How Much Does It Cost To Run A Caliphate?

The self-proclaimed Islamic State is known as the world's richest terrorist organization, but the group is having to pay for services to the areas they are controlling in Syria and Iraq. U.S. analysts and officials say the financial burden of the group's territorial ambitions could ultimately lead to ISIS' demise.

MELISSA BLOCK, HOST:

It's been five months since ISIS established what it calls an Islamic state. In that time, the group has gained territory both in Syria and Iraq, enough territory that the group now controls an area as large as West Virginia. But as NPR's Dina Temple-Raston reports, governing that area costs a lot of money, and U.S. officials believe ISIS may be in the red.

DINA TEMPLE-RASTON, BYLINE: The U.S. Treasury says oil sales, highway taxes and extortion, among other things, are allowing the so-called Islamic State to bring in as much as $30 million a month. If the group was just funding terrorist operations, that much money would be more than enough. Trying to govern, however, is an expensive enterprise. And that means the Islamic State's money goes out about as fast as it comes in. Here's a rough tally to get an idea of what the group is likely to be spending.

CHARLES RIES: You'd want to start with how much they are paying their soldiers.

TEMPLE-RASTON: Charles Ries is a vice president at the RAND Corporation. He was the coordinator for economic transition in Iraq in 2007 and 2008.

RIES: We have some evidence that they're paying the sort of run-of-the-mill soldier maybe $500 a year.

TEMPLE-RASTON: So multiply by that by 30,000, which is how big the CIA thinks the group is now, and you get $15 million a year. But that's only part of the cost, Ries says. The Islamic State also supports fighters' families.

RIES: They pay, apparently, 250 extra dollars a year for each dependent these soldiers have. And if they are at all advanced in age, then the cost goes up quite a bit.

TEMPLE-RASTON: The cost goes up so much because soldiers take multiple wives and typically have children with each of them. So that's one expense, supporting fighters and their families. But the Treasury Department says the big ticket item for the group is the cost of governing - providing electricity to residents, which in Iraq has traditionally been delivered for free, subsidizing food and paying local officials and tribal leaders.

RIES: So when you add up all these costs, it's not hard to imagine that we're talking about running costs of hundreds of millions of dollars for governance, even of a very basic nature, of these territories.

TEMPLE-RASTON: So the Islamic State could be spending hundreds of millions of dollars a month to govern the area it has taken; and that's new.

JUAN ZARATE: What you have here is an innovation in a terrorist group.

TEMPLE-RASTON: Juan Zarate was an assistant secretary at the treasury, where he focused on terrorist financing. The innovation is that the Islamic State is a terrorist group trying to generate revenue to establish what is essentially a country within a country.

ZARATE: They're having to expend money to operate. And what those numbers ultimately look like, I'm not sure. But it does suggest that they're not walking around with bags and bags of excess cash that they can simply bury in the desert and come back to.

TEMPLE-RASTON: No bags of excess cash because there's never been anything as ambitious or as costly as what the Islamic State is trying to do now.

DAVID MACK: I'm David Mack. I'm a scholar at the Middle East Institute in Washington, D.C.

TEMPLE-RASTON: Mack was in the State Department for 30 years. He served as an ambassador all over the Middle East and North Africa. And he thinks the Islamic State made a mistake when it declared a Muslim homeland, or caliphate.

MACK: Accepting the responsibilities of being a state and responsible for the water systems, the food distribution, law and order, health care for all the inhabitants, is a huge step.

TEMPLE-RASTON: And maybe, officials say, an overstep. Just consider Mosul, the largest Iraqi city under ISIS control. In the five months since the group took over, there are reports of food and water shortages. The price of kerosene for cooking has more than tripled since June. Treasury officials say that's an indication that the group is being squeezed. And it's a vulnerability they hope to exploit. Dina Temple-Raston, NPR News.

Copyright © 2014 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.