A UK Foreign Affairs Sub-Committee says the Gulf States must apply legal barriers to the private financing of Islamic State (IS, formerly ISIS) by unidentified members of royal families in the region, particularly Saudi Arabia.

The financial operations of royals in the Persian Gulf are vague, the committee concluded, recommending the Foreign Office “work with local partners in the region to ensure they have the capacity and resolve to rigorously enforce local laws to prevent the funding of Islamic State, so that the group cannot benefit from donations in future.”

Assessing the likelihood of Sunni royal families directly funding terrorist groups, Foreign Office Minister Tobias Ellwood called the issue “very opaque.”

“When somebody who is close to the top of a royal family is a very rich individual donor … that is very likely to happen,” Ellwood is quoted as saying in the committee report.

Foreign Office senior civil servant Dan Chugg also said when “dealing with royal families, wealthy princes and those kind of things” it is “difficult with some of these countries to know exactly what is government funding.”

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“Our strategy was not to try to ascertain whose problem and whose fault it was, but to stop the funding going to Daesh [Arabic pejorative term for IS]. That was what was important. And that is what our efforts have been focused on,” Chugg told the committee.

The Gulf royal families have consistently denied funding links with IS, insisting they cooperate with the terrorist group’s adversaries.

The British government proclaimed IS a terrorist organization in June 2014, whereas Riyadh only made support for IS among Saudi Arabian citizens illegal in March 2015, the committee highlighted.

The report also lends extra weight to evidence of the dire state of IS’ finances. The group has been forced to impose the most improbable “taxes” on the populations under its control.

IS is sinking into “gangsterism and protection rackets” disguised as taxation, the report claims.

The would-be caliphate, which used to pull in US $80 million each month from its illegal activities, has lost most of its revenues for three principal reasons: the collapse of oil prices, “airstrikes to destroy ISIL’s bulk cash storage facilities,” together with elimination of financiers and efforts of Iraqi authorities curbing terrorist activities in the Iraqi banking system.

On the question of oil sales, the impact of market price can be disputed. IS revenues from selling smuggled oil were estimated at $50 million last October. But IS has never actually sold the oil it steals from Iraq and Syria at market price. The oil smuggled to Turkey has always been sold at only a portion of its worth and never actually depended on the fluctuation of oil prices.

The role of Russian Air Force in devastating oilfields under terrorist control, destroying oil processing facilities and eliminating thousands of oil tankers on their way to Turkish border, meanwhile, was disregarded by British MPs.

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US-led coalition airstrikes on the group’s oil infrastructure have been comparatively sparing, for fear of undermining “ultimate capacity for post–war reconstruction,” the report said. In case “oil production continues to provide the group with revenue and fuel,” the wellheads could be targeted “more intensively.”

As for the role of the Iraqi government in damaging IS finances, John Baron MP, chair of the committee inquiry team, said Baghdad should do more to prevent terrorists from operating within Iraq’s financial systems.

“The Iraqi government must demonstrate that this terrorist organization does not and cannot generate income from inside Iraq’s financial systems - that must be transparent to all,” Baron said. The UK could provide help to the Iraqi government in this effort, he added.

“The UK’s role in the economic war against ISIL” analyzes IS revenues, “including oil production, taxation, cash storage facilities, donations and access to local and international financial systems.”

The report concludes the UK should be playing a leading role in isolating IS from the global financial system.

“This is a fluid picture. As oil and tax revenues decline, ISIL is likely to seek new sources of funding. The UK should take a leading role in international efforts to identify and target new funding streams for ISIL with a stronger role in the Counter-ISIL Finance Group currently chaired by the US, Italy and Saudi Arabia.”