Islamic State group, once aided by Gulf donors, profits from oil smuggling, human trafficking

WASHINGTON (AP) -- Islamic State militants, who once relied on wealthy Persian Gulf donors for money, have become a self-sustaining financial juggernaut, earning more than $3 million a day from oil smuggling, human trafficking, theft and extortion, according to U.S. intelligence officials and private experts.

The extremist group's resources exceed that "of any other terrorist group in history," said a U.S. intelligence official who, like others interviewed, spoke on condition of anonymity to discuss classified assessments. Such riches are one reason that American officials are so concerned about the group even while acknowledging they have no evidence it is plotting attacks against the United States.

The Islamic State group has taken over large sections of Syria and Iraq, and controls as many as 11 oil fields in both countries, analysts say. It is selling oil and other goods through generations-old smuggling networks under the noses of some of the same governments it is fighting: Kurdish-controlled northern Iraq, Turkey and Jordan.

While U.S. intelligence does not assess that those governments are complicit in the smuggling, the Obama administration is pressing them do to more to crack down. The illicit oil is generally transported on tanker trucks, analysts said.

"There's a lot of money to be made," said Denise Natali, who worked in Kurdistan as an American aid official and is now a senior research fellow at National Defense University. "The Kurds say they have made an attempt to close it down, but you pay off a border guard you pay off somebody else and you get stuff through."

The price the Islamic State group fetches for its smuggled oil is discounted —$25 to $60 for a barrel of oil that normally sells for more than $100 — but its total profits from oil are exceeding $3 million a day, said Luay al-Khatteeb, a visiting fellow at the Brookings Institution's Doha Center in Qatar.

The group also has earned hundreds of millions of dollars from smuggling antiquities out of Iraq to be sold in Turkey, al-Khatteeb said, and millions more from human trafficking by selling women and children as sex slaves.

Other revenue comes from extortion payments, ransom from kidnapped hostages, and outright theft of all manner of materials from the towns the Islamic State group has seized, analysts say.

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This undated file image posted on a militant website on Jan. 14, 2014, which has been verified and i …

"It's cash-raising activities resemble those of a mafia-like organization," a second U.S. intelligence official said, reflecting the assessment of his agency. "They are well-organized, systematic and enforced through intimidation and violence."

Even prior to seizing Mosul in June, for example, the group began to impose "taxes" on nearly every facet of economic activity, threatening death for those unwilling to pay, U.S. intelligence officials say. An analysis by the Council on Foreign Relations estimated the group was reaping $8 million a month from extortion in Mosul alone.

Once the group took over Mosul, in northern Iraq, and other areas, it grabbed millions of dollars in cash from banks, though not the hundreds of millions initially reported, U.S. intelligence officials say.

This spring, four French and two Spanish journalists held hostage by Islamic State extremists were freed after their governments paid multimillion-dollar ransoms through intermediaries.

The Islamic State group "has managed to successfully translate territorial control in northern Syria and portions of Iraq into a means of revenue generation," said a third U.S. intelligence official.

Analysts say the group is relying on the fact that the area along the border between Iraq and Turkey has long been a smugglers haven, and was made more so by the fall of Iraqi leader Saddam Hussein in 2003. Generations of families have illicitly moved goods through the region.

The Islamic State is the successor to al-Qaida in Iraq, which was founded by Jordanian Abu Musab al-Zarqawi. For a time, the group was allied with the Nusra Front, the al-Qaida affiliate that is a key player among the rebels battling Syrian President Bashar Assad. The Islamic State group has since broken with the Nusra Front and al-Qaida.

In the early days of the Syrian civil war, the Islamic State group was funded in large part by donations from wealthy residents of Gulf States, including Kuwait and Qatar, American officials have said.

"A number of fundraisers operating in more permissive jurisdictions — particularly in Kuwait and Qatar — are soliciting donations to fund ... al-Qaida's Syrian affiliate, the Nusra Front, and the Islamic State of Iraq and the Levant (ISIL)," David Cohen, the Treasury department's top counterterrorism official, said in a speech in March. ISIL is an alternative acronym for the Islamic State group.

That stream of funding has diminished in recent months as the group's violent tactics have drawn worldwide attention, U.S. intelligence officials say.

