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​The Economics of the Islamic State: Terror as a Global Start-Up

Talking to Loretta Napoleoni, whose new book, The Islamist Phoenix: The Islamic State and the Redrawing of the Middle East, looks at how unique and singular the Islamic State is as a terrorist organization.
December 2, 2014, 11:09pm

Photo by Jean-René Augé-Napoli

At this point, with the Islamic State's stated ambition of establishing a global Sunni-extremist nation-state and its reportedly vast coffers, it's safe to say that it requires accountants and advisors who wouldn't be out of place at the most sophisticated of Fortune 500 companies. The expertly run finances of the organization, if anything, should remind those who only first learned the definition of caliphate in late June that these sorts of things do not happen overnight.

In terms of marketing and socio-economic ingenuity, it would not be unfair to compare IS to what some of today's private-sector tech behemoths looked like in their halcyon days. Its novel use of social media and old fashioned brutality have birthed a participatory culture that, in many respects, is a true form of consumerism that has solidified the IS as a brand—an iconic banner and logo (a flag being the first hallmark of any nation's proclaimed sovereignty), a uniform (all black—both rejecting previous military references and providing an image of rebellion that disenfranchised Muslim youth can embrace on a superficial level), viral media campaigns that include severe acts of violence (just like the most popular Western TV shows), and a seemingly mandated but largely mythological lore. Even the masked, British-accented young man who is supposedly responsible for beheading a half-dozen Westerners on tape has been nicknamed "Jihad John," after the most rebellious and outspoken member of the Beatles.

It's all so well conceived I still can't decide if it's ironic that Apple, too, was built on a cult of personality and took its name from the Fab Four's record label and was spearheaded by an iconic figurehead. (Even more ironic, certainly, are shady reports that ISIS leaders banned iPhones following Tim Cook's public pronouncement that he was "proud to be gay.")

But, at a certain point, the comparison of IS to NASDAQ-listed companies with snazzy marketing departments fall flat. While on myriad levels IS may function as a prescient umbrella corporation with an in-house branding agency that aligns several subsidiaries and outside interests, it is also a flagrant criminal enterprise. At least in the eyes of international law, which is an easy enough thing to skirt when your employees and associates believe their mandate comes directly from the mouth of god. Hence any comparison to various organized mafias and cartels also falls short, as by their very nature these organizations require secrecy—or at the very least the coverage of the shadows—to thrive.

The Islamic State, in contrast, swallows all: Their mandate allows for the purported ethical acts of robbery, rape, slaughter, extortion, and the selling of hostages, all while they continue to overtake key strategic natural resources in the region (with IS-controlled oil wells in Syria and Iraq generating $1 to $5 million in revenue a day out on to the black market at peak production, according to various estimates). But where IS is unique is its regurgitation of its marauded seed money into global enterprise, having it both ways in explicit defiance, with a marketing plan and tightly managed budget to boot. Like it or not, at this moment IS is effectively running a proxy nation inside two recognized nation-states, with their eyes laser-focused on expansion.

And if their latest al-Naba (its annual military report) is any indication of IS's level of sophistication as of late March 2014, the events of this past summer only dictate that similar and more accurate auditing is happening above the line. Only the events of the next few months will dictate whether they can keep things afloat at the seemingly break-neck pace they did this year.

A new book by Loretta Napoleoni, The Islamist Phoenix: The Islamic State and the Redrawing of the Middle East, focuses on the above in a micro- and macro-level detail within its matter-of-fact and succinct 160 pages. Napoleoni's thesis is that the Islamic State is a singular terrorist organization in its uniqueness and operational procedures—and as a business enterprise in general—that should absolutely not be compared to the likes of al-Qaeda or previous statehood-driven and extremely well-financed organizations such as the PLO.

IS, Napoleoni posits, is a whole new beast. And a fully modernized—and capable—one that was long brewing under the surface, waiting for the moment with geopolitical pressure shifted a subset of largely Sunni-driven interests into a powerful alignment. The book follows a timeline established by her previous works, Terror Inc: Tracing the Money Behind Global Terrorism and Insurgent Iraq: Al-Zarqawi and the New Generation, which closely follows Abu Musab al-Zarqawi's rise from an uneducated blue-collar worker to the patsy for the US's tenuous link between al-Qaeda and Saddam Hussein to his ability to stir revolution within the country through groups like Jama'at al-Tawhid wa'al-Jihad and al-Qaeda in Iraq—direct precursors to what is now known as the Islamic State. It is essential reading for anyone who is curious about how or why IS came to be in its current form, and where it might be going next.

I sat with Napoleoni over the weekend, to chat about her new book and meet before the event we will both be participating in tonight, December 2, at the New York Society of Ethical Culture tonight at 7 PM. Also on the panel will be VICE Ground Zero: Syriacorrespondent Jean-René Augé-Napoli and former New York Times Middle East bureau chief Chris Hedges.

If you're still looking for something to do tonight, tickets are still available (if you buy tickets at the door—they are available online for $10 plus a $2 transaction fee, or $10 at the door if you mention VICE). More details can be found on the flyer below this interview.

VICE: What made you feel, with so many books and articles being written right now about Iraq and Syria and the Islamic State, that there was a void for an economic analysis of the situation?
​**Loretta Napoleoni:** Well the reason why I wrote this book is because I wrote a book about insurgent Iraq that Seven Stories published in 2005. So, the book turned out to be a sort of biography about al-Zarqawi, unveiling all the fake stories, the mythology that was built around him. So I had a really rich archive and I kept the archive updated as things progressed even—even after his death. So when I started seeing something happening in Syria—I mean, I didn't really know what it was, but there was something going on—but it seemed the original group [al-Qaeda in Iraq and its cohorts) had moved over to Syria, and they were still using some of the terminology that was identifiable as being used by previous groups with which al-Zarqawi had been involved. It's how these guys operate—the same kind of pattern that keeps coming back.

