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Is the Islamic 'state' doomed to failure?

By building an economy that is based on oil and a society confined by severe and repressive laws, the economic and social foundations of the so-called Islamic State are doomed to crumple.
Al-Hayat (translation: Al-monitor)
December 8, 2014
Vicken Cheterian
This Islamic State (IS) is offering a new job for those interested. No, it's not aimed at carrying out a suicide mission or executing hostages, but rather it's a high-paying position involving managing one of the organization's oil refineries in exchange for 140,000 British pounds ($220,000) per year.
IS today controls a section of land stretching between Iraq and Syria that is more than three times the size of Lebanon and contains 8 million people. In the event that a political project attracting Arab Sunnis in both Iraq and Syria does not emerge, the area IS controls could extend west toward Aleppo and south in the direction of Baghdad, and perhaps even beyond. It is very likely that we are currently witnessing the birth of a new nation in the Middle East, but the question is: what will be the nature of this state?
The majority of analyses on IS have revolved around the organization's ideology and speeches, and in particular its brutality and the doctrine of violence that it believes in. Yet if we want to understand the nature of the state IS is establishing, our analysis should not be limited to statements made by the group. Rather, we should be concerned with its actions. We can conclude from the analysis that IS is repeating the bad model of the states that existed in the Middle East, and whose failure led to the popular revolts known as the Arab Spring.
IS has begun to establish an economy based on oil that is no different from the system that existed in Iraq under the rule of [former Prime Minister] Nouri al-Maliki, or even before him under [former President] Saddam Hussein. To operate the oil and gas facilities that the group now controls in Iraq and Syria, IS is in dire need of engineers and directors, because of the fleeing of many technicians that were living in the largest Iraqi and Syrian cities that fell under IS control. The recent air raids carried out by coalition forces targeted oil product facilities in order to direct a blow at the organization's economy. In response, IS is searching for volunteers from Arab and Islamic states, recently calling on Saudi youth working for oil companies to volunteer to join the "Islamic caliphate" and help it manage its oil sector.
Available reports reveal that oil production lies at the head of IS' "new" economy. After the acts of violence perpetrated by IS drove away technicians and managers, the group is urgently in need of workers possessing the necessary qualifications to move the wheels of the economy. Otherwise, in the end it will be forced to face the wrath of the large number of residents under its control - reaching 8 million today - or will be unable to provide food to fighters raising its black banners, whose numbers range from 30,000-50,000.
The volume of IS' oil production has been estimated at 80,000 barrels per day (bpd), but it has declined since the start of the US bombings. This figure only represents a fraction of Iraqi oil production, amounting to 3.4 million bpd in 2013, or Syrian production, which reached 400,000 bpd in the same year.
In addition, IS will realize that the Arab young people, who are enchanted with ideological vows, have limited wherewithal; thus IS will be forced to relinquish some of its ideological fervor to attract cadres from the former regime. The enticing authorization to grant a salary of 140,000 British pounds is only the beginning. All revolutions, from the Russian Revolution of 1917 to the anti-colonialism movements, passed through similar stages whereby the choice lay in either allowing for the collapse of existing economic and political institutions, or integrating "ideological enemies" into the new state.
IS controls 11 oil refineries, bringing in an estimated daily income from oil sales ranging between $2 million and $3 million. Given that oil is its primary source of income, the state that IS is working to build will not differ from that of the Iraqi government in power today, nor from the one that managed the affairs of the country under the Baathist regime. With oil at the heart of the organization's economic activity, this will define the features of all other activities and sectors, something known as the "Dutch disease." Non-oil imports will become easier and cheaper than developing domestic production, whether industrial or agricultural.
Available information suggest that IS sells oil at a low price, not exceeding $20 per barrel domestically and $40 per barrel for exports, while the international price stands at about $80 per barrel. The low quality of the oil produced may be the reason it is selling for such a low cost, as its production is considered illegitimate and therefore must be sold at a cheaper price. The second reason as to why IS is selling oil at cheaper prices within the areas it controls is to supply local residents with cheap oil sources. This is a policy pursued by oil-rich countries to support the local economy and stimulate consumption.
Taxes, alongside embezzlement and the looting of ancient treasures, is one of the means used by IS to gain profit. The organization also receives support from wealthy donors abroad, with the value of total gifts estimated at $40 million during the past two years.
The worst repercussions of IS policies are evident in the social and educational sectors. In order to understand the method IS will adopt to manage its state, one cannot ignore the group's ideology. It has excluded half of the workforce - women - from the labor market. IS has also implemented strict control on the educational system, excluding any reference to evolution, Darwin, democracy, elections and many other things. In the field of media and communications, the group has imposed laws and strict controls on journalists, requiring them first and foremost to express their loyalty to the "caliphate," not to the truth or their readers.
IS has not shown any signs of having a clear vision for projects related to agriculture, aside from the destruction of farms belonging to those who do not share their beliefs. However, the decline of the agricultural sector should be of concern to IS leaders. The Jazeera region of northeast Syria has been totally destroyed as a result of years of drought, which caused the collapse of thousands of farms and led to the internal migration of a large number of residents. This is one of the causes for the current conflict in the country. Population growth and declining water supply - which can be attributed to a number of reasons, including climate change and the construction of dams in Turkey - will only increase these pressures in the coming years.
Furthermore, demographics is another issue that should be of concern to IS. Syria was one of the countries experiencing rapid population growth, witnessing an annual increase of 2% before the outbreak of the war, compared with a growth of 2.9% - equivalent to 1 million people - in Iraq in 2013. Unemployment among youth was a common problem that arose in 2011, the year in which the "Arab Spring" began. How will IS solve this problem in the areas under its control?
Worst of all, IS is establishing a state mired in permanent conflict. While the organization maintains power in a limited geographic region, its ideology knows no boundaries. As a result, there will be an ongoing war with its neighbors. Here, too, the organization has brought nothing new. The two Baathist regimes in Iraq and Syria did not resolve the borders of their states, and they were living in a state of constant conflict with their surroundings and with each other.
At its core, IS is no different - in terms of both its economic system and its oppressive and ideologically heavy-handed social policies - from the former Baathist regimes, or from Abdul Hamid II, the last of the "real" caliphs and the Sultan of the Ottoman Empire in the final decades preceding its collapse. History is repeating itself in the Middle East - the region will not experience a new farce, but rather an ongoing tragedy.
As for the 140,000 British pound salary being offered by IS, the British Daily Mail noted that while the amount may be high for the group, the same is not true for an international oil director with many qualifications.
2014 Al-Monitor
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