The group's reliance on oil as its main source of revenue could easily be disrupted by American airstrikes, officials say. But so far, no decision has been made to target Iraqi or Syrian oil infrastructure, which is serviced by civilian workers who may have been conscripted.

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US President Barack Obama delivers a live televised address to the nation on his plans for military action against the Islamic State, from the Cross Hall of the White House in Washington September 10, 2014.

President Barack Obama would seek to overthrow the regime of Bashar al-Assad if American planes were attacked upon entering Syrian air space, Peter Baker of The New York Times reports .

If Assad's troops f ired at American planes entering Syrian airspace, "Obama said he would order American forces to wipe out Syria’s air defense system," Baker reports. "He went on to say that such an action by Mr. Assad would lead to his overthrow, according to one account."

On Wednesday, Obama announced that he had authorized US airstrikes in Syria while laying out a four-part strategy to "destroy" and "eradicate" radical ISIS militants who have captured roughly a third of Syria and a third of Iraq.

Since August, US warplanes have backed Iraqi soldiers, Kurdish peshmerga fighters, and Iranian-backed Shia militiamen as they attempt to roll back ISIS gains in Iraq.

Baker, who spoke with 10 people who spoke to the president leading up to his speech on Wednesday, writes that Obama " struck his guests as less certain about the endgame on the Syrian side, where he has called for Mr. Assad to step down and must now rely on the same moderate Syrian rebels he refused to arm in the past."

Syrian rebels associated with the Western-backed Free Syrian Army (FSA) have scoffed at Obama's plan, saying that it rushes to target ISIS while ignoring Assad.

"I don't really understand this sudden fuss about ISIS," one FSA fighter told The Guardian. "They killed people, but Bashar has been killing for the last three years. But nobody seems to be interested in that anymore."

Opposition fighters note that simply bombing ISIS will not stop the criminal army and that a comprehensive plan is needed to deal with both ISIS and Assad.

"Instead of bombing ISIS from the air, we need support inside Syria to fight. It's the only way," Mohammed Al Bakhour, 31, a senior commander of an Aleppo-based FSA battalion, told the Guardian . "Once Assad is gone, we'll deal with ISIS ourselves."

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It's unclear if the US would protect what it calls "the legitimate opposition" near Aleppo, Syria's largest city and the last place that the FSA has a significant foothold. FSA-aligned revolutionaries are currently fighting for their survival as ISIS and Assad attack them from all sides.

Helping FSA rebels against Assad's warplanes would force Obama to get involved in " somebody else's civil war " while putting American planes in the sights of Syrian planes and air defense systems.

"From everything the administration has said and leaked to the press, we know that it will not offer the FSA any meaningful protection from the Syrian Air Force’s punishing aerial assaults, either in the form of a no-fly zone or shoulder-launched surface-to-air missiles," journalist Michael Weiss writes in Now . " This means that the same rebels who ... were already fighting six different enemies in Syria will only be equipped to carry on fighting one. So what happens if Assad continues to bomb America’s half-a-billion-dollar counterterrorism proxy force?"

The New York Times editorial board argues that without significant strengthening of Syrian rebels, then " there is no chance the fight against ISIS can be successful."

And then there is the hovering question of Assad.

The Obama administration has argued that US airstrikes on ISIS positions wouldn't help Assad because he has lost legitimacy in the areas currently under ISIS control. But without a strong nationalist opposition — which both Assad and ISIS are trying to destroy — the Syrian regime stands to gain from airstrikes on ISIS.

"Assad is the far stronger player in Syria; hitting ISIS necessarily helps him consolidate power," geopolitical expert Ian Bremmer told Business Insider in an email. "That’s a cause and effect that the US is trying to avoid, but it’s the reality."

LONDON (AP) — How do you divorce after a 300-year union? It's complicated, and there is a deadline.

If Scots vote yes to separation on Thursday, a clock starts ticking down to March 24, 2016 — the independence day declared by the Scottish government.

The British and Scottish administrations have agreed that they will recognize the outcome of the referendum and appoint negotiators to work out the details of separation "in the best interests of the people of Scotland and of the rest of the United Kingdom."

But there is disagreement on many issues, and only 18 months to redraft laws, establish international agreements and work out relationships with international organizations.

Robert Hazell, head of the Constitution Unit at University College London, says that is an "impossible timetable," and estimates it could take up to three years to hammer out the details.

