The Impact Of The Oil Collapse On ISIS Is Severe (STA BREAKING NEWS and ARCHIVES)

by Theresa , Thursday, January 15, 2015, 10:34

As oil prices continue to fall, flirting with the US$40/bbl floor, there has been much talk of cheap oil’s winners and losers. The discussion has focused on big producer and consumer countries, but there may be another contender in the loser category – namely, the Islamic State.

In its gambit to become a state, it unwittingly became a hydrocarbon state, and as such has exposed itself to the same economic volatility that plagues other rentier states.

However, unlike most hydrocarbon states, the IS has not had the benefit of having been around long enough to build a stabilization fund – the cash reserves that can smooth out the highs and lows of commodities markets – and in this sense it is likely to be even more of a loser than conventional oil reliant countries (the IS’s own claims to have a budget surplus of US$250 million are not credible.)

What this means is that with less revenue the nature and focus of the IS’s military operations will change and that the IS will have to turn to other financing methods such as extortion and organized crime to address the revenue shortfall.

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