The Wall Street Journal reports: The Islamic State runs a self-sustaining economy across territory it controls in Syria and Iraq, pirating oil while exacting tribute from a population of at least eight million, Arab and Western officials said, making it one of the world’s richest terror groups and an unprecedented threat.

That illicit economy presents a new picture of Islamic State’s financial underpinnings. The group was once thought to depend on funding from Arab Gulf donors and donations from the broader Muslim world. Now, Islamic State—the former branch of al Qaeda that has swallowed parts of Iraq and Syria—is a largely self-financed organization.

Money from outside donors “pales in comparison to their self-funding through criminal and terrorist activities,” a U.S. State Department official said, adding that those activities generate millions of dollars a month.

For Western and Arab nations that are striving to stop Islamic State, the group’s local funding sources pose a conundrum: A clampdown on economic activity that helps fund the group, counterterrorism officials and experts said, could cause a humanitarian crisis in the already stressed areas it controls.

“Can you prevent ISIS from taking assets? Not really, because they’re sitting on a lot of assets already,” said a Western counterterrorism official. “So you must disrupt the network of trade. But if you disrupt trade in commodities like food, for example, then you risk starving thousands of civilians.”

From Raqqa in Syria to Mosul in Iraq, Sunni radicals from the group administer an orderly extortion system of business and farm tributes, public-transport fees and protection payments from Christians and other religious minorities who choose to live under the militants rather than flee, according to residents of these areas, analysts who have studied the group and government officials tracking it.

Islamic State also does business with people from some of the same regions whose governments are trying to stamp it out. From the territory the group has taken, it controls the sale of oil, wheat and antiquities, spurring a vast gray market with buyers as unlikely as the Syrian regime and Shiite and Kurdish businessmen from Lebanon and Iraq, said Western officials and Syrians and Iraqis with knowledge of the now-common business transactions.

“They have a stable economy, more or less, across their territory in Syria and Iraq,” said Hasan Abu Hanieh, a Jordanian scholar of Sunni radicalism who is an expert on al Qaeda and Islamic State. [Continue reading…]