Finweek English Edition - - REWIND - GLOBAL TER­ROR­ISM IS

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.”

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