The Economist’s Pomegranite blog: In between chopping off the heads of its adversaries, crucifying miscreants and committing acts of genocide, the Islamic State (IS), the al-Qaeda-minded extremist group that straddles Iraq and Syria and is being targeted by American airstrikes, is dealing with more mundane issues — such as the school curriculum.

This month, August, IS called in teachers in Raqqa province in eastern Syria and set out new conditions for them to receive their salaries, says the Syrian Observatory of Human Rights (SOHR), a Britain-based group that has a network of informants in Syria. IS told the teachers to dedicate more hours to Islamic studies, as well as dropping subjects including philosophy and chemistry. The prompt for the rules appears to be that the government in Damascus has pulled the plug on the education budget of the region, 18 months after it was taken over by rebels opposed to Bashar Assad, Syria’s president.

The evolution of IS from insurgent group to a self-declared state straddling much of the Euphrates valley would not have been possible without careful financial and administrative management, alongside effective military tactics, exploitation of social media and an uncompromising ideology. The group operated a lucrative protection racket in Mosul, Iraq’s second city, long before it took it over on June 10th with the help of allied Sunnis disgruntled with the government in Baghdad. The funds helped to finance IS’s expansion into Syria in 2013.

IS may also have tapped into the pool of funds from Gulf Arab donors to Salafist and jihadist groups in Syria, but its Iraqi revenue streams gave it an edge over its rivals. The group’s takeover of the eastern Syrian city of Deir ez-Zor has given it access to a cluster of oilfields in that area that used to be operated by Shell and Total, Western energy companies, allowing it to sell oil, some allegedly to the regime in Damascus. Additional revenue comes from taxing farmers in both Syria and Iraq, and from various forms of extortion in the towns it controls, including levying jizya (tax) on Christians.

IS’s mission is to create its own caliphate, but until now many of its sources of revenue have depended on its host states. In Iraq, the money that IS extorted from contractors, businesses and institutions ultimately derived from the expenditure of the central government in Baghdad. In both countries, IS’s “subjects” include thousands of employees of the respective central governments, who are still drawing their salaries from the government and carrying out their functions. [Continue reading…]