you know, we don’t have any Western journalists, so we are relying upon the propaganda that comes from the social media, and also we rely upon whatever the U.S. or the coalition forces are telling us. But you know, reading what happened in the last few days, I’d be surprised that they are now targeting the convoys carrying oil. Why didn’t they do it before?

I really think that being a state, and being a state which is very much sustained by war economy, the only way to starve its financing is to pacify the area.

PERIES: All right. Loretta, I want to thank you so much for joining us. I know you’re very much in demand right now, and I appreciate you coming on the Real News Network. Thank you.

NAPOLEONI: Thank you.

PERIES: And thank you for joining us on the Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.