In your opinion, did the succession of monikers that preceded "the Islamic State" indicate a carefully calculated rebranding strategy, or was it the result of infighting... or perhaps both?
I think the rebranding is fundamental because language is fundamental. Especially in that part of the world. So, rebranding is a way of achieving what they really wanted to achieve, which is simply the transition from an armed organization to a state.Every single armed organization ultimately wants one thing: statehood. So, in the past, they tried to reach it through the denomination of enemies because by saying, "I'm not a terrorist, I'm your enemy," you're automatically giving yourself a certain kind of legitimacy. But nobody_—nobody_—has ever done what these guys have done. They have actually created a state, and they're running a state in a very modern fashion. So it's a step up, a massive jump in the history of terrorist organizations. You can't compare the PLO with these guys! These guys are miles ahead in the running. So, I think the rebranding was thought out to even the level of prepositions. And then all of a sudden... all prepositions were dropped for a definite article: The Islamic State.

So you think it's always a good thing when they rebrand in terms one's fighting over a preposition necessarily.
I also think it was a very good way to suck in the opposition. For instance, the merge with Jabhat al-Nusra was clearly strategic, and semantics helps in these cases. I think that the driving force really was to find the true definition of the group, which will stick. Many people think they will rebrand again, but I don't think so. I think that's it. This is perfect. The Islamic State is the state denomination of the prophet. You can't do better than that.

In 2010, when Abu Bakr al-Baghdadi became leader of al-Qaeda in Iraq, he reverted its name to a previous moniker: The Islamic State of Iraq. It has been reported that at the time al-Baghdadi had a falling out with the senior-level leadership of al-Qaeda proper. Do you believe this reversion to the previous name was a slight against Ayman al-Zawahiri, then and now the current leader of al-Qaeda proper? The whole thing seems very confusing.
I think that al-Baghdadi had a major disagreement with al-Zawahiri. Forget about Osama bin Laden, because Osama bin Laden was never really involved in that kind of discussion. But al-Baghdadi is perfectly qualified—better qualified than al-Zawahiri because al-Zawahiri is a doctor. This guy supposedly has a PhD in theology, so who better?

Since Sheikh Aziz we have never had anybody at this level. This is the first one. He's perfect. So, I really think he didn't want to be a part of al-Qaeda. I think he understood al-Qaeda was on a decline, and also—although this is my speculation—he agreed with al-Zarqawi that al-Qaeda was never actually anything else but a little toy in the hands of bin Laden and his followers. If you're clever, would you knock down the two towers and then the day after, then don't put bombs in every single, underground station in this country? Think about it. These guys [al-Zarqawi, al-Baghdadi, et al.] would have done it if that were the case. You don't knock down a country like the United States by simply attacking two towers. The symbol is huge, but the action... they could have destroyed this country if they had done it in the way of true strategists. The way true generals would have done it.

Is some of this generational? Like the young punks rejecting the ethos of their elders? Except in this case it's resulting in widespread chaos and bloodshed, and not peaceful countercultural revolution?
Put it this way... al-Zawahiri is a man of the past. I don't think he really understands what is happening, and also, al-Zawahiri has always been fixated with Egypt! That particular group of individuals who have followed him... they always thought that whatever happens in Egypt is what's going to make everything in the rest of the Arab world sway one way or another. Obviously that's not the case.

Are there any points in the mainstream media's Cliff Notes narrative regarding the rise of ISIS that you find particularly hyperbolic?
Yes! That "[IS] is the richest terrorist organization in the world!" It's not true! It's absolutely not true. I mean, the PLO, in the 1990s—and this is according to the CIA, which I think this is a quite conservative estimate—could manage, lets call it the GDP, between $8 billion and $12 billion! The PLO had vast amounts of money, far outstripping the best estimates of ISIS's coffers. The difference with ISIS, though, is not the amount of money, it's how the money is administered. How they're actually running the business of running a state, which is very very good. The Financial Times, of all places, had an entire page, explaining that these guys were actually running their finances as a multinational company in terms of dealing black market oil—replete with nice compensation packages for their employee-recruits.

But what about the distinction between al-Qaeda and ISIS, on an operational level, that you make in your book. Can you pinpoint an X factor?
Yes, it's that everything is seductive. So... if in the late-90s you went to Afghanistan you would have been submitted to the Iraqi structure of al-Qaeda, where Mister Osama bin Laden, born with a silver spoon... well now, there's an alternative. You go to somebody like you, or at least somebody who is making you believe they are like you. That you're identical to those who went just six months before... this is seductive. This is what people don't understand: to its followers, everything is seductive about ISIS. Including the fact that women are not a part of it. I mentioned this point at a conference we had about the yesterday, and it was a bit controversial, but they understood, it's true: it's very hard for young men to deal with women these days! Because women are difficult, in the sense of their needs. I see it with my kids.

The Islamic State, in some ways, has created a utopia where even women don't exist! You go with your friends, your boys to be a part of this amazing, beautiful experience—you're heroes, you're fighting! And there's not a woman nagging you about doing this or not doing that—if you're in your twenties, and you have a dream like this, you don't want to deal with girlfriends! You don't! They give you a wife! This is what people don't understand, the idea that there are much more important things than one's personal love life. It's like, "I am building a state! You think I can bother with my personal life?" This is at the core of IS's success.