At its peak, the Islamic State of Iraq and the Levant (ISIL) controlled vast portions of territory in Iraq and Syria with several million inhabitants. ISIL's territorial ambition and desire to conduct state-like governance over this territory are integral to its global ideological appeal. By examining ISIL's impact on local economic activity in Iraq and Syria, this report seeks to assess the effectiveness of ISIL's governance over its self-styled caliphate.

This report leverages remote sensing data and commercial satellite imagery to offer a unique, data-driven look inside areas controlled by the Islamic State. It paints a bleak picture of economic life under ISIL, replete with shortages of electricity, massive refugee flows, reductions in agricultural output, and upticks in violence all associated with ISIL control.

At times, ISIL was able to build a dense governing apparatus that helped maintain stable local commercial activity, particularly in its strategic capitals in Raqqah and Mosul. At other times, ISIL mismanaged key resources or sought to punish its citizenry rather than govern it. However, this report suggests that decaying economic conditions in ISIL-held territory are also a product of ISIL's inability to insulate its territory from opposing military forces. Outside pressure against ISIL successfully prevented the group from realizing its governing ambitions across significant parts of its caliphate, with major consequences for its ability to support functioning local economies.

This report is important for those trying to understand the group's impact on local populations in Iraq and Syria, for those seeking to counter its financing or conduct post-conflict stabilization, and for broader efforts to understand the economic impact of insurgent governance.