not a new thing. For years terrorist attacks have increased across the globe – with the newest Islamist militant groups Boko Haram and the radical Islamic State of Iraq and Syria (ISIS) becoming more outspoken and violent in their attacks. How do groups like these acquire the money to expand at such a rapid rate, and what is the effect of terrorism on the global economy?
In a recent interview with CNN, Matthew Levitt, the director of the Stein Program of Counterterrorism and Intelligence at the Washington Institute for Near East Policy, described ISIS as “the best-financed group we’ve ever seen.” It is estimated that ISIS makes between $ 1m and $2m a day, and, according to Iraqi officials, the group’s financial reserves are estimated to be around $2bn and growing.
Aside from its cross- border oil smuggling activities ( i n 2012 I SIS took control of the oilfields in eastern Syria, securing massive cash flows), the Islamist extremist group has many other ways in which to finance its operation – including through morethan-generous donations from wealthy sympathisers around the world.
The group amassed further finances through the looting of the central bank in Mosul, Iraq, as well as other smaller provincial banks, and through the absurd taxation and extortion of the population in territories under its control.
While experts say that it is still too early to tell what long-term negative impact these terrorist groups will have on the global economy, they have some idea of what might happen should these groups succeed.
For one, oil prices could spike dramatically. Should ISIS gain control of world’s biggest oil- exporting countries, there is no doubt that they would increase oil prices, especially in dealings with the Western world, which would detrimentally slow global growth.
This could also l ead to an oil embargo. Should terrorist groups gain further control of oil-producing regions – such as Iraq (which is the second- largest oil producer in the Organisation of Petroleum Exporting Countries (Opec), producing 3.17m barrels per day in June alone) – it could spell trouble for the rest of the world.
In 1973, Opec placed an embargo on the US and its allies, which resulted in a catastrophic recession, and as we all know, when the US gets knocked down, the rest of the world feels the punches. Another speculative theory suggests that since the oil prices will rise at a frightening pace, with inflation increasing just as fast – which may cause the Federal Reserve Bank to counteract with higher interest rates. The theory further suggests that this may cause the stock market to crash.
Whi l e these are j u s t s o me speculative theories, the idea of some terrorist organisation gaining control is frightening. Should such terrorist networks become more successful in their endeavours, the knock-on effect on the economy could be massive, with dire consequences for the Western world, if not globally.
Said Min Zhu, deputy managing director of the International Monetary Fund: “The financing of terrorism are financial crimes with economic effects. They can threaten the stability of a country’s financial sector or its external stability more generally. Effective combating of the financing of terrorism regimes are essential to protect the integrity of markets and the of the global financial framework… action to prevent terrorist financing thus responds not only to a moral imperative, but also to an economic need.”