Economy of Terrorist Groups

By Ayman Okeil

I was intrigued by a news item on an international media platform stating that a terrorist group, primarily active in an Arab country, collects more taxes than the state in which it operates. It is a strange paradox that an armed group functioning outside the framework of the state can generate greater revenues than the state itself.
This observation motivated me to explore the economies of terrorist groups and how they collect their resources. For instance, in Somalia, where Al-Shabaab movement is active, the group controls areas in southern and central Somalia and generates significant financial resources, estimated to be between $70 million and $100 million annually. These funds come from various sources, including illegal levies imposed at approximately 23% of the checkpoints under its control. The primary source of these levies is the local population and traders, as the movement relies on both permanent and mobile checkpoints to maximize revenue, particularly from trade routes involved in the illegal charcoal trade. The tax imposed on a single truck passing through these checkpoints can reach about $850. Additionally, the movement collects zakat from the local population, particularly during Ramadan each year.
Al-Shabaab also benefits from maritime piracy operations off the east coast of Africa, which include kidnapping and ransom activities. Furthermore, it receives funds from outside Somalia through M-PESA application, enhancing its financial resources. These accumulated funds enable the movement to plan and coordinate new terrorist operations, including attacks in the capital, Mogadishu.
In contrast, ISIS currently retains an estimated $20 million, a significant decrease from the financial resources it once possessed, which some reports estimated at $100 million annually during its peak power after 2016. The group’s primary revenue sources included cattle theft, kidnappings for ransom, and taxes levied on fishermen and farmers in communities under threat. The decline in ISIS’s financial resources appears to result from measures implemented by various Arab countries targeting financial transactions involving individuals suspected of affiliation with the organization. Additionally, a shortage of gold reserves previously held by the group has exacerbated its financial struggles, leading to expenses exceeding revenues. Consequently, ISIS has adopted a different strategy for conducting terrorist operations, opting for fewer but more impactful attacks. The organization has also shifted its focus to acquiring weapons and paying salaries to its militants. While it cannot be said that ISIS’s funding sources have completely dried up, the organization is actively seeking to diversify its revenue streams. Notably, there has been a recent increase in sheep theft in areas controlled by the Syrian army, with stolen livestock being smuggled to regions controlled by the Syrian Democratic Forces or across the border into Iraq, where they are sold in livestock markets, in addition to attempts to use digital platforms for fundraising through cryptocurrencies.
One of the terrorist groups whose financial resources have been monitored is Al-Qaeda in the Arabian Peninsula. This group primarily operates in southern Yemen and collects funds through various sources, including illegal oil smuggling, kidnappings for ransom, and donations via the internet and charities that serve as fronts for the organization. Therefore, it is essential to intensify the exchange of information among Arab countries regarding terrorism. We must also encourage studies and research that track the actions of terrorist groups and analyze their behaviors. Additionally, activating the Arab strategy to combat terrorism and developing innovative mechanisms for its implementation is crucial.