Up until last year, Daesh was experiencing significant growth. The group was growing in terms of its local economy, supporters, recruits and territory; it seemed to be unstoppable. It perplexed terrorism experts and the foreign and security policies of nation states began to revolve around what seemed to be an existential threat. From debating air strikes, ground forces and even granting Daesh diplomatic recognition, the possibilities seemed never-ending; the battle was exhausting. The patterns of the extremists' fluctuating territorial gains and losses have in many ways depended on the military activity around them, along with their ability to generate revenue to fund their so-called caliphate.
A Wall Street Journal report, though, has shown that there are now weaknesses in Daesh's economic infrastructure, according to intelligence documents it has obtained. The group started to feel a strain in its finances after Abu Sayyaf, a high-ranking official who had a role akin to an oil executive, was killed by US Special Forces during a raid. The Americans also managed to capture documents which explained how Daesh became the world's wealthiest terrorist group. Despite Abu Sayyaf's lack of experience in the oil and gas industry, he managed to build an extensive energy trade network which led to him tripling Daesh's energy revenue at one point. He did so in many ways, one of the most important of which was through securing business deals with the Assad regime in Damascus.
Since his death, Daesh has been unable to find a competent replacement, which means that its oil revenue has fallen significantly; it now relies heavily on taxation and paying lower benefits to its fighters. Daesh propaganda revolves around financial security for those who choose to submit to the caliphate and many who migrate from Western countries do so expecting a luxurious, extravagant lifestyle. The reduction in benefits has led to low morale among Daesh fighters, who are paid an average of $50 per month plus $50 for each wife and $35 for each "sex slave". Local fighters are usually paid less than this. To compensate for the loss in income, Daesh has also made electricity cuts in some cities and are imposing more fines and "repentance fees" on residents. Documents show that there are now more fighters asking their doctors for sick notes in order to get out of their military duties. Furthermore, stricter border controls by the Turkish police and the loss of areas that were once key to smuggling, such as Tel Abyad and Kobane, mean that there has been a decrease in the inflow of foreign fighters.
Moreover, with fewer territorial gains there have been fewer opportunities for looting, another source of income, a drop in which has paralysed Daesh's economic growth. The last significant gains were made in May last year when the group captured Ramadi in Iraq. This led it to spread into the rest of Anbar province and parts of neighbouring Salah Al-Din province, although this was after Daesh had lost Diyala and Babil, which were regarded as military strongholds. This year has been significantly difficult for Daesh, with estimates that it has lost 22 per cent of its territory across Syria and Iraq.
With hindsight, its loss of territory seems positive, but not when you look at who has replaced Daesh's presence in areas like Diyala in Iraq and Palmyra in Syria; the situation is worrying. Given the damage that the Assad regime has caused — with indiscriminate barrel bombs, chemical weapons and countless war crimes — it is clear that the Syrian president is not the best option for his people.
Assad has conducted business deals with Daesh and turned a blind eye to the influx of jihadists coming into Syria from Iraq after the fall of Saddam Hussein. His is not a regime that can be relied upon to instil stability in Syria. He allowed for a Baathist-jihadist tactical alliance to develop in the mid-2000s because he believed that it would create an internal buffer zone, should the Americans decide that he deserves a fate similar to that of Saddam Hussain. This is surely sufficient evidence that Syria cannot be a competent ally in the counter-terrorist struggle. In Iraq, areas that have been captured from Daesh have fallen into the hands of Shia militias, in alliance with the Iraqi government, who are carrying out many very serious atrocities.
Another problem is that despite it losing ground and power, the conditions that fostered the growth of Daesh are still there. Without addressing the political instability and the humanitarian crisis that has allowed the group to grow, it will continue to exist, albeit reshaped and adapted to new circumstances. It has been doing this from the beginning of the foreign air strikes, since when Daesh has been using smaller cars instead of SUVs, or walking instead of driving so that heat sensor satellites don't pick up its fighters' movement and activities.
There are also some financial activities about which we actually know little and can only guess at, such as the income from drug smuggling. Last year, the Russian intelligence services estimated that the smuggling of heroin alone is worth $1bn to Daesh, around half of its overall economic value as a "state". These figures have not been challenged internationally, but they remain very hard to prove. This adds some ambiguity to Daesh's ability to morph, rebrand, recover and reinvent itself.
The incompetence of the international community has thus not only helped Daesh to survive, but also to overcome its weaknesses. Though much of the way that it operates remains a secret, from what we know it is clear that the international community is not facing up to facts and is instead looking for quick fix solutions to the Daesh question. This is being done in the main by dealing with the same parties and regimes that have allowed to stay in place the conditions which are ideal for Daesh to prosper. This situation cannot be allowed to continue if we are serious about defeating the extremist group.
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.