Current international strategies to strip the Islamic State (ISIS) of power and influence have been sluggish and often disjointed, as governments struggle to find ways to contain the organization. Viewing ISIS as a business enterprise instead of a state, however, could provide a surprisingly useful frame: the international community is essentially attempting to bankrupt and delegitimize a business—albeit one with an oppressive culture, impractical mission, and seventh-century values—and should focus on exploiting ISIS’s commercial vulnerabilities, degrading its competitive advantages, and matching its marketing successes.
In November 2014, the National Consortium for the Study of Terrorism and Responses to Terrorism at the University of Maryland published a study examining concepts in organizational behavior, and their pertinence to the Islamic State (ISIS). The hybrid jihadist group has built firm legitimacy through effective branding, a clear mission, and military and governance capabilities. It has built competitive advantages through human capital that is rare, inimitable and non-substitutable by other groups. And it engages in extensive succession planning and cross training and delegates day-to-day authorities to lower level officials, creating a low power distance and less susceptibility to collapse through turnover of top leadership.
However, the Islamic State’s mission, while clear, is largely unfeasible. The group seeks the establishment of a “lasting and expanding” caliphate with broad recognition across the Islamic world, but the legitimacy of a caliphate depends largely on the scope and stability of territory controlled. Under the duress of airstrikes, ISIS faces conflicting priorities: to defend its core territory, but also to attempt additional expansion to sustain recruitment and legitimacy, which overextends its military and human resources. According to Tom Keatinge, director of the Centre for Financial Crime and Security Studies, in declaring a caliphate, luring recruits, and promising welfare and a utopian religious culture, ISIS has become responsible for 6-8 million people. Iraq’s 2014 budget for the provinces ISIS currently controls totaled $2 billion—a heavy financial burden to fulfill. Removing ISIS’s competitive advantages would relegate it to a decentralized group with few concrete assets, squandering its mission and deterring recruitment.
Degrading ISIS’s Competitive Advantages
Large swaths of Iraq and Syria remain under sole control of the militant group. Yet many ISIS leaders are foreign mercenaries, not Iraqi or Syrian citizens. Consequently, international law enforcement’s apprehension of ISIS recruiters, counter-marketing campaigns to discourage recruitment, and the tightening of the Turkish and Kurdish borders all hurt ISIS’s ability to get the human capital it needs, through restricting recruitment and movement of new militants and professionals into the Islamic State. This restriction, in turn, allows airstrikes and raids to be more effective, causing rampant turnover of critical positions while leaving ISIS increasingly incapable of deploying individuals skilled in repairing that physical infrastructure.
Airstrikes and raids can be applied with more precision and synchronization. They should increasingly focus on mid-level officials who manage day-to-day operations and be more closely timed with concurrent raids that would provide a double punch that inhibits ISIS’s protection or recovery of vital military and communications infrastructure. Increased military support by France and the United Kingdom would augment the impact of these tactics.
Exploiting Commercial Vulnerabilities
ISIS provides some public services, such as policing, but earns far more revenue than expenses incurred in the public sector. Most Syrian public employees still receive salaries from the Syrian government and, until recently, Iraq still paid employees in ISIS territory. ISIS avoids public expenses in this form, but earns recurring revenues by taxing public employees for operating within their declared state. Additionally, most assets (such as religious or cultural antiquities, oil production facilities, and banks) were stolen through force: ISIS does not legally own them. And it reinvests these assets into communications to further its mission or revenue generation to finance militant operations and salaries. As a result, ISIS currently holds abundant levels of cash However, the ways the group obtains its funding causes numerous commercial vulnerabilities.
ISIS generates significant revenue primarily through taxation, bank seizures, and the sale of antiquities and oil, and the latter three revenue streams can be easily exploited. The seizure of Iraqi and Syrian bank branches and antiquities provide abundant cash or rapidly convertible assets, but pressure from airstrikes and Iraqi and Kurdish ground forces block ISIS’s ability to acquire new assets and generate sustainable cash flows from these sources. Moreover, many individuals and institutions in Syria and Iraq purchase oil from ISIS out of necessity, not adherence to its ideology. Many civilians, and allegedly the Syrian and Turkish governments, purchase oil from ISIS because it is the cheapest or the only supplier. The U.S. Treasury can pressure Iraqi banks to freeze accounts, delay disbursements to branches in ISIS territory and provide financial incentives to banks to offset losses. Additionally, the group’s proportion of current assets (those in cash or highly liquid form) remains high, but with few options outside of their territory to store cash. Several weeks ago the United States destroyed hundreds of millions of dollars through airstrikes on cash storage sites.
Beyond airstrikes targeting oil facilities, the United States can create sanctions to dissuade Syrian and Turkish government purchases of ISIS oil. Conversely, since many civilian customers reside outside of ISIS territory, if identified, the US could provide customers with oil or subsidies to purchase elsewhere. Containing and recapturing ISIS territory will restrict oil revenues and deprive ISIS of approximately 50 percent of its recurring revenue and fuel for military operations. This will force ISIS to rely primarily on increases taxes, likely encouraging resistance by civilians. As of mid-February, airstrikes on cash depots and other assets have reportedly already forced ISIS to cut militant pay by 50 percent. This deprives fighters of income and comforts, thereby decreasing morale, and discouraging new recruits.
Matching Marketing Successes
ISIS offers a consistent, focused message identifying itself as the solution to preserving Islam from Western aggression. According to Alberto Fernandez, from the U.S. State Department’s Center for Strategic Counterterrorism Communications, “We [the United States] don’t have a counter-narrative that speaks to that. What we have is half a message: ‘Don’t do this.’ But we lack the ‘do this instead.’ That’s not very exciting.” Furthermore, it remains unclear if the West has segmented its marketing appeals to adjust to the wide range of demographics and cultural origins of ISIS recruits. The West must develop a unified messaging campaign that counters both negative and positive ISIS messaging and markets a real alternative for ISIS followers. And these efforts must be applied across various social media platforms, television, and outdoor advertising in highly trafficked areas.
Americans typically desire quick solutions to complex foreign threats. Yet, groups such as ISIS often operate with two hopeful outcomes in mind: a) if they antagonize U.S. forces enough, U.S. civilian leadership will become weary and pull forces out; or b) that violent actions and threats will provoke a disproportionate escalation in force by the United States that strengthens the group’s anti-Western propaganda. To be successful, the United States must resist the impulse to do either. Treating ISIS as a business will encourage the West to think plan more strategically about the type of governance structures, public services and human capital that that must be developed as long-term replacements for ISIS.
Sam Schofield is a first-year MBA student at American University’s Kogod School of Business in Washington, D.C. Sam has a passion for research and writing on issues at the intersection of business, the political economy, U.S. foreign policy and national security. He has a B.A. in International Affairs/Geography from the University of New Hampshire and previously spent seven years working in Boston for an international NGO focused on sustainable development and conservation for rural communities in Central America and Mexico.
Image: U.S. Navy F-18E Super Hornet aircraft over northern Iraq in 2014 (U.S. Department of Defense/Flickr).