Some of the key issues:

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DIVIDING THE ASSETS

The Yes and No campaigns have very different assessments of Scotland's financial picture, including its share of Britain's national debt and North Sea oil reserves.

The pro-independence Scottish government says Scotland would be entitled to 90 percent of Britain's oil wealth — based on divvying up the two countries' waters — but only liable for about 8 percent of its 1.3 trillion pound ($2.1 trillion) national debt, based on its share of the U.K. population.

The British government disputes this, pointing out that Scotland has higher per capita public-sector spending than England and so is more indebted.

Scottish independence leader Alex Salmond has signaled he could play hardball.

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COUNTRY CLUBS

Salmond says that Scotland wants to remain in the United Nations, the European Union and NATO, and he anticipates little difficulty in keeping those seats.

Opponents say re-admission cannot be guaranteed. NATO, in particular, may be perturbed by Salmond's promise to remove nuclear weapons from Scottish territory.

That's not so much a problem for Scotland — nuclear weapons are not a membership requirement — as for Britain, whose entire nuclear arsenal is based aboard submarines at the Faslane naval base in western Scotland.

Adm. Mark Stanhope, a former head of the Royal Navy, has said that moving the weapons "would add a dangerous period of destabilization in our nuclear defense posture at a time when the international picture is clearly deteriorating."

The Royal United Services Institute, a military think-tank, estimates that moving the weapons could cost several billion pounds (dollars) and take until 2028. In the shorter term, Salmond may seek to use the base as a bargaining chip in negotiations with Britain.

Opponents of independence also say the loss of Scotland would sharply reduce Britain's clout on the world stage. It could endanger its place in the G-7 group of wealthy industrialized nations and its seat on the United Nations Security Council, although Salmond says Scotland would support Britain in efforts to keep the security council seat.

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THE CURRENCY QUESTION

The day after an independence vote, the pound sterling will remain Scotland's official currency. The Scottish government wants to keep it in the long term as well — as a key prop of stability amid the uncertainty independence would bring.

British officials and bankers say it's not that simple. Bank of England governor Mark Carney has said that "a currency union is incompatible with sovereignty."

Salmond thinks the British government is bluffing. He says "a common-sense agreement on a common currency" is in everyone's best interest.

Another unknown is whether businesses will pull out of Scotland. Financial institutions including the Royal Bank of Scotland and insurance giant Standard Life have announced plans to transfer some operations south of the border to ensure they remain part of British tax and currency systems.

Salmond says these are administrative measures and that the firms will keep most of their thousands of jobs in Scotland — but only time will tell.

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DRAWING A BORDER

At the moment only a blue-and-white billboard informs motorists and train passengers that they have passed from England into Scotland, and border checks will not be set up the day after an independence vote.

Salmond said there is "no danger" of such border formalities, saying Scotland would become part of the passport-free Common Travel Area Britain operates with the Channel Islands and the Republic of Ireland.

He says Scotland, like Britain, will be a member of the EU. But opponents say membership cannot be guaranteed; countries such as Spain, that face strong secessionist movements, may be uneasy about quick recognition.

If Scotland remains outside the EU — or if Britain leaves, as some London politicians wish — there may be no alternative to border checks. Britain could also take umbrage if Scotland adopts much more liberal immigration policies.

Scots will be getting different passports if they opt for independence, even if they don't need them to cross the border. The Scottish government says all British citizens living in Scotland will automatically be considered Scottish citizens, as will Scotland-born Britons who live elsewhere. They will be able to apply for Scottish passports from independence day in 2016, and would be allowed to retain dual Scottish and British nationality.

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KEEPING THE QUEEN

One thing both sides agree on — Queen Elizabeth II will continue to be the Scottish monarch after independence.

Scotland and England shared a monarch for a century before they united politically in 1707, and the queen remains head of state in Canada, Australia and several other former British colonies.

The queen will keep her Balmoral estate in Scotland, the royal family's traditional summer-vacation destination.

Many other symbols of state are up for grabs. Scotland will likely adopt the Saltire, a blue-and-white flag that already flies alongside the Union Jack over government buildings in Edinburgh.

The red, white and blue British flag combines the emblems of its member regions, including England's red-and-white Cross of St. George and Scotland's blue. A redesign of the iconic banner may be in order.

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Follow Jill Lawless at http://Twitter.com/JillLawless

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