With so-called Islamic State (IS) revenue streams drying up as it continues to lose territory in Syria and Iraq, IS is resorting to a fire sale by liquidating whatever marketable products it can, Iraqi prosecutors say.
The Iraqi Higher Judicial Council said in a recent report that prosecutors’ interrogations with a group of captured IS members tell of how IS is dumping goods on Iraqi markets in hopes of making quick profits needed to continue military operations.
“Confessions of this group clarified that the organization has recently resorted to an indirect mechanism of funding by sending goods to its suppliers who will later sell them to retailers,” the report said.
Before it started to lose territory, IS generated millions of U.S. dollars in illicit revenues by smuggling oil and gas and implementing a harsh system of taxation in areas it controlled.
But as the U.S.-led coalition pounded IS’s tankers and oil infrastructure, U.S. Treasury Department and Iraqi oil officials say IS oil revenues have plummeted by as much as 90 percent from a high of $80 million monthly in 2015.
And as IS flees areas in Iraq and Syria, its ability to tax residents has been stifled. Recent reports say cash-strapped IS has stopped paying the salaries of its fighters in some areas.
Iraqi authorities say IS is dumping on markets cheap food supplies that are close to expiry for a quick sell out.
“The retailers sell the goods in the Iraqi market under the banner of ‘Special Offer’ to attract more customers,” the Judicial Council said.
The products are entering Iraq from neighboring countries through a system of smuggling by trucks that had enabled IS to keep Mosul running before a U.S.-backed offensive began pushing IS from the city last year.
But merchants say the cheap IS goods are forcing prices to plummet and profits to fall.
Dlshad Abdullah, an Iraqi merchant from Irbil who imports household supplies from China to northern Iraq, told VOA that tradesmen are alarmed.
“What I have noticed the last three months is that there have been some goods in the market much below the usual rates,” Abdullah said. “People usually pay over $600 to buy an air conditioner, but there have been cases were they were sold for $120.”
Abdullah said traders “have to be cautious of buying goods that are oddly cheap” because they cannot guarantee their authenticity.
Experts say the dumping of goods by IS shows the group’s increasing financial desperation.
Ghayath Surchi, a spokesman for the Kurdistan Patriotic Union in Mosul, told VOA that IS fighters crammed in neighborhoods of old Mosul are depending on looting stored supplies in homes they confiscated from residents.
“IS was in control of Mosul’s trade center until about a month ago and allowed tradesmen of the neighborhood to flee if they agreed to hand over their goods,” Surchi said.
Sarhang Hamasaeed, director of Middle East Programs at the U.S. Institute of Peace in Washington, said with IS on the run, it will be interesting to see if IS can replicate its financial empire as it regroups.
"As IS loses ground, its expenses also go down because it wouldn’t need to pay and expend on the same functions of running a government and matters of public,” he said adding that IS may go back to the rudimentary tactics of trying to extort money from locals.