McClatchy reports: The Islamic State might be the best-funded radical Islamist group, perhaps in history, but the coalition air campaign that’s targeting its oil-refining operations and military assets has begun to damage its ability to earn.

And by denying the group additional territorial expansion, the airstrikes have limited the opportunities for it to profit from capturing new infrastructure and banks, according to a recent report by a money-laundering watchdog group, as well as U.S. officials and residents of Islamic State territory.

The Islamic State, a self-styled modern caliphate that controls much of northern and western Iraq and eastern Syria, turned itself into perhaps the richest and best-equipped military non-state actor last June after seizing tremendous amounts of money and equipment from the Iraqi government as it swept through Mosul and to the western and northern outskirts of Baghdad while the Iraqi army collapsed.

The Islamic State is thought to have at least 30,000 combatants and 5 million to 6 million people under its control, leaving a huge economy to be taxed and extorted.

Thousands of armored vehicles and thousands of tons of military equipment, much of it modern weaponry supplied to Iraq by the United States, were seized in the rout last June, along with cash reserves from government banks, mostly in local currency, of at least $500 million, according to the Financial Action Task Force, an international money-laundering body that examined the group’s complex financial operations in a report released in late February.

That windfall came as the group was already making millions of dollars a day pumping and refining oil and petroleum products from previously captured oil fields, mostly in eastern Syria, where the group has wrested control of at least 50,000 barrels per day of oil and refined petroleum output, according to the task force’s report, a number widely supported by reports from the area.

Although the task force notes recent efforts by Turkish and Kurdish officials to limit the Islamic State’s ability to export these products by smuggling, not all the exporting has been stopped. Even the group’s rudimentary oil-refining ability — a process commonly targeted by coalition airstrikes — while damaged, is probably sufficient to at least support the group’s huge military operation and provide some income stream. [Continue reading…]