The shrinking caliphate

Foreign Policy:

The Islamic State’s self-proclaimed caliphate is no more, according to an Iraqi military spokesman, and a new report on the group’s shrinking revenue suggests he might be right.

“Their fictitious state has fallen,” Brigadier General Yahya Rasool told state television.

The group’s apparent collapse is backed up a study released Thursday morning that found three years after Islamic State declared its caliphate on parts of Iraq and Syria, it has lost 80 percent of its revenue and roughly two thirds of its territory. The report, by IHS Markit, a London-based information and analytics group, found the Islamic State’s average monthly revenue has fallen dramatically from $81 million in the second quarter of 2015 to $16 million in the second quarter of 2017 — an 80 percent drop.

Revenue is down across all of the terror group’s income streams: taxation of the people under its control, confiscation of goods, oil smuggling and production, and trade in illegal antiquities. IHS found that monthly oil revenue is down 88 percent, and income from taxation and confiscation has fallen by 79 percent from initial estimates in 2015.

“Territorial losses are the main factor contributing to the Islamic State’s loss of revenue,” said Ludovico Carlino, senior Middle East analyst at IHS Markit. “Losing control of the heavily populated Iraqi city of Mosul, and oil rich areas in the Syrian provinces of Raqqa and Homs, has had a particularly significant impact on the group’s ability to generate revenue.”

As it rose to power, the Islamic State became a financial behemoth. According to a 2014 Thomson Reuters study, the terrorist group had more than $2 trillion in assets under its control, with an annual income of $2.9 billion. Other estimates vary, but they all show a group with once-deep pockets.
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The caliphate is also suffering from shrinking manpower as forces against it have moved to an annihilation strategy that cuts off avenues of retreat and focuses on wiping out those still fighting.  The groups still may be able to inspire attacks against targets outside the territory it once claimed as is happening in the Philippines at this point.  It also claimed responsibility for a recent attack in the